<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
ANADARKO PETROLEUM CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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<PAGE> 2
ANADARKO PETROLEUM CORPORATION
P. O. BOX 1330
HOUSTON, TEXAS 77251-1330
March 22, 1999
TO THE STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders of
the Company. The meeting will be held in The Wyndham Hotel, Greenspoint, 12400
Greenspoint Drive, Houston, Texas, on Thursday, April 29, 1999, at 9:30 a.m.
The Notice of the Annual Meeting and Proxy Statement, which are attached,
provide information concerning the matters to be considered at the meeting. In
addition, the general operations of the Company will be discussed and
stockholders will be afforded the opportunity to ask questions.
We value your opinions and encourage you to participate in this year's
Annual Meeting by VOTING your proxy. You may VOTE either by telephone using the
instructions on the proxy card or by signing your proxy card and returning it in
the enclosed envelope.
Very truly yours,
/s/ ROBERT J. ALLISON, JR.
ROBERT J. ALLISON, JR.
Chairman, President and
Chief Executive Officer
<PAGE> 3
ANADARKO PETROLEUM CORPORATION
P. O. BOX 1330
HOUSTON, TEXAS 77251-1330
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Anadarko Petroleum Corporation will
be held in The Wyndham Hotel, Greenspoint, 12400 Greenspoint Drive, Houston,
Texas, on Thursday, April 29, 1999, at 9:30 a.m., for the purpose of:
(1) electing three Directors;
(2) approving the 1999 Stock Incentive Plan;
(3) approving the performance criteria and amendment to the Annual
Incentive Bonus Plan;
(4) approving an amendment to the Restated Certificate of Incorporation;
and
(5) transacting any other business appropriate to the meeting.
RECORD DATE
March 1, 1999, has been fixed as the record date. Holders of common stock
of record at the close of business on the record date will be entitled to
receive notice of and to vote at the meeting.
Whether or not you expect to be present at the meeting, please VOTE. You
may VOTE by telephone using the instructions on the proxy card or by signing
your proxy card and returning it in the enclosed envelope.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ SUZANNE SUTER
SUZANNE SUTER
Corporate Secretary
Dated: March 22, 1999
Houston, Texas
<PAGE> 4
ANADARKO PETROLEUM CORPORATION
P. O. BOX 1330
HOUSTON, TEXAS 77251-1330
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 29, 1999
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the Annual
Meeting, please take the time to VOTE by following the telephone voting
instructions on the proxy card or completing and mailing the enclosed proxy
card. A postage-prepaid envelope has been provided for your convenience if you
wish to vote by mail.
If you VOTE by mail and your proxy card is returned unsigned, your VOTE
cannot be counted. If you VOTE by mail and the returned proxy card is signed and
dated without indicating how you want to VOTE, your proxy will be voted as
recommended by the Board of Directors.
REVOKING YOUR PROXY
You may revoke your proxy at any time prior to the meeting by (1) sending a
written statement to that effect to the Corporate Secretary of the Company; (2)
submitting a valid proxy with a later date either by telephone or in writing; or
(3) voting in person at the annual meeting.
VOTE REQUIRED AND METHOD OF COUNTING VOTES
Number of Shares Outstanding. At the close of business on the Record Date,
March 1, 1999, there were 122,486,567 shares of common stock issued and
outstanding of which 120,486,567 shares are entitled to vote at the meeting.
Quorum. A quorum is present if at least a majority of the outstanding
shares of common stock on the Record Date are present in person or by proxy.
Vote Required. The following is an explanation of the vote required for
each of the items to be voted on at the annual meeting.
Item 1 -- Election of Directors. A director is elected if the number
of votes cast for the director exceeds the number of votes cast against the
director.
Item 2 -- Approval of 1999 Stock Incentive Plan. Item 2 requires the
affirmative vote of a majority of shares present in person or by proxy for
approval. Shares represented by proxy which are marked "abstain" will have
the effect of a vote against Item 2. A "broker non-vote" (when a broker
does not have authority to vote on a specific issue) will have no effect on
the vote.
Item 3 -- Approval of the performance criteria and amendment to the
Annual Incentive Bonus Plan. Item 3 requires the affirmative vote of a
majority of shares present in person or by proxy for approval. Shares
represented by proxy which are marked "abstain" will have the effect of a
vote against Item 3. A "broker non-vote" will have no effect on the vote.
Item 4 -- Approval of amendment to the Restated Certificate of
Incorporation. Item 4 requires the affirmative vote of a majority of
outstanding shares of common stock. Shares represented by proxy which are
marked "abstain" or a "broker non-vote" will have the effect of a vote
against Item 4.
1
<PAGE> 5
ANADARKO BOARD OF DIRECTORS
STRUCTURE
The Board is divided into three classes of directors for purposes of
election. One class of directors is elected at each annual meeting of
stockholders to serve for a three-year term.
At the 1999 meeting, the terms of three directors are expiring. Each
director elected at this annual meeting will hold office until the expiration of
his term in 2002. Other directors not up for election this year will continue in
office for the remainder of their term.
If a nominee is unavailable for election, the proxies will be voted for the
election of another nominee proposed by the Board or, as an alternative, the
Board may reduce the number of directors to be elected at the meeting.
ITEM 1 -- ELECTION OF DIRECTORS
Directors Nominated this Year for Terms Expiring in 2002
Ronald Brown (66) -- Mr. Brown resides in Rancho Santa Fe, California. He
retired as Executive Vice President of Compass Bank, Houston, Texas in 1992. Mr.
Brown has been a director of the Company since 1986.
John R. Butler, Jr. (60) -- Mr. Butler is Chairman of J. R. Butler and
Company, a reservoir engineering company in Houston, Texas. He is also Chairman,
President and CEO of the Houston Advanced Research Center, a 501(c)(3)
corporation. Formerly, he was Chairman of the Board and Chief Executive Officer
of GeoQuest International Holdings, Inc., a position he had held since 1973. Mr.
Butler has been a director of the Company since 1996.
John R. Gordon (51) -- Mr. Gordon has been President of Deltec Asset
Management Corporation, a New York investment management company, since 1988.
Deltec Asset Management Corporation's executive office is in New York, New York.
Mr. Gordon has been a director of the Company since 1988.
Directors up for Election in 2000
Conrad P. Albert (53) -- Mr. Albert resides in Bedford, New York and is
engaged in private investments. Mr. Albert was a director of Deep Tech
International until August, 1998. He has been a director of the Company since
1986.
Robert J. Allison, Jr. (60) -- Mr. Allison has been Chairman of the Board
and Chief Executive Officer of the Company since October 1986. Mr. Allison was
elected President of the Company in 1993. Mr. Allison has been a director of the
Company since 1985.
John N. Seitz (48) -- Mr. Seitz was named Executive Vice President,
Exploration and Production of the Company in 1997. He was elected as Senior Vice
President, Exploration in 1995 and Vice President, Exploration in 1993. He has
worked for the Company since 1977. Mr. Seitz became a director of the Company in
1997.
Directors up for Election in 2001
Larry Barcus (61) -- Mr. Barcus is Chairman of L. G. Barcus and Sons, Inc.,
Kansas City, Kansas, a general contractor with operations nationwide. Mr. Barcus
has been a director of the Company since 1986.
James L. Bryan (63) -- Mr. Bryan retired as Senior Vice President of
Dresser Industries, Inc., an oilfield services company with executive offices in
Dallas, Texas, in 1998. He had been a Vice President of Dresser since 1990. Mr.
Bryan has been a director of the Company since 1986.
2
<PAGE> 6
BOARD MEETINGS AND COMMITTEES
During 1998, the Board met four times. The Board also has an Executive
Committee which may take action with respect to the conduct of the business of
the Company between Board meetings. The Executive Committee did not meet during
1998. During 1998, each incumbent director of the Company attended all the
meetings of the Board.
The Board has an Audit Committee and Compensation and Benefits Committee.
Membership on these two committees is limited to non-employee directors.
Audit Committee. The Audit Committee met three times in 1998. The primary
responsibilities of the Audit Committee are to establish and review the
activities of the independent auditors and the internal auditors, review
recommendations of the independent auditors and responses of management, and
review the annual financial statements issued by the Company. Messrs. Albert,
Barcus and Butler are members of the Audit Committee and each attended all of
the committee meetings in 1998.
Compensation and Benefits Committee. The Compensation and Benefits
Committee met five times in 1998. The primary responsibilities of the
Compensation and Benefits Committee are to establish base salaries and determine
any bonus awards for the Company's executive officers, consider and make
recommendations on executive and director compensation plans and grant stock
options, restricted stock and other stock-based awards. Messrs. Brown, Bryan and
Gordon are members of the Compensation and Benefits Committee and each attended
all of the committee meetings in 1998.
DIRECTOR COMPENSATION
Directors who are not employees of Anadarko receive compensation for Board
and committee service. Directors who are employees of Anadarko receive no
compensation for their service on the Board. The principal components of
director compensation, which a director may elect to receive in cash, common
stock or a combination of both are as follows:
1. an annual board retainer of $35,000;
2. a fee of $1,250 for each Board or committee meeting attended plus
expenses related to attendance;
3. an annual committee membership retainer of $3,000; and,
4. an annual committee retainer of $3,000 for a committee chair.
1998 Director Stock Plan. Under this plan, the directors may grant
stock-based awards to non-employee directors. In October 1998, the directors
granted each non-employee director an option to purchase 5,000 shares of common
stock. The option price was the fair market value on the date of grant. The
options will vest 50% one year from the date of grant and the remaining 50% two
years from the date of grant. The options granted will expire 10 years from the
date of grant.
Phantom Stock Units. In January 1999, each current non-employee director
received phantom stock units equal to $13,000 to be held until the director
terminates service. The phantom stock units will accrue dividend equivalents
until the director terminates. Directors may receive additional phantom stock
units in future years.
Director Deferred Compensation Plan. This plan was eliminated in 1990,
although previously deferred amounts continue to accrue interest. Under the
plan, non-employee directors could elect to defer all or part of their annual
retainer. The plan provides benefit payments based upon the amount of
compensation deferred, age of the director at the time the compensation was
deferred and accrued interest at 20% per annum. Payments are made under the plan
to the director while he is a member of the Board and upon retirement, death,
disability or the attainment of age 65.
3
<PAGE> 7
STOCK OWNERSHIP
The information provided below summarizes the beneficial ownership of
officers and directors of the Company and owners of more than 5% of outstanding
common stock. In general, "beneficial ownership" includes those shares of common
stock someone has the power to vote, sell or acquire within 60 days. It includes
common stock that is held directly and also shares held indirectly through a
relationship, a position as a trustee or under a contract or understanding.
DIRECTORS AND EXECUTIVE OFFICERS
On February 26, 1999, the directors and executive officers of Anadarko
beneficially owned, in the aggregate, 4,777,755 shares of Anadarko common stock
(approximately 3.9% of the outstanding shares entitled to vote). Except for Mr.
Allison, no director, nominee for director or officer of the Company owns or has
the right to acquire more than 1% of the outstanding common stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
---------------------------------------------
SHARES
NAME OF NUMBER OF SHARES EXERCISABLE TOTAL
BENEFICIAL BENEFICIALLY OWNED WITHIN BENEFICIAL PERCENT
OWNER (1) 60 DAYS OWNERSHIP OF CLASS
---------- ------------------ ----------- ---------- --------
<S> <C> <C> <C> <C>
Robert J. Allison, Jr............... 432,414 1,080,000 1,512,414 1.2
John N. Seitz....................... 51,865 322,000 373,865 *
Michael E. Rose..................... 49,922 123,000 172,922 *
Charles G. Manley................... 75,446 270,000 345,446 *
William D. Sullivan................. 30,745 168,000 198,745 *
Conrad P. Albert.................... 28,338 56,000 84,338 *
Larry Barcus........................ 14,480 90,000 104,480 *
Ronald Brown........................ 6,344 90,000 96,344(2) *
James L. Bryan...................... 9,500 90,000 99,500 *
John R. Butler, Jr.................. 18,093 30,000 48,093 *
John R. Gordon...................... 47,121 90,000 137,121 *
All directors and executive officers
as a group, (22 persons).......... 1,049,755 3,728,000 4,777,755 3.9
</TABLE>
- ---------------
* Less than one percent.
(1) This number does not include shares of common stock which the directors or
officers of the Company have the right to acquire within 60 days of February
26, 1999.
(2) Mr. Brown disclaims beneficial ownership of the 100 shares held in his
wife's name.
4
<PAGE> 8
OWNERS OF MORE THAN FIVE PERCENT OF ANADARKO STOCK
The following table shows, as of December 31, 1998, the beneficial owners
of more than 5% of Anadarko common stock. This information is based on reports
(Schedule 13G) filed with the Securities and Exchange Commission by each of the
firms listed in the table below. If you wish, you may obtain copies of these
reports from the SEC.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OF CLASS
- -------------- ------------------- ---------- --------
<S> <C> <C> <C>
Common Stock FMR Corp. 15,922,128 13.0%
82 Devonshire Street
Boston, Massachusetts 02109
Common Stock Sonatrach 12,120,000 9.9%
10, rue du Sahara
16035, Algiers, Algeria
Common Stock Wellington Management Co LLP 8,238,200 6.7%
75 State Street
Boston, MA 02109
Common Stock American Express Financial 7,558,772 6.2%
IDS Tower 10
Minneapolis, Minnesota 55440
Common Stock Vanguard/Windsor Funds Inc. 6,550,100 5.3%
P. O. Box 2600
V37
Valley Forge, PA 19482
</TABLE>
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Anadarko Algeria Corporation, a wholly-owned subsidiary of the Company, has
an agreement with Sonatrach, the national oil and gas enterprise of Algeria,
which gives Anadarko Algeria the right to develop and produce liquid
hydrocarbons in Algeria. The Company also has a minority interest in an
agreement covering two additional blocks which are operated by BHP Petroleum
(Algerie) Inc., where an exploration program is underway. In 1998, approximately
$26,000 was paid to Sonatrach for charges related to well testing services.
During 1998, $32,091,000 was received and $25,854,000 was included in accounts
receivable as of December 31, 1998 from Sonatrach for joint interest billings of
development costs in Algeria.
Anadarko and its partners have a $177,000,000 engineering, procurement and
construction contract with Brown & Root Condor, SPA ("BRC") for the construction
of an oil production facility. Sonatrach owns 51% of BRC either directly or
indirectly. In 1998, approximately $43,463,000 was paid to BRC pursuant to the
agreement, which substantially completes the Company's obligations under the
contract.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 furnished to the Company during
its most recent fiscal year and Forms 5 furnished to the Company with respect to
its most recent fiscal year, the Company believes that all transactions by
reporting persons during the most recent fiscal year and the prior fiscal year
were reported on a timely basis except for those disclosed in this report.
During 1998, the following reports were filed late: Mr. Allison's appointment as
trustee of a trust which contains a small number of shares of Anadarko common
stock; Mr. Butler's receipt of investment authority over Anadarko common stock
held by certain family members; and, Mr. Brown's sale of common stock at the
same time he exercised stock options.
5
<PAGE> 9
COMPENSATION AND BENEFITS COMMITTEE REPORT
ON 1998 EXECUTIVE COMPENSATION
The Compensation Committee is responsible for establishing and
administering the executive compensation programs of the Company. This report
describes the compensation decisions made by the Compensation Committee during
1998 with respect to Anadarko's executive officers.
COMPENSATION PHILOSOPHY OF THE COMPANY
Anadarko's executive compensation programs consist primarily of base
salary, performance-based annual bonus and long-term stock incentive plans which
the Company considers essential to attract, retain and reward key personnel.
Collectively, these programs are designed to promote the strategic objectives
that are critical to the long-term success of the Company.
The Company utilizes an outside compensation consultant to review executive
compensation and benefits programs as well as total compensation levels provided
to executive officers. Anadarko's compensation programs provide executives the
opportunity to earn compensation levels within the top quartile of a select peer
group of oil and gas companies, to the extent that Company and executive
performance on an individual and combined basis so warrants. The peer group
consists of energy companies similar in business operations and size to
Anadarko, some of whom are also included in the Dow Jones Oil-Secondary index
used for stock price performance comparison on the Performance Graph. Not all
companies included in the Dow Jones Oil-Secondary index are considered
comparable with respect to analyzing executive compensation and benefits levels.
The index is comprised of select energy companies representing most facets of
the industry including independent oil and gas companies as well as those having
integrated operations or operating in diversified industries. This index does,
however, provide a meaningful comparison of total stockholder return against a
consistent representation of oil and gas companies with whom Anadarko competes
for investment dollars.
In designing Anadarko's compensation programs, the Compensation Committee's
primary consideration is the Company's achievement of strategic business goals
that serve to enhance shareholder value. Consideration is also given to
competitive practice, market economics and other factors. Section 162(m) of the
Internal Revenue Code, as amended (the "Code"), limits a company's ability to
deduct compensation paid in excess of $1 million during any fiscal year to the
Chief Executive Officer and the next four highest paid officers, unless such
compensation meets certain performance-based requirements. The Annual Incentive
Bonus Plan (the "Incentive Plan") and the 1993 Stock Incentive Plan (the "1993
Plan") currently meet the performance-based requirements under section 162(m).
The Compensation Committee is committed to making awards that qualify as
deductible compensation under section 162(m) of the Code whenever possible.
However, where granting awards is consistent with the strategic business goals
of the Company, the Compensation Committee reserves the right to make awards
that are non-deductible where it feels it is in the best interest of the
Company.
BASE SALARY
Anadarko structures its compensation programs to match pay with
performance. Individual base salaries are determined based on a subjective
evaluation considering peer company market data, the executive's performance and
the length of time the executive has been in the position. Base compensation is
reviewed annually by the Compensation Committee and adjusted accordingly to
reflect each executive officer's contribution to the performance of the Company.
In early 1998, the Compensation Committee reviewed the competitive market
data presented by the outside consultant and elected not to increase Mr.
Allison's annual base salary for the year.
6
<PAGE> 10
ANNUAL INCENTIVE BONUS
The Incentive Plan puts a significant portion of compensation at risk by
linking potential annual compensation to the Company's achievement of specific
performance goals. These goals are established by the Compensation Committee at
the beginning of each calendar year and for 1998 included:
(1) Operational criteria including comparisons of Anadarko's five-year
worldwide reserve replacement measured against an internal objective and
Anadarko's five-year worldwide cost of finding measured against defined
performance levels based on the most recent available industry five-year
worldwide cost of finding for a select group of companies;
(2) Financial criteria of net income and cash flow, both of which were
measured against internal objectives; and,
(3) Stock performance criteria comparing Anadarko's total stockholder
return for the three-year period 1996-1998 against the total stockholder
return of a select group of peer companies for the same period.
Each performance goal, including the specific criteria for such goal, is
weighted based upon the relative importance of each goal as determined by the
Compensation Committee.
A bonus target, ranging up to 80% of base salary, is established for each
executive officer under the Incentive Plan based upon individual position, level
of responsibility and ability to impact the Company's success. Bonus targets are
adjusted based on the Company's achievement of the performance goals.
Individuals may receive up to 150% of their bonus target if the Company exceeds
the specified goals and, conversely, a reduced bonus or no bonus payment if the
Company does not attain the specified goals.
The Company's financial performance for 1998, like others in the industry,
was adversely affected by low commodity prices. However, Anadarko's operating
performance for 1998 was the best in the Company's 40-year history. The Company
added 274 million energy equivalent barrels (MMEEBs) of reserves, increasing
total reserves 32% to 935 MMEEBs. Reserve replacement for 1998 was 581%, which
resulted in the Company replacing annual production volumes for the 17th
consecutive year. In addition, Anadarko continues to find quality reserves at
low finding costs. Based on Anadarko's outstanding results as measured against
the performance goals, the Compensation Committee approved a bonus for Mr.
Allison representing 125% of his 80% bonus target. In addition to his bonus
under the Incentive Plan, the Compensation Committee also awarded Mr. Allison a
special bonus of $350,000 in recognition of his significant contribution to the
Company's record operational success in 1998. The payment of this bonus is
deferred until his retirement from the Company.
STOCK PLANS
The Company makes certain stock-based awards under the 1993 Plan to align
the interests of executive officers with those of stockholders. Additionally,
Anadarko has established stock ownership guidelines for executive officers
ranging from two and one-half times base salary for Vice Presidents up to five
times base salary for the Chief Executive Officer.
The Compensation Committee, listed on page 8, annually reviews competitive
market data to determine appropriate stock awards based on the executive's
position and the market value of the stock. In addition, the Compensation
Committee considers previous stock grants when determining grant size for
executive officers. Under the 1993 Plan, the Compensation Committee has made
annual and multi-year grants of stock options at the fair market value of the
Common Stock on the date of grant.
In 1996, the Compensation Committee awarded a stock compensation package to
Mr. Allison consisting of performance shares and a multi-year stock option
grant. The combination of these awards serves to encourage and emphasize the
long-term increase in stockholder value both in absolute dollars and relative to
the Company's peers. As a result of the 1996 award, no stock grants were awarded
to Mr. Allison in 1997 or 1998.
7
<PAGE> 11
SUMMARY
Anadarko's compensation strategy is to provide total compensation
commensurate with the achievement of specific short-term and long-term
operational, financial and strategic objectives. Accordingly, Mr. Allison's
total compensation for 1998 was within the top quartile of the peer companies as
a result of Anadarko's outstanding operational performance.
The Compensation Committee believes the design of the Company's total
executive compensation program provides executives the incentive to maximize
long-term operational performance using sound financial controls and high
standards of integrity. It is the Compensation Committee's belief that this
focus will ultimately be reflected in Anadarko's stock price and stockholder
return.
Mr. Ronald Brown, Chairman
Mr. James L. Bryan
Mr. John R. Gordon
The following table sets forth information with respect to the Chief
Executive Officer and the four most highly compensated executive officers of the
Company as to whom the total annual salary and bonus for the fiscal year ended
December 31, 1998, exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------
OTHER
ANNUAL
COMPEN-
SALARY BONUS SATION
NAME PRINCIPAL POSITION YEAR ($) ($) ($)(1)
---- ------------------ ---- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Robert J. Allison, Jr.... Chairman, President and Chief 1998 1,000,000 1,350,000(6) 0
Executive Officer
Chairman, President and Chief 1997 1,000,000 1,200,000 60,253
Executive Officer
Chairman, President and Chief 1996 925,000 1,110,000 53,172
Executive Officer
John N. Seitz............ Executive Vice President, 1998 425,000 400,000 0
Exploration & Production
Executive Vice President, 1997 387,083 325,000 0
Exploration & Production
Senior Vice President, 1996 300,000 190,000 0
Exploration
Michael E. Rose.......... Senior Vice President, Finance 1998 370,000 207,000 0
Senior Vice President, Finance 1997 350,000 186,000 0
Senior Vice President, Finance 1996 315,000 167,000 0
Charles G. Manley........ Senior Vice President, 1998 355,000 199,000 0
Administration
Senior Vice President, 1997 345,000 183,000 0
Administration
Senior Vice President, 1996 310,000 164,000 0
Administration
William D. Sullivan...... Vice President, International 1998 270,000 135,000 233,805
Operations
Vice President, Algeria 1997 250,000 113,000 126,083
Vice President, Algeria 1996 215,000 97,000 0
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
AWARDS
------------------------
SECURITIES ALL
UNDERLYING OTHER
RESTRICTED OPTIONS(3)/ LTIP COMPEN-
STOCK(2) SARS(4) PAYOUTS SATION(5)
NAME ($) (#) ($) ($)
---- ---------- ----------- ------- ---------
<S> <C> <C> <C> <C>
Robert J. Allison, Jr.... 0 0 0 383,013
0 0 0 349,812
0 960,000 0 331,687
John N. Seitz............ 244,219 280,000 0 132,046
0 80,000 0 83,778
0 48,000 0 74,312
Michael E. Rose.......... 0 186,000 0 133,789
0 54,000 0 96,398
0 48,000 0 97,214
Charles G. Manley........ 0 186,000 0 136,515
0 48,000 0 103,179
0 48,000 0 105,144
William D. Sullivan...... 0 128,000 0 271,850
0 48,000 0 229,277
0 36,000 0 106,613
</TABLE>
- ---------------
(1) Represents certain perquisites, including $212,250 attributable to the net
payment of taxes by the Company on Mr. Sullivan's behalf associated with
his foreign assignment.
(2) As of December 31, 1998, the number of restricted shares held by each
executive officer and corresponding value on December 31, 1998 was for Mr.
Seitz, 7,500 shares valued at $231,563. The restricted stock awarded to Mr.
Seitz in 1998 vests 25% per year each October 29th beginning in 1999.
Dividends will be paid on unvested shares.
(3) Adjusted for 2-for-1 stock split, effective July 1, 1998.
(4) No SARs are outstanding.
8
<PAGE> 12
(5) This column includes (a) Company contributions to the Anadarko Employee
Savings Plan and Savings Restoration Plan; (b) interest earned above 120%
of the applicable federal rate on deferred compensation under the Executive
Deferred Compensation Plan; (c) payments under the Annual Override Bonus
Plan ("ORRI"); (d) the value of Company paid split-dollar insurance; and
(e) a one-time cash settlement attributable to the elimination of company
provided vehicles. The 1998 amounts for items (a), (b), (c), (d) and (e)
for each of the individuals named in the table are for Mr. Allison,
$132,000, $57,288, $48,174, $100,551 and $45,000; Mr. Seitz, $45,000,
$9,761, $12,415, $29,870 and $35,000; Mr. Rose, $33,360, $24,604, $10,329,
$30,496 and $35,000; Mr. Manley, $32,280, $26,357, $10,598, $32,280 and
$35,000; Mr. Sullivan, $22,980, $0, $7,590, $14,340 and $28,000,
respectively. In addition, Mr. Sullivan's amount includes $198,940
applicable to foreign service and relocation payments associated with his
foreign service assignment. No deferrals have been made under the Executive
Deferred Compensation Plan since 1990. Grants under the ORRI were
discontinued after 1986; however, awards that were previously made will
continue to produce payments to recipients in accordance with the
provisions of the plan.
(6) Includes $1,000,000 paid under the Incentive Plan for 1998 performance and
a special bonus of $350,000, the payment of which is deferred until Mr.
Allison's retirement from the Company.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS/SARS EXERCISE OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM(3)
OPTIONS/SARS EMPLOYEES IN PRICE(2) EXPIRATION --------------------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE 0%($) 5%($) 10%($)
- --------------------- ------------- ------------ -------- ---------- ----- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert J. Allison,
Jr................. 0 0% N/A N/A $0 $ 0 $ 0
John N. Seitz........ 280,000(4) 12.5% $35.938 4/3/08 $0 $6,328,252 $16,037,034
Michael E. Rose...... 186,000(4) 8.3% $35.938 4/3/08 $0 $4,203,768 $10,653,172
Charles G. Manley.... 186,000(4) 8.3% $35.938 4/3/08 $0 $4,203,768 $10,653,172
William D.
Sullivan........... 128,000(4) 5.7% $35.938 4/3/08 $0 $2,892,915 $ 7,331,215
</TABLE>
- ---------------
(1) No SARs were granted in 1998.
(2) The exercise price equals the fair market value of the common stock on the
date of grant.
(3) The dollar amounts under these columns are the results of calculation at 0%
and at the 5% and 10% rates set by the SEC and are not intended to forecast
possible future appreciation, if any, of the Company's stock price. The
Company did not use an alternative formula for a grant date valuation, as
the Company is not aware of any formula which will determine with
reasonable accuracy a present value based on future unknown or volatility
factors.
(4) Stock options granted on April 3, 1998 were granted under the Company's
1993 Stock Incentive Plan. The options become fully exercisable on April 3,
2002. In the event of a "Change of Control", any outstanding options will
automatically vest. The Board may also take any one or more of the
following actions: (i) provide for the purchase of any outstanding awards
by the Company; (ii) make adjustments to any outstanding awards; or (iii)
allow for the substitution of any outstanding awards by the acquiring
company's stock.
9
<PAGE> 13
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY
ON VALUE OPTIONS/SARS AT OPTIONS/SARS AT
EXERCISE REALIZED FISCAL YEAR-END(#) FISCAL YEAR-END($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE*
---- -------- -------- ------------------------- --------------------------
<S> <C> <C> <C> <C>
Robert J. Allison, Jr.......... 40,000 $803,125 960,000/600,000 $7,728,750/$2,193,750
John N. Seitz.................. 8,000 $182,783 322,000/320,000 $2,666,625/$ 0
Michael E. Rose................ 48,000 $727,750 123,000/213,000 $ 328,500/$ 0
Charles G. Manley.............. 0 $ 0 270,000/210,000 $1,941,375/$ 0
William D. Sullivan............ 0 $ 0 168,000/152,000 $ 875,250/$ 0
</TABLE>
- ---------------
* Computed based upon the difference between aggregate fair market value on
December 31, 1998 ($30.84375 per share) and aggregate exercise price.
PERFORMANCE GRAPH
The following performance graph compares the performance of the Company's
common stock to the S&P 500 Index and to the Dow Jones Oil -- Secondary Index
for the last five years. The graph assumes that the value of the investment in
the Company's common stock and each index was $100 at December 31, 1993 and that
all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
ANADARKO PETROLEUM CORPORATION, DOW JONES OIL -- SECONDARY AND S&P 500
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
ANADARKO DOW JONES
MEASUREMENT PERIOD PETROLEUM OIL - S&P 500
(FISCAL YEAR COVERED) CORPORATION SECONDARY INDEX
<S> <C> <C> <C>
1993 100 100 100
1994 85 97 101
1995 121 112 139
1996 145 138 171
1997 137 147 229
1998 140 107 294
</TABLE>
Assumes $100 Invested on December 31, 1993.
*Total Return Assumes Reinvestment of Dividends
Total Return Data Provided by S&P's Compustat Services, Inc. and Dow Jones &
Company Inc.
10
<PAGE> 14
PENSION PLAN TABLE
The Company has a defined benefit retirement plan covering all United
States employees that does not require employee contributions. The Retirement
Plan provides benefits based on a length of service and a final average pay
formula. For this purpose, "pay" generally includes the amounts shown in the
Salary and Bonus columns of the Summary Compensation Table. The following table
shows the estimated single life annuity payable annually at normal retirement in
specified remuneration and years-of-service classifications, based on the
benefit formula in effect on December 31, 1998.
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 400,000................. $106,000 $ 142,000 $ 177,000 $ 212,000 $ 248,000
500,000................ 133,000 178,000 222,000 266,000 311,000
600,000................ 160,000 214,000 267,000 320,000 374,000
700,000................ 187,000 250,000 312,000 374,000 437,000
800,000................ 214,000 286,000 357,000 428,000 500,000
900,000................ 241,000 322,000 402,000 482,000 563,000
1,000,000................ 268,000 358,000 447,000 536,000 626,000
1,100,000................ 295,000 394,000 492,000 590,000 689,000
1,200,000................ 322,000 430,000 537,000 644,000 752,000
1,300,000................ 349,000 466,000 582,000 698,000 815,000
1,400,000................ 376,000 502,000 627,000 752,000 878,000
1,500,000................ 403,000 538,000 672,000 806,000 941,000
1,600,000................ 430,000 574,000 717,000 860,000 1,004,000
1,700,000................ 457,000 610,000 762,000 914,000 1,067,000
1,800,000................ 484,000 646,000 807,000 968,000 1,130,000
1,900,000................ 511,000 682,000 852,000 1,022,000 1,193,000
2,000,000................ 538,000 718,000 897,000 1,076,000 1,256,000
2,100,000................ 565,000 754,000 942,000 1,130,000 1,319,000
2,200,000................ 592,000 790,000 987,000 1,184,000 1,382,000
2,300,000................ 619,000 826,000 1,032,000 1,238,000 1,445,000
2,400,000................ 646,000 862,000 1,077,000 1,292,000 1,508,000
2,500,000................ 673,000 898,000 1,122,000 1,346,000 1,571,000
2,600,000................ 702,000 936,000 1,170,000 1,404,000 1,638,000
2,700,000................ 729,000 972,000 1,215,000 1,458,000 1,701,000
2,800,000................ 756,000 1,008,000 1,260,000 1,512,000 1,764,000
2,900,000................ 783,000 1,044,000 1,305,000 1,566,000 1,827,000
3,000,000................ 810,000 1,080,000 1,350,000 1,620,000 1,890,000
</TABLE>
Messrs. Allison, Seitz, Rose, Manley, and Sullivan, respectively, have 25,
21, 21, 25 and 17 years of accrued service under the Plan. An employee becomes
vested in his benefit under the Retirement Plan at completion of five years of
vesting service, as defined in the Retirement Plan.
A portion of the benefits shown in the table may be paid from the Company's
supplementary retirement plan, rather than from the Retirement Plan, due to
limitations imposed by the Code, which restricts the amount of benefits payable
under tax-qualified plans.
At the end of 1998, Anadarko entered in to an agreement with Mr. Allison
pursuant to which Mr. Allison relinquished $5.7 million of his supplemental
pension benefit in exchange for a term life insurance policy. Anadarko paid $4.5
million to purchase the policy. The annual cost of the term life insurance
available to Mr. Allison under the policy would normally be reflected in the
"All Other Compensation" column of the Summary Compensation Table. However,
there was no income imputed to Mr. Allison for 1998 with respect to this policy.
Upon the death of both Mr. and Mrs. Allison, their beneficiaries will receive
the term life
11
<PAGE> 15
insurance proceeds, and Anadarko will receive cash under the policy sufficient
to compensate the Company for the premium paid. The balance of the proceeds, if
any, will be paid to Mr. and Mrs. Allison's designees.
CHANGE OF CONTROL ARRANGEMENTS
The Company has Key Employee Change of Control Contracts (the "Severance
Contracts") with all current executive officers. The Severance Contracts provide
that in the event of a Change of Control, as defined in the Severance Contracts,
the executives will receive certain benefits in the event of the termination of
their employment within three years of the effective date of the Change of
Control. If termination of employment is (i) by the Company other than for
cause, (ii) by the executive for good reason (as defined in the Severance
Contracts), or (iii) by the executive without good reason during a window period
(as defined in the Severance Contracts) benefits payable under the terms of the
Severance Contracts include a lump-sum cash payment equal to (i) sum of earned
but unpaid base salary plus pro-rata bonus (based on the higher of the (A)
highest annual bonus earned by the executive in the three fiscal years prior to
the Change of Control and (B) the annual bonus paid or payable for the most
recently completed fiscal year following the Change of Control (the "Annual
Bonus") plus accrued unpaid vacation pay; (ii) 2.9 times the sum of the
executive's annual base salary and the Annual Bonus; (iii) the Company matching
contributions which would have been made on the executive's behalf had he
continued to participate in the Anadarko Employee Savings Plan and the Savings
Restoration Plan for up to an additional three years; (iv) the value of any
investments credited to the executive under the Savings Restoration Plan; (v)
the present value of the accrued retirement benefit under the Retirement
Restoration Plan and the additional retirement benefit under the Retirement Plan
and the Retirement Restoration Plan which would have been accrued had the
executive continued service for up to three additional years; and, (vi) the
present value of the amounts of deferred compensation and interest, if any,
which would have been received had the executive continued service through age
65. In addition, the Severance Contracts provide for a continuation of various
health care, disability and life insurance plans and financial counseling for a
period of up to three years, outplacement services and the payment of all legal
fees and expenses incurred by the executive in obtaining or enforcing any right
or benefit provided by the Severance Contracts. In addition, the Severance
Contracts provide that the executive is entitled to receive a payment in an
amount sufficient to make the executive whole for any excise tax on excess
parachute payments imposed under section 4999 of the Code. In consideration of
these benefits, the executive agrees in the event a person or organization seeks
to effect a Change of Control not to leave the employ of the Company and to
render services commensurate with his position until the person or organization
has abandoned or terminated the effort or the Change of Control has occurred and
the executive experiences a termination that qualifies him for benefits under
the Severance Contract. The executive also agrees to retain, in confidence, any
and all confidential information known to him concerning the Company and its
business so long as the information is not otherwise publicly disclosed. No
amounts have been paid under the Severance Contracts.
The Change of Control Severance Pay Plan (the "Severance Plan") covers all
of the Company employees who are not covered by the Severance Contracts. The
Severance Plan provides that, in the event of a Change of Control, as defined in
the Severance Plan, employees will have certain benefits provided to them in the
event of the termination of their employment within three years after the
effective date of the Change of Control. Benefits under the Severance Plan are
provided unless termination of employment is (i) because of disability or
retirement, (ii) for cause, or (iii) due to a qualified sale of business. The
Severance Plan provides benefits that include a lump sum cash payment based on
salary and years of service ranging from a minimum of three months salary to a
maximum of two years salary; and a continuation of the employee's medical,
dental and life insurance for six months. No amounts have been paid under the
Severance Plan.
Under the 1993 Stock Incentive Plan in the event of a Change of Control,
any outstanding options will automatically vest and restrictions on restricted
stock shall lapse. The Board may also take any one or more of the following
actions: (i) provide for the purchase of any outstanding awards by the Company;
(ii) make adjustments to any outstanding awards; or (iii) allow for the
substitution of any outstanding awards by the acquiring company's stock. In the
event of a Change of Control, under the terms of the 1987 Stock Option Plan, all
outstanding options shall be surrendered to the Company and the optionee shall
receive a cash
12
<PAGE> 16
payment in an amount equal to the number of shares of common stock subject to
the options multiplied by the difference between the fair market value of a
share of common stock on the date determined to be the date of cancellation and
surrender of the options and the option price. The Board also has the ability to
substitute common stock for the cash payment under the 1987 Stock Option Plan.
Under the 1999 Stock Incentive Plan in the event of a Change of Control,
any outstanding option, stock appreciation award, restricted stock award and
performance award (unless otherwise provided in the award agreement) will
automatically vest. The Board may also take any one or more of the following
actions: (i) provide for the purchase of any outstanding awards by the Company;
(ii) make adjustments to any outstanding awards; or (iii) allow for the
substitution of awards relating to an acquiring company's stock for any
outstanding awards.
ITEM 2 -- APPROVAL OF 1999 STOCK INCENTIVE PLAN. The directors approved
this plan on January 28, 1999, subject to stockholder approval at this meeting.
The key provisions of the plan are summarized below. See Appendix A for the full
text of the 1999 Stock Incentive Plan.
SUMMARY OF 1999 STOCK INCENTIVE PLAN
Purpose and Eligibility. The purpose of the Plan is to promote the
interests of the Company and its stockholders by (i) attracting and retaining
employees; (ii) motivating employees by means of performance-related incentives
to achieve longer-range performance goals; and (iii) enabling employees to
participate in the long-term growth and financial success of the Company. At the
discretion of the Compensation and Benefits Committee, any employee of the
Company or its affiliates may be granted an award under the Plan.
Administration. The Plan will be administered by the Compensation and
Benefits Committee. The Compensation and Benefits Committee will select the
employees who will receive awards, determine the type and terms of awards to be
granted, including the amount of each award, the times at which each award shall
be exercisable or vested, and the performance goals, if any, that may apply with
respect to each award and take any other action the Compensation and Benefits
Committee deems necessary or desirable for the administration of the Plan. The
Compensation and Benefits Committee cannot reprice options.
Plan Amendment and Termination. The Compensation and Benefits Committee may
terminate or amend the Plan, at any time. However, the Committee (i) cannot
increase the number of shares authorized under the Plan, (ii) grant options
and/or stock appreciation rights at less than fair market value on the date of
original grant except adjustments to prevent dilution or enlargement of the
benefits under the Plan; (iii) permit a change in the class of employees
eligible to receive Awards or (iv) materially increase the benefits under the
Plan without stockholder approval.
Shares Available Under the Plan. A total of 4,000,000 shares of common
stock are authorized for issuance under the Plan. Of this amount, a maximum of
800,000 shares may be granted as restricted stock. To the extent awards are
intended to qualify as performance-based compensation under section 162(m) of
the Code the following additional limitations are imposed under the Plan: (i) no
more than an aggregate of 1,500,000 shares may be granted as options and/or
stock appreciation rights to any one individual over the term of the Plan; (ii)
no more than an aggregate of 500,000 shares may be granted as Restricted Stock
to any one individual over a performance period; and (iii) the maximum aggregate
shares that may be granted as a performance award to any one individual over a
performance period shall be 300,000 shares. The share limitations may be
adjusted as a result of action by the Board that affects Anadarko's common stock
or if an adjustment is determined to be appropriate in order to prevent dilution
or enlargement of the benefits or potential benefits intended under the Plan.
Types of Awards. Stock options, stock appreciation rights, restricted
stock, performance awards and stock compensation may be granted under the Plan.
Stock Options. The option exercise price for stock options cannot be
less than 100% of fair market value of a share of common stock at the time
the option is granted. The Compensation and Benefits Committee shall
determine the form in which payment of the exercise price may be made.
13
<PAGE> 17
Stock Appreciation Rights. The grant price for a stock appreciation
right cannot be less than 100% of fair market value of a share of common
stock on the date of grant or on the date of original grant of any related
award.
Restricted Stock. Restricted stock may not vest until the restrictions
expire or performance criteria associated with the award are met. An
employee receiving a restricted stock award shall have the right to vote
the shares and receive any cash dividends during the restricted period.
Performance Award. The Compensation and Benefits Committee may grant
performance awards which shall consist of a right to receive common stock
based upon the achievement of certain performance goals. The performance
goals shall be based on one or more of the following criteria as determined
by the Committee: (i) the Company's total shareholder return compared to
peer companies' total shareholder return; (ii) cost of finding of energy
equivalent barrels; (iii) reserve replacement; (iv) production; (v)
reserves; (vi) cash flow; and, (vii) net income.
Stock Compensation. The Compensation and Benefits Committee shall have
the authority to make an award in lieu of all or a portion of the cash
compensation payable under any compensation program of the Company. The
number and type of shares distributed, as well as the terms and conditions
of any stock compensation, shall be determined by the Compensation and
Benefits Committee.
Performance Criteria. The vesting of restricted stock and performance
awards may be subject to the attainment of performance goals established by
the Compensation and Benefits Committee based on one or more of the
following criteria: (i) the Company's total stockholder return compared to
peer companies' total stockholder return; (ii) cost of finding; (iii)
reserve replacement; (iv) production; (v) reserves; (vi) cash flow; and,
(vii) net income.
Change of Control. In the event of a Change of Control, any
outstanding option, stock appreciation award, restricted stock award and
performance award (unless otherwise provided in the award agreement) will
automatically vest. The Board may also take any one or more of the
following actions: (i) provide for the purchase of any outstanding awards
by the Company; (ii) make adjustments to any outstanding awards; or (iii)
allow for the substitution of awards relating to an acquiring company's
stock for any outstanding awards.
Federal Income Tax Consequences Relating to Options. At the discretion
of the Compensation and Benefits Committee, an option granted under the
Plan may take the form of either an "incentive stock option," which is
intended to qualify for favorable tax treatment under section 421 of the
Code, or a "nonqualified stock option," which is not intended to qualify
for this tax treatment. With respect to an incentive stock option, an
optionee generally will not recognize taxable income upon grant or exercise
of the option and the Company will not be entitled to any business expense
deduction with respect to the grant or exercise of the option. If the
optionee has held the shares acquired upon exercise of an incentive stock
option for at least two years after the date of grant and for at least one
year after the date of exercise, upon disposition of the shares by the
optionee, the difference, if any, between the sales price of the shares and
the exercise price of the option will be treated as long-term capital gain
or loss. If the optionee does not satisfy these holding period
requirements, the optionee will recognize ordinary income at the time of
the disposition of the shares, generally in an amount equal to the excess
of the fair market value of the shares at the time the option was exercised
over the exercise price of the option. The balance of gain realized, if
any, will be long-term or short-term capital gain, depending upon whether
or not the shares were sold more than one year after the option was
exercised. If the optionee sells the shares prior to the satisfaction of
the holding period requirements but at a price below the fair market value
of the shares at the time the option was exercised, the amount of ordinary
income will be limited to the excess of the amount realized on the sale
over the exercise price of the option. The Company and its subsidiaries
will be allowed a business expense deduction to the extent the optionee
recognizes ordinary income.
In general, an optionee to whom a nonqualified stock option is granted
will recognize no income at the time of the grant of the option. Upon
exercise of a nonqualified stock option, an optionee will recognize
ordinary income in an amount equal to the amount by which the fair market
value of the shares
14
<PAGE> 18
on the date of exercise exceeds the exercise price of the option. The
Company generally will be entitled to a business expense deduction in the
same amount and at the same time as the optionee recognizes ordinary
income.
New Plan Benefits. No grants have been made to any executive officer
under the 1999 Plan at this time.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 2
ITEM 3 -- APPROVAL OF THE PERFORMANCE CRITERIA UNDER AND AMENDMENT TO THE
ANNUAL INCENTIVE BONUS PLAN. In the Revenue Reconciliation Act of 1993, Congress
enacted section 162(m) of the Code which limits to $1 million per year the tax
deduction available to public companies paid to certain employees, subject to
exceptions for "performance-based" compensation. In 1994, the stockholders
approved the Incentive Plan and the material terms of the performance goals
established at that time. As a result of that approval, bonuses paid under the
Incentive Plan met the requirements of section 162(m). To continue to meet
section 162(m) requirements, stockholders must approve the performance criteria
at least every five years and any changes to the maximum amount permitted to be
paid to any individual under the Incentive Plan. The performance criteria is
stated below. The Board approved an amendment to the Incentive Plan, subject to
stockholder approval, which increased the maximum bonus amount that could be
paid to any individual for any calendar year under the Incentive Plan to $3
million.
Below is a summary of the key provisions of the Incentive Plan. See
Appendix B for a full text of the Incentive Plan.
Administration. The Incentive Plan is administered by the Compensation and
Benefits Committee. The Compensation and Benefits Committee designates the
employees eligible to receive bonuses and determines the performance objectives,
bonus amounts and how and when bonuses will be paid.
Performance Criteria. For each calendar year, the Compensation and Benefits
Committee establishes, in writing, the performance goals, the specific
performance criteria and the performance target or range of targets to measure
satisfaction of the performance goals. One or more of the following performance
criteria will be used to establish the performance goals: (i) cost of finding of
energy equivalent barrels; (ii) reserve replacement; (iii) cash flow; (iv) net
income; and/or (v) stock price performance.
Limitation of Bonus Amount. In no event will a bonus be paid to any
individual for any calendar year in excess of $3 million under the Incentive
Plan.
Termination of Employment. The Compensation and Benefits Committee may pay
the bonus to the employee or his beneficiary if the employee terminates
employment with the Company for any reason prior to the date a bonus is paid.
The amount of any such bonus payment will be at the discretion of the
Compensation and Benefits Committee.
Plan Termination or Amendment. The Board may amend or terminate the
Incentive Plan at any time.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 3
ITEM 4 -- APPROVAL OF AMENDMENT TO THE RESTATED CERTIFICATE OF
INCORPORATION. Article Fourth of the Company's Restated Certificate of
Incorporation currently establishes the Company's authorized capital stock at
200,000,000 shares of common stock and 2,000,000 shares of preferred stock. In
1998, the Board declared a stock split by way of a stock dividend which did not
increase the authorized common stock. The Board is now recommending an amendment
to increase the number of authorized shares of common stock to 300,000,000. No
change is being proposed to the number of authorized shares of preferred stock.
The rights of additional authorized shares would be identical to shares now
authorized. Although the authorization would not, in itself, have any effect on
your rights as a stockholder, issuance of additional shares for other than a
stock split or dividend could have a dilutive effect on earnings per share. The
increase in the authorized shares is not intended as an anti-takeover measure,
however, the additional shares could be used to make any attempt to gain control
of the Company more difficult. This proposal is not in response to any known
effort to obtain control of the Company.
15
<PAGE> 19
As of December 31, 1998, Anadarko had 200,000,000 shares of authorized
common stock, of which 122,432,692 were issued and outstanding and 120,432,692
were entitled to vote. In addition, there were 11,051,370 shares reserved for
issuance under various Company stock plans. While Anadarko does not have any
current plans to issue additional shares of common stock, other than under
previously authorized benefit and compensation plans and the Dividend
Reinvestment and Stock Purchase Plan, the amendment would enhance the Board's
flexibility in possible future actions, such as stock splits, stock dividends,
acquisitions, raising equity capital and other corporate activities involving
common stock.
If approved, the amendment would allow the Board to authorize the issuance
of additional shares up to the new maximum without further stockholder approval,
unless approval is required under applicable law or NYSE regulations.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 4
INDEPENDENT AUDITORS
KPMG LLP served as the Company's independent auditors during 1998 and was
appointed by the Board to serve in that capacity for 1999. Representatives of
KPMG LLP will be present at the meeting to respond to appropriate questions from
stockholders.
OTHER MATTERS
It is not expected that any other matters will come before the meeting.
However, if any other matters properly come before the meeting, it is the
intention of the persons named in the accompanying form of proxy to vote the
proxy in accordance with their judgment on such matters.
STOCKHOLDER PROPOSALS
An eligible stockholder who wants to have a qualified proposal considered
for inclusion in the proxy statement for the 2000 Annual Meeting must notify the
Corporate Secretary of the Company. The proposal must be received no later than
November 24, 1999.
PROXY SOLICITATION
The Company pays for the cost of preparing, assembling and mailing the
material in connection with the solicitation of proxies. It is expected that the
solicitation of proxies will be primarily by mail but solicitations may also be
made personally or by telephone or telegraph by officers and other employees of
the Company without additional compensation. Anadarko pays all costs of
solicitation, including certain expenses of brokers and nominees who mail proxy
material to their customers or principals. In addition, the Company has engaged
ChaseMellon Shareholder Services, L.L.C. to assist in the solicitation of
proxies for this Annual Meeting at an estimated fee of $9,500 plus
disbursements.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ SUZANNE SUTER
SUZANNE SUTER
Corporate Secretary
Dated: March 22, 1999
Houston, Texas
SEE ENCLOSED PROXY CARD -- PLEASE VOTE PROMPTLY.
16
<PAGE> 20
APPENDIX A
ANADARKO PETROLEUM CORPORATION
1999 STOCK INCENTIVE PLAN
JANUARY 1, 1999
SECTION 1. Purpose.
The purpose of the 1999 Stock Incentive Plan is to promote the interests of
Anadarko Petroleum Corporation and its stockholders by (i) attracting and
retaining employees of the Company and its affiliates; (ii) motivating such
employees by means of performance-related incentives to achieve longer-range
performance goals; and (iii) enabling such employees to participate in the
long-term growth and financial success of the Company.
SECTION 2. Definitions.
As used in the Plan, the following terms shall have the meanings set forth
below:
"Affiliate" shall mean (i) any entity that, directly or through one or
more intermediaries, is controlled by the Company and (ii) any entity in
which the Company has a significant equity interest, as determined by the
Committee.
"Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock, Performance Award or Stock Compensation.
"Award Agreement" shall mean any agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Change of Control" shall have the meaning set forth in Section 8.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Committee" shall mean the Compensation and Benefits Committee of the
Board.
"Company" shall mean Anadarko Petroleum Corporation, a Delaware
corporation.
"Employee" shall mean any employee of the Company or any Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exercise Price" shall mean the price determined under Section
6(a)(i).
"Fair Market Value" shall mean, as of any given date, the mean between
the highest and lowest reported sales prices of a Share on the New York
Stock Exchange Composite Tape.
"Incentive Stock Option" shall mean an option granted under Section
6(a) that is intended to meet the requirements of Section 422 of the Code
or any successor provision thereto.
"Mature Shares" shall mean Shares held by a Participant for a period
of at least six months.
"Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) that is not intended to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
"Participant" shall mean any Employee granted an Award under the Plan.
"Performance Award" shall mean any right granted under Section 6(d).
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization,
government or political subdivision thereof or other entity.
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"Plan" shall mean the 1999 Stock Incentive Plan.
"Restricted Stock" shall mean any Share, prior to the lapse of
restrictions thereon, granted under Section 6(c).
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Shares" shall mean the common shares of the Company, $0.10 par value.
"Stock Appreciation Right" shall mean any right granted under Section
6(b).
"Stock Compensation" shall mean any right granted under Section 6(e).
SECTION 3. Administration.
The Plan shall be administered by the Committee. Subject to the terms of
the Plan and applicable law, and in addition to other express powers and
authorizations conferred on the Committee by the Plan, the Committee shall have
full power and authority to:
(i) designate Participants;
(ii) determine the type or types of Awards to be granted to a
Participant;
(iii) determine the number of Shares to be covered by, or with respect
to which payments, rights, or other matters are to be calculated in
connection with, Awards;
(iv) determine the terms and conditions of any Award;
(v) determine whether, to what extent, and under what circumstances
Awards may be settled or exercised in cash, Shares, other securities, other
Awards or other property, or cancelled, forfeited, or suspended and the
method or methods by which Awards may be settled, exercised, cancelled,
forfeited, or suspended;
(vi) determine whether, to what extent, and under what circumstances
cash, Shares, other securities, other Awards, other property, and other
amounts payable with respect to an Award shall be deferred either
automatically or at the election of the holder thereof or of the Committee;
(vii) interpret and administer the Plan and any instrument or
agreement relating to, or Award made under, the Plan;
(viii) establish, amend, suspend, or waive such rules and regulations
and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and
(ix) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan or any Award shall be within the sole discretion of the Committee, may
be made at any time and shall be final, conclusive, and binding upon all
Persons, including the Company, any Affiliate, any Participant, any holder or
beneficiary of any Award, any shareholder and any Employee.
Notwithstanding the foregoing, the Committee is not authorized to reprice
or cancel and reissue Options.
SECTION 4. Shares Available for and Limitations of Awards.
(a) Shares Available. Subject to the specified limitations and adjustment
as provided in this Section 4:
(i) The maximum number of Shares with respect to Awards, which may be
granted as specified in Section 6 of the Plan, shall be 4,000,000.
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(ii) The maximum aggregate number of Shares that may be granted as
Restricted Stock shall be 800,000 Shares.
The Committee shall determine the appropriate methodology for calculating
the number of Shares issued pursuant to the Plan.
If, after the effective date of the Plan, any Shares covered by an Award
granted under the Plan, or to which such an Award relates, are forfeited, or if
an Award otherwise terminates or is cancelled without the delivery of Shares or
of other consideration, then the Shares covered by such Award, or to which such
Award relates, or the number of Shares otherwise counted against the aggregate
number of Shares with respect to which Awards may be granted, to the extent of
any such forfeiture, termination or cancellation, shall again be, or shall
become Shares with respect to which Awards may be granted. In the event that any
Option or other Award granted hereunder is exercised through the delivery of
Shares, the number of Shares available for Awards under the Plan shall be
increased by the number of Shares surrendered.
(b) Section 162(m) Requirements. To the extent Awards are intended to
qualify as performance-based compensation under Section 162(m) of the Code, the
following additional limitations are imposed under the Plan, subject to
adjustments as provided in this Section 4.
(i) The maximum aggregate number of Shares that may be granted as
Options and Stock Appreciation Rights to any one individual over the term
of the Plan shall be 1,500,000 Shares.
(ii) The maximum aggregate number of Shares that may be granted as
Restricted Stock Awards to any one individual over a performance period
shall be 500,000 Shares.
(iii) The maximum aggregate number of Shares that may be granted as
Performance Awards to any one individual over a performance period shall be
300,000 Shares.
(c) Sources of Shares Deliverable Under Awards. Any Shares delivered
pursuant to an Award may consist, in whole or in part, of authorized and
unissued Shares or treasury Shares.
(d) Adjustments. In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the Shares such
that an adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such manner as
it may deem equitable, adjust any or all of (i) the number and type of Shares
(or other securities or property) with respect to which Awards may be granted,
(ii) the number and type of Shares (or other securities or property) subject to
outstanding Awards, and (iii) the grant or exercise price with respect to any
Award or, if deemed appropriate, make provision for a cash payment to the holder
of an outstanding Award; provided, that the number of Shares subject to any
Award denominated in Shares shall always be a whole number.
SECTION 5. Eligibility.
Any Employee of the Company shall be eligible to be designated a
Participant.
SECTION 6. Awards.
(a) Options. The Committee shall have authority to award Options subject to
the following terms and conditions and such additional terms and conditions as
the Committee shall determine are not inconsistent with the provisions of the
Plan.
(i) Exercise Price. The purchase price per Share purchasable under an
Option shall be determined by the Committee at the time each Option is
granted; provided, however, that the purchase price per Share shall not be
less than 100% of Fair Market Value on the date of grant, except in the
case of Options
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that are granted in assumption of, or in substitution for, outstanding
awards previously granted by (i) a company acquired by the Company or one
or more of its Affiliates, or (ii) a company with which the Company or one
or more of its Affiliates combines.
(ii) Time and Method of Exercise. Options shall be exercisable in
accordance with such terms and conditions and during such periods as may be
established by the Committee.
(iii) Payment of Option Exercise Price. The payment of the Exercise
Price of an Option granted under this Section 6 shall be subject to the
following:
(A) The full Exercise Price for Shares purchased upon the exercise
of any Option shall be paid at the time of such exercise (except that,
in the case of an exercise arrangement approved by the Committee and
described in subsection (C) below, payment may be made as soon as
practicable after the exercise).
(B) The Exercise Price shall be payable in cash or by tendering
Mature Shares (by either actual delivery of Mature Shares or by
attestation, with such Shares valued at Fair Market Value as of the day
of exercise), or in any combination thereof, as determined by the
Committee.
(C) The Committee may permit a Participant to elect to pay the
Exercise Price upon the exercise of an Option by authorizing a third
party to sell Shares (or a sufficient portion of the Shares) acquired
upon exercise of the Option and remit to the Company a sufficient
portion of the sale proceeds to pay the entire Exercise Price and any
tax withholding resulting from such exercise.
(iv) Incentive Stock Options. The terms of any Incentive Stock Option
granted under the Plan shall comply in all respects with the provisions of
Section 422 of the Code, or any successor provision, and any regulations
promulgated thereunder.
(b) Stock Appreciation Rights. The Committee shall have authority to award
Stock Appreciation Rights which shall consist of a right to receive the excess
of the Fair Market Value over the Exercise Price. Subject to the following
conditions, a Stock Appreciation Right may be granted in tandem with another
Award, in addition to another Award, or freestanding and unrelated to another
Award. A Stock Appreciation Right granted in tandem with or in addition to
another Award may be granted either at the same time as such other Award or at a
later time.
(i) Grant Price. The grant price of a Stock Appreciation Right shall
be determined by the Committee; provided, however, that the grant price
shall not be less than 100% of Fair Market Value on the date of grant or on
the date of original grant of any related Award, except in case of Awards
granted in assumption of, or in substitution for, outstanding awards
previously granted by (i) a company acquired by the Company or one or more
of its Affiliates, or (ii) a company with which the Company or one or more
of its Affiliates combines.
(ii) Other Terms and Conditions. The Committee may impose such
conditions or restrictions on the exercise of any Stock Appreciation Right
as it shall deem appropriate.
(c) Restricted Stock. The Committee shall have authority to award
Restricted Stock subject to such conditions, restrictions and contingencies as
the Committee shall determine, including but not limited to the following terms
and conditions.
(i) Dividends. Unless otherwise determined by the Committee,
Restricted Stock Awards shall provide for the payment of dividends during
the Restricted Period. Dividends paid on Restricted Stock may be paid
directly to the Participant, may be subject to risk of forfeiture and/or
transfer restrictions during any period established by the Committee, all
as determined by the Committee in its discretion.
(ii) Registration. Any Restricted Stock may be evidenced in such
manner, as the Committee shall deem appropriate, including, without
limitation, book-entry registration or issuance of a stock certificate or
certificates. In the event any stock certificate is issued in respect of
Restricted Stock granted under the Plan, such certificate shall be
registered in the name of the Participant and shall bear an appropriate
legend referring to the terms, conditions, and restrictions applicable to
such Restricted Stock.
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Unrestricted Shares, evidenced in such manner as the Committee shall deem
appropriate, shall be issued to the holder of Restricted Stock promptly
after the applicable restrictions have lapsed or otherwise been satisfied.
(iii) Transfer Restrictions. During the applicable restriction period,
Restricted Stock will be subject to the limitations on transfer as provided
in Section 6(f)(iii).
(iv) Performance Based. The Committee may, subject to the terms of the
Plan, establish at the time a Restricted Stock Award is granted the
performance period, the performance goals pursuant to which the
restrictions on the Restricted Stock Award will lapse and establish the
schedule or schedules setting forth the portion of the Restricted Stock
Award which will be earned or forfeited based on the degree of achievement,
or lack thereof, of the performance goals at the end of the relevant
performance period. The performance goals shall be based on one or more of
the following criteria as determined by the Committee: (i) the Company's
total shareholder return compared to peer companies' total shareholder
return; (ii) cost of finding; (iii) reserve replacement; (iv) production;
(v) reserves; (vi) cash flow; and, (vii) net income. During any performance
period, the Committee shall have authority to adjust the performance goals
in such manner as the Committee, in its sole discretion, deems appropriate
with respect to such performance period.
(v) Vesting. Non-performance based Restricted Stock Awards will not be
100% vested prior to three years from the date of grant. Performance based
Restricted Stock Awards will not vest prior to one year from the date of
grant.
(d) Performance Awards. The Committee shall have authority to grant
Performance Awards, which shall consist of a right denominated or payable in
Shares and shall confer on the holder thereof compensation rights based upon the
achievement of performance goals.
(i) Terms and Conditions. Subject to the terms of the Plan, the
Committee shall establish at the time a Performance Award is granted the
performance period (which shall not be less than one year), the performance
goals pursuant to which a Participant may earn and be entitled to a payment
under such Performance Award and establish the schedule or schedules
setting forth the portion of the Performance Award which will be earned or
forfeited based on the degree of achievement, or lack thereof, of the
performance goals at the end of the relevant performance period. The
performance goals shall be based on one or more of the following criteria
as determined by the Committee: (i) the Company's total shareholder return
compared to peer companies' total shareholder return; (ii) cost of finding;
(iii) reserve replacement; (iv) production; (v) reserves; (vi) cash flow;
and (vii) net income. During any performance period, the Committee shall
have authority to adjust the performance goals in such manner as the
Committee, in its sole discretion, deems appropriate with respect to such
performance period.
(ii) Payment of Performance Awards. Performance Award compensation
payments may be paid in a lump sum or in installments, in cash, Shares or
in any combination thereof, following the close of the performance period
or, in accordance with procedures established by the Committee, on a
deferred basis.
(e) Stock Compensation. The Committee shall have authority to make an Award
in lieu of all or a portion of the cash compensation payable under any
compensation program of the Company. The number and type of Shares to be
distributed, as well as the terms and conditions of any such Awards, shall be
determined by the Committee.
(f) General.
(i) Awards May Be Granted Separately or Together. Awards may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with, or in substitution for any other Award granted under the Plan
or any award granted under any other plan of the Company or any Affiliate.
Awards granted in addition to or in tandem with other Awards or awards
granted under any other plan of the Company or any Affiliate may be granted
either at the same time as or at a different time from the grant of such
other Awards or awards.
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(ii) Forms of Payment by Company Under Awards. Subject to the terms of
the Plan and of any applicable Award Agreement, payments or transfers to be
made by the Company or an Affiliate upon the grant, exercise or payment of
an Award may be made in such form or forms as the Committee shall
determine, including, without limitation, cash, Shares, other securities,
other Awards or other property, or any combination thereof, and may be made
in a single payment or transfer, in installments, or on a deferred basis,
in each case in accordance with rules and procedures established by the
Committee. Such rules and procedures may include, without limitation,
provisions for the payment or crediting of reasonable interest on
installment or deferred payments.
(iii) Limits on Transfer of Awards.
(A) Each Award, and each right under any Award, shall be
exercisable only by the Participant during the Participant's lifetime,
or, if permissible under applicable law, by the Participant's guardian
or legal representative or by a transferee receiving such Award pursuant
to a qualified domestic relations order (a "QDRO") as determined by the
Committee.
(B) Except as otherwise provided by the Committee, Awards under the
Plan are not transferable except as designated by the participant by
will or by the laws of descent and distribution.
(iv) Term of Awards. The term of each Award shall be for such period
as may be determined by the Committee; provided, that in no event shall the
term of any Incentive Stock Option exceed a period of ten years from the
date of its grant.
(v) Share Certificates. All certificates for Shares or other
securities of the Company or any Affiliate delivered under the Plan
pursuant to any Award or the exercise thereof shall be subject to such stop
transfer orders and other restrictions as the Committee may deem advisable
under the Plan or the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which such
Shares or other securities are then listed, and any applicable Federal or
state laws, and the Committee may cause a legend or legends to be put on
any such certificates to make appropriate reference to such restrictions.
(vi) Consideration for Grants. Awards may be granted for no cash
consideration or for such consideration as the Committee determines
including, without limitation, such minimal cash consideration as may be
required by applicable law.
(vii) Delivery of Mature Shares or other Securities and Payment by
Participant of Consideration. No Shares or other securities shall be
delivered pursuant to any Award until payment in full of any amount
required to be paid is received by the Company pursuant to the Plan or the
applicable Award Agreement. Such payment may be made by such method or
methods and in such form or forms as the Committee shall determine,
including, without limitation, cash, Mature Shares, other securities, other
Awards or other property, or any combination thereof; provided that the
combined value, as determined by the Committee, of all cash and cash
equivalents and the Fair Market Value of any such Shares or other property
so tendered to the Company, as of the date of such tender, is at least
equal to the full amount required to be paid pursuant to the Plan or the
applicable Award Agreement to the Company.
SECTION 7. Amendment and Termination.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of any shareholder,
Participant, other holder or beneficiary of an Award, or other Person; provided
that notwithstanding any other provision of the Plan or any Award Agreement,
without the approval of the stockholders of the Company no such amendment,
alteration, suspension, discontinuation, or termination shall be made that
would:
(i) increase the total number of Shares available for Awards under the
Plan, except as provided in Section 4(d);
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(ii) permit Awards encompassing rights to purchase Shares to be
granted with per Share grant, exercise or purchase prices of less than the
Fair Market Value of a Share on the date of grant thereof, except as
otherwise permitted under Section 6;
(iii) permit a change in the class of employees eligible to receive
Awards; or
(iv) materially increase the benefits accruing to Participants under
the Plan.
(b) Amendments to Awards. The Committee may amend any Award theretofore
granted, provided no change in any Award shall reduce the benefit to Participant
without the consent of such Participant. Notwithstanding the foregoing, the
Committee is not authorized to reprice or cancel and reissue Options.
(c) Adjustment of Awards. The Committee is authorized to make adjustments
in the terms and conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 4(d)) affecting the Company, any Affiliate, or
the financial statements of the Company or any Affiliate, or of changes in
applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan.
SECTION 8. Change of Control.
(a) Notwithstanding any other provision of the Plan to the contrary, in the
event of a Change of Control and as of the date such Change of Control is
determined to have occurred:
(i) Any Options and Stock Appreciation Rights outstanding as of the
date of the Change of Control, and which are not then exercisable and
vested, shall become fully exercisable and vested.
(ii) The restrictions applicable to any Restricted Stock Award as of
the date of the Change of Control which is not performance based shall
lapse and such Restricted Stock shall become free of all restrictions and
become fully vested and transferable.
(iii) Except as otherwise set forth in a Participant's Award
Agreement, as of the date of the Change of Control, the restrictions
applicable to any Performance Award and any performance-based Restricted
Stock Award granted pursuant to Section 6(c)(iv) or Section 6(d) shall
become free of all restrictions and become fully vested and transferable.
(b) In addition to the Board's authority set forth in Sections 7(c) and
8(a), in order to maintain the Participants' rights in the event of any Change
of Control, the Board, as constituted before such Change of Control, is hereby
authorized, and has sole discretion, as to any Award, either at the time such
Award is made hereunder or any time thereafter, to take any one or more of the
following actions: (i) provide for the purchase of any such Award for an amount
of cash equal to the amount that could have been attained upon the exercise of
such Award or realization of the Participant's rights had such Award been
currently exercisable or payable; (ii) make such adjustment to any such Award
then outstanding as the Board deems appropriate to reflect such Change of
Control; or (iii) cause any such Award then outstanding to be assumed, or new
rights substituted therefor, by the acquiring or surviving corporation after
such Change of Control. The Board may, in its discretion, include such further
provisions and limitations in any Award Agreement, as it may deem equitable and
in the best interests of the Company.
(c) A "Change of Control" shall be deemed to occur if:
(i) any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") acquires beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of either (A) the then outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (i), the following acquisitions shall not
constitute a Change of Control: (1) any acquisition directly from the
Company, (2) any acquisition by the Company, (3) any acquisition
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by any employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company or (4) any
acquisition pursuant to a transaction which complies with clauses (A), (B)
and (C) of subsection (iii) of this Section (c); or
(ii) individuals who, as of the effective date of the Plan, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the effective date of the Plan whose
election, or nomination for election by the Company's stockholders, was
approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; or
(iii) approval by the stockholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition of assets
of another entity (a "Business Combination"), in each case, unless,
following such Business Combination, (A) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly or through one
or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (B) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting from such
Business Combination) beneficially own, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business
Combination, and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(iv) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
SECTION 9. General Provisions.
(a) No Rights to Awards. No Employee, Participant or other Person shall
have any claim to be granted any Award, and there is no obligation for
uniformity of treatment of Employees, Participants, or holders or beneficiaries
of Awards. The terms and conditions of Awards need not be the same with respect
to each recipient.
(b) Delegation. Subject to the terms of the Plan and applicable law, the
Committee may delegate to one or more officers or managers of the Company or any
Affiliate, or to a committee of such officers or managers, the authority,
subject to such terms and limitations as the Committee shall determine, to grant
Awards to, or to cancel, modify or waive rights with respect to, or to alter,
discontinue, suspend, or terminate Awards held by Participants who are not
officers or directors of the Company for purposes of Section 16 of the Exchange
Act, or any successor Section thereto, or who are otherwise not subject to such
Section.
(c) Tax Withholding. The Company or any Affiliate is hereby authorized to
withhold from any Award, from any payment due or transfer made under any Award
or under the Plan or from any compensation or other amount owing to a
Participant the amount (in cash, Shares, other securities, other Awards or other
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property) of any applicable withholding taxes in respect of an Award, its
exercise, the lapse of restrictions thereon, or any payment or transfer under an
Award or under the Plan and to take such other action as may be necessary in the
opinion of the Company to satisfy all obligations for the payment of such taxes.
(d) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other compensation arrangements (subject to shareholder approval of such
other arrangement, if such approval is required), and such arrangements may be
either generally applicable or applicable only in specific cases.
(e) No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the Company or
any Affiliate. Further, the Company or an Affiliate may at any time dismiss a
Participant from employment, free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.
(f) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Texas and applicable Federal law.
(g) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as
to any Person or Award, or would disqualify the Plan or any Award under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended to conform to applicable laws, or if it cannot be construed or deemed
amended without, in the determination of the Committee, materially altering the
intent of the Plan or the Award, such provision shall be stricken as to such
jurisdiction, Person or Award and the remainder of the Plan and any such Award
shall remain in full force and effect.
(h) Other Laws. The Committee may refuse to issue or transfer any Shares or
other consideration under an Award if, acting in its sole discretion, it
determines that the issuance of transfer or such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Award shall be promptly refunded to the
relevant Participant, holder or beneficiary.
(i) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.
(j) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash, other securities, or other property shall be paid or transferred in lieu
of any fractional Shares or whether such fractional Shares or any rights thereto
shall be cancelled, terminated, or otherwise eliminated.
(k) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
SECTION 10. Effective Date of the Plan.
The Plan shall be effective as of the date of its approval by the Board,
subject to its approval by the stockholders of the Company.
SECTION 11. Term of the Plan.
No Award shall be granted under the Plan ten years after approval by the
Board. However, unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, any Award theretofore granted may, and the authority
of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or
terminate any such Award or to waive any conditions or rights under any such
Award shall, extend beyond such date.
A-9
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APPENDIX B
ANADARKO PETROLEUM CORPORATION
ANNUAL INCENTIVE BONUS PLAN
AS AMENDED JANUARY 1, 1999
1. Purpose of the Plan. The ANNUAL INCENTIVE BONUS PLAN (the "Plan") is
intended to provide a method for attracting and retaining employees of ANADARKO
PETROLEUM CORPORATION and participating subsidiaries (the "Company"), to
encourage these individuals to remain with the Company and to devote their best
efforts to its affairs and to recognize employees for their contributions to the
overall success of the Company.
2. Administration of the Plan. The Plan shall be administered by the
Compensation and Benefits Committee (the "Committee") of the Board of Directors
(the "Board") of the Company and shall operate on the basis of the calendar
year. The Committee is authorized to interpret the Plan and from time to time
may adopt such rules, regulations, definitions and forms consistent with the
provisions of the Plan as it may deem advisable to carry out the Plan.
3. Determinations of Bonuses. The Committee shall have full power and
authority to (i) designate those employees who may be eligible for bonuses under
the Plan for a calendar year; (ii) determine performance objectives which must
be satisfied as a condition to earning a bonus under the Plan for a calendar
year (which objectives may differ as among employees or classes of employees);
(iii) determine the types of bonuses to be paid under the Plan for a calendar
year; (iv) determine the extent to which performance objectives applicable to a
given bonus have been achieved; (v) determine the amounts of bonuses (which may
differ among employees or classes of employees) and (vi) determine the form and
time of payment of bonuses. All decisions made by the Committee shall be final.
4. Section 162(m) Conditions. In the case of any employee whose
compensation is or, in the opinion of the Committee, is potentially subject to
the compensation deduction limits of section 162(m) of the Internal Revenue Code
of 1986, as amended ("162(m)") for a calendar year, the Committee shall
establish, in writing, with respect to each calendar year beginning with the
1994 calendar year (i) objective performance goals and the appropriate weighting
of such goals from among the performance criteria described below; (ii)
performance targets or range of targets to measure satisfaction in whole or in
part of such performance goals or combination of goals and (iii) a bonus
opportunity target which will be used to establish the amount of bonus to be
paid to such employee depending upon the degree of satisfaction of the
performance goals. A bonus amount shall be paid under the Plan for a calendar
year to an employee whose compensation is or, in the opinion of the Committee,
is potentially subject to 162(m) if and only if the performance goal or
combination of performance goals established by the Committee with respect to
such employee have been attained (based upon the degree of satisfaction of the
performance target or range of targets). The Committee shall certify the
attainment of such performance goals in writing. In no event shall bonuses paid
pursuant to the Plan to any individual for any calendar year be in excess of
$3.0 million. The Committee shall establish performance goals from one or more
of the following performance criteria for those individuals subject to this
section: (i) net income, cash flow and/or reserve replacement measured against
internally established targets; and (ii) cost of finding of energy equivalent
barrels and/or stock price performance, in either case compared against industry
or a select peer group.
5. Payments in Event of Termination. In the event an employee terminates
employment with the Company for any reason including death, disability and
retirement prior to the date of payment of a bonus award, the Committee may, in
its sole discretion, pay to such employee or his beneficiary, as the case may
be, a bonus award. The amount of the bonus award, if any, will be at the sole
discretion of the Committee.
6. Prohibition Against Assignment or Encumbrance. The Plan, and the rights,
interests and benefits hereunder, shall not be assigned, transferred, pledged,
sold, conveyed, or encumbered in any way by an
B-1
<PAGE> 30
employee, and shall not be subject to execution, attachment or similar process.
Any attempted sale, conveyance, transfer, assignment, pledge or encumbrance of
the rights, interests or benefits provided pursuant to the terms of the Plan,
contrary to the terms of the foregoing sentence, or the levy of any attachment
or similar process thereupon, shall be null and void and without effect.
7. Nature of the Plan. The Plan shall constitute an unfunded, unsecured
obligation of the Company to make bonus payments in accordance with the
provisions of the Plan. The establishment of the Plan shall not be deemed to
create a trust. No participant shall have any security or other interest in any
assets of the Company.
8. Employment Relationship. Employee shall be considered to be in the
employment of the Company as long as he or she remains an employee of the
Company, any subsidiary of the Company or any enterprise which acquires all or
substantially all of the assets and business of the Company. Nothing in the
adoption or implementation of the Plan shall confer on any employee any right to
continued employment by the Company or affect in any way the right of the
Company to terminate his employment at any time. Any question as to whether and
when there has been a termination of an employee's employment and the cause of
such termination shall be determined by the Committee and its determination
shall be final.
9. Company Not Liable for Interest. If the Company for any reason fails to
make any payment provided for in the Plan at the time same becomes payable, the
Company shall not be liable for interest or other charges thereon.
10. Termination and Amendment of Plan. The Committee shall have the right,
without the necessity of shareholder or employee approval, to alter, amend or
terminate the Plan at any time.
11. Adjustments to Performance Factors. If any performance goal, criterion
or target for any year shall have been affected by special factors (including
material changes in accounting policies or practices, material acquisitions or
dispositions of property, or other unusual items) which in the Committee's
judgment should or should not be taken into account, in whole or in part, in the
equitable administration of the Plan, the Committee may, for any purpose of the
Plan, adjust such goal, criterion or target, as the case may be, for such year
(and subsequent years as appropriate), or any combination of them, and make
credits, payments and reductions accordingly under the Plan; provided, however,
that the Committee shall not have the authority to make any such adjustments
with respect to awards paid to any participant who is at such time a covered
employee under Section 4 of the Plan.
12. Rights of Company. Nothing contained in the Plan shall prevent the
Company or any subsidiary from adopting or continuing in effect other
compensation arrangements, which arrangements may be either generally applicable
or applicable only in specific cases.
B-2
<PAGE> 31
- --------------------------------------------------------------------------------
PROXY
ANADARKO PETROLEUM CORPORATION
SOLICITED BY THE BOARD OF DIRECTORS
for Annual Meeting of Stockholders
April 29, 1999
The undersigned stockholder hereby appoints ROBERT J. ALLISON, JR. AND SUZANNE
SUTER, and any one of them, with power of substitution and revocation, the
attorneys of the undersigned to vote all shares registered in the name of the
undersigned for the election of directors (unless such authority is withheld);
and approval of the 1999 Stock Incentive Plan, Performance Criteria and
Amendment to the Annual Incentive Bonus Plan and Amendment to Restated
Certificate of Incorporation; and on all other matters which may come before the
1999 Annual Meeting of Stockholders of Anadarko Petroleum Corporation to be held
on Thursday, April 29, 1999 at 9:30 A.M. or any adjournment thereof.
Please vote on any item as indicated on the reverse side. The shares represented
by this proxy will be voted as directed by the stockholder. If you wish to vote
in accordance with the Board of Directors' recommendations by telephone see
option 1, or please sign the reverse side; no boxes need to be checked.
(Continued, and to be marked, dated and signed, on the other side)
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
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<PAGE> 32
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4.
Please mark
your votes [X]
like this
WITHHELD
Item 1-ELECTION OF DIRECTORS FOR FOR ALL
Nominees: | | | |
(01) Ronald Brown
(02) John R. Butler, Jr.
(03) John R. Gordon
WITHHELD FOR: (Write that nominee's name
in the space provided below).
- ----------------------------------------
FOR AGAINST ABSTAIN
Item 2-APPROVAL OF 1999 STOCK | | | | | |
INCENTIVE PLAN
Item 3-APPROVAL OF THE PERFORMANCE | | | | | |
CRITERIA and AMENDMENT TO THE
ANNUAL INCENTIVE BONUS PLAN
Item 4-APPROVAL OF AMENDMENT TO RESTATED | | | | | |
CERTIFICATE OF INCORPORATION
PLEASE VOTE YOUR PROXY
Signature _____________________ Signature ______________________ Date __________
Please sign as your name appears above. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE AND READ THE REVERSE SIDE *
-----------------------------------------------------------------------
[GRAPHIC OMITTED] VOTE BY TELEPHONE [GRAPHIC OMITTED]
QUICK *** EASY *** IMMEDIATE
-----------------------------------------------------------------------
YOUR VOTE IS IMPORTANT! - YOU CAN VOTE IN ONE OF TWO WAYS:
1. TO VOTE BY PHONE: Call toll-free 1-800-840-1208 on a touch tone telephone
24 hours a day-7 days a week
There is NO CHARGE to you for this call. - Have your proxy card in hand.
You will be asked to enter a Control Number, which is located in the box in the
lower right hand corner of this form
- --------------------------------------------------------------------------------
OPTION 1: To vote as the Board of Directors recommends on ALL Items,
press 1
- --------------------------------------------------------------------------------
When asked, please confirm by Pressing 1.
- --------------------------------------------------------------------------------
OPTION 2: If you choose to vote on each Item separately, press 0. You
will hear these instructions:
- --------------------------------------------------------------------------------
Item 1 - To vote FOR ALL nominees, press 1; to WITHHOLD FOR
ALL nominees, press 9 To WITHHOLD FOR AN INDIVIDUAL nominee,
Press 0 and listen to the instructions
Item 2 - To vote FOR, press 1; AGAINST, press 9; ABSTAIN,
press 0.
When asked, please confirm by Pressing 1.
The instructions are the same for all remaining Items.
or
2. VOTE BY PROXY: Mark, sign and date your proxy card and return promptly in the
enclosed envelope.
NOTE: If you vote by telephone, THERE IS NO NEED TO MAIL BACK your Proxy Card.
THANK YOU FOR VOTING.
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<PAGE> 33
TWO NEW WAYS TO VOTE
========================================== ==================================
VOTE BY TELEPHONE VOTE BY INTERNET
========================================== ==================================
It's fast, convenient, and your vote It's fast, convenient, and
is immediately confirmed and posted. your vote is immediately
confirmed and posted and you
can get all future materials
Using a touch-tone phone by Internet.
call the toll-free number shown on the
voting instruction form. WWW.PROXYVOTE.COM
Just follow these 4 easy steps: Just follow these 4 easy steps:
1. Read the accompanying Proxy Statement 1. Read the accompanying Proxy
and voting instruction form. Statement and voting
2. Call the toll-free number shown on instruction form.
your voting instruction form. 2. Go to website WWW.PROXYVOTE.COM.
3. Enter your 12 digit Control 3. Enter your 12 digit Control
Number located on your voting Number located on your voting
instruction form. instruction form.
4. Follow the simple recorded instructions. 4. Follow the simple instructions.
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
GO TO WWW.PROXYVOTE.COM
DO NOT RETURN VOTING FORM IF YOU ARE VOTING BY TELEPHONE OR INTERNET
