EXHIBIT 20.1
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-38108
[ANADARKO LOGO] [UNION PACIFIC RESOURCES LOGO]
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
Anadarko Petroleum Corporation and Union Pacific Resources Group Inc. have
agreed on a merger transaction involving our two companies. Before we can
complete the merger, we must obtain the approval of our companies' stockholders.
We are sending you this joint proxy statement/prospectus to ask you to vote in
favor of the merger transaction and related matters.
In the merger, a subsidiary of Anadarko will merge with and into Union
Pacific Resources. As a result, Union Pacific Resources will become a wholly
owned subsidiary of Anadarko, and stockholders of Union Pacific Resources will
be entitled to receive 0.455 of an Anadarko common share in return for each
Union Pacific Resources common share they currently own. Outstanding Anadarko
common shares will remain unchanged in the merger. The Anadarko common shares,
including the Anadarko common shares issued to stockholders of Union Pacific
Resources as a result of the merger, will continue to be listed on the New York
Stock Exchange under the trading symbol "APC."
Union Pacific Resources will hold a special meeting of its stockholders
instead of its annual meeting to consider and vote on the merger proposal.
Anadarko will hold a special meeting of its stockholders to consider and vote on
four proposals related to the merger. The first proposal is to approve the
issuance of Anadarko common shares in the merger. The second proposal is to
increase the maximum size of the Anadarko board of directors from nine to 15
directors. The third proposal is to increase the authorized number of Anadarko
common shares from 300,000,000 to 450,000,000. The fourth proposal is to amend
Anadarko's 1999 stock incentive plan. Completion of the merger requires Union
Pacific Resources stockholder approval of the merger proposal and Anadarko
stockholder approval of the first proposal.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend your special
meeting, please take the time to vote by completing the enclosed proxy card and
mailing it to us or, in the case of Anadarko stockholders, you may also vote by
following the Internet or telephone instructions on the proxy card. If you sign,
date and mail your proxy card without indicating how you want to vote, your
proxy will be counted as a vote FOR each of the proposals presented. If you
neither return your card nor vote by Internet or telephone, or if you do not
instruct your broker how to vote any shares held for you in "street name," your
shares will not be voted at your special meeting.
The dates, times and places of the stockholders' meetings are as follows:
FOR ANADARKO STOCKHOLDERS: FOR UNION PACIFIC RESOURCES STOCKHOLDERS:
Thursday, July 13, 2000 Thursday, July 13, 2000
2:00 p.m., local time 10:00 a.m., local time
The Wyndham Hotel, Greenspoint Fort Worth Club
12400 Greenspoint Drive 306 West 7th Street, 12th Floor
Houston, Texas Fort Worth, Texas
This joint proxy statement/prospectus gives you detailed information about
the merger we are proposing, and it includes our merger agreement as Annex A.
You can get more information about our companies from publicly available
documents we have filed with the Securities and Exchange Commission. We
encourage you to read carefully this entire document, including all its annexes,
and WE ESPECIALLY ENCOURAGE YOU TO READ THE SECTION ON "RISK FACTORS" BEGINNING
ON PAGE 19.
We enthusiastically support this compelling combination of two successful
oil and gas exploration and production companies, and we join with the members
of our boards of directors in recommending that you vote FOR the merger and all
of the related proposals.
/s/ ROBERT J. ALLISON, JR. /s/ GEORGE LINDAHL III
Robert J. Allison, Jr. George Lindahl III
Chairman and Chief Executive Officer Chairman, President and Chief
Anadarko Petroleum Corporation Executive Officer
Union Pacific Resources Group Inc.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS JOINT PROXY STATEMENT/PROSPECTUS IS DATED MAY 31, 2000, AND IS
BEING FIRST MAILED TO STOCKHOLDERS ON OR ABOUT JUNE 1, 2000.
<PAGE>
This document incorporates important business and financial information about
Anadarko and Union Pacific Resources that is not included in or delivered with
this document. This information is available without charge to stockholders upon
written or oral request at the applicable company's address and telephone number
listed on page 4. To obtain timely delivery, stockholders must request the
information no later than July 6, 2000.
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT WILL HAPPEN IN THE MERGER?
A: In the merger, Union Pacific Resources will become a wholly owned subsidiary
of Anadarko. Union Pacific Resources stockholders will become Anadarko
stockholders and will own approximately 47% of the Anadarko common shares
that are outstanding after the merger. Current Anadarko stockholders will own
the remaining approximately 53%.
Q: WHY ARE ANADARKO AND UNION PACIFIC RESOURCES PROPOSING THE MERGER?
A: Our companies are proposing the merger because we expect as a combined
company to grow reserves, production, cash flow and earnings faster and
beyond the levels either company could achieve individually. We believe our
companies have complementary skills, and we seek to combine Anadarko's
strength in oil and gas exploration with Union Pacific Resources'
industry-leading oil and gas drilling and completion technology. In addition,
the combined company will hold significant lease acreage positions and have
significant opportunities in most of the high-potential basins of North
America, as well as in select international locations. Finally, the combined
company will have the cash flow and the financial strength to fund the
opportunities we have in our new portfolio, which is more robust and
well-balanced than either company's individual portfolio.
Q: WHAT WILL HAPPEN TO UNION PACIFIC RESOURCES COMMON SHARES IN THE MERGER?
A: Union Pacific Resources stockholders will receive 0.455 of an Anadarko common
share for each Union Pacific Resources common share they own. Union Pacific
Resources stockholders also will receive cash in place of any fractional
shares.
The Anadarko common shares received in the merger will be listed on the New
York Stock Exchange under the ticker symbol "APC."
Q: WHAT WILL HAPPEN TO ANADARKO COMMON SHARES IN THE MERGER?
A: Nothing. Each Anadarko common share outstanding will remain outstanding as an
Anadarko common share.
1
QUESTIONS AND ANSWERS ABOUT THE MERGER
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
777 Main Street
Fort Worth, Texas 76102
(817) 321-6000
Union Pacific Resources, one of the largest independent oil and gas
companies in North America, is engaged primarily in the exploration for and the
development and production of natural gas, natural gas liquids and crude oil in
several major producing basins in the United States, Canada, Guatemala,
Venezuela and other international areas. As of December 31, 1999, Union Pacific
Resources had 951 million energy equivalent barrels of proved reserves, 58% of
which were represented by natural gas reserves. Of total proved reserves, 56%
were located in the United States and 28% were located in Canada. In addition,
Union Pacific Resources engages in the hard minerals business through
nonoperated joint ventures and royalty interests in several coal and trona
(natural soda ash) mines located on lands within and adjacent to its land grant
holdings in Wyoming. The land grant consists of land in Colorado, Wyoming and
Utah, where Union Pacific Resources has fee ownership of the mineral rights
under approximately 7.9 million acres. Union Pacific Resources also held as of
December 31, 1999 leasehold interests in more than 17 million gross acres
worldwide. During 1999, over 68% of the revenues, 44% of fixed assets and 56% of
proved reserves of Union Pacific Resources were generated or located in the
United States.
4
SUMMARY
<PAGE>
THE MERGER (PAGE 31)
The merger agreement is attached as Annex A to this document. Please carefully
read the merger agreement. The merger agreement is the legal document that
governs the merger.
GENERAL
We propose a merger transaction in which Union Pacific Resources will merge
with Dakota Merger Corp., a wholly owned subsidiary of Anadarko created for the
purpose of effecting the merger. After the merger, Union Pacific Resources will
be a wholly owned subsidiary of Anadarko and Union Pacific Resources
stockholders will become Anadarko stockholders.
EXCHANGE OF COMMON SHARES (PAGE 59)
When we complete the merger, Union Pacific Resources common shares will be
converted into Anadarko common shares.
UNION PACIFIC RESOURCES STOCKHOLDERS. Each Union Pacific Resources common
share will automatically be converted into 0.455 of an Anadarko common share.
The total number of Anadarko common shares received, therefore, will be equal to
the number of Union Pacific Resources common shares owned multiplied by 0.455,
with cash being paid in place of any fractional shares. Union Pacific Resources
stockholders will own approxi-
5
SUMMARY
<PAGE>
mately 47% of the Anadarko common shares outstanding after the merger.
ANADARKO STOCKHOLDERS. Each Anadarko common share will remain issued and
outstanding as one Anadarko common share. Anadarko stockholders will own
approximately 53% of the Anadarko common shares outstanding after the merger.
UNION PACIFIC RESOURCES STOCK OPTIONS (PAGE 60)
When we complete the merger, stock options to purchase Union Pacific
Resources common shares granted to Union Pacific Resources employees and
directors under Union Pacific Resources' stock option plans that are outstanding
and not yet exercised immediately before completing the merger will become
options to purchase Anadarko common shares. The number of common shares subject
to such stock options and the exercise price of such stock options will be
adjusted according to the exchange ratio.
MANAGEMENT AND OPERATIONS AFTER THE MERGER (PAGE 64)
After the merger, the Anadarko board of directors will continue to manage
the business of Anadarko, which then will include the business of Union Pacific
Resources as a wholly owned subsidiary. The company will continue to be called
"Anadarko Petroleum Corporation" and will be headquartered in Houston, Texas.
The merger agreement requires Anadarko to take all steps necessary to have
Anadarko stockholders consider and vote upon an amendment to Anadarko's restated
certificate of incorporation to increase the maximum size of the Anadarko board
of directors to at least 13 directors. If the proposed amendment to increase the
maximum size of the board to 15 directors is approved by the holders of 80% of
the outstanding Anadarko common shares, the Anadarko board of directors will
take all action necessary, immediately following the completion of the merger,
to elect as Anadarko directors George Lindahl III, Chairman, President and Chief
Executive Officer of Union Pacific Resources, and four others who are currently
independent directors of Union Pacific Resources and who are mutually agreed
upon by the chief executive officers of Anadarko and Union Pacific Resources. If
this amendment is not approved by the holders of 80% of the outstanding Anadarko
common shares, the Anadarko board of directors will take all action necessary,
immediately following the completion of the merger, to elect as Anadarko
directors Mr. Lindahl and two others who are currently independent directors of
Union Pacific Resources and who are mutually agreed upon by the chief executive
officers of Anadarko and Union Pacific Resources. If the maximum size of the
Anadarko board of directors is not increased, two current directors of Anadarko
would have to resign to make room for the new directors.
6
SUMMARY
<PAGE>
ACCOUNTING TREATMENT (PAGE 56)
The merger will be treated as a "purchase" for accounting purposes.
Therefore, the purchase price will be allocated to the assets and liabilities of
Union Pacific Resources based on their estimated fair market values at the date
of acquisition, and any excess of the purchase price over such fair market
values will be accounted for as goodwill.
INTERESTS OF CERTAIN PEOPLE IN THE MERGER THAT ARE DIFFERENT FROM YOUR INTERESTS
(PAGE 52)
Some of Union Pacific Resources' directors and executive officers have
interests in the merger that are different from Union Pacific Resources
stockholders' interests:
- All unvested outstanding stock options (other than performance-based
options) that Union Pacific Resources has granted to its directors will
become exercisable upon approval of the merger by Union Pacific Resources
stockholders. Any options not exercised before the merger will be
converted into options to purchase Anadarko common shares, with
appropriate adjustments to reflect the exchange ratio. Any director who
is not asked to serve as a member of the Anadarko board of directors will
be entitled to exercise the options at any time during the five-year
period following the director's departure from the Union Pacific
Resources board of directors or the remaining term of the option,
whichever is less.
- Union Pacific Resources' executive officers are each covered by
change-in-control agreements that generally become operative
8
SUMMARY
<PAGE>
upon approval of the merger by Union Pacific Resources stockholders. At
such time, all unvested outstanding options (other than performance-based
options) that Union Pacific Resources has granted to its executive
officers will become exercisable and, if not exercised before the merger,
will be converted into options to purchase Anadarko common shares with
appropriate adjustments to reflect the exchange ratio. Also, at such
time, all restrictions on restricted shares (other than performance-based
restrictions, if any) will lapse and be deemed fully satisfied. If, after
the merger, and unless waived by the executive, an executive (a) is
terminated by Anadarko or the surviving corporation within a three-year
period without "cause," (b) terminates employment for "good reason" or
(c) terminates employment for any reason during a 30-day period beginning
on the first anniversary of the merger, the executive is entitled to
certain change-in-control benefits.
- As a condition to Anadarko's obligation to complete the merger, Mr.
Lindahl has entered into a three-year employment agreement with Anadarko
under which he will serve as Vice Chairman of Anadarko commencing on the
effective date of the merger and, in lieu of his current
change-in-control benefits, will be entitled to equity-based compensation
and other benefits.
- Under the merger agreement, Anadarko will take all steps necessary to
have Anadarko stockholders consider and vote upon an amendment to
Anadarko's restated certificate of incorporation to increase the maximum
size of the Anadarko board of directors to at least 13 directors. If
Anadarko stockholders approve the amendment, five current Union Pacific
Resources directors, including Mr. Lindahl, will become Anadarko
directors. Otherwise, three current Union Pacific Resources directors,
including Mr. Lindahl, will become Anadarko directors.
Some of Anadarko's directors and executive officers have interests in the
merger that are different from Anadarko stockholders' interests:
- All unvested outstanding options of Anadarko directors become exercisable
upon a change in control. The merger will constitute a change in control
under Anadarko's stock plans.
- Anadarko's executive officers are covered by change-in-control agreements
with benefits and other provisions similar to those pertaining to Union
Pacific Resources executive officers. The merger will constitute a change
in control under these agreements. In connection with the merger,
Anadarko expects to obtain assurances from the Anadarko executive
officers that they will not treat the merger as a change in control under
the agreement.
- Under Anadarko's stock plans, upon a change in control, unvested options
held by Anadarko's executive officers become exercisable and restrictions
on executives' restricted shares lapse.
Additional interests of Union Pacific Resources and Anadarko directors and
executive officers are described elsewhere in this document. For more
information, please see pages 52 through 56.
Our boards of directors knew about these interests, and considered them, in
approving the merger and recommending that our stockholders approve the merger
transaction.
9
SUMMARY
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED BY ANADARKO AND UNION PACIFIC RESOURCES DIRECTORS
AND EXECUTIVE OFFICERS AS OF THE RECORD DATE
ANADARKO SPECIAL MEETING UNION PACIFIC RESOURCES SPECIAL MEETING
------------------------ ---------------------------------------
<S> <C>
Anadarko directors and executive officers Union Pacific Resources directors and
beneficially own 5,168,867 Anadarko common executive officers beneficially own 4,515,241
shares, including outstanding options. Union Pacific Resources common shares,
These shares represent approximately 4% of including outstanding options. These shares
the Anadarko common shares outstanding as represent approximately 1.3% of the Union
of the record date. Pacific Resources common shares outstanding
as of the record date.
These individuals have indicated that they
intend to vote their Anadarko common shares These individuals have indicated that they
in favor of the Anadarko proposals. intend to vote their Union Pacific Resources
common shares in favor of the merger
proposal.
</TABLE>
26
THE SPECIAL MEETINGS
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
UNION PACIFIC RESOURCES DIRECTORS AND EXECUTIVE OFFICERS. In considering
the recommendation of the Union Pacific Resources board of directors with
respect to the merger, Union Pacific Resources stockholders and Anadarko
stockholders should be aware that some Union Pacific Resources directors and
executive officers have interests in the merger that are different from the
interests of Union Pacific Resources stockholders generally:
- DIRECTOR STOCK OPTIONS. All unvested outstanding stock options that Union
Pacific Resources has granted to its directors will become exercisable
upon approval of the merger by Union Pacific Resources stockholders,
other than options that become exercisable upon the attainment of
performance targets which, at the time the stockholders approve the
merger, have not been met. The options that will become exercisable
represent the right to purchase 376,833 Union Pacific Resources common
shares. Under the merger agreement, all outstanding options to purchase
Union Pacific Resources common shares that are not exercised before the
completion of the merger will be converted into options to purchase
Anadarko common shares, with appropriate adjustments to reflect the
exchange ratio. As a result of an amendment to the 1995 Directors Stock
Incentive Plan approved by the Union Pacific Resources board on April 2,
2000, any director who is not asked to serve as a member of the Anadarko
board will be entitled to exercise the options at any time during the
five-year period following the director's departure from the board or the
remaining term of the option, whichever is shorter.
- DEFERRED COMPENSATION PLANS. Under Union Pacific Resources' Executive
Deferred Compensation Plan and Deferred Compensation Plan for the Board
of Directors, executive officers and directors may defer receipt of
amounts payable to them as compensation before they earn or receive those
amounts. For those participants who commit to defer compensation into the
plans' stock unit accounts for a specified period, the company
contributes to their accounts an additional 25% of the amounts they so
defer. The plans generally provide that if a participant's employment or
service is terminated (for reasons other than death, disability, or for
executives' retirement) within one year of a company contribution, the
participant will forfeit that contribution. If a participant is
terminated within two years of a change in control, however, the
participant will not have to forfeit the company's most recent
contribution. The stock units, including the right to receive
distributions in Union Pacific Resources common shares, upon completion
of the merger will be converted into similar rights with respect to
Anadarko common shares, with appropriate adjustments to reflect the
exchange ratio.
52
THE MERGER
<PAGE>
- CHANGE-IN-CONTROL AGREEMENTS. Union Pacific Resources' executive officers
are each covered by individual change-in-control agreements that
generally become operative upon approval of the merger by Union Pacific
Resources stockholders. In connection with the execution of the merger
agreement, the board approved and the company entered into supplemental
change-in-control agreements that modified the pre-existing
change-in-control benefits to place such benefits in relative overall
parity with the change-in-control benefits payable to similarly-situated
Anadarko executives. Upon approval of the merger by Union Pacific
Resources stockholders, the change-in-control agreements provide for
automatic vesting of all unvested stock options and elimination of all
remaining forfeiture provisions on restricted shares, other than options
or restricted shares (if any) subject to performance targets that at the
time the stockholders approve the merger have not been met. This
provision will cover a total of 860,666 Union Pacific Resources common
shares, including option grants with respect to 760,000 shares approved
by the compensation committee of the board of Union Pacific Resources,
effective March 30, 2000. In addition, the agreements provide that if,
during the three-year period following stockholder approval of the
merger, an executive officer other than Mr. Lindahl (1) is terminated by
Anadarko or the surviving corporation without "cause," (2) terminates
employment for "good reason" or (3) terminates employment for any reason
during a 30-day period beginning on the first anniversary of the merger,
the executive is entitled to the following benefits:
- A lump-sum payment of (a) 2.9 times the executive's base salary, (b) 2.9
times a "bonus factor" equal to the greater of the highest annual bonus
the executive earned in the three years before the merger and the annual
bonus that the executive earned in the year before the year of
termination, and (c) a pro rata bonus based on the number of months
elapsed in the fiscal year of the merger;
- 36 months of additional age and benefit credit under the company's
supplemental pension plan, 36 months' worth of additional matching
contributions under the company's qualified and nonqualified thrift
plans, calculated as if the executive had continued with the company for
such period, and a guaranteed account value under the supplemental
thrift plan equal to the greater of the value at the date of termination
or at the date of the merger;
- 36 months of health, life, disability and accident coverage;
- Upon such termination, all unvested options shall become exercisable and
all restrictions on restricted shares shall lapse or be deemed fully
satisfied, unless otherwise expressly waived by the executive officer,
and all options then held by the executive shall be exercisable for five
years following the termination or the remaining term of such option,
whichever is shorter;
- Financial planning services for three years after termination at a cost
not to exceed $7,500 annually;
- Outplacement services at a cost not to exceed $100,000;
- Additional benefits matching any benefits that Anadarko might grant to a
similarly situated Anadarko executive in connection with the merger and
payable to the Union Pacific Resources executive only under
circumstances that such additional benefits would be paid to the
Anadarko executive; and
- An additional payment to the extent necessary to make the executive
whole for any excise tax imposed as a result of receiving "excess
parachute payments."
Mr. Lindahl also has a change-in-control agreement. His benefits are the same as
those described above except that his lump-sum payment is (a) three times his
base salary, and (b) three times a "bonus factor" equal to the greater of the
highest annual bonus he earned in the three years before the merger and the
annual bonus that he earned in the year before the year of termination.
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THE MERGER
<PAGE>
If each of Union Pacific Resources' seven executive officers were
terminated "without cause" or were to terminate employment for "good
reason" immediately after the effective time of the merger, we estimate
that the aggregate amount of cash severance payable to the executives upon
the terminations (before required tax withholdings) would be approximately
$19.7 million. This estimate assumes that the merger occurred on April 2,
2000 and that the price of a Union Pacific Resources common share
immediately before the merger was $17.60. Union Pacific Resources has
established so-called "rabbi trusts" for purposes of providing payments
under the change-in-control agreements and certain deferred compensation
plans that include executive officers and directors and is obligated to
transfer to the rabbi trusts sufficient funds to satisfy such payment
obligations to executive officers and directors. Since entering into the
merger agreement, Anadarko and Union Pacific Resources have engaged in
discussions with a number of executive officers and other senior
management employees of Union Pacific Resources concerning their continued
service with the combined company after the merger and their waiver of
rights under their change-in-control agreements which would result from
the merger. Anadarko expects that those executive officers and senior
management employees who commit to remain with the combined company and
agree to waive their rights under such agreements would receive payment
from Anadarko in the form of Anadarko common shares having a value equal
to the aggregate cash severance amount which would be paid (exclusive of
the amount attributable to the pro rata bonus for the year of the merger
and before required tax withholdings) if their employment were to
terminate, other than for cause, following the merger. In consideration of
their waivers, such executives and other senior management employees would
also receive grants of options to purchase Anadarko common shares.
- CONTINUED EMPLOYMENT WITH ANADARKO. It is a condition to Anadarko's
obligation to complete the merger that Mr. Lindahl execute a three-year
employment agreement under which he will serve as Vice Chairman of
Anadarko after the merger, and Mr. Lindahl has entered into such an
agreement. The principal terms of the employment agreement with Mr.
Lindahl include the following: (a) guaranteed annual cash compensation of
at least $1,500,000; (b) an equity grant of 125,000 Anadarko shares of
restricted stock that vests over the term of the agreement, 125,000
unrestricted Anadarko common shares, and options to acquire 500,000
Anadarko common shares at fair market value on the date of grant, which
options vest over the term of the agreement; (c) retirement benefits
determined under the Anadarko Retirement Restoration Plan based on
termination of employment at age 57 with 17 years of credited service and
a minimum final average pay of $1,500,000, with such benefit offset by
certain amounts payable under other Anadarko and Union Pacific Resources
retirement plans; (d) an additional payment, if Anadarko terminates Mr.
Lindahl's employment without cause or if Mr. Lindahl resigns for good
reason, to make Mr. Lindahl whole for any excise tax imposed with respect
to any payment or distribution made under the agreement; (e) an agreement
by Mr. Lindahl not to compete with Anadarko for the shorter of one year
following the date of his termination or the three years following the
effective date of the agreement; and (f) severance and other benefits in
the event of Mr. Lindahl's separation from service with Anadarko in
connection with a change of control of Anadarko following the merger. The
employment agreement between Mr. Lindahl and Anadarko has been executed,
but will not take effect unless the merger is consummated. If the
employment agreement is made effective, the change-in-control agreement
between Mr. Lindahl and Union Pacific Resources will terminate.
- DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. Under the merger
agreement, after the completion of the merger, Anadarko will cause Union
Pacific Resources to indemnify the present and former officers and
directors of Union Pacific Resources in respect of acts or omissions
occurring before the completion of the merger to the extent provided
under the Union Pacific Resources charter and bylaws. In addition,
Anadarko shall use all reasonable best efforts to cause Union Pacific
Resources to maintain, for a period of six years, policies of directors'
and officers' liability insurance with respect to acts or omissions
occurring before the completion of the merger. These policies will be
comparable to those currently maintained by Union Pacific Resources.
However, neither Union Pacific Resources nor Anadarko will be required to
pay an aggregate
54
THE MERGER
<PAGE>
premium for this coverage in excess of 200% of the annual premiums that
Union Pacific Resources currently pays.
- ANADARKO BOARD OF DIRECTORS. Under the merger agreement, Anadarko will
take all steps necessary to have Anadarko stockholders consider and vote
upon an amendment to Anadarko's restated certificate of incorporation to
increase the maximum size of the Anadarko board of directors to at least
13 directors. As discussed under "Proposed Amendments to Anadarko's
Restated Certificate of Incorporation -- Maximum Board Size Proposal,"
Anadarko is proposing to increase the maximum size of the board of
directors to 15 members. If this amendment is approved by the holders of
80% of the outstanding Anadarko common shares, the Anadarko board of
directors will take all action necessary, immediately following the
completion of the merger, to elect as Anadarko directors Mr. Lindahl and
four other individuals who are currently independent directors of the
Union Pacific Resources board of directors, as may be mutually agreed by
the chief executive officers of Anadarko and Union Pacific Resources. If
this amendment is not approved by the holders of 80% of the outstanding
Anadarko common shares, the Anadarko board of directors will take all
action necessary, immediately following the completion of the merger, to
elect as Anadarko directors Mr. Lindahl and two other individuals who are
currently independent directors of the Union Pacific Resources board of
directors, as may be mutually agreed by the chief executive officers of
Anadarko and Union Pacific Resources.
The Union Pacific Resources board of directors was aware of these interests
and took them into account in approving the merger and recommending that the
Union Pacific Resources stockholders approve the merger.
Union Pacific Resources directors and executive officers beneficially
owned, as of the record date, approximately 1.3% of the outstanding Union
Pacific Resources common shares, including Union Pacific Resources common shares
subject to outstanding stock options.
ANADARKO DIRECTORS AND EXECUTIVE OFFICERS. In considering the
recommendation of the Anadarko board of directors with respect to the merger,
Union Pacific Resources stockholders and Anadarko stockholders should be aware
that some Anadarko directors and executive officers have interests in the merger
that are different from the interests of Anadarko stockholders generally:
- STOCK OPTIONS AND OTHER EQUITY-BASED AWARDS. All outstanding unvested
stock options that Anadarko has granted to its directors vest upon a
change in control. These stock options represent the right to purchase
45,000 Anadarko common shares. Under Anadarko's stock plans, upon a
change in control, 3,028,000 unvested options held by Anadarko's
executive officers become exercisable and restrictions on 73,125 shares
of executives' restricted stock lapse. The merger will constitute a
change in control under the plans providing for these stock options and
shares of restricted stock.
- CHANGE-IN-CONTROL ARRANGEMENTS. Anadarko's executive officers are covered
by change-in-control agreements with benefits and other provisions
similar to those in the Union Pacific Resources change-in-control
agreements described above. The merger will constitute a change of
control under these agreements. If the employment of each of Anadarko's
18 executive officers were to terminate after the merger, other than for
"cause," we estimate that the aggregate amount of cash severance payable
upon the terminations (exclusive of amounts attributable to certain
retirement and deferred compensation benefits and before required tax
withholdings) would be approximately $39 million. In connection with the
merger, Anadarko expects to obtain assurance from the Anadarko officers
that they will not treat the merger as a change in control under these
agreements. Since entering into the merger agreement, Anadarko has
engaged in discussions with these executives to the effect that in
consideration of the executives' waiver of their rights in connection
with the merger, Anadarko would make payment to each such executive in
the form of Anadarko common shares having a value equal to the aggregate
cash severance amount that would be paid (exclusive of amounts
attributable to certain retirement and deferred compensation benefits and
before required
55
THE MERGER
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tax withholdings) if the executive's employment were to terminate, other
than for cause, following the merger.
The Anadarko board of directors was aware of these interests and took them
into account in approving the merger.
Anadarko directors and executive officers beneficially owned, as of the
record date, approximately 4% of outstanding Anadarko common shares, including
those Anadarko common shares subject to outstanding stock options.
ACCOUNTING TREATMENT
The merger will be treated as a "purchase" for accounting purposes.
Therefore, the purchase price will be allocated to Union Pacific Resources'
assets and liabilities based on their estimated fair market values at the
completion of the merger. Any excess of the purchase price over these fair
market values will be accounted for as goodwill.
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THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF THE MERGER AGREEMENT, A
COPY OF WHICH IS ATTACHED AS ANNEX A TO THIS DOCUMENT AND IS INCORPORATED IN
THIS DOCUMENT BY REFERENCE. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MERGER AGREEMENT. YOU SHOULD CAREFULLY READ THE MERGER
AGREEMENT BECAUSE IT, AND NOT THIS DOCUMENT, IS THE LEGAL DOCUMENT THAT GOVERNS
THE MERGER.
THE MERGER
At the effective time of the merger, Dakota Merger Corp. will merge with
and into Union Pacific Resources, which will be the surviving corporation in the
merger and become a wholly owned subsidiary of Anadarko.
The closing date of the merger will occur as soon as practicable, and in
any event within three business days following the date on which all conditions
to the merger have been satisfied or waived, unless we agree on another time. As
promptly as possible on the closing date of the merger, we will file articles of
merger with the Division of Corporations and Commercial Code of the State of
Utah. The effective time of the merger will be the time we file the articles of
merger with the Division of Corporations and Commercial Code or at a later time
as we may agree and specify in the articles of merger. We currently anticipate
that we will complete the merger shortly after the Union Pacific Resources and
Anadarko special meetings, assuming our respective stockholders approve the
merger and the share issuance at these special meetings and all other conditions
to the merger have been satisfied or waived.
MERGER CONSIDERATION
EXCHANGE RATIO. At the effective time of the merger, each Union Pacific
Resources common share issued and outstanding immediately before the effective
time of the merger (other than Union Pacific Resources common shares held by
Union Pacific Resources, which will be canceled and retired) will be converted
into 0.455 of an Anadarko common share.
FRACTIONAL SHARES. Certificates for fractional Anadarko common shares will
not be issued in the merger. Union Pacific Resources stockholders who would
otherwise receive fractional shares will, instead, be entitled to receive a cash
payment equal to the value of these fractional share interests.
EXCHANGE PROCEDURES
As soon as reasonably practicable after the effective time of the merger,
an exchange agent will mail a letter of transmittal to each holder of record of
Union Pacific Resources stock certificates. This letter of transmittal must be
used in surrendering Union Pacific Resources stock certificates to the exchange
agent for cancellation. Upon surrender of a Union Pacific Resources stock
certificate for cancellation, together with a duly executed letter of
transmittal, the holder of such Union Pacific Resources stock certificate will
be entitled to receive in exchange (a) an Anadarko certificate representing the
whole number of Anadarko common shares that the holder has the right to receive,
(b) a check representing the amount of cash payable in lieu of any fractional
Anadarko common shares, if any, and (c) unpaid dividends and distributions, if
any, that the holder has the right to receive pursuant to the merger agreement,
after giving effect to any required withholding tax. UNION PACIFIC RESOURCES
STOCKHOLDERS SHOULD NOT SEND IN THEIR UNION PACIFIC RESOURCES STOCK CERTIFICATES
UNTIL THEY RECEIVE THE LETTER OF TRANSMITTAL.
After the effective time of the merger, each Union Pacific Resources stock
certificate, until surrendered and exchanged, will represent only the right to
receive a certificate representing Anadarko common shares and cash in lieu of
fractional shares, if any, and unpaid dividends and distributions, if any.
Holders of Union Pacific Resources stock certificates will not be entitled to
receive any dividends or other distributions declared or made by Anadarko having
a record date on or after the effective time of the merger until the Union
Pacific Resources stock certificates are surrendered. Subject to applicable law,
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THE MERGER AGREEMENT
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following surrender of the Union Pacific Resources stock certificates, such
dividends and distributions, if any, will be paid without interest and less the
amount of any required withholding taxes.
TREATMENT OF UNION PACIFIC RESOURCES STOCK OPTIONS
Before the effective time of the merger, Anadarko and Union Pacific
Resources will take all necessary actions to cause each unexpired and
unexercised outstanding stock option granted or issued under Union Pacific
Resources stock option plans in effect on the date of the merger agreement to be
converted at the effective time of the merger into a stock option to acquire
Anadarko common shares, with appropriate adjustments to reflect the exchange
ratio of 0.455 of an Anadarko common share for each Union Pacific Resources
common share. Anadarko will equitably adjust the applicable performance target
under any Union Pacific Resources stock option that contains performance targets
and, with respect to "incentive stock options," carry out such conversion in
compliance with section 424(a) of the Internal Revenue Code.
Anadarko will use its reasonable efforts to file with the SEC within 30
days after the closing date of the merger a registration statement to register
Anadarko common shares issuable upon exercise of these stock options to acquire
Anadarko common shares, and to use its reasonable efforts to cause this
registration statement to remain effective until the exercise or expiration of
these stock options.
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THE MERGER AGREEMENT
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BUSINESS OF UNION PACIFIC RESOURCES
Union Pacific Resources is engaged primarily in the exploration for and the
development and production of natural gas, natural gas liquids and crude oil. At
the end of 1999, Union Pacific Resources had proved reserves of 402 million
barrels of crude oil, condensate and natural gas liquids and 3.3 trillion cubic
feet of natural gas. Union Pacific Resources' exploration and development
operations are organized into four primary business operating areas.
- U.S. ONSHORE OPERATIONS. These operations are composed of Union Pacific
Resources' oil and gas activities that are concentrated in the land grant
area of Colorado, Wyoming and Utah; the Coastal Plain of Texas and
Louisiana; the Austin Chalk trend in Texas and Louisiana; the East Texas
area; and the West Texas area. U.S. onshore operations accounted for 43%
of Union Pacific Resources' 1999 total capital expenditures, 49% of its
proved reserves and 59% of its producing property sales volumes. Over 70%
of the proved reserves in the United States is natural gas.
- U.S. OFFSHORE OPERATIONS. These operations are composed of Union Pacific
Resources' oil and gas properties in the Gulf of Mexico. This operating
area accounted for 13% of the 1999 capital expenditures, 7% of proved
reserves, and 7% of producing property sales volumes.
- CANADIAN OPERATIONS. These operations are composed of properties in
Western Canada and were primarily acquired by Union Pacific Resources as
part of its 1998 acquisition of Norcen Energy Resources Limited for a
cash price of $2.6 billion. These operations provide a commodity mix of
38% crude oil and natural gas liquids and 62% natural gas. Approximately
46% of Canadian oil production is heavy oil. In 1999, the Canadian
operations accounted for 29% of capital expenditures, 28% of proved
resources and 21% of producing property sales volumes.
- OTHER INTERNATIONAL OPERATIONS. These operations are concentrated in
Latin America, primarily in Guatemala and Venezuela. Other less
significant international oil and gas interests include six fields in
Argentina, two non-operated offshore producing properties in Australia, a
producing interest in a non-operated property in Egypt and an
exploitation interest in Brazil with potential exploration upside. In the
aggregate, in 1999 these international operations accounted for 15% of
capital expenditures, 16% of proved reserves, and 13% of producing
property sales volumes.
Union Pacific Resources' mineral segment contributed significantly to Union
Pacific Resources' operating revenues in 1999 ($117.8 million) by exploiting the
hard minerals portion of Union Pacific Resources' fee mineral interests in the
land grant through non-operated joint venture and royalty arrangements in coal,
trona and industrial mineral mines. In general, Union Pacific Resources
reinvests the cash flow from its hard minerals operations into its oil and gas
business segment.
Since 1998, Union Pacific Resources has made significant asset sales of its
non-strategic properties, including the $1.36 billion sale of its gathering,
processing and marketing business segment to Duke Energy Field Services, Inc. in
March 1999. The proceeds from the asset sales generally have been used to pay
down the debt incurred from the acquisition of Norcen Energy Resources Limited.
Union Pacific Resources had 2,223 employees as of February 29, 2000. Union
Pacific Resources' headquarters are located at 777 Main Street, Fort Worth,
Texas 76102, its telephone number is (817) 321-6000, and its website is
http://www.upr.com.
Additional information concerning Union Pacific Resources is included in
documents filed by Union Pacific Resources with the SEC, which are incorporated
by reference into this document. See "Where You Can Find More Information."
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THE COMPANIES
