1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
[ ] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
sec.240.14a-11(c) or sec.240.14a-12
JOINT FILING BY:
ANADARKO PETROLEUM CORPORATION
UNION PACIFIC RESOURCES GROUP INC.
- - - - - - - - - - - - --------------------------------------------------------------------------------
(NAMES OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rule 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, no par value, of Union Pacific Resources Group Inc.
- - - - - - - - - - - - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
252,050,651 Shares of Union Pacific Resources Common Stock
- - - - - - - - - - - - --------------------------------------------------------------------------------
(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 is
calculated and state how it was determined):
The proposed maximum aggregate value of the transaction of $5,671,139,647.50
was calculated in accordance with Rule 0-11(a)(4) and (c) promulgated under
the Securities Exchange Act of 1934, as amended, based on $22.50, the
average of the high and low sale price per share of Union Pacific Resources
Common Stock on the New York Stock Exchange on May 17, 2000, multiplied by
252,050,651, the outstanding number of shares of Union Pacific Resources
Common Stock.
- - - - - - - - - - - - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction: $5,671,139,647.50
- - - - - - - - - - - - --------------------------------------------------------------------------------
(5) Total fee paid: $1,134,227.93
- - - - - - - - - - - - --------------------------------------------------------------------------------
[ ] 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:
- - - - - - - - - - - - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- - - - - - - - - - - - --------------------------------------------------------------------------------
(3) Filing Party:
- - - - - - - - - - - - --------------------------------------------------------------------------------
(4) Date Filed:
- - - - - - - - - - - - --------------------------------------------------------------------------------
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SUBJECT TO COMPLETION, MAY , 2000
[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:
ANADARKO STOCKHOLDERS: UNION PACIFIC RESOURCES STOCKHOLDERS:
[ ] [ ]
June [ ], 2000, [ ] a.m., June [ ], 2000, [ ] a.m.,
local time local time
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 18.
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 IN FAVOR OF the merger
and all of the related proposals.
George Lindahl III
Robert J. Allison, Jr. Chairman, President and Chief Executive Officer
Chairman and Chief Executive Officer Union Pacific Resources Group Inc.
Anadarko Petroleum Corporation
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 [ ], 2000,
AND IS BEING FIRST MAILED TO STOCKHOLDERS ON [ ], 2000.
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UNION PACIFIC RESOURCES GROUP INC.
777 MAIN STREET
FORT WORTH, TEXAS 76102
---------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE , 2000
---------------------
To the Stockholders of Union Pacific Resources Group Inc.:
A special meeting of stockholders of Union Pacific Resources Group Inc.
will be held on [ ], June [ ], 2000, at [ ], local time, at [ ], for the
following purposes:
- To consider and vote upon a proposal to approve the merger agreement
among Anadarko Petroleum Corporation, Dakota Merger Corp., which is a
newly formed, wholly owned subsidiary of Anadarko, and Union Pacific
Resources, and the transactions contemplated by the merger agreement,
including the merger.
- To transact such other business as may properly be brought before the
special meeting and any adjournments or postponements thereof.
Holders of record of Union Pacific Resources common shares at the close of
business on May 30, 2000 will be entitled to vote at the special meeting or any
adjournment or postponement thereof.
THE UNION PACIFIC RESOURCES BOARD OF DIRECTORS HAS DETERMINED THAT THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY IT ARE IN THE BEST
INTERESTS OF UNION PACIFIC RESOURCES AND ITS STOCKHOLDERS. ACCORDINGLY, THE
UNION PACIFIC RESOURCES BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE MERGER, AT THE SPECIAL
MEETING.
Please take the time to vote by completing and mailing the enclosed proxy
card. A postage-prepaid envelope has been provided for your convenience. You may
revoke your proxy at any time before the vote is taken by sending to the
Secretary of Union Pacific Resources a proxy with a later date. Alternatively,
you may revoke your proxy by delivering to the Secretary of Union Pacific
Resources a written revocation prior to the special meeting or by voting in
person at the special meeting.
IT IS IMPORTANT THAT YOU SIGN, DATE AND RETURN THE PROXY CARD IN THE
ENCLOSED ENVELOPE, SO THAT YOUR UNION PACIFIC RESOURCES COMMON SHARES WILL BE
REPRESENTED, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. IF YOU DO
NOT RETURN YOUR CARD, OR IF YOU DO NOT INSTRUCT YOUR BROKER HOW TO VOTE ANY
UNION PACIFIC RESOURCES COMMON SHARES HELD FOR YOU IN "STREET NAME," YOUR UNION
PACIFIC RESOURCES COMMON SHARES WILL NOT BE VOTED AT THE SPECIAL MEETING.
REGARDLESS OF THE NUMBER OF UNION PACIFIC RESOURCES COMMON SHARES YOU HOLD,
YOUR VOTE IS VERY IMPORTANT.
By Order of the Board of Directors
Kerry R. Brittain
Vice President, General Counsel
and Secretary
Fort Worth, Texas
[ ] , 2000
PLEASE DO NOT SEND ANY UNION PACIFIC RESOURCES STOCK CERTIFICATES AT THIS TIME.
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ANADARKO PETROLEUM CORPORATION
17001 NORTHCHASE DRIVE
HOUSTON, TEXAS 77060-2141
---------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE , 2000
---------------------
To the Stockholders of Anadarko Petroleum Corporation:
A special meeting of stockholders of Anadarko Petroleum Corporation will be
held on [ ], June [ ], 2000, at [ ], local time, at [ ], for the following
purposes:
- To consider and vote upon a proposal to approve the issuance of the
Anadarko common shares to be received by Union Pacific Resources Group
Inc. stockholders in the proposed merger among Anadarko, Dakota Merger
Corp, which is a newly-formed, wholly owned subsidiary of Anadarko, and
Union Pacific Resources.
- To consider and vote upon a proposal to approve an amendment to
Anadarko's restated certificate of incorporation to increase the maximum
size of the Anadarko board of directors from nine to 15 directors.
- To consider and vote upon a proposal to approve an amendment to
Anadarko's restated certificate of incorporation to increase the
authorized number of Anadarko common shares from 300,000,000 to
450,000,000.
- To consider and vote upon a proposal to approve an amendment to
Anadarko's 1999 stock incentive plan that would, among other things,
increase the number of Anadarko common shares that may be granted under
the plan.
- To transact such other business as may properly be brought before the
special meeting and any adjournments or postponements thereof.
Holders of record of Anadarko common shares at the close of business on
May 30, 2000 will be entitled to vote at the special meeting or any
adjournment or postponement thereof. A list of Anadarko stockholders will
be available for inspection at Anadarko's headquarters during ordinary
business hours for the ten-day period prior to the special meeting.
THE ANADARKO BOARD OF DIRECTORS HAS DETERMINED THAT THE TERMS OF THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY IT ARE IN THE BEST INTERESTS OF
ANADARKO AND ITS STOCKHOLDERS. ACCORDINGLY, THE ANADARKO BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE AT THE SPECIAL MEETING TO APPROVE
THE SHARE ISSUANCE, THE TWO AMENDMENTS TO THE RESTATED CERTIFICATE OF
INCORPORATION AND THE AMENDMENT TO THE ANADARKO 1999 STOCK INCENTIVE PLAN.
Please take the time to vote by following the Internet or telephone voting
instructions on the enclosed proxy card or by completing and mailing the proxy
card. A postage-prepaid envelope has been provided for your convenience if you
wish to vote by mail. You may revoke your proxy at any time before the vote is
taken by sending to the Corporate Secretary of Anadarko a proxy with a later
date or voting again by Internet or telephone. Alternatively, you may revoke
your proxy by delivering to the Corporate Secretary of Anadarko a written
revocation prior to the special meeting or by voting in person at the special
meeting.
IT IS IMPORTANT THAT YOU SIGN, DATE AND RETURN THE PROXY CARD IN THE
ENCLOSED ENVELOPE OR VOTE BY INTERNET OR TELEPHONE SO THAT YOUR ANADARKO COMMON
SHARES WILL BE REPRESENTED, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU DO NOT RETURN YOUR CARD OR VOTE BY INTERNET OR TELEPHONE, OR IF
YOU DO NOT INSTRUCT YOUR BROKER HOW TO VOTE ANY ANADARKO COMMON SHARES HELD FOR
YOU IN "STREET NAME," YOUR ANADARKO COMMON SHARES WILL NOT BE VOTED AT THE
SPECIAL MEETING.
REGARDLESS OF THE NUMBER OF ANADARKO COMMON SHARES YOU HOLD, YOUR VOTE IS
VERY IMPORTANT.
By Order of the Board of Directors
----------------------------------------
Suzanne Suter
Corporate Secretary
Houston, Texas
[ ] , 2000
PLEASE DO NOT SEND ANY ANADARKO STOCK CERTIFICATES.
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To find any one of the principal sections identified below, simply bend the
document slightly to expose the black tabs and open the document to the tab that
corresponds to the title of the section you wish to read.
TABLE OF CONTENTS
---------------
QUESTIONS AND ANSWERS ABOUT THE MERGER
---------------
SUMMARY
---------------
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL
INFORMATION ---------------
RISK FACTORS
---------------
FORWARD-LOOKING STATEMENTS
---------------
THE SPECIAL MEETINGS
---------------
THE MERGER
---------------
THE MERGER AGREEMENT
---------------
THE STOCK OPTION AGREEMENTS
---------------
THE COMPANIES
---------------
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
---------------
COMPARISON OF STOCKHOLDER RIGHTS
---------------
AMENDMENTS TO ANADARKO'S RESTATED CERTIFICATE OF
INCORPORATION ---------------
AMENDMENT TO ANADARKO'S 1999 STOCK INCENTIVE PLAN
---------------
ANNEXES
---------------
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TABLE OF CONTENTS
PAGE
----
Questions and Answers About the Merger....... 1
Summary...................................... 4
Summary Historical and Unaudited Pro Forma
Financial Information...................... 11
Risk Factors................................. 18
The Market Value of Anadarko Common Shares
That Union Pacific Resources Stockholders
Receive Will Vary as a Result of the
Fixed Exchange Ratio and Possible Stock
Price Fluctuations....................... 18
There Are Uncertainties in Integrating Our
Business Operations...................... 18
A Substantial or Extended Decline in Oil or
Gas Prices Would Have a Material Adverse
Effect on the Combined Company........... 18
The Oil and Gas Reserves Data and Future
Net Revenues Estimates We Report Are
Uncertain................................ 19
If We Fail to Acquire or Find Additional
Reserves, Our Reserves and Production
Will Decline Materially from Their
Current Levels........................... 19
We Incur Costs to Comply with Government
Regulations, Especially Regulations
Relating to Environmental Protection, and
We Could Incur Even Greater Costs in the
Future................................... 19
Our Non-U.S. Operations Are Subject to the
Risks of Doing Business Abroad........... 19
Forward-Looking Statements................... 21
The Special Meetings......................... 22
Information About the Special Meetings and
Voting................................... 22
Matters Relating to the Special Meetings... 22
Vote Necessary at the Special Meetings to
Approve Anadarko and Union Pacific
Resources Proposals...................... 24
Voting by Proxy............................ 24
How to Vote by Proxy....................... 25
Other Business; Adjournments............... 26
The Merger................................... 27
Background of the Merger................... 27
Reasons for the Merger; Recommendations of
the Boards of Directors.................. 30
Opinion of Union Pacific Resources'
Financial Advisor........................ 34
Opinion of Anadarko's Financial Advisor.... 43
Interests of Certain Persons in the
Merger................................... 48
Accounting Treatment....................... 51
Regulatory Approvals....................... 51
Legal Proceedings.......................... 52
Rights of Dissenting Stockholders.......... 52
Federal Securities Law Consequences........ 52
U.S. Federal Income Tax Consequences of the
Merger................................... 52
The Merger Agreement......................... 55
The Merger................................. 55
Merger Consideration....................... 55
Exchange Procedures........................ 55
Treatment of Union Pacific Resources Stock
Options.................................. 56
Representations and Warranties............. 56
Covenants.................................. 57
Conditions................................. 61
Termination................................ 63
Effect of Termination...................... 64
Amendment and Waiver....................... 65
Costs and Expenses......................... 66
The Stock Option Agreements.................. 67
The Stock Options.......................... 67
PAGE
----
When the Stock Options May Be Exercised.... 67
Election to Repurchase Options............. 67
Right of First Refusal..................... 68
Registration Rights........................ 68
Limitation on Total Profit................. 68
Effect of Stock Option Agreements.......... 68
The Companies................................ 70
Business of Union Pacific Resources........ 70
Business of Anadarko....................... 71
Dakota Merger Corp......................... 71
Unaudited Pro Forma Condensed Combined
Financial Statements....................... 72
Comparison of Stockholder Rights............. 79
Amendment of Charter Documents............. 79
Amendment of Bylaws........................ 80
Removal of Directors....................... 80
Vacancies on the Board..................... 81
Indemnification of Directors and
Officers................................. 81
Limitation on Liability of Directors....... 82
Right to Call Special Meetings of
Stockholders............................. 82
Stockholder Action Without a Meeting....... 82
Class Voting............................... 83
Cumulative Voting.......................... 83
Provisions Affecting Control Share
Acquisitions and Business Combinations... 84
Mergers, Acquisitions, Share Purchases and
Certain Other Transactions............... 85
Rights of Dissenting Stockholders.......... 85
Dividends.................................. 86
Preemptive Rights of Stockholders.......... 86
Proposed Amendments to Anadarko's Restated
Certificate of Incorporation............... 87
Maximum Board Size Proposal................ 87
Authorized Common Shares Proposal.......... 87
Proposed Amendment to Anadarko's 1999 Stock
Incentive Plan............................. 89
Legal Matters................................ 99
Experts...................................... 99
Independent Public Accountants............... 99
Other Matters................................ 100
Certain Proxy Card Matters................... 100
Stockholder Proposals........................ 100
Where You Can Find More Information.......... 101
Agreement and Plan of Merger, dated as of
April 2, 2000, by and among Anadarko
Petroleum Corporation, Dakota Merger Corp.
and Union Pacific Resources Group Inc...... Annex A
Anadarko Stock Option Agreement, dated as of
April 2, 2000, by and between Anadarko
Petroleum Corporation and Union Pacific
Resources Group Inc........................ Annex B
Union Pacific Resources Stock Option
Agreement, dated as of April 2, 2000, by
and between Union Pacific Resources Group
Inc. and Anadarko Petroleum Corporation.... Annex C
Opinion of Goldman, Sachs & Co., dated April
2, 2000.................................... Annex D
Opinion of Credit Suisse First Boston
Corporation, dated April 2, 2000........... Annex E
Proposed Anadarko Maximum Board Size Charter
Amendment.................................. Annex F
Proposed Anadarko Authorized Common Shares
Charter Amendment.......................... Annex G
Anadarko's 1999 Stock Incentive Plan......... Annex H
Proposed Amendment to Anadarko's 1999 Stock
Incentive Plan............................. Annex I
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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.
Please read the more detailed description of our reasons for the merger on
pages 30 through 34.
Q: WHAT WILL THE NEW COMPANY BE CALLED AND WHERE WILL IT BE HEADQUARTERED?
A: The combined company will be called "Anadarko Petroleum Corporation" and will
be headquartered in Houston, Texas.
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.
Q: WHEN ARE THE SPECIAL STOCKHOLDERS' MEETINGS?
A: Each company's special meeting of stockholders will take place on June [ ],
2000. The location of each special meeting is specified on the cover page of
this document.
Q: WHAT WILL HAPPEN AT THE SPECIAL STOCKHOLDERS' MEETINGS?
A: At the Union Pacific Resources special meeting, Union Pacific Resources
stockholders will vote on the merger agreement and the transactions
contemplated by the merger agreement, including the merger. At the Anadarko
special meeting, Anadarko stockholders will vote on issuance of Anadarko
common shares in the merger. Anadarko stockholders also will vote on whether
- to amend Anadarko's restated certificate of incorporation to increase the
maximum size of the Anadarko board of directors from nine to 15 directors,
- to amend Anadarko's restated certificate of incorporation to increase the
number of authorized Anadarko common shares from 300,000,000 to 450,000,000,
and
- to amend Anadarko's 1999 stock incentive plan.
We cannot complete the merger unless, among other things, Union Pacific
Resources stockholders vote to approve the merger agreement and Anadarko
stockholders vote to approve the stock issuance. The completion of the merger
is not contingent on stockholder approval of the proposals to amend
Anadarko's restated certificate of incorporation or Anadarko's 1999 stock
incentive plan.
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8
Q: WHAT DO I NEED TO DO TO VOTE?
A: Mail your signed proxy card in the enclosed return envelope or, in the case
of Anadarko stockholders, you also may vote by Internet or by telephone, in
each case as soon as possible so that your shares may be represented at your
special meeting. In order to assure that we obtain your vote, please vote as
instructed on your proxy card even if you currently plan to attend your
special meeting in person.
THE UNION PACIFIC RESOURCES BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
UNION PACIFIC RESOURCES STOCKHOLDERS VOTE FOR THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE MERGER.
THE ANADARKO BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT ANADARKO
STOCKHOLDERS VOTE FOR THE ISSUANCE OF ANADARKO COMMON SHARES IN THE MERGER,
FOR THE AMENDMENTS TO ANADARKO'S RESTATED CERTIFICATE OF INCORPORATION AND
FOR THE AMENDMENT TO ANADARKO'S 1999 STOCK INCENTIVE PLAN.
Q: ARE THERE RISKS ASSOCIATED WITH THE MERGER THAT I SHOULD CONSIDER IN DECIDING
HOW TO VOTE?
A: Yes. There are risks associated with all business combinations, including the
merger. In particular, you should be aware that the number of Anadarko common
shares that Union Pacific Resources stockholders will receive is fixed and
will not change as the market prices of Union Pacific Resources common shares
and Anadarko common shares fluctuate in the period before the merger.
Accordingly, the value of the Anadarko common shares that Union Pacific
Resources stockholders will receive in return for their Union Pacific
Resources common shares may be either less than or more than the current
market price of the appropriate number of Anadarko common shares. There also
are a number of other risks that are discussed in this document and in other
documents incorporated by reference in this document.
PLEASE READ WITH PARTICULAR CARE THE MORE DETAILED DESCRIPTION OF THE RISKS
ASSOCIATED WITH THE MERGER ON PAGES 18 THROUGH 20.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We expect to complete the merger as quickly as possible once all the
conditions to the merger, including obtaining the approvals of our
stockholders at the special meetings, are fulfilled. Fulfilling some of these
conditions, such as receiving certain governmental clearances or approvals,
is not entirely within our control. We currently expect to complete the
merger in the middle of this year.
Q: SHOULD I SEND IN MY UNION PACIFIC RESOURCES STOCK CERTIFICATES NOW?
A: No. After the merger is completed, we will send written instructions to Union
Pacific Resources stockholders, including a letter of transmittal, that
explain how to exchange Union Pacific Resources stock certificates for
Anadarko stock certificates. Please do not send in any Union Pacific
Resources stock certificates until you receive these written instructions and
the letter of transmittal.
Q: HOW DO I VOTE MY SHARES IF MY SHARES ARE HELD IN "STREET NAME"?
A: You should contact your broker. Your broker can give you directions on how to
instruct the broker to vote your shares. Your broker will not vote your
shares unless the broker receives appropriate instructions from you.
Q: MAY I CHANGE MY VOTE EVEN AFTER RETURNING A PROXY CARD?
A: Yes. If you are a Union Pacific Resources stockholder and want to change your
vote, you may do so at any time before the Union Pacific Resources special
meeting by sending to the Secretary of Union Pacific Resources a proxy with a
later date. Alternatively, you may revoke your proxy by delivering to the
Secretary of Union Pacific Resources a written revocation prior to the Union
Pacific Resources special meeting or by voting in person at the Union Pacific
Resources special meeting.
Similarly, if you are an Anadarko stockholder and want to change your vote,
you may do so at any time before the Anadarko special meeting by sending to
the Corporate Secretary of Anadarko a proxy with a later date or by voting
again by Internet or telephone. Alternatively, you may revoke your proxy by
delivering to the Corporate Secretary of Anadarko a written revocation prior
to the Anadarko spe-
2
9
cial meeting or by voting in person at the Anadarko special meeting.
Union Pacific Resources stockholders that require assistance in changing or
revoking a proxy should contact Innisfree M&A Incorporated, Union Pacific
Resources' solicitation agent for the merger, at 1-888-750-5835.
Anadarko stockholders that require assistance in changing or revoking a proxy
should contact ChaseMellon Shareholder Services, L.L.C., Anadarko's
solicitation agent for the merger, at 1-800-953-2497.
Q: IF I HAVE MORE QUESTIONS ABOUT THE MERGER OR THE TWO COMPANIES, WHERE CAN I
FIND ANSWERS?
A: In addition to reading this document, its annexes and the documents we have
incorporated in this document by reference, you can find more information
about the merger or the two companies in our companies' filings with the
Securities and Exchange Commission and the New York Stock Exchange. Please
see pages 101 through 103.
3
10
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. You should carefully
read this entire document and the other documents to which this document refers
to fully understand the merger. See "Where You Can Find More Information" on
page 101 . Each item in this summary includes a page reference directing you to
a more complete description of that item.
THE COMPANIES (PAGE 70)
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.
ANADARKO PETROLEUM CORPORATION
17001 Northchase Drive
Houston, Texas 77060-7141
(281) 875-1101
Anadarko is one of the world's largest independent oil and gas exploration
and production companies, with 991 million energy equivalent barrels of proved
reserves as of December 31, 1999. About 71% of these proved reserves were
located in the United States, with the remaining 29% of these proved reserves in
Algeria. Oil reserves accounted for 58% of Anadarko's total proved reserves
while U.S. natural gas reserves accounted for 42% of Anadarko's total proved
reserves. As of year-end 1999, Anadarko held worldwide interests in more than 8
million gross lease acres. During 1999, about 87% of Anadarko's production was
domestic. U.S. drilling and production operations are located primarily in
Alaska, the Gulf of Mexico, Kansas, Oklahoma and Texas. Anadarko has significant
oil production in Algeria, and participates in exploration ventures in Tunisia,
the North Atlantic Ocean and other selected areas. Anadarko also owns and
operates gas gathering systems in its U.S. core producing areas.
DAKOTA MERGER CORP.
17001 Northchase Drive
Houston, Texas 77060-7141
(281) 875-1101
Dakota Merger Corp. is a wholly owned subsidiary of Anadarko recently
formed for the purpose of effecting the merger.
THE SPECIAL MEETINGS (PAGE 22)
Union Pacific Resources Stockholders
The Union Pacific Resources special meeting of stockholders will be held on
June [ ], 2000, at [ ] a.m., local time, at [ ]. At the Union
Pacific Resources special meeting, you will be asked to approve the merger
agreement and the transactions contemplated by the merger agreement, including
the merger.
Anadarko Stockholders
The Anadarko special meeting of stockholders will be held on June [ ],
2000, at [ ] a.m., local time, at [ ]. At the Anadarko special meeting,
you will be asked to approve
- the issuance of Anadarko common shares to Union Pacific Resources
stockholders in connection with the merger,
- an amendment to Anadarko's restated certificate of incorporation to
increase the
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maximum size of the Anadarko board of directors from nine to 15
directors,
- an amendment to Anadarko's restated certificate of incorporation to
increase the number of authorized Anadarko common shares from 300,000,000
to 450,000,000, and
- an amendment to Anadarko's 1999 stock incentive plan.
RECORD DATE; VOTE REQUIRED (PAGES 22 AND 24)
Union Pacific Resources Stockholders
You can vote at the Union Pacific Resources special meeting if you owned
Union Pacific Resources common shares at the close of business on May 30, 2000.
On that date, there were [ ] Union Pacific Resources common shares
outstanding and entitled to vote. You can cast one vote for each Union Pacific
Resources common share you then owned. Approval of the merger agreement and the
transactions contemplated by the merger agreement, including the merger,
requires the approval of the holders of a majority of the outstanding Union
Pacific Resources common shares.
Anadarko Stockholders
You can vote at the Anadarko special meeting if you owned Anadarko common
shares at the close of business on May 30, 2000. On that date, there were
[ ] Anadarko common shares outstanding and entitled to vote. You can
cast one vote for each Anadarko common share you then owned.
Approval of the share issuance requires the approval of the holders of a
majority of the votes cast on the proposal, provided that the total votes cast
on the proposal represent over 50% in interest of all securities entitled to
vote on the proposal. Approval of the amendment to Anadarko's restated
certificate of incorporation increasing the maximum size of the Anadarko board
of directors requires the approval of the holders of 80% of the outstanding
Anadarko common shares. Approval of the amendment to Anadarko's restated
certificate of incorporation increasing the authorized number of Anadarko common
shares requires the approval of the holders of a majority of the outstanding
Anadarko common shares. Approval of the amendment to Anadarko's 1999 stock
incentive plan requires the approval of the holders of a majority of the votes
cast on the proposal, provided that the total votes cast on the proposal
represent over 50% in interest of all securities entitled to vote on the
proposal.
THE MERGER (PAGE 27)
The merger agreement is attached as Annex A to this document. Please 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 55)
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 approximately 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 56)
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
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exercise price of such stock options will be adjusted according to the exchange
ratio.
Following stockholder approval and completion of the merger transaction,
Anadarko's 1999 stock incentive plan will be the plan used for purposes of
making future stock-based awards to employees of the combined company. The
Anadarko board of directors has unanimously approved an amendment to the 1999
stock incentive plan that would, among other things, increase the number of
Anadarko common shares that may be granted under the plan. This increase would
be used to offer equity compensation to the expanded number of eligible
employees of the combined company.
Management and Operations after the Merger (page 58)
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
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.
Our Recommendations to Stockholders (page 30)
Union Pacific Resources Stockholders. The Union Pacific Resources board of
directors believes that the merger is fair to you and in your best interests,
and it unanimously recommends that you vote FOR the proposal to approve the
merger agreement and the transactions contemplated by the merger agreement,
including the merger.
Anadarko Stockholders. The Anadarko board of directors believes that the
merger is fair to you and in your best interests, and it unanimously recommends
that you vote FOR the proposals to issue Anadarko common shares in the merger.
The Anadarko board also unanimously recommends that you vote FOR the proposals
to amend Anadarko's restated certificate of incorporation to increase the
maximum size of the Anadarko board of directors, to amend Anadarko's restated
certificate of incorporation to increase the number of authorized Anadarko
common shares and to amend Anadarko's 1999 stock incentive plan, although none
of these three proposals are conditions to completion of the merger.
Opinion of Union Pacific Resources' Financial Advisor (page 34)
Goldman, Sachs & Co., Union Pacific Resources' financial advisor, delivered
a written opinion to the Union Pacific Resources board of directors as to the
fairness, from a financial point of view, of the exchange ratio to the
stockholders of Union Pacific Resources. We have attached this opinion, dated
April 2, 2000, as Annex D to this document. You should read this opinion
completely to understand the procedures followed, assumptions made, matters
considered and limitations of the review undertaken.
Goldman Sachs' opinion is addressed to the Union Pacific Resources board of
directors and does not constitute a recommendation to any stockholder as to how
that stockholder should vote in connection with the merger proposal.
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Opinion of Anadarko's Financial Advisor (page 43)
Credit Suisse First Boston Corporation, Anadarko's financial advisor,
delivered a written opinion to the Anadarko board of directors as to the
fairness, from a financial point of view, to Anadarko of the exchange ratio. We
have attached this opinion, dated April 2, 2000, as Annex E to this document.
You should read this opinion completely to understand the procedures followed,
assumptions made, matters considered and limitations of the review undertaken.
Credit Suisse First Boston's opinion is addressed to the Anadarko board of
directors and does not constitute a recommendation to any stockholder as to any
matters relating to the merger.
Conditions to Completion of the Merger (page 61)
The completion of the merger depends on a number of conditions being met or
waived. In addition to customary conditions relating to our compliance with the
merger agreement, these include the following:
- approval of the merger agreement by Union Pacific Resources stockholders
and approval of the common share issuance by Anadarko stockholders;
- receipt of all requisite governmental approvals, including foreign
antitrust approvals; in this connection, the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the
expiration or termination of which had been a condition to the merger,
was terminated on May 10, 2000;
- absence of any injunction or legal restraint blocking the merger or the
ownership or operation of a material portion of the business or assets of
Anadarko or Union Pacific Resources;
- absence of any proceedings by a governmental entity trying to block the
merger;
- receipt by Union Pacific Resources of an opinion from its legal counsel
that, for U.S. federal income tax purposes, the exchange of Union Pacific
Resources common shares for Anadarko common shares generally will not
cause Union Pacific Resources stockholders to recognize any gain or loss
other than in connection with any cash received in lieu of fractional
shares; and
- absence of any event that has had or is likely to have a material adverse
effect on the other company.
Termination of the Agreement (page 63)
We can agree at any time to terminate the merger agreement without
completing the merger, even if Union Pacific Resources stockholders have
approved the merger and Anadarko stockholders have approved the share issuance.
Also, either of us can decide, without the consent of the other, to terminate
the merger agreement in various circumstances, including the following:
- if the merger has not been completed by December 31, 2000 (or, if the
only barrier to closing is a governmental restraint on the merger
pursuant to an antitrust law, then the relevant date is extended to the
earlier of March 31, 2001 or the fifth business day after a court renders
a decision on the litigation relating to the antitrust law);
- if Union Pacific Resources stockholders do not approve the merger or if
Anadarko stockholders do not approve the share issuance;
- if any governmental entity has issued a final and non-appealable order,
or has taken any other final and non-appealable action, blocking the
merger; or
- if the other party breaches the merger agreement in a way that would
entitle the party seeking to terminate the agreement not to consummate
the merger and the breaching party does not promptly correct the breach.
In addition, Union Pacific Resources may, without the consent of Anadarko,
decide to terminate the merger agreement if the Anadarko board of directors
withdraws or modifies its approval or recommendation in favor of the share
issuance, or if the Anadarko board of directors recommends a competing business
combination or similar transaction for Anadarko with a third party.
Anadarko may, without the consent of Union Pacific Resources, decide to
terminate the merger
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agreement if the Union Pacific Resources board of
directors withdraws or modifies its approval or recommendation of the merger
agreement or merger in a manner adverse to Anadarko, or if the Union Pacific
Resources board of directors recommends a competing business combination or
similar transaction for Union Pacific Resources with a third party.
Termination Fees (page 64)
Anadarko must pay Union Pacific Resources a fee of $25 million in cash if
the merger agreement is terminated in a number of circumstances described
elsewhere in this document. Please see pages 64 through 65. In addition, if
within one year of a termination giving rise to this $25 million fee, Anadarko
enters into a definitive agreement with respect to one of several types of
acquisitions, or such an acquisition is consummated, then Anadarko must pay
Union Pacific Resources an additional $100 million upon completion of that
transaction.
Similarly, Union Pacific Resources must pay Anadarko a fee of $25 million
in cash if the merger agreement is terminated in a number of circumstances
described elsewhere in this document. Please see pages 64 through 65. In
addition, if within one year of a termination giving rise to this $25 million
fee, Union Pacific Resources enters into one of several types of acquisitions,
or such an acquisition is consummated, then Union Pacific Resources must pay
Anadarko an additional $100 million upon completion of that transaction.
Accounting Treatment (page 51)
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.
Stock Option Agreements (page 67)
Union Pacific Resources has granted Anadarko an option to purchase up to
19.9% of the outstanding Union Pacific Resources common shares, at a per share
price in cash equal to the lesser of (a) $17.60 and (b) 0.455 multiplied by the
closing price of Anadarko common shares on the date the option is exercised.
Anadarko can exercise this option if it becomes entitled to receive the $25
million termination fee under the merger agreement. The stock option agreement
limits to $25 million the total profit Anadarko may receive from the option
unless an event giving rise to the $100 million termination fee occurs, in which
case the limitation on total profits is $125 million.
Similarly, Anadarko has granted Union Pacific Resources an option to
purchase up to 19.9% of the outstanding Anadarko common shares, at a per share
price in cash of $38.6875. The provisions of this stock option agreement
otherwise parallel the provisions of the stock option agreement described above.
Union Pacific Resources and Anadarko granted these options to each other to
increase the likelihood that the merger would be completed. The stock option
agreements could discourage other companies from trying or proposing to combine
with Union Pacific Resources or Anadarko before we complete the merger.
INTERESTS OF CERTAIN PEOPLE IN THE MERGER THAT ARE DIFFERENT FROM YOUR INTERESTS
(PAGE 48)
Some of Union Pacific Resources' directors and 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 upon
approval of the merger by Union Pacific Resources stockholders. At such
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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) 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 will enter 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 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 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 48 through 51.
Our boards of directors knew about these interests, and considered them,
when they approved the merger and recommended that our stockholders approve the
merger transaction.
APPRAISAL RIGHTS (PAGE 52)
Under Utah law, Union Pacific Resources stockholders are not entitled to
dissenters' rights in connection with the merger.
Under Delaware law, Anadarko stockholders are not entitled to appraisal
rights in connection with the merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (PAGE 52)
Union Pacific Resources Stockholders
We expect that, for U.S. federal income tax purposes, your exchange of
Union Pacific Resources common shares for Anadarko common shares generally will
not cause you to recognize any gain or loss. You will, however, recognize gain
or loss in connection with any cash received instead of fractional shares.
We have conditioned the merger on Union Pacific Resources' receipt of a
legal opinion from its counsel that the U.S. federal income tax treatment will
be as we have described it in this document. This opinion will not bind the
Internal
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Revenue Service, which could take a different view.
Anadarko Stockholders
Because Anadarko common shares remain unchanged, the merger will not cause
you to recognize any gain or loss for U.S. federal income tax purposes.
THIS TAX TREATMENT MAY NOT APPLY TO CERTAIN STOCKHOLDERS. DETERMINING THE
ACTUAL TAX CONSEQUENCES OF THE MERGER TO YOU MAY BE COMPLICATED. THESE
CONSEQUENCES WILL DEPEND ON YOUR SPECIFIC SITUATION AND ON VARIABLES NOT WITHIN
OUR CONTROL. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF
THE MERGER'S TAX CONSEQUENCES FOR YOU.
CERTAIN DIFFERENCES IN THE RIGHTS OF STOCKHOLDERS (PAGE 79)
The rights of Union Pacific Resources stockholders currently are governed
by the Utah Revised Business Corporation Act and the Union Pacific Resources
charter and bylaws. The rights of Anadarko stockholders are governed by the
Delaware General Corporation Law and the Anadarko charter and bylaws. Upon our
completing the merger, Anadarko stockholders and Union Pacific Resources
stockholders will both be Anadarko stockholders, and your rights will be
governed by the Delaware General Corporation Law and by the Anadarko charter and
bylaws. See pages 79 to 86 for more specific information.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
Anadarko common shares and Union Pacific Resources common shares are both
quoted on the New York Stock Exchange. On March 31, 2000, the last trading day
before we announced the merger, Anadarko common shares closed at $38.69 per
share and Union Pacific Resources common shares closed at $14.50 per share. On
[ ], 2000, the most recent practicable date before the mailing of this
document, Anadarko common shares closed at $[ ] per share and Union Pacific
Resources common shares closed at $[ ] per share.
Based on the exchange ratio in the merger, which is 0.455, the market value
of the consideration that Union Pacific Resources stockholders will receive in
the merger for each Union Pacific Resources common share would be $17.60 per
share based on the closing price of Anadarko common shares on March 31, 2000,
and $[ ] per share based on the closing price of Anadarko common shares on
[ ], 2000. Of course, the market price of Anadarko common shares will
fluctuate prior to and after the merger, whereas the exchange ratio is fixed.
You should obtain current stock price quotations for Anadarko common shares and
Union Pacific Resources common shares.
REGULATORY APPROVALS (PAGE 52)
Under the Hart-Scott-Rodino Act, we may not complete the merger unless we
make various filings with the Antitrust Division of the U.S. Department of
Justice and the U.S. Federal Trade Commission and certain waiting periods expire
or are terminated. On April 24, 2000, Anadarko and Union Pacific Resources
submitted the required filings to the Federal Trade Commission and the Antitrust
Division. The waiting period under the Hart-Scott-Rodino Act was terminated on
May 10, 2000.
In addition, under the laws of certain foreign nations, we may not complete
the merger unless we make various filings with these nations' antitrust
regulatory authorities and these authorities approve the merger. We expect that
the merger will not violate any foreign antitrust laws and that all the foreign
antitrust regulatory authorities whose approval we must seek will approve the
merger.
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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL INFORMATION
UNION PACIFIC RESOURCES SUMMARY HISTORICAL FINANCIAL INFORMATION
We have derived the summary historical financial information of Union
Pacific Resources set forth below for the years 1996-1999 from the information
Union Pacific Resources included in its annual reports on Form 10-K filed for
the fiscal years ended December 31, 1999 and 1998. Information for the quarters
ended March 31, 2000 and 1999 is derived from Union Pacific Resources' quarterly
reports on Form 10-Q filed for the periods ended March 31, 2000 and 1999 and is
unaudited. Information for 1995 has been audited and restated for discontinued
operations. Such restatements are unaudited. You should read this financial
information in conjunction with the information in those reports by Union
Pacific Resources and in conjunction with the other information incorporated by
reference in this document. See "Where You Can Find More Information."
QUARTERS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
---------------- ------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------ ------- -------- --------- -------- -------- --------
(MILLIONS, EXCEPT PER SHARE AMOUNTS)
REVENUE AND EXPENSE DATA
Revenues........................ $522.3 $ 415.1 $1,727.5 $ 1,841.0 $1,518.0 $1,369.2 $1,166.8(a)
Production expenses............. 107.9 90.5 400.6 444.3 300.8 263.2 223.1
Exploration expenses............ 30.3 51.6 267.9 339.0(b) 204.7 144.6 89.4
Minerals........................ 0.6 0.4 (2.8) 3.5 3.4 8.0 8.8
Administrative and general...... 18.8 15.6 86.9 104.8 71.2 66.9 50.5
Depreciation, depletion and
amortization.................. 176.2 183.2 827.7 2,125.6(b) 504.0 478.0 414.7
Restructuring charge............ -- 14.5 11.4 17.0 -- -- --
------ ------- -------- --------- -------- -------- --------
Operating income................ 188.5 59.3 135.8 (1,193.2) 433.9 408.5 380.3
Other (income) expense.......... 14.8 (11.4) (31.7) 45.3 (24.5) 3.5 2.5
Interest expense................ 48.9 64.3 218.7 249.8 39.5 38.9 9.5
------ ------- -------- --------- -------- -------- --------
Income (loss) from continuing
operations before income
taxes......................... 124.8 6.4 (51.2) (1,488.3) 418.9 366.1 368.3
Income taxes.................... 32.1 (35.9) (140.4) (605.2) 115.8 112.4 74.1
------ ------- -------- --------- -------- -------- --------
Income (loss) from continuing
operations, before
extraordinary items........... 92.7 42.3 89.2 (883.1) 303.1 253.7 294.2
Gain on sale of discontinued
operations, net of tax........ -- 157.0 157.0 -- -- -- --
Income (loss) from discontinued
operations, net of tax........ -- (23.8) (23.8) (15.6) 29.9 67.1 56.5
------ ------- -------- --------- -------- -------- --------
Net income (loss) from
discontinued operations....... -- 133.2 133.2 (15.6) 29.9 67.1 56.5
Extraordinary gain from early
extinguishment of debt, net of
tax........................... 2.9 -- 3.4 -- -- -- --
------ ------- -------- --------- -------- -------- --------
Net income (loss)............... $ 95.6 $ 175.5 $ 225.8 $ (898.7)(b) $ 333.0 $ 320.8 $ 350.7
------ ------- -------- --------- -------- -------- --------
Net income (loss) per common
share
Continuing
operations -- basic......... $ 0.37 $ 0.17 $ 0.36 $ (3.57) $ 1.21 $ 1.02 n/a(c)
Continuing
operations -- diluted....... $ 0.37 $ 0.17 $ 0.36 $ (3.57) $ 1.21 $ 1.01 n/a(c)
Discontinued
operations -- basic and
diluted..................... -- $ 0.54 $ 0.54 $ (0.06) $ 0.12 $ 0.27 n/a(c)
Extraordinary item -- basic
and diluted................. $ 0.01 -- $ 0.01 -- -- -- n/a(c)
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UNION PACIFIC RESOURCES SUMMARY HISTORICAL FINANCIAL INFORMATION (CONTINUED)
QUARTERS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- --------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- --------- --------- --------- --------- -------- --------
(MILLIONS, EXCEPT OPERATING DATA)
BALANCE SHEET DATA (AT END OF PERIOD)
Properties, net......................... $5,413.5 $ 5,882.8 $ 5,471.0 $ 6,093.3 $ 2,901.1 $2,404.7 $2,238.4
Total assets............................ 6,059.5 6,685.2 6,146.9 7,642.4 4,313.7 3,531.6 3,265.7
Long-term debt.......................... 2,606.1 2,755.4 2,797.3 3,744.9 1,230.6 670.9 101.5
Shareholders' equity.................... 1,020.5 860.8 937.5 728.2 1,760.7 1,514.3 1,312.4
OTHER FINANCIAL DATA
EBITDA(d)............................... $ 380.2 $ 305.5 $ 1,263.1 $ 1,226.1 $ 1,167.1 $1,027.6 $ 881.9
Net cash provided by operating
activities............................ 314.5 221.7 995.5 1,031.1 856.2 772.5 719.0
Net cash provided (used) by investing
activities............................ (152.5) 1,279.0 1,008.6 (3,293.4) (1,390.6) (632.1) (472.4)
Net cash provided (used) by financing
activities............................ (220.1) (1,338.2) (1,889.2) 2,204.0 487.7 (46.2) (225.7)
Capital expenditures, including
acquisitions.......................... 155.2 110.8 428.2 3,828.8(e) 1,188.4 773.0 603.0
OPERATING DATA
Sales volumes
Gas (Bcf)............................. 106.2 119.4 466.7 526.0 404.6 361.9 336.5
Oil (MMBbls).......................... 10.1 11.4 42.7 50.3 19.3 18.5 19.3
NGLs (MMBbls)......................... 2.7 2.2 10.4 12.1 11.6 11.2 9.5
MMEEBs................................ 30.5 33.5 130.9 150.1 98.3 90.0 84.8
MEEBs per day......................... 334.8 371.9 358.6 411.2 269.3 245.9 232.3
Average prices
Gas (per Mcf)......................... $ 2.29 $ 1.63 $ 1.83 $ 1.74 $ 2.00 $ 1.85 $ 1.43
Oil (per Bbl)......................... $ 18.69 $ 9.54 $ 11.81 $ 10.48 $ 18.36 $ 18.84 $ 16.08
NGLs (per Bbl)........................ $ 17.86 $ 7.47 $ 10.95 $ 7.88 $ 11.23 $ 11.48 $ 8.36
Per EEB............................... $ 15.75 $ 9.54 $ 11.26 $ 10.24 $ 13.16 $ 12.76 $ 10.25
Production cost (per Mcfe).............. $ 0.59 $ 0.45 $ 0.51 $ 0.49 $ 0.51 $ 0.49 $ 0.42
- - - - - - - - - - - - ---------------
Bbl -- Barrel.
Bcf -- Billion cubic feet.
EEB -- Energy equivalent barrel.
Mcf -- Thousand cubic feet.
Mcfe -- Thousand cubic feet equivalent.
MEEBs -- Thousand energy equivalent barrels.
MMBbls -- Million barrels.
MMEEBs -- Million energy equivalent barrels.
NGLs -- Natural gas liquids.
(a) In November 1995, Union Pacific Resources recorded a $122.5 million pretax
($78.5 million after-tax) gain resulting from the Columbia Gas Transmission
Company bankruptcy settlement.
(b) In 1998, Union Pacific Resources recorded a $760 million after-tax charge
related to asset impairments in accordance with Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of."
(c) Earnings per share information prior to 1996 has been omitted as Union
Pacific Resources was a wholly owned subsidiary of Union Pacific
Corporation until Union Pacific Resources' initial public offering in
October 1995. Therefore, net income per share is not applicable for periods
prior to the fourth quarter of 1995.
(d) EBITDA represents the sum of income (loss) from continuing operations
before income taxes, interest expense, depreciation, depletion and
amortization, and exploration expenses. EBITDA is presented because it is a
widely accepted financial indicator of the ability to service and incur
debt. EBITDA is not intended to represent cash flow in accordance with
generally accepted accounting principles and does not represent the measure
of cash flow available for distribution.
(e) In March 1998, Union Pacific Resources acquired Norcen Energy Resources of
Canada for $2.634 billion.
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ANADARKO SUMMARY HISTORICAL FINANCIAL INFORMATION
We have derived the summary historical financial information of Anadarko
set forth below from the information Anadarko included in its previous annual
reports on Form 10-K, except for the information for the quarters ended March
31, 2000 and 1999, which is derived from Anadarko's quarterly reports on Form
10-Q for the quarters ended March 31, 2000 and 1999 and is unaudited. You should
read this financial information in conjunction with the information in those
reports by Anadarko and in conjunction with the other information incorporated
by reference in this document. See "Where You Can Find More Information."
Amounts for 1995, 1996, 1997 and 1998 have been adjusted for the 2-for-1 stock
split, which occurred on July 1, 1998.
QUARTERS ENDED
MARCH 31, YEARS ENDED DECEMBER 31
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
(MILLIONS, EXCEPT PER SHARE AMOUNTS AND OPERATING DATA)
REVENUE AND EXPENSE DATA
Revenues.......................... $ 247.1 $ 136.4 $ 701.1 $ 560.3 $ 675.1 $ 570.1 $ 435.2
Operating expenses................ 43.0 34.1 141.7 160.6 154.7 115.3 105.8
Administrative and general........ 30.1 24.4 103.0 94.9 73.6 67.7 59.5
Depreciation, depletion and
amortization.................... 57.3 56.5 218.1 204.5 198.8 167.2 164.7
Other taxes....................... 11.3 9.3 35.4 37.7 42.7 37.2 36.9
(Gains) losses and impairments
related to international
properties, net................. -- 20.0 24.0 70.0 -- (14.0) 2.6
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)........... 105.4 (7.9) 178.9 (7.4) 205.3 196.7 65.7
Interest expense.................. 21.1 18.6 74.1 57.7 41.0 38.9 36.4
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income
taxes........................... 84.3 (26.5) 104.8 (65.1) 164.3 157.8 29.3
Income taxes...................... 42.5 (6.1) 62.2 (22.9) 57.0 57.1 8.3
-------- -------- -------- -------- -------- -------- --------
Net income (loss)................. 41.8 (20.4) 42.6 (42.2) 107.3 100.7 21.0
Preferred stock dividends......... 2.7 2.7 10.9 7.1 -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss) available to
common stockholders............. $ 39.1 $ (23.1) $ 31.7 $ (49.3) $ 107.3 $ 100.7 $ 21.0
-------- -------- -------- -------- -------- -------- --------
Net income (loss) per common share
Basic........................... $ 0.31 $ (0.19) $ 0.25 $ (0.41) $ 0.90 $ 0.85 $ 0.18
Diluted......................... $ 0.30 $ (0.19) $ 0.25 $ (0.41) $ 0.89 $ 0.85 $ 0.18
BALANCE SHEET DATA (AT END OF
PERIOD)
Properties and equipment, net..... $3,807.7 $3,414.0 $3,681.2 $3,381.5 $2,754.8 $2,297.5 $2,088.8
Total assets...................... 4,219.8 3,657.8 4,098.4 3,633.0 2,992.5 2,584.0 2,267.0
Long-term debt.................... 1,573.2 1,560.8 1,443.3 1,425.4 955.7 731.0 674.0
Stockholders' equity.............. 1,586.6 1,234.5 1,534.6 1,259.5 1,116.8 1,014.1 909.7
OTHER FINANCIAL DATA
EBITDA(a)......................... $ 162.7 $ 68.6 $ 421.0 $ 267.1 $ 404.1 $ 369.3 $ 233.0
Net cash provided by (used in)
operating activities............ 11.8 (5.2) 317.7 239.6 362.0 314.5 248.3
Net cash used in investing
activities...................... (183.9) (107.9) (536.3) (887.3) (589.5) (381.1) (268.4)
Net cash provided by financing
activities...................... 136.6 111.6 246.4 655.7 221.9 64.0 30.6
Capital expenditures, including
acquisitions.................... 184.0 111.8 679.9 917.0 686.2 427.2 331.2
OPERATING DATA
Sales volumes
Gas (Bcf)....................... 44.3 44.0 169.8 176.7 178.7 164.9 171.7
Oil (MMBbls).................... 3.8 4.0 14.6 11.1 9.1 6.7 7.4
NGLs (MMBbls)................... 2.0 1.6 6.6 6.6 5.5 3.5 3.6
MMEEBs.......................... 13.2 12.9 49.5 47.2 44.3 37.7 39.6
MEEBs per day................... 145.0 143.7 135.5 129.4 121.5 103.3 108.6
Average prices
Gas (per Mcf)................... $ 2.46 $ 1.59 $ 2.08 $ 1.92 $ 2.30 $ 2.13 $ 1.42
Oil (per Bbl)................... $ 26.34 $ 10.60 $ 16.83 $ 11.51 $ 18.03 $ 20.21 $ 16.52
NGLs (per Bbl).................. $ 20.73 $ 8.60 $ 13.40 $ 10.29 $ 14.64 $ 16.86 $ 12.81
Per EEB......................... $ 18.98 $ 9.78 $ 13.88 $ 11.34 $ 14.77 $ 14.48 $ 10.41
Production cost (per EEB)......... $ 3.85 $ 3.01 $ 3.22 $ 3.67 $ 3.56 $ 3.22 $ 3.19
- - - - - - - - - - - - ---------------
(a) EBITDA represents the sum of income (loss) before income taxes, interest
expense, depreciation, depletion and amortization expense and impairments
related to international properties. EBITDA is presented because it is a
widely accepted financial indicator of the ability to service and incur
debt. EBITDA is not intended to represent cash flow in accordance with
generally accepted accounting principles and does not represent the measure
of cash flow available for distribution.
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SUMMARY HISTORICAL OIL AND GAS RESERVE INFORMATION
The following tables set forth summary information with respect to Union
Pacific Resources' and Anadarko's proved oil and gas reserves as of December 31,
1999.
OIL, CONDENSATE ENERGY
AND NGLS NATURAL GAS EQUIVALENTS
(MMBBLS) (BCF) (MMEEBS)
--------------- ----------- -----------
NET PROVED RESERVES
UNION PACIFIC RESOURCES
Developed........................................... 276.6 2,692 725.3
Undeveloped......................................... 125.5 599 225.3
----- ----- -----
Total..................................... 402.1 3,291 950.6
----- ----- -----
ANADARKO
Developed........................................... 194.6 1,672 473.4
Undeveloped......................................... 378.6 835 517.6
----- ----- -----
Total..................................... 573.2 2,507 991.0
----- ----- -----
RESERVE VALUATION INFORMATION
The standardized measure of discounted future net cash flows represents the
present value of future net revenues after income taxes discounted at 10%.
MILLIONS
UNION PACIFIC RESOURCES
Future net cash flows before income taxes................... $10,775
Present value of future net cash flows before income taxes,
discounted at 10%......................................... 6,504
Standardized measure of discounted future net cash flows.... 4,659
ANADARKO
Future net cash flows before income taxes................... $13,962
Present value of future net cash flows before income taxes,
discounted at 10%......................................... 6,363
Standardized measure of discounted future net cash flows.... 4,382
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UNAUDITED PRO FORMA CONDENSED COMBINED SUMMARY FINANCIAL INFORMATION
The pro forma balance sheet data as of March 31, 2000 gives effect to the
merger as if it occurred on that date. The pro forma income statement data gives
effect to the merger as if it occurred on January 1, 1999.
We have included this unaudited pro forma condensed summary information
only for the purposes of illustration, and it does not necessarily indicate what
the operating results or financial position would have been if the merger
between Anadarko and Union Pacific Resources had been completed at the dates
indicated. Moreover, this information does not necessarily indicate what the
future operating results or financial position of the combined company will be.
You should read this unaudited pro forma condensed summary financial information
in conjunction with the "Unaudited Pro Forma Condensed Combined Financial
Statements" included elsewhere in this document. This unaudited pro forma
condensed summary financial information does not reflect any adjustments to
conform accounting practices, other than to conform Union Pacific Resources'
accounting for oil and gas activities to the full-cost method of accounting, or
to reflect any cost savings or other synergies anticipated as a result of the
merger or any future merger related expenses.
QUARTER ENDED YEAR ENDED
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
(MILLIONS, EXCEPT PER SHARE DATA)
OPERATING DATA
Operating revenues.................................. $ 769.2 $2,335.9
Net income from continuing operations available to
common stockholders............................... 166.2 360.8
PER SHARE INFORMATION
Net income from continuing operations -- basic...... $ 0.69 $ 1.51
Net income from continuing operations -- diluted.... 0.68 1.50
Cash dividends...................................... 0.05 0.20
BALANCE SHEET DATA (AT END OF PERIOD)
Total assets........................................ $14,329.6
Long-term debt...................................... 3,976.3
Stockholders' equity................................ 5,494.7
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COMPARATIVE PER SHARE DATA
We have set forth below information concerning net income from continuing
operations, cash dividends declared and book value per share data for Anadarko
and Union Pacific Resources on both historical and pro forma bases and on a per
share equivalent pro forma basis for Union Pacific Resources. We have derived
the pro forma net income per share from the "Unaudited Pro Forma Condensed
Combined Financial Statements" presented elsewhere in this document (which gives
effect to the merger under the purchase accounting method). Pro forma cash
dividends declared per share reflect Anadarko cash dividends per share declared
in the periods indicated. Book value per share for the pro forma presentation is
based upon outstanding Anadarko common shares, adjusted to include the estimated
number of Anadarko common shares to be issued in the merger for outstanding
Union Pacific Resources common shares at the time the merger is completed. The
per share equivalent pro forma data for shares of Union Pacific Resources common
shares is based on the assumed conversion of each of the Union Pacific Resources
common shares into 0.455 of an Anadarko common share. You should read the
information set forth below in conjunction with the respective audited and
unaudited financial statements of Anadarko and Union Pacific Resources
incorporated by reference, and the "Unaudited Pro Forma Condensed Combined
Financial Statements" and the notes thereto presented elsewhere in this
document. See "Where You Can Find More Information."
QUARTER ENDED YEAR ENDED
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
(MILLIONS, EXCEPT PER SHARE DATA)
UNION PACIFIC RESOURCES HISTORICAL PER COMMON SHARE
DATA
Net income from continuing operations
Basic.............................................. $ 0.37 $ 0.36
Diluted............................................ 0.37 0.36
Cash dividends....................................... 0.05 0.20
Book value........................................... 4.09 3.77
ANADARKO HISTORICAL PER COMMON SHARE DATA
Net income from continuing operations
Basic.............................................. $ 0.31 $ 0.25
Diluted............................................ 0.30 0.25
Cash dividends....................................... 0.05 0.20
Book value........................................... 10.83 10.46
PRO FORMA COMBINED PER COMMON SHARE DATA(A)
Net income from continuing operations
Basic.............................................. $ 0.69 $ 1.51
Diluted............................................ 0.68 1.50
Cash dividends....................................... 0.05 0.20
Book value........................................... 22.75 --
PRO FORMA COMBINED PER UNION PACIFIC RESOURCES
EQUIVALENT COMMON SHARE DATA(A)
Net income from continuing operations
Basic.............................................. $ 0.31 $ 0.69
Diluted............................................ 0.31 0.68
Cash dividends....................................... 0.02 0.09
Book value........................................... 10.35 --
- - - - - - - - - - - - ---------------
(a) Union Pacific Resources' net income from continuing operations has been
adjusted to reflect operations on a full-cost basis.
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MARKET PRICE AND DIVIDEND DATA
In the table below, we present the range of the reported high and low sales
prices, as shown on the New York Stock Exchange Composite Tape, of the Anadarko
common shares and the Union Pacific Resources common shares, as well as the per
share dividends paid on those shares, for the calendar quarters indicated. The
Anadarko common share prices and dividend amounts for the first and second
quarters of 1998 are adjusted for the 2-for-1 stock split, which occurred on
July 1, 1998.
ANADARKO UNION PACIFIC RESOURCES
COMMON SHARES COMMON SHARES
--------------------------- ---------------------------
CALENDAR YEAR HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
- - - - - - - - - - - - ------------- ------ ------ --------- ------ ------ ---------
1998:
First quarter.......................... $35.50 $26.44 $ 0.0375 $24.50 $20.88 $0.05
Second quarter......................... 38.00 30.31 0.05 25.25 16.56 0.05
Third quarter.......................... 44.88 28.38 0.05 18.56 8.31 0.05
Fourth quarter......................... 41.88 24.75 0.05 14.50 8.25 0.05
1999:
First quarter.......................... $40.00 26.88 $ 0.05 $12.19 $ 7.69 0.05
Second quarter......................... 42.75 35.19 0.05 17.00 10.75 0.05
Third quarter.......................... 39.13 28.63 0.05 19.38 14.44 0.05
Fourth quarter......................... 35.75 26.25 0.05 16.13 10.94 0.05
2000:
First quarter.......................... $40.00 $27.56 $ 0.05 $15.00 $ 8.56 $0.05
Second quarter (through May 18,
2000)................................ $53.19 $33.25 -- $23.56 $14.44 --
------ ------ ------- ------ ------ -----
On March 31, 2000, the last full trading day prior to our signing and
announcing the merger agreement, the closing price of Anadarko common shares was
$38.69 per share and the closing price of Union Pacific Resources common shares
was $14.50 per share, as reported on the New York Stock Exchange Composite Tape.
Based on the 0.455 exchange ratio provided in the merger agreement and the
closing price of Anadarko common shares on March 31, 2000, the value of the
Anadarko common shares to be received for each Union Pacific Resources common
share is $17.60 per share. On [ ], 2000, the most recent date prior to the
mailing of this document to you, the last sale prices of Anadarko common shares
and Union Pacific Resources common shares were $[ ] per share and $[ ]
per share, respectively, as reported on the New York Stock Exchange Composite
Tape. We encourage you to obtain current market quotations for Anadarko common
shares and Union Pacific Resources common shares.
Anadarko has filed an application with the New York Stock Exchange to list
on the exchange the Anadarko common shares that Union Pacific Resources
stockholders will receive in the merger.
On April 27, 2000, the Anadarko board of directors declared a dividend on
Anadarko common shares of $0.05 per share, payable on June 28, 2000 to holders
of record on June 14, 2000.
In the merger agreement, Anadarko agreed that, until the merger is
completed or the merger agreement is terminated, Anadarko will not make, declare
or pay any dividends or distributions on any Anadarko common shares, except for
regular quarterly dividends of $0.05 per share.
In the merger agreement, Union Pacific Resources agreed that, until the
merger is completed or the merger agreement is terminated, Union Pacific
Resources will not make, declare or pay any dividends or distributions on Union
Pacific Resources common shares, except for regular quarterly dividends of $0.05
per share.
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RISK FACTORS
In considering whether to vote in favor of the merger transaction involving
our companies, you should consider all of the information we have included in
this document and its annexes and all of the information included in the
documents we have incorporated by reference. In addition, you should pay
particular attention to the following risks related to the merger.
THE MARKET VALUE OF ANADARKO COMMON SHARES THAT UNION PACIFIC RESOURCES
STOCKHOLDERS RECEIVE WILL VARY AS A RESULT OF THE FIXED EXCHANGE RATIO AND
POSSIBLE STOCK PRICE FLUCTUATIONS.
The exchange ratio is a fixed ratio that will not be adjusted as a result
of any increase or decrease in the price of either Anadarko common shares or
Union Pacific Resources common shares. The price of Anadarko common shares at
the time the merger is completed may be higher or lower than its price on the
date of this document or on the date of the special meetings of stockholders.
Changes in the business, operations or prospects of Anadarko or Union Pacific
Resources, market assessments of the benefits of the merger and of the
likelihood that the merger will be completed, regulatory considerations, oil and
gas prices, general market and economic conditions, or other factors may affect
the prices of Anadarko common shares or Union Pacific Resources common shares.
Most of these factors are beyond our control.
Because the merger will be completed only after the special meetings of our
stockholders are held, there is no way to be sure that the price of the Anadarko
common shares on the date of the special meetings will be indicative of their
price at the time the merger is completed. We urge you to obtain current market
quotations for both Anadarko common shares and Union Pacific Resources common
shares.
THERE ARE UNCERTAINTIES IN INTEGRATING OUR BUSINESS OPERATIONS.
In deciding that the merger is in the best interests of our respective
stockholders, the Anadarko board of directors and the Union Pacific Resources
board of directors considered the potential complementary effects of combining
our companies' assets, personnel and operational expertise. Integrating
businesses, however, involves a number of special risks, including the
possibility that management may be distracted from regular business concerns by
the need to integrate operations, unforeseen difficulties in integrating
operations and systems, problems concerning assimilating and retaining the
employees of the combined company, challenges in retaining customers, and
potential adverse short-term or long-term effects on operating results.
A SUBSTANTIAL OR EXTENDED DECLINE IN OIL OR GAS PRICES WOULD HAVE A MATERIAL
ADVERSE EFFECT ON THE COMBINED COMPANY.
Prices for oil and natural gas fluctuate widely. Among the factors that can
cause these price fluctuations are:
- level of consumer demand,
- weather conditions,
- price and availability of alternative fuels,
- domestic drilling activity, and
- overall economic conditions.
Due to the many uncertainties associated with the world political
environment, the availability of other worldwide energy supplies and the
relative competitive relationships of the various energy sources in the view of
consumers, we are unable to predict what changes may occur in oil and natural
gas prices in the future.
18
25
Our cash flow and earnings depend to a great extent on the prevailing
prices for oil and natural gas. Prolonged or substantial declines in these
commodity prices may adversely affect our liquidity, the amount of cash flow
available for capital expenditures, and our ability to maintain our credit
quality and access to the credit and capital markets.
THE OIL AND GAS RESERVES DATA AND FUTURE NET REVENUES ESTIMATES WE REPORT ARE
UNCERTAIN.
Estimates of proved oil and gas reserves and projected future net revenues
by necessity are projections based on engineering data, projection of future
rates of production and timing of future expenditures. The process of estimating
oil and gas reserves requires substantial judgment on the part of petroleum
engineers, resulting in imprecise determinations, particularly with respect to
new discoveries. Future performance that deviates significantly from reserve
reports could have a material adverse effect on us. The estimates of future net
revenues reflect oil and gas prices as of the date of estimation, without
escalation or reduction. Fluctuations in the price of oil or natural gas could
have the effect of significantly altering reserve estimates as economic
projections inherent in the estimates may reduce or increase the quantities of
recoverable reserves. Actual future production, oil and natural gas prices,
revenues, taxes, development expenditures, operating expenses, and quantities of
recoverable oil and natural gas reserves most likely will vary from our
estimates.
IF WE FAIL TO ACQUIRE OR FIND ADDITIONAL RESERVES, OUR RESERVES AND PRODUCTION
WILL DECLINE MATERIALLY FROM THEIR CURRENT LEVELS.
The rate of production from oil and gas properties generally declines as
reserves are depleted. Except to the extent that we acquire additional
properties containing proved reserves, conduct successful exploration and
development activities, or, through engineering studies, identify additional
behind-pipe zones or secondary recovery reserves, our proved reserves will
decline materially as reserves are produced. Future oil and gas production is,
therefore, highly dependent upon our level of success in acquiring, finding and
developing additional reserves, as well as upon increasing production from
existing properties through exploitation or other reservoir management
activities.
WE INCUR COSTS TO COMPLY WITH GOVERNMENT REGULATIONS, ESPECIALLY REGULATIONS
RELATING TO ENVIRONMENTAL PROTECTION, AND WE COULD INCUR EVEN GREATER COSTS IN
THE FUTURE.
Our exploration, production and marketing operations are regulated
extensively at the U.S. federal, state and local levels, as well as by other
countries in which we do business. We have made and will continue to make
expenditures in our efforts to comply with the requirements of environmental and
other regulations. Further, the oil and gas regulatory environment could change
in ways that might substantially increase these costs.
Hydrocarbon-producing states regulate conservation practices and protection
of correlative rights. These regulations affect our operations and limit the
quantity of hydrocarbons we may produce and sell. In addition, at the U.S.
federal level, the U.S. Federal Energy Regulatory Commission regulates
interstate transportation of natural gas under the Natural Gas Act. Other
regulated matters include marketing, pricing, transportation and valuation of
royalty payments.
As an owner or lessee and operator of oil and gas properties, we are
subject to various U.S. federal, state and local and foreign regulations
relating to the discharge of materials into, and protection of, the environment.
These regulations may, among other things, impose liability on us for the cost
of pollution cleanup resulting from operations, subject us to liability for
pollution damages, and require suspension or cessation of operations in affected
areas. Changes in or additions to regulations regarding the protection of the
environment could hurt our business.
OUR NON-U.S. OPERATIONS ARE SUBJECT TO THE RISKS OF DOING BUSINESS ABROAD.
Over the past few years, Anadarko and Union Pacific Resources have devoted
a portion of their capital expenditures to international ventures. Currently,
the majority of Anadarko's expenditures for
19
26
international projects is devoted to continuing development of discoveries in
Algeria, which accounts for approximately 29% of Anadarko's total proved
reserves of oil and gas and approximately 15% of the combined company's total
proved reserves of oil and gas. Anadarko also conducts exploration activities in
Tunisia and the North Atlantic Ocean. Union Pacific Resources' international oil
and gas exploration and production operations are primarily concentrated in
Western Canada, Guatemala and Venezuela, and account for approximately 44% of
Union Pacific Resources' total proved reserves of oil and gas and approximately
22% of the combined company's total proved reserves of oil and gas.
These non-U.S. oil and gas exploration, exploitation, development and
production activities, particularly those outside of North America, are subject
to political and economic risks, including:
- cancellation or renegotiation of contracts;
- disadvantages of competing against companies from countries that are not
subject to U.S. laws and regulations, including the Foreign Corrupt
Practices Act;
- changes in foreign laws or regulations;
- changes in tax laws;
- royalty and tax increases or claims;
- retroactive tax or royalty claims;
- expropriation or nationalization of property;
- currency fluctuations;
- foreign exchange controls;
- import and export regulations;
- environmental controls;
- risks of loss due to civil strife, acts of war, guerilla activities and
insurrection; and
- other risks arising out of foreign sovereignty over the areas in which
our operations are conducted.
Consequently, our non-U.S. exploration, exploitation, development and
production activities may be substantially affected by factors beyond our
control, any of which could materially adversely affect our financial position
or results of operations. Furthermore, in the event of a dispute arising from
non-U.S. operations, we may be subject to the exclusive jurisdiction of courts
outside the United States or may not be successful in subjecting non-U.S.
persons to the jurisdiction of the courts in the United States, which could
adversely affect the outcome of a dispute.
20
27
FORWARD-LOOKING STATEMENTS
This document and the documents incorporated by reference contain
forward-looking statements with respect to the merger and the financial
condition, results of operations, plans, objectives, future performance and
business of Anadarko and Union Pacific Resources. Often these statements include
words such as "believes," "expects," "anticipates," "estimates," "intends,"
"strategy," "plan," or similar words or expressions. In particular, statements,
express or implied, concerning future operating results or the ability to
generate income or cash flows are forward-looking statements.
These forward-looking statements involve certain risks and uncertainties.
Actual results may differ materially from those contemplated by these
forward-looking statements. You should understand that various factors, in
addition to those discussed elsewhere in this document and in the documents
referred to or incorporated by reference in this document, could affect the
future results of the combined company following the merger and could cause
results to differ materially from those expressed in these forward-looking
statements, including:
- revenues following the merger are lower than expected;
- costs or difficulties related to the integration of the business of
Anadarko and Union Pacific Resources are greater than expected;
- competitive pressures increase in the industry or markets in which the
companies operate;
- timing and extent of changes in commodity prices for crude oil, natural
gas and related products;
- extent of our success in discovering, developing, marketing and producing
reserves, and in acquiring oil and gas properties;
- estimates of oil and gas reserves are imprecise, particularly with
respect to new discoveries;
- actual future production, oil and natural gas prices, revenues, taxes,
development expenditures, operating expenses and quantities of
recoverable oil and natural gas reserves vary from estimates;
- changes in general economic conditions or in political or competitive
forces;
- changes in the securities or currency-exchange markets;
- dependence on key personnel to manage the integration of the two
companies;
- risk that our analyses of these risks and forces could be incorrect or
that the strategies developed to address them could be unsuccessful; and
- risks described above under "Risk Factors."
Anadarko stockholders and Union Pacific Resources stockholders are
cautioned not to place undue reliance on these statements, which speak only as
of the date of this document or, in the case of documents incorporated by
reference, the dates of those documents.
All subsequent written and oral forward-looking statements attributable to
Anadarko or Union Pacific Resources or any person acting on their behalf are
expressly qualified in their entirety by the cautionary statements contained or
referred to in this section. Neither Anadarko nor Union Pacific Resources
undertakes any obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after the date of
this document or to reflect the occurrence of unanticipated events.
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THE SPECIAL MEETINGS
INFORMATION ABOUT THE SPECIAL MEETINGS AND VOTING
The Anadarko board of directors is using this document to solicit proxies
from Anadarko stockholders for use at the Anadarko special meeting of
stockholders. The Union Pacific Resources board of directors is using this
document to solicit proxies from Union Pacific Resources stockholders for use at
the Union Pacific Resources special meeting of stockholders.
MATTERS RELATING TO THE SPECIAL MEETINGS
TIME AND PLACE OF THE SPECIAL MEETINGS
ANADARKO SPECIAL MEETING UNION PACIFIC RESOURCES SPECIAL MEETING
------------------------ ---------------------------------------
June [ ], 2000 June [ ], 2000
[time and address] [time and address]
PURPOSE OF THE SPECIAL MEETINGS IS TO VOTE ON THE FOLLOWING ITEMS
ANADARKO SPECIAL MEETING UNION PACIFIC RESOURCES SPECIAL MEETING
------------------------ ---------------------------------------
- - - - - - - - - - - - - A proposal to approve the issuance of - A proposal to approve the merger agreement
Anadarko common shares in the merger. and the transactions contemplated by the
merger agreement, including the merger.
- - - - - - - - - - - - - A proposal to amend Anadarko's restated
certificate of incorporation to increase - Such other matters as may properly come
the maximum size of the Anadarko board of before the Union Pacific Resources special
directors from nine to 15 directors. meeting, including the approval of any
adjournment or postponement of the Union
- - - - - - - - - - - - - A proposal to amend Anadarko's restated Pacific Resources special meeting.
certificate of incorporation to increase
the number of authorized Anadarko common
shares from 300,000,000 to 450,000,000.
- - - - - - - - - - - - - A proposal to amend Anadarko's 1999 stock
incentive plan.
- - - - - - - - - - - - - Such other matters as may properly come
before the Anadarko special meeting,
including the approval of any adjournment
or postponement of the Anadarko special
meeting.
RECORD DATE FOR THE SPECIAL MEETINGS
ANADARKO SPECIAL MEETING UNION PACIFIC RESOURCES SPECIAL MEETING
------------------------ ---------------------------------------
Holders of record of Anadarko common shares Holders of record of Union Pacific Resources
at the close of business on May 30, 2000 common shares at the close of business on
will be entitled to vote. May 30, 2000 will be entitled to vote.
OUTSTANDING SHARES HELD ON RECORD DATE
ANADARKO SPECIAL MEETING UNION PACIFIC RESOURCES SPECIAL MEETING
------------------------ ---------------------------------------
As of the record date, there were [ ] As of the record date, there were [ ]
outstanding Anadarko common shares that are outstanding Union Pacific Resources common
entitled to vote at the special meeting. shares that are entitled to vote at the
special meeting.
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SHARES ENTITLED TO VOTE AT THE SPECIAL MEETINGS
ANADARKO SPECIAL MEETING UNION PACIFIC RESOURCES SPECIAL MEETING
------------------------ ---------------------------------------
Each Anadarko common share that you own as of Each Union Pacific Resources common share
the record date entitles you to one vote. that you own as of the record date entitles
you to one vote.
Anadarko common shares deemed beneficially
held by Anadarko or its subsidiaries will not Union Pacific Resources common shares deemed
be voted. beneficially held by Union Pacific Resources
or its subsidiaries will not be voted.
QUORUM REQUIREMENT FOR THE SPECIAL MEETINGS
ANADARKO SPECIAL MEETING UNION PACIFIC RESOURCES SPECIAL MEETING
------------------------ ---------------------------------------
A quorum of Anadarko stockholders is A quorum of Union Pacific Resources
necessary to hold a valid Anadarko special stockholders is necessary to hold a valid
meeting. Union Pacific Resources special meeting.
The presence in person or by proxy at the The presence in person or by proxy at the
Anadarko special meeting of holders of a Union Pacific Resources special meeting of
majority of the Anadarko common shares holders of a majority of the Union Pacific
entitled to vote at the Anadarko special Resources common shares entitled to vote at
meeting is necessary for a quorum. the Union Pacific Resources special meeting
Abstentions and broker non-votes count as is necessary for a quorum. Abstentions and
present for establishing a quorum. Anadarko broker non-votes count as present for
common shares held by Anadarko do not count establishing a quorum. Union Pacific
toward a quorum. Resources common shares held by Union Pacific
Resources do not count toward a quorum.
A "broker non-vote" occurs with respect to a
proposal when a broker is not permitted to A "broker non-vote" occurs with respect to a
vote on that proposal without instruction proposal when a broker is not permitted to
from the beneficial owner of the Anadarko vote on that proposal without instruction
common shares and no instruction is given. from the beneficial owner of the Union
Pacific Resources common shares and no
instruction is given.
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
------------------------ ---------------------------------------
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. These Union Pacific Resources common shares,
shares represent approximately 4% of the including outstanding options. These shares
Anadarko common shares outstanding as of the represent approximately 1.3% of the Union
record date. Pacific Resources common shares outstanding
as of the record date.
These individuals have indicated that they
intend to vote in favor of the Anadarko These individuals have indicated that they
proposals. intend to vote in favor of the merger
proposal.
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VOTE NECESSARY AT THE SPECIAL MEETINGS TO APPROVE ANADARKO AND UNION PACIFIC
RESOURCES PROPOSALS
ANADARKO SPECIAL MEETING UNION PACIFIC RESOURCES SPECIAL MEETING
------------------------ ---------------------------------------
Approval of the share issuance requires the Approval of the merger agreement and the
approval of the holders of a majority of the transactions contemplated by the merger
votes cast on the proposal, provided that the agreement, including the merger, requires the
total votes cast on the proposal represent approval of the holders of a majority of the
over 50% in interest of all securities outstanding Union Pacific Resources common
entitled to vote on the proposal. shares.
Approval of the amendment to Anadarko's Abstentions and broker non-votes will have
restated certificate of incorporation the same effect as votes against the Union
increasing the maximum size of the Anadarko Pacific Resources merger proposal.
board of directors requires the approval of
the holders of 80% of the outstanding
Anadarko common shares.
Approval of the amendment to Anadarko's
restated certificate of incorporation
increasing the authorized number of Anadarko
common shares requires the approval of the
holders of a majority of the outstanding
Anadarko common shares.
Approval of the amendment to Anadarko's 1999
stock incentive plan requires the approval of
the holders of a majority of the votes cast
on the proposal, provided that the total
votes cast on the proposal represent over 50%
in interest of all securities entitled to
vote on the proposal.
Abstentions and broker non-votes will not be
treated as votes cast and will have no effect
on the outcome of the votes on the issuance
of Anadarko common shares and the adoption of
the amendment to Anadarko's 1999 stock
incentive plan (except in the determination
of whether the total votes cast on a proposal
represent over 50% in interest of all
securities entitled to vote on the proposal),
but will have the same effect as votes
against the two proposals to amend Anadarko's
restated certificate of incorporation.
VOTING BY PROXY
VOTING YOUR PROXY. You may vote in person at your special meeting or by
proxy. We recommend you vote by proxy even if you plan to attend your special
meeting. You can always change your vote at your special meeting.
If you are an Anadarko stockholder, you may vote by proxy card, Internet or
telephone by completing and mailing the enclosed proxy card or following the
Internet or telephone voting instructions on the proxy card. If you are a Union
Pacific Resources stockholder, you may vote by proxy card, but not by Internet
or telephone, by completing and mailing the enclosed proxy card. If you properly
submit your proxy to us in time to vote, one of the individuals named as your
proxy will vote your common shares as you have directed. You may vote for or
against the proposal or proposals submitted at your special meeting or abstain
from voting.
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HOW TO VOTE BY PROXY
IN WRITING*
ANADARKO SPECIAL MEETING UNION PACIFIC RESOURCES SPECIAL MEETING
- - - - - - - - - - - - --------------------------------------------- ---------------------------------------------
Complete, sign, date and return your proxy Complete, sign, date and return your proxy
card in the enclosed envelope. card in the enclosed envelope.
BY INTERNET OR TELEPHONE*
ANADARKO SPECIAL MEETING UNION PACIFIC RESOURCES SPECIAL MEETING
- - - - - - - - - - - - --------------------------------------------- ---------------------------------------------
Go to http://www.eproxy.com/apc and follow Voting by Internet is not available to Union
the instructions. You will need to give the Pacific Resources stockholders.
personal identification number contained on
your proxy card.
Or, call toll-free 1-800-840-1208 and follow Voting by telephone is not available to Union
the instructions. You will need to give the Pacific Resources stockholders.
personal identification number contained on
your proxy card.
- - - - - - - - - - - - ---------------
* If you hold common shares through a broker or other custodian, please follow
the voting instructions for the voting form used by that firm.
Voting by Anadarko Plan Participants. If you are a participant in the
Anadarko Dividend Reinvestment and Stock Purchase Plan or the Anadarko Employee
Savings Plan, your proxy will also serve as an instruction to vote the Anadarko
common shares held for your account under these plans in the manner indicated on
the proxy. If your proxy is not received, the Anadarko common shares held in
your account in either the Anadarko Dividend Reinvestment and Stock Purchase
Plan or the Anadarko Employee Savings Plan will not be voted.
Voting by Union Pacific Resources Plan Participants. If you are a
participant in one of the following employee benefit plans -- Union Pacific
Resources Group Inc. Employees' Thrift Plan, Union Pacific Resources Employee
Stock Ownership Plan, Union Pacific Resources Group Inc. Thrift Plan PAYSOP or
Union Pacific Resources Group Inc. TRASOP -- your proxy will also serve as an
instruction to vote the Union Pacific Resources common shares held for your
account under that plan in the manner indicated on the proxy. If your proxy is
not received, the common shares held in your Union Pacific Resources Group Inc.
Thrift Plan PAYSOP and Union Pacific Resources Group Inc. TRASOP accounts will
not be voted, and shares held in all other accounts will be voted by the trustee
of the plans in accordance with instructions from Independent Fiduciary
Services.
If you submit your proxy but do not make specific choices, your proxy will
follow your board of directors' recommendations and your shares will be voted
for their recommendations.
THE ANADARKO BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
THE ISSUANCE OF ANADARKO COMMON SHARES IN THE MERGER, FOR THE AMENDMENT TO
ANADARKO'S RESTATED CERTIFICATE OF INCORPORATION INCREASING THE MAXIMUM SIZE OF
THE ANADARKO BOARD OF DIRECTORS FROM NINE TO 15 DIRECTORS, FOR THE AMENDMENT TO
ANADARKO'S RESTATED CERTIFICATE OF INCORPORATION INCREASING THE AUTHORIZED
NUMBER OF ANADARKO COMMON SHARES FROM 300,000,000 TO 450,000,000 AND FOR THE
ADOPTION OF THE AMENDMENT TO ANADARKO'S 1999 STOCK INCENTIVE PLAN.
THE UNION PACIFIC RESOURCES BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
YOU VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
BY THE MERGER AGREEMENT, INCLUDING THE MERGER.
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APPROVAL OF THE ISSUANCE OF ANADARKO COMMON SHARES BY ANADARKO STOCKHOLDERS
AND APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE
MERGER AGREEMENT, INCLUDING THE MERGER, BY UNION PACIFIC RESOURCES STOCKHOLDERS
ARE CONDITIONS TO CONSUMMATION OF THE MERGER.
Revoking Your Proxy. You may revoke your proxy before it is voted by:
- submitting a new proxy with a later date, including if you are an
Anadarko stockholder a proxy given by the Internet or by telephone,
- notifying your company's Secretary in writing before your special meeting
that you have revoked your proxy, or
- voting in person at your special meeting.
Voting in Person. If you plan to attend your special meeting and wish to
vote in person, we will give you a ballot at your special meeting. However, if
your common shares are held in the name of a brokerage firm or trustee, you must
obtain from the firm or trustee an account statement, letter or other evidence
of your beneficial ownership of the common shares.
People with Disabilities. We can provide reasonable assistance to help you
participate in your special meeting if you tell us about your disability and
your plan to attend. Please call or write the Secretary of your company at least
two weeks before your special meeting at the number or address provided on page
4.
Proxy Solicitation. We will each pay our own costs of soliciting proxies.
In addition to this mailing, Anadarko and Union Pacific Resources employees
may solicit proxies personally, electronically or by telephone. Anadarko is
paying ChaseMellon Shareholder Services, L.L.C. a customary fee, plus expenses,
to assist with the solicitation. Union Pacific Resources is paying Innisfree M&A
Incorporated a customary fee, plus expenses, to assist with the solicitation.
The extent to which these proxy soliciting efforts will be necessary
depends upon how promptly proxies are submitted. You should submit your proxy
without delay by mail or, if you are an Anadarko stockholder, by Internet or
telephone. We also will reimburse brokers and other nominees for their expenses
in sending these materials to you and getting your voting instructions.
DO NOT SEND IN ANY UNION PACIFIC RESOURCES STOCK CERTIFICATES WITH YOUR
PROXY CARDS. THE EXCHANGE AGENT WILL MAIL TRANSMITTAL FORMS WITH INSTRUCTIONS
FOR THE SURRENDER OF STOCK CERTIFICATES FOR UNION PACIFIC RESOURCES COMMON
SHARES AS SOON AS PRACTICABLE AFTER THE COMPLETION OF THE MERGER.
OTHER BUSINESS; ADJOURNMENTS
We currently are not aware of any other business to be acted upon at either
special meeting. If, however, other matters are properly brought before either
special meeting, or any adjourned or postponed special meeting, your proxies
will have discretion to vote or act on those matters according to their best
judgment, including to adjourn the special meeting.
Adjournments or postponements of the special meetings may be made for the
purpose of, among other things, soliciting additional proxies. Any adjournment
may be made from time to time by approval of the holders of common shares
representing a majority of the votes present in person or by proxy at the
special meeting, whether or not a quorum exists, without further notice other
than by an announcement made at the special meeting.
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THE MERGER
BACKGROUND OF THE MERGER
Until October 1995, Union Pacific Resources was a wholly owned subsidiary
of Union Pacific Corporation, which, in addition to the activities of Union
Pacific Resources, operated through subsidiaries in the areas of rail
transportation and trucking. In October 1995, Union Pacific Corporation
completed an initial public offering of approximately 15% of Union Pacific
Resources common shares. In October 1996, Union Pacific Corporation distributed
the remaining stock in Union Pacific Resources to Union Pacific Corporation's
stockholders.
After the election of Union Pacific Resources' chief executive officer by
the board of directors in July 1999, Union Pacific Resources' chief executive
officer initiated a review of Union Pacific Resources' strategy. At the regular
meeting of the Union Pacific Resources board of directors in January 2000, the
board was presented by management with a proposed strategy statement and a
revised long-term strategic plan which included a discussion of, among other
matters, current industry trends and certain strategic alternatives for Union
Pacific Resources. After discussion, Union Pacific Resources' board authorized
management to continue its review of strategic alternatives for Union Pacific
Resources, including the possibility of a strategic merger with a peer company.
In February 2000, Union Pacific Resources' chief executive officer received
unsolicited inquiries from, and initiated inquires to, other independent oil and
gas exploration and production companies regarding industry consolidation
trends.
From time to time, Anadarko had considered expanding its operations through
a strategic merger or acquisition involving another significant independent oil
producer. In February 2000, following an initial internal evaluation of the
attributes of Union Pacific Resources, Anadarko requested that Credit Suisse
First Boston, Anadarko's financial advisor, approach Union Pacific Resources'
chief executive officer at an energy industry conference and raise the
possibility of a combination between Union Pacific Resources and Anadarko. In
mid-February, Anadarko's and Union Pacific Resources' chief executive officers
met at an industry function and had a preliminary discussion regarding a
possible combination of the two companies.
On February 22, 2000, representatives of Anadarko and Union Pacific
Resources, including their respective chief executive officers, met and executed
a confidentiality agreement and exchanged general information regarding the
assets and strategic focus of each company. The two chief executive officers
also discussed other general issues regarding a possible combination of the two
companies. On February 29, 2000, representatives of the financial staffs of
Anadarko and Union Pacific Resources, including representatives of each
company's financial advisors, met and exchanged financial information with
respect to the two companies.
At a special meeting of the Union Pacific Resources board of directors held
on March 2, 2000, Union Pacific Resources' chief executive officer updated the
Union Pacific Resources board regarding the strategic alternatives discussed at
the January board meeting, which included the possibility of a strategic merger
transaction or other business combination with a peer company. Union Pacific
Resources' chief executive officer reported that he had held preliminary
discussions with six peer companies, and had executed confidentiality
agreements, held meetings and exchanged information with two of these, including
Anadarko. The board was then advised that Goldman, Sachs & Co. and Simmons &
Company International had been engaged as joint financial advisors to assist the
Union Pacific Resources board and management in their review of the strategic
alternatives available to Union Pacific Resources and to make recommendations in
light of that review, including the possibility of a strategic combination. The
Union Pacific Resources board agreed that Union Pacific Resources should
continue to assess its strategic alternatives.
In the second week of March 2000, senior management, other key employees
and the financial advisors of Union Pacific Resources and Anadarko met and
exchanged additional information about each company. Union Pacific Resources'
and Anadarko's chief executive officers participated in these meetings, and also
met separately following these meetings to discuss a number of matters,
including the timing and process involved in a possible combination of the two
companies. Following this meeting, each of the two
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companies began due diligence examinations of the other. This due diligence
continued in various meetings and review sessions for the next few weeks until
the execution of a definitive merger agreement, and involved the exchange of
additional information regarding each company.
On March 24, 2000, the two chief executive officers met and discussed
various issues relating to a possible strategic combination of the two
companies, including a number of other issues such as the size and composition
of the board of directors of the combined company, the name and location of the
combined company, management issues with respect to the combined company
(including the Union Pacific Resources chief executive officer's position with
the combined company and the terms under which he would serve), Anadarko's
activities in Algeria and Union Pacific Resources' operations in Latin America,
and the nature and location of each company's assets. They also discussed the
timing and process involved in any potential transaction and certain measures to
enhance the likelihood of completing the proposed merger. Union Pacific
Resources' chief executive officer noted that the Union Pacific Resources board
of directors had scheduled meetings on March 27 and on March 29-30 to review
Union Pacific Resources' strategic alternatives, and that Union Pacific
Resources would not be in a position to consider any specific proposal from
Anadarko until after those meetings, and then only if its board determined that
it was appropriate to pursue a strategic transaction, such as a combination of
Anadarko and Union Pacific Resources.
At a special meeting of the Union Pacific Resources board of directors held
on March 27, 2000, representatives of Goldman, Sachs & Co. presented a detailed
review of Union Pacific Resources' current situation, including an analysis of
the company's long-term strategic plan. In addition, Union Pacific Resources'
financial advisors reviewed a number of potential strategic alternatives for
Union Pacific Resources and its stockholders, including continuing as an
independent public company, implementing a stock repurchase program, acquiring
the assets or stock of other oil and gas exploration and production companies,
selling the company for cash or stock, engaging in a leveraged recapitalization,
or effecting a strategic transaction with an appropriate peer company. The
financial advisors then discussed a group of peer companies which were potential
strategic partners and provided an analysis of certain of these peer companies.
The financial advisors' analysis concluded that Anadarko was, of the peer
companies considered, the best potential partner for Union Pacific Resources in
a strategic merger if appropriate terms could be negotiated. Union Pacific
Resources' chief executive officer also briefed the Union Pacific Resources
board on his March 24, 2000 meeting with Anadarko's chief executive officer. The
Union Pacific Resources board also received reports from members of senior
management on the due diligence review process conducted by Union Pacific
Resources regarding Anadarko and its operations. After discussion, the board
determined that a strategic merger with an appropriate peer partner was the best
potential alternative, if such a transaction could be structured on terms that
were fair to the stockholders of Union Pacific Resources.
Following this meeting, counsel for Anadarko provided Union Pacific
Resources' counsel with an initial draft of a proposed merger agreement and
related stock option agreements. Anadarko had previously indicated to Union
Pacific Resources that it would only pursue a transaction that included the
execution of such stock option agreements.
At a special meeting of the Union Pacific Resources board of directors held
on March 29, 2000 and a regular meeting held on March 30, 2000, the Union
Pacific Resources board engaged in a comprehensive review of a possible
strategic merger with Anadarko. The board received detailed presentations from
Union Pacific Resources' management, from the company's financial advisors, and
from the company's counsel, Morgan, Lewis & Bockius LLP. The management
presentations included an overview of the company's strategic alternatives and a
financial analysis of a possible strategic combination with Anadarko, including
a detailed review of Anadarko's strategic plan, certain financial attributes,
reserves, exploration activities and major projects, a review of other due
diligence issues relating to Anadarko and a discussion of the political and
economic risks associated with Anadarko's Algerian assets. The presentation by
the financial advisors included an overview of Union Pacific Resources and
Anadarko, a discussion of the rationale of a potential combination of the two
companies, and an analysis of various financial aspects of the combination of
the two companies. After a full discussion, the board authorized representatives
of Union Pacific Resources to
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continue discussions of a possible strategic merger with Anadarko and to
negotiate a definitive merger agreement subject to final board approval.
At a special meeting of the Anadarko board of directors held on March 30,
2000, the Anadarko board was briefed on the proposed transaction with Union
Pacific Resources by Anadarko's senior management, Credit Suisse First Boston,
and Wachtell, Lipton, Rosen & Katz, special counsel to Anadarko. The Anadarko
board of directors reviewed the results of management's due diligence with
respect to Union Pacific Resources and discussed the financial aspects of the
proposed transaction. As a result of this meeting, Anadarko's management was
authorized to continue discussion with Union Pacific Resources and to make a
proposal with respect to the specific terms of the proposed merger transaction.
Following the March 30, 2000 Union Pacific Resources board of directors
meeting, the chief executive officers of Union Pacific Resources and Anadarko
spoke by telephone; Union Pacific Resources' chief executive officer advised
Anadarko's chief executive officer that Union Pacific Resources was prepared to
receive a specific proposal from Anadarko with regard to a strategic merger of
the two companies. Anadarko's chief executive officer then proposed that the
exchange ratio for the merger be 0.42 of an Anadarko common share for each
common share of Union Pacific Resources stock outstanding, which would result in
Union Pacific Resources stockholders owning approximately 44.4% of the total
equity of the combined company. Anadarko's chief executive officer also proposed
that the board of directors of Anadarko following the merger consist of five
representatives of the Union Pacific Resources board and the eight current
directors of Anadarko, subject to Anadarko obtaining stockholder approval of an
amendment to its certificate of incorporation. Anadarko's chief executive
officer also stated that its proposal was contingent on Union Pacific Resources
agreeing to a termination fee of $150 million and execution of mutual stock
option agreements. Anadarko's and Union Pacific Resources' chief executive
officers also discussed other merger-related issues, including a proposed
timetable for executing a definitive agreement. Following this discussion, Union
Pacific Resources' chief executive officer advised Anadarko's chief executive
officer that the proposed exchange ratio was not acceptable to the Union Pacific
Resources board and that Union Pacific Resources stockholders should have a
higher percentage of the equity of the combined company.
At a special meeting of the Union Pacific Resources board of directors held
on the morning of March 31, 2000, Union Pacific Resources' chief executive
officer reported on his discussions with Anadarko's chief executive officer and
advised the Union Pacific Resources board that the parties appeared to be at an
impasse on the exchange ratio and the percentage of equity of the combined
company to be held by Union Pacific Resources stockholders.
Discussions and negotiations between the companies' respective financial
and legal advisors took place on March 31, 2000 with regard to the proposed
exchange ratio and equity percentage, the amount of the termination fee and the
proposed mutual stock options, as well as with regard to the form and structure
of the proposed merger agreement previously circulated by counsel for Anadarko.
As a result of these negotiations, the parties remained at an impasse with
respect to the exchange ratio and respective equity percentages and the issues
relating to termination fees and mutual stock options, but did reach an
agreement in principle on the form and structure of the proposed merger
agreement.
On April 1, 2000, Union Pacific Resources' chief executive officer and
Anadarko's chief executive officer spoke again. Anadarko's chief executive
officer proposed an exchange ratio of 0.45, which would result in Union Pacific
Resources stockholders receiving approximately 46.2% of the total equity of the
combined company. In response, Union Pacific Resources' chief executive officer
indicated that Union Pacific Resources stockholders should have a higher
percentage of the equity of the combined company than the percentage represented
by Anadarko's revised offer.
At a special meeting of the Union Pacific Resources board of directors held
on the morning of April 1, 2000, Union Pacific Resources' chief executive
officer reported on the continuing discussions of the parties, advised that an
agreement in principle had been reached on the form and structure of the merger
agreement, but reported that the parties still remained apart on the exchange
ratio, termination fees and mutual stock options.
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36
During April 1, 2000, discussions continued between the two companies'
financial advisors regarding the proposed exchange ratio and the respective
equity percentages to be held by the stockholders of each company. Counsel for
Anadarko also circulated a revised form of merger agreement. Between March 31
and April 2, 2000, the parties' legal and financial advisors negotiated the
terms of the definitive merger agreement and the reciprocal stock option
agreements.
On April 2, 2000, discussions between the companies' financial advisors
continued, and in discussions between the chief executive officers of Anadarko
and Union Pacific Resources, it was ultimately tentatively agreed that the
exchange ratio would be 0.455 of an Anadarko common share for each Union Pacific
Resources common share outstanding, which represented an implied premium of
21.4% to Union Pacific Resources' closing stock price of $14.50 on March 31 and
the ownership by Union Pacific Resources stockholders of 46.7% of the equity of
the combined company following the transaction. Tentative agreement was also
reached with respect to certain other matters, including the amount of the
termination fee, reciprocal stock option agreements and the composition of the
board of directors.
On the evening of April 2, 2000, the Union Pacific Resources board of
directors held a special meeting to review the proposed transaction. Union
Pacific Resources' chief executive officer reviewed with the board the status of
the negotiations with Anadarko and the terms of the proposed merger transaction.
A representative of Morgan, Lewis & Bockius LLP reviewed with the board the
terms and provisions of the proposed merger agreement and ancillary agreements.
Representatives of Goldman, Sachs & Co. presented an overview of the proposed
transaction terms, a comparative financial analysis of the transaction, a review
of certain key business and financial attributes of both Union Pacific Resources
and Anadarko, an analysis of the combined company and a summary of the strategic
rationale for the proposed combination; thereafter, they presented to the board
of directors their opinion that, subject to the conditions set forth in their
opinion and the execution of a merger agreement, as of such date, the proposed
exchange ratio was fair from a financial point of view to Union Pacific
Resources stockholders. The board then reviewed the principal business
rationales for the transactions. Following full discussion, the board
unanimously approved and adopted the merger agreement, the option agreements and
other ancillary agreements, determining that the terms of the merger agreement,
the option agreements and the ancillary agreements were advisable, fair to, and
in the best interests of, the stockholders of Union Pacific Resources and
directed that the merger agreement be submitted to the stockholders of Union
Pacific Resources for their approval.
On the evening of April 2, 2000, a special meeting of the Anadarko board of
directors was convened to review the terms of the proposed merger transaction
with Union Pacific Resources. The Anadarko board was briefed on the results of
the negotiations between Anadarko and Union Pacific Resources and their
respective legal and financial advisors. The Anadarko board also received a
presentation from Credit Suisse First Boston regarding the financial terms of
the proposed merger transaction. In addition, the Anadarko board received
presentations from Anadarko's senior management as to the strategic rationales
for the transaction and from Anadarko's counsel as to the proposed terms of the
transaction. Credit Suisse First Boston then gave its opinion to the Anadarko
board of directors to the effect that, as of that date and based on and subject
to the matters described in its opinion, the exchange ratio was fair, from a
financial point of view, to Anadarko. At the conclusion of the meeting, the
Anadarko board unanimously determined that the merger agreement and merger
transactions were fair and in the best interests of Anadarko and Anadarko
stockholders, and resolved to recommend that Anadarko stockholders approve and
authorize the issuance of Anadarko common shares in connection with the merger
and an amendment to Anadarko's restated certificate of incorporation to increase
the maximum size of the Anadarko board of directors from nine to at least 13
directors.
Following execution of the definitive merger agreement and related
agreements, a joint press release announcing the merger transaction was issued
on April 3, 2000.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Union Pacific Resources. The Union Pacific Resources board of directors
believes that the merger is fair to and in the best interests of Union Pacific
Resources and its stockholders because it believes that, as
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37
a result of this strategic merger, the long-term value to Union Pacific
Resources stockholders of an investment in the combined company will likely be
superior to the long-term value of an investment in Union Pacific Resources as a
stand-alone company. The decision of the Union Pacific Resources board of
directors to approve the merger agreement, including the transactions
contemplated in the merger agreement, and to recommend the merger to Union
Pacific Resources stockholders was based upon various factors, including the
following:
- Exchange Ratio. The board believed that the exchange ratio agreed to by
Anadarko was favorable in relation to recent market prices for Union
Pacific Resources' and Anadarko's common shares and the underlying value
of Union Pacific Resources' and Anadarko's net assets.
- Higher Market Valuations. The board believed that as a consequence of the
merger a higher market valuation of Union Pacific Resources' assets,
revenues, cash flow and other financial attributes could result.
- Stronger Balance Sheet. The merger would strengthen Union Pacific
Resources' balance sheet, as the pro forma financial data in this
document indicate.
- Strategic Alternatives. Based upon the judgment, advice and analyses of
senior management and advisors of Union Pacific Resources, including the
analyses of senior management and Union Pacific Resources' financial
advisors, Goldman, Sachs & Co. and Simmons & Company International, of
conditions in the oil and gas exploration and production industry, the
Union Pacific Resources board believed that the merger was the best
strategic alternative available to Union Pacific Resources at the time,
including Union Pacific Resources' continued pursuit of its long-term
strategic plan as a stand-alone company. The board took into account
limitations on its current ability to repurchase a significant number of
its shares given its existing debt levels, the unlikely possibility of
its engaging in a leveraged recapitalization or a sale of the company at
an attractive price, the business and financial attributes of Anadarko
compared to other possible strategic merger candidates, the likelihood of
future consolidation in the oil and gas exploration and production
industry, and the constraints on Union Pacific Resources' ability to take
advantage of available acquisition and expansion opportunities due to
Union Pacific Resources' current size and financial circumstances.
- Risks of Long-Term Strategic Plan. Implementation of Union Pacific
Resources' long-term strategic plan is subject to risks and
uncertainties. The merger, if consummated, could ameliorate risks
relating to the Union Pacific Resources' strategic repositioning and the
possibility that the benefits of the strategic plan would not be
achieved.
- Complementary Skills. Based upon its consideration of the business,
operations, assets, technology, financial position, prospects and
personnel of Union Pacific Resources and Anadarko on a combined basis,
the combined company would benefit from the complementary strengths of
Anadarko in exploration and Union Pacific Resources in high-technology
exploitation and completion, the ability of the combined company to
exploit more effectively existing assets and to pursue future
opportunities, and the potential cost-savings that the two companies
could achieve as a result of the merger.
- Significant Lease Acreage Positions. The combined company would hold
significant lease acreage positions and have significant opportunities in
most of the high-potential basins of North America, including Alaska,
Western Canada, the Rocky Mountains, the Mid-continent, Texas and the
Gulf of Mexico. The company would also hold significant acreage positions
in select international locations, including North Africa and Latin
America.
- Industry Leader in Reserves, Production and Drilling. The merger would
create one of the largest independent oil and gas exploration and
production companies in the world in terms of 1999 reserves, production
and drilling activity.
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- Terms and Conditions of the Merger. Based upon presentations by and
discussions with senior executives of Union Pacific Resources and
representatives of Morgan, Lewis & Bockius LLP and Goldman, Sachs & Co.,
the Union Pacific Resources board evaluated the terms of the merger
agreement, including the conditions to closing of the merger, the ability
of each company under certain conditions to consider unsolicited
alternative business combination proposals, the ability to terminate the
agreement on certain conditions, the option agreements, and the
termination fees payable upon certain events.
- Tax Treatment. The completion of the merger would be on a tax-free basis
to the stockholders of Union Pacific Resources for United States federal
income tax purposes, except for cash received by Union Pacific Resources
stockholders in lieu of fractional shares.
- Presentation of Financial Advisor. Goldman, Sachs & Co. gave a financial
presentation and delivered an opinion to the effect that, as of the date
of such opinion and based upon and subject to certain matters stated
therein, the exchange ratio was fair from a financial point of view to
the stockholders of Union Pacific Resources, as more fully described
below under "Opinion of Union Pacific Resources' Financial Advisor."
In reaching its decision to approve the merger agreement and to recommend
the merger to Union Pacific Resources stockholders, the Union Pacific Resources
board of directors did not view any single factor as determinative, and did not
find it necessary or practicable to assign relative or specific weights to the
various factors considered. Further, individual directors may have given
differing weights to different factors.
The board of directors was aware of the interests of Union Pacific
Resources' management in the merger, as described in "Interests of Certain
Persons in the Merger" on page 49, in determining to approve the merger
agreement. The Union Pacific Resources board of directors did not specifically
adopt the opinion of Goldman, Sachs & Co., but did rely on it in reaching its
conclusion that the merger is advisable and fair to and in the best interests of
Union Pacific Resources and its stockholders and considered it an important
factor in determining whether to approve the merger agreement.
The Union Pacific Resources board of directors also considered the
principal detriments of the merger to Union Pacific Resources, including that:
- the merger would be effected at a time when Union Pacific Resources'
stock was trading below its previous high levels, and at a time before
the company's strategic repositioning had been fully implemented and its
expected benefits fully achieved;
- as a result of the merger, the benefits of Union Pacific Resources'
long-term strategic plan would be shared by stockholders of Anadarko,
rather than enjoyed solely by Union Pacific Resources stockholders;
- the risk that the benefits sought from the merger, due to the matters
described under "Risk Factors" and other factors, might not be fully
achieved;
- the risk that the merger might not be consummated, and the potential
implications to Union Pacific Resources' investor relations and employee
morale in that event;
- the risk that, although Union Pacific Resources has the right to
terminate the merger agreement if a third party makes a superior proposal
for a business combination with Union Pacific Resources, the termination
fee provisions of the merger agreement would have the effect of
discouraging such a proposal, and the risk that the option agreement
would have the effect of precluding any alternative business combination
with Union Pacific Resources from being accounted for as a "pooling of
interests," which could be an impediment to certain alternative business
combination proposals. Union Pacific Resources' board of directors
accepted these provisions as a means to obtain other terms in the merger,
principally the exchange ratio, that are favorable to Union Pacific
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Resources stockholders, and did not believe these favorable terms could
otherwise have been obtained in the negotiations with Anadarko; and
- the potential impact of the merger on certain Union Pacific Resources'
employees and the Fort Worth business and civic communities.
However, the Union Pacific Resources board of directors determined that
these detriments, many of which were inherent in proceeding with a merger, were
substantially offset by the potential benefits of the merger summarized above,
including the opportunity for Union Pacific Resources stockholders to share in
the benefits of the combined company's long-term prospects.
FOR THE REASONS DISCUSSED ABOVE, THE UNION PACIFIC RESOURCES BOARD OF
DIRECTORS HAS DETERMINED THAT THE TERMS OF THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, UNION PACIFIC RESOURCES AND UNION PACIFIC RESOURCES
STOCKHOLDERS. ACCORDINGLY, THE UNION PACIFIC RESOURCES BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT UNION PACIFIC RESOURCES STOCKHOLDERS VOTE FOR THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT,
INCLUDING THE MERGER.
Anadarko. In reaching its decision to approve the merger, the Anadarko
board of directors consulted with Anadarko's legal and financial advisors as
well as with Anadarko's management. The Anadarko board of directors considered a
number of material factors:
- Complementary Skills. The combined company would blend Anadarko's
strengths in exploration with Union Pacific Resources' industry-leading
drilling and completion technology. By combining these complementary
skills, Anadarko expects to grow faster and beyond the levels either
company could achieve individually.
- Well-Balanced Production and Reserves Portfolio. The combined company
would give Anadarko a better geographical balance in oil and gas
production. Combining the two companies would also result in an excellent
blend of balance and diversity between North American and international
reserves, and between crude oil and natural gas reserves.
- Accretive to Cash Flows. The Anadarko board of directors and Anadarko's
management believed that the proposed merger would be immediately
accretive to cash flow per share.
- Stronger Balance Sheet. The merger would strengthen Anadarko's balance
sheet, as the pro forma financial data in this document indicate.
- Cash and Financial Strength to Grow. After the merger, Anadarko would
have the cash flow and financial strength to pursue aggressively a
broader portfolio of drilling and business development projects, to
accelerate activity in the most prospective areas and to accelerate
growth.
- Significant Lease Acreage Positions. The combined company would hold
significant lease acreage positions and have significant opportunities in
most of the high-potential basins of North America, including Alaska,
Western Canada, the Rocky Mountains, the Mid-continent, Texas and the
Gulf of Mexico. The company would also hold significant acreage positions
in select international locations, including North Africa and Latin
America. Anadarko has identified over 100 exploration prospects from the
combined company's portfolio on existing leaseholds with over 11 billion
barrels of net un-risked reserve potential.
- Industry Leader in Reserves, Production and Drilling. The merger would
create one of the largest independent oil and gas exploration and
production companies in the world in terms of 1999 reserves, production
and drilling activity.
- Presentation of Financial Advisor. Credit Suisse First Boston, Anadarko's
financial advisor, gave a financial presentation and delivered an opinion
to the effect that, as of the date of its opinion and based on and
subject to the matters described in its opinion, the exchange ratio was
fair, from a financial point of view, to Anadarko, as more fully
described below under "Opinion of Anadarko's Financial Advisor."
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- Terms and Conditions of Merger. The terms and conditions of the merger
agreement and the merger were viewed by the Anadarko board of directors
and management as fair to, and in the best interests of, Anadarko and
Anadarko stockholders.
The board of directors was aware of the interests of Anadarko's management
in the merger, as described in "Interests of Certain Persons in the Merger" on
page 49, in determining to approve the merger agreement.
All combinations, including the merger, also include certain risks and
disadvantages. The material potential risks and disadvantages to Anadarko
stockholders identified by the Anadarko board of directors and management in
considering the merger include the following:
- the time and resources required to complete the merger, with the
completion of the merger being subject to various conditions (see "The
Merger Agreement -- Conditions");
- the difficulties inherent in combining and integrating the two companies
and the potential distraction to management caused by a transaction of
this magnitude;
- as a result of the merger, the benefits of Anadarko's long-term strategic
plan would be shared by stockholders of Union Pacific Resources, rather
than enjoyed solely by Anadarko stockholders; and
- the risk that the benefits sought from the merger, might not be fully
achieved.
The Anadarko board of directors believed and continues to believe that
these potential risks and disadvantages are greatly outweighed by the potential
benefits anticipated to result from the merger.
This discussion of the factors considered by the Anadarko board of
directors is not intended to be exhaustive. Because of the wide variety of
factors considered in connection with its evaluation of the merger, the Anadarko
board of directors did not find it practicable to, and did not, quantify or
otherwise attempt to assign relative weights to the specific factors considered
in reaching its conclusions. In addition, individual directors may have given
different weights to different factors.
FOR THE REASONS DISCUSSED ABOVE, THE ANADARKO BOARD OF DIRECTORS HAS
DETERMINED THAT THE TERMS OF THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS
OF, ANADARKO AND ANADARKO STOCKHOLDERS. ACCORDINGLY, THE ANADARKO BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT ANADARKO STOCKHOLDERS VOTE FOR THE
ISSUANCE OF ANADARKO COMMON SHARES IN CONNECTION WITH THE MERGER. THE ANADARKO
BOARD OF DIRECTORS ALSO UNANIMOUSLY RECOMMENDS THAT ANADARKO STOCKHOLDERS VOTE
FOR THE AMENDMENT TO ANADARKO'S RESTATED CERTIFICATE OF INCORPORATION INCREASING
THE MAXIMUM SIZE OF THE ANADARKO BOARD OF DIRECTORS FROM NINE TO 15 DIRECTORS,
FOR THE AMENDMENT TO ANADARKO'S RESTATED CERTIFICATE OF INCORPORATION INCREASING
THE AUTHORIZED NUMBER OF ANADARKO COMMON SHARES FROM 300,000,000 TO 450,000,000,
AND FOR THE AMENDMENT TO ANADARKO'S 1999 STOCK INCENTIVE PLAN.
OPINION OF UNION PACIFIC RESOURCES' FINANCIAL ADVISOR
On April 2, 2000, Goldman Sachs delivered its written opinion to the Union
Pacific Resources board of directors that, as of that date, the exchange ratio
was fair from a financial point of view to the stockholders of Union Pacific
Resources.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED APRIL 2, 2000,
WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS ANNEX D AND IS
INCORPORATED BY REFERENCE IN THIS DOCUMENT. YOU SHOULD READ THE OPINION IN ITS
ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things:
- the merger agreement;
- annual reports to stockholders and annual reports on Form 10-K of Union
Pacific Resources for the four years ended December 31, 1999;
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- annual reports to stockholders and annual reports on Form 10-K of
Anadarko for the five years ended December 31, 1999;
- certain interim reports to stockholders and quarterly reports on Form
10-Q of Union Pacific Resources and Anadarko;
- other communications from Union Pacific Resources and Anadarko to their
respective stockholders; and
- internal financial analyses and forecasts for Union Pacific Resources and
Anadarko prepared by their respective managements, internal financial
analyses and forecasts for Anadarko prepared by its management, as
adjusted by the management of Union Pacific Resources (the "Anadarko
Forecasts"), and certain cost savings and operating synergies projected
by the managements of Union Pacific Resources and Anadarko to result from
the merger (the "Synergies").
Goldman Sachs also reviewed and discussed with the managements of Union
Pacific Resources and Anadarko some information and internal estimates relating
to their respective oil and gas reserves, including reserve information for the
year ended December 31, 1999, prepared by their respective managements. Goldman
Sachs also held discussions with the senior managements of Union Pacific
Resources and Anadarko regarding their assessment of the strategic rationale
for, and the potential benefits of, the merger and the past and current business
operations, financial condition and future prospects of their respective
companies. In addition, Goldman Sachs:
- reviewed the reported price and trading activity for Union Pacific
Resources common shares and Anadarko common shares;
- compared financial and stock market information for Union Pacific
Resources and Anadarko with similar information for other companies that
have publicly traded securities;
- reviewed the financial terms of recent business combinations in the oil
and gas industry specifically and in other industries generally; and
- performed other studies and analyses Goldman Sachs considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information discussed with or reviewed by it and assumed
such accuracy and completeness for purposes of rendering its opinion. In that
regard, Goldman Sachs has assumed, with the consent of the Union Pacific
Resources board of directors, that the internal financial analyses and forecasts
for Union Pacific Resources prepared by the management of Union Pacific
Resources and the Anadarko Forecasts, including the Synergies, have been
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the respective managements of Union Pacific Resources and
Anadarko, and that the Anadarko Forecasts will be realized in the amounts and
time periods contemplated thereby. In addition, Union Pacific Resources
management has advised Goldman Sachs that in preparing the Anadarko Forecasts,
Union Pacific Resources management received guidance from outside consultants,
Ryder Scott Company and DeGolyer and MacNaughton. Goldman Sachs did not make an
independent evaluation or appraisal of the assets and liabilities of Union
Pacific Resources or Anadarko or any of their respective subsidiaries and was
not furnished with any such evaluation or appraisal. With respect to oil and gas
reserve information, Goldman Sachs is not an expert in the evaluation of oil and
gas properties and has relied without independent verification solely upon the
reserve information and internal estimates prepared by the managements of Union
Pacific Resources and Anadarko. Union Pacific Resources estimates have been
periodically confirmed by Ryder Scott and Gaffney, Cline & Associates. Ryder
Scott and DeGolyer and MacNaughton were also retained by Union Pacific Resources
to provide an opinion of their confidence in the reserve estimates of Anadarko.
Goldman Sachs was not required to solicit, and did not solicit, interest from
other parties with respect to an acquisition of or other business combination
with Union Pacific Resources. The advisory services and opinion of Goldman Sachs
were provided for the information and assistance of the Union Pacific Resources
board of directors in connection with its consideration of the
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merger, and the opinion does not constitute a recommendation as to how any Union
Pacific Resources stockholder should vote on the merger.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its opinion to the Union Pacific
Resources board of directors on April 2, 2000.
THE FOLLOWING SUMMARIES OF FINANCIAL ANALYSES INCLUDE INFORMATION PRESENTED
IN TABULAR FORMAT. YOU SHOULD READ THESE TABLES TOGETHER WITH THE TEXT OF EACH
SUMMARY.
(1) Exchange Ratio History. Goldman Sachs calculated the ratio of the
market price of Union Pacific Resources common shares to the market price of
Anadarko common shares at selected points over the past three years.
IMPLIED HISTORICAL MERGER
PERIOD EXCHANGE RATIO EXCHANGE RATIO
- - - - - - - - - - - - ------ ------------------ --------------
March 31, 2000 Closing Price........................... 0.375x 0.455x
1 Month prior to March 31, 2000........................ 0.352x
3 Months prior to March 31, 2000....................... 0.350x
6 Months prior to March 31, 2000....................... 0.402x
1 Year prior to March 31, 2000......................... 0.415x
2 Years prior to March 31, 2000........................ 0.419x
3 Years prior to March 31, 2000........................ 0.540x
(2) Historical Premium Analysis. Goldman Sachs calculated the implied
premium being paid in the merger based on the exchange ratio of 0.455 Anadarko
common shares for each Union Pacific Resources common share based on the March
31, 2000 closing price of Anadarko common shares and the average prices of Union
Pacific Resources common shares over the following periods and on the following
dates:
IMPLIED PREMIUM
DATE/PERIOD (DISCOUNT)
- - - - - - - - - - - - ----------- ---------------
March 31, 2000....................................... 21.4%
1 Week ending March 31, 2000 Average................. 30.5%
30 Days ending March 31, 2000 Average................ 50.2%
60 Days ending March 31, 2000 Average................ 60.2%
90 Days ending March 31, 2000 Average................ 53.7%
52 Week high share price............................. (9.1%)
(3) Premium Paid Analysis. Goldman Sachs reviewed the premiums to the share
price on the business day prior to the announcement of the transaction paid to
shareholders of the acquired company in 19 selected mergers and acquisitions in
the oil and gas industry since 1995. The following table presents the ranges of
premiums paid and transaction values in the selected transactions, compared to
the premium in the merger.
UNION PACIFIC RESOURCES
MEDIAN ANADARKO MERGER
RANGE PREMIUM PREMIUM
------------------------ ------- -----------------------
Premium to Target Share Price... (13.9%)-50.6% 22.0% 21.4%
Transaction Values.............. $332 million-$91 billion
(4) Selected Companies Analysis. Goldman Sachs reviewed and compared
selected financial information, ratios and public market multiples for Union
Pacific Resources and Anadarko to corresponding financial information, ratios
and public market multiples for the following eight publicly traded oil and gas
companies:
- Apache Corporation;
- Burlington Resources Inc.;
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- Devon Energy Corporation;
- EOG Resources, Inc.;
- Kerr-McGee Corporation;
- Noble Affiliates, Inc.;
- Santa Fe Snyder Corporation; and
- Unocal Corporation.
The selected companies were chosen because they are publicly traded
companies with operations that for purposes of analysis may be considered
similar to Union Pacific Resources and/or Anadarko. Goldman Sachs calculated and
compared various financial multiples and ratios. The multiples and ratios were
calculated using the closing price for the Union Pacific Resources common shares
and Anadarko common shares and each of the selected companies on March 31, 2000
and were based on the most recent publicly available information. Goldman Sachs'
analyses of the selected companies compared the following to the results for
Union Pacific Resources and Anadarko:
- closing share price on March 31, 2000 as a percentage of 52-week high
share price;
- price as a multiple of discretionary cash flow for 2000 and 2001, based
on Goldman Sachs research estimates as of March 29, 2000; and
- total enterprise value, which is the market value of common equity plus
preferred stock plus minority interest plus debt less cash, as a multiple
of unlevered discretionary cash flow, which equals discretionary cash
flow plus interest expense, for calendar years 2000 and 2001, based on
Goldman Sachs research estimates as of March 29, 2000.
The results of these analyses are summarized as follows:
SELECTED PUBLICLY TRADED
OIL AND GAS COMPANIES
---------------------------------------------
MEDIAN (NOT MEAN (NOT UNION PACIFIC
INCLUDING INCLUDING RESOURCES
UNION PACIFIC UNION PACIFIC UNION STANDALONE AT
RESOURCES RESOURCES PACIFIC IMPLIED MERGER
PERCENTAGE/MULTIPLE RANGE OR ANADARKO) OR ANADARKO) RESOURCES ANADARKO PRICE(A)
- - - - - - - - - - - - ------------------- ----- ------------- ------------- --------- -------- -------------------
March 31, 2000 share
price as a percentage of
52-week high share
price.................... 64.0%-100.0% 86% 86% 75% 90% 91%
Price as a multiple of
estimated 2000
discretionary cash
flow..................... 3.2x-8.7x 4.2x 4.4x 3.2x 8.7x 3.9x
Price as a multiple of
estimated 2001
discretionary cash
flow..................... 3.1x-6.5x 4.2x 4.4x 3.1x 6.5x 3.8x
Total enterprise value as
a multiple of estimated
2000 unlevered
discretionary cash
flow..................... 4.4x-9.5x 5.3x 5.4x 4.8x 9.5x 5.4x
Total enterprise value as
a multiple of estimated
2001 unlevered
discretionary cash
flow..................... 4.2x-7.4x 5.4x 5.4x 4.7x 7.4x 5.3x
- - - - - - - - - - - - ---------------
(a) Based on exchange ratio and Anadarko closing price on March 31, 2000.
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Goldman Sachs also compared the selected companies':
- total enterprise value as a multiple of proved reserves;
- total enterprise value as a percentage of the present value of reserves
after taxes ("PV10");
- net debt per barrel of oil equivalents ("BOE");
- net debt as a multiple of discretionary cash flow for 2000, based on
Goldman Sachs research estimates as of March 29, 2000; and
- proved reserves to production ratio, based on Goldman Sachs research
estimated production for 2000.
The results of these analyses are summarized as follows:
SELECTED PUBLICLY TRADED
OIL AND GAS COMPANIES
-------------------------------------------------
MEDIAN (NOT MEAN (NOT UNION PACIFIC
INCLUDING INCLUDING RESOURCES
UNION PACIFIC UNION PACIFIC UNION STANDALONE AT
RESOURCES RESOURCES PACIFIC IMPLIED MERGER
MULTIPLE RANGE OR ANADARKO) OR ANADARKO) RESOURCES ANADARKO PRICE(A)
- - - - - - - - - - - - -------- ----- ----------------- ----------------- --------- -------- ----------------
Total enterprise value
as a multiple of proved
reserves(b)............. 5.89x-9.12x 6.66x 7.19x 6.66x 6.64x 7.50x
Total enterprise value
as a percentage of
PV10(b)................. 135%-179% 159% 159% 135% 150% 153%
Net debt as a multiple
of estimated 2000
discretionary cash
flow.................... 0.9x-2.8x 1.7x 1.6x 2.3x 2.8x 2.3x
Ratio of reserves to
production.............. 7.5x-17.5x 8.6x 8.8x 7.7x 17.5x 7.7x
- - - - - - - - - - - - ---------------
(a) Based on exchange ratio and Anadarko closing price on March 31, 2000.
(b) Enterprise values are unadjusted for undeveloped acreage or other assets.
(5) Selected Transactions Analysis. Goldman Sachs analyzed certain
information relating to 20 selected transactions involving more than $1 billion
in the oil and gas exploration and production industry since 1997. The following
table presents the range of transaction values attributable to reserves per BOE,
as well as the mean and median transaction value attributable to reserves per
BOE indicated for the selected transactions, compared to the value indicated for
the merger.
SELECTED TRANSACTIONS THE MERGER
- - - - - - - - - - - - ----------------------------------------------------------- -----------------
RANGE OF TRANSACTION MEAN TRANSACTION MEDIAN TRANSACTION TRANSACTION VALUE
VALUES PER BOE VALUE PER BOE VALUE PER BOE PER BOE
- - - - - - - - - - - - -------------------- ---------------- ------------------ -----------------
$3.83-$12.47 $6.01 $5.27 $6.87(a)
- - - - - - - - - - - - ---------------
(a) Transaction value adjusted to reflect $600 million for non-reserve assets.
(6) Present Value of Implied Union Pacific Resources Future Stock Price
Analysis. Goldman Sachs performed an analysis to determine the present value as
of March 31, 2000 of an implied future stock price of Union Pacific Resources,
calculated using an internal financial forecast prepared by Union Pacific
Resources management, a discount rate of 12% and three different future oil and
gas price assumptions: Union Pacific Resources management's price assumptions,
Goldman Sachs research price assumptions and the implied forward prices based on
the New York Mercantile Exchange forward strip. The following table
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presents the ranges of present values indicated by the analysis for Union
Pacific Resources' implied future stock price at different discretionary cash
flow multiples.
UNION PACIFIC RESOURCES IMPLIED
DISCRETIONARY MERGER PRICE (BASED ON EXCHANGE
CASH FLOW DISCRETIONARY CASH FLOW DISCRETIONARY CASH FLOW RATIO AND ANADARKO CLOSING PRICE
MULTIPLE OF 3.0X MULTIPLE OF 4.0X MULTIPLE OF 5.0X ON MARCH 31, 2000
- - - - - - - - - - - - ---------------- ----------------------- ----------------------- -----------------------------------
$11.24-$14.89 $14.98-$19.85 $18.73-$24.81 $17.60
(7) Present Value of Union Pacific Resources Long Range Plan. Goldman Sachs
performed a present value analysis of Union Pacific Resources, based on Union
Pacific Resources management's internal financial forecasts and using three
different future oil and gas price assumptions: Union Pacific Resources
management's price assumptions, Goldman Sachs research price assumptions and the
implied forward prices based on the New York Mercantile Exchange forward strip.
The analysis was performed by calculating the annual free cash flows for
2000-2004 and a terminal value for Union Pacific Resources as of 2005 and
discounting the results back to December 31, 1999 using discount rates of 10% to
12%. The following table presents the ranges of present values indicated by each
of the three oil and gas price assumptions using a terminal value of 4.0x to
5.0x 2005 estimated unlevered discretionary cash flow.
UNION PACIFIC RESOURCES IMPLIED MERGER
UNION PACIFIC RESOURCES GOLDMAN SACHS PRICE (BASED ON EXCHANGE RATIO AND
MANAGEMENT PUBLISHED RESEARCH IMPLIED ANADARKO CLOSING PRICE
PRICE ASSUMPTIONS PRICE ASSUMPTION FORWARD PRICES ON MARCH 31, 2000)
- - - - - - - - - - - - ----------------------- ------------------ -------------- --------------------------------------
$10.88-$16.64 $13.94-$20.43 $14.04-$20.39 $17.60
Goldman Sachs also performed the present value analysis with each of the
three oil and gas price assumptions and a terminal value of $5.50 per barrel to
$6.50 per barrel of 2004 estimated reserves. The following table presents the
ranges of present values.
UNION PACIFIC RESOURCES IMPLIED MERGER
UNION PACIFIC RESOURCES GOLDMAN SACHS PRICE (BASED ON EXCHANGE RATIO AND
MANAGEMENT PUBLISHED RESEARCH IMPLIED ANADARKO CLOSING PRICE
PRICE ASSUMPTIONS PRICE ASSUMPTION FORWARD PRICES ON MARCH 31, 2000)
- - - - - - - - - - - - ----------------------- ------------------ -------------- --------------------------------------
$9.83-$13.93 $11.23-$15.42 $11.75-$15.96 $17.60
(8) Union Pacific Resources Net Asset Value Calculation. Goldman Sachs
analyzed the present value of future production for proved, probable, possible
and exploratory reserves based on Union Pacific Resources management's
assumptions as to production, land grant development and minerals using a
discount rate of 10% and using three different oil and gas price assumptions:
Union Pacific Resources management's price assumptions, Goldman Sachs research
price assumptions and the implied forward prices based on the New York
Mercantile Exchange forward strip. The results of these analyses are summarized
as follows:
UNION PACIFIC RESOURCES IMPLIED MERGER
UNION PACIFIC RESOURCES GOLDMAN SACHS PRICE (BASED ON EXCHANGE RATIO AND
MANAGEMENT PUBLISHED RESEARCH IMPLIED ANADARKO CLOSING PRICE
PRICE ASSUMPTIONS PRICE ASSUMPTION FORWARD PRICES ON MARCH 31, 2000)
- - - - - - - - - - - - ----------------------- ------------------ -------------- --------------------------------------
$7.54-$11.83 $10.58-$16.48 $9.58-$15.76 $17.60
(9) Present Value of Implied Anadarko Future Stock Price Analysis. Goldman
Sachs performed an analysis to determine the present value as of March 31, 2000
of an implied future stock price of Anadarko, calculated using the Anadarko
Forecasts, a discount rate of 12% and two different future oil and gas price
assumptions: Goldman Sachs research price assumptions and the implied forward
prices based on the New York Mercantile Exchange forward strip. The following
table presents the ranges of present values
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indicated by the analysis for Anadarko's implied future stock price at different
discretionary cash flow multiples.
DISCRETIONARY DISCRETIONARY DISCRETIONARY ANADARKO ACTUAL
CASH FLOW CASH FLOW CASH FLOW CLOSING PRICE ON
MULTIPLE OF 6.5X MULTIPLE OF 7.5X MULTIPLE OF 8.5X MARCH 31, 2000
- - - - - - - - - - - - ---------------- ---------------- ---------------- ----------------
$28.02-$45.58 $32.33-$52.59 $36.64-$59.60 $38.69
(10) Present Value of Anadarko Forecasts. Goldman Sachs performed a present
value analysis of Anadarko, based on the Anadarko Forecasts and using two
different future oil and gas price assumptions: Goldman Sachs research price
assumptions and the implied forward prices based on the New York Mercantile
Exchange forward strip. The analysis was performed by calculating the annual
free cash flows for 2000-2004 and a terminal value for Anadarko as of 2005 and
discounting the results back to December 31, 1999 using discount rates of 10% to
12%. The following table presents the ranges of present values indicated by both
of the oil and gas price assumptions using a terminal value of 8.0x to 9.0x 2005
estimated unlevered discretionary cash flow.
GOLDMAN SACHS ANADARKO ACTUAL
PUBLISHED RESEARCH IMPLIED CLOSING PRICE ON
PRICE ASSUMPTION FORWARD PRICES MARCH 31, 2000
------------------ -------------- ----------------
$39.12-$52.02 $33.95-$45.46 $38.69
Goldman Sachs also performed the present value analysis with both of the
oil and gas price assumptions and a terminal value of $5.50 per barrel to $6.50
per barrel of 2004 estimated reserves. The following table presents the ranges
of present values.
GOLDMAN SACHS ANADARKO ACTUAL
PUBLISHED RESEARCH IMPLIED CLOSING PRICE ON
PRICE ASSUMPTION FORWARD PRICES MARCH 31, 2000
------------------ -------------- ----------------
$24.46-$35.05 $24.60-$35.15 $38.69
(11) Anadarko Net Asset Value Calculation. Goldman Sachs analyzed the
present value of future production for proved, probable, possible and
exploratory reserves based on internal forecasts for Anadarko prepared by its
management, as adjusted by the management of Union Pacific Resources, using a
discount rate of 10% and using three different future oil and gas price
assumptions: Union Pacific Resources management's price assumptions, Goldman
Sachs research price assumptions and the implied forward prices based on the New
York Mercantile Exchange forward strip. The results of these analyses are
summarized as follows:
UNION PACIFIC RESOURCES GOLDMAN SACHS ANADARKO ACTUAL
MANAGEMENT PUBLISHED RESEARCH IMPLIED CLOSING PRICE ON
PRICE ASSUMPTIONS PRICE ASSUMPTION FORWARD PRICES MARCH 31, 2000
- - - - - - - - - - - - ----------------------- ------------------ -------------- --------------------
$13.24-$19.08 $19.72-$37.06 $18.34-$32.85 $38.69
(12) Contribution Analysis. Goldman Sachs analyzed the relative
contribution of Union Pacific Resources and Anadarko to the combined company
resulting from the merger based on selected historical and estimated future
operating and financial information for Union Pacific Resources, Anadarko and
the combined company based on Union Pacific Resources management's forecasts and
the Anadarko Forecasts
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and utilizing New York Mercantile Exchange forward strip price decks and Goldman
Sachs research price decks, all adjusted for net debt. The results of these
analyses are summarized as follows:
GOLDMAN SACHS RESEARCH PRICE
FORWARD STRIP PRICE DECK DECK
------------------------------- -------------------------------
UNION PACIFIC UNION PACIFIC
RESOURCES ANADARKO RESOURCES ANADARKO
CONTRIBUTION CONTRIBUTION TO CONTRIBUTION CONTRIBUTION TO
TO COMBINED COMBINED TO COMBINED COMBINED
COMPANY COMPANY COMPANY COMPANY
------------- --------------- ------------- ---------------
PROVED RESERVES......................... 42.3% 57.7% 42.3% 57.7%
PRESENT VALUE OF RESERVES (PV10)........ 46.3 53.7 46.3 53.7
TOTAL PRODUCTION
Year 2000 estimated................... 73.1% 26.9% 73.1% 26.9%
Year 2001 estimated................... 63.1 36.9 63.1 36.9
Year 2002 estimated................... 57.2 42.8 57.2 42.8
Year 2003 estimated................... 60.8 39.2 60.8 39.2
Year 2004 estimated................... 58.0 42.0 58.0 42.0
NET ASSET VALUE
Proved reserves....................... 50.7% 49.3% 50.7% 49.3%
Proved and potential reserves......... 48.6 51.4 46.0 54.0
PRESENT VALUE OF STRATEGIC PLANS
Low terminal value multiple(a)........ 42.9% 57.1% 38.8% 61.2%
High terminal value multiple(b)....... 45.2 54.8 41.4 58.6
UNLEVERED DISCRETIONARY CASH FLOW
Year 2000 estimated................... 68.7% 31.3% 71.1% 28.9%
Year 2001 estimated................... 56.9 43.1 57.5 42.5
Year 2002 estimated................... 50.7 49.3 50.7 49.3
Year 2003 estimated................... 54.4 45.6 53.6 46.4
Year 2004 estimated................... 52.4 47.6 51.3 48.7
DISCRETIONARY CASH FLOW
Year 2000 estimated................... 66.6% 33.4% 68.5% 31.5%
Year 2001 estimated................... 59.5 40.5 60.2 39.8
Year 2002 estimated................... 56.0 44.0 56.1 43.9
Year 2003 estimated................... 59.2 40.8 58.7 41.3
Year 2004 estimated................... 58.5 41.5 57.7 42.3
NET INCOME
Year 2000 estimated................... 61.7% 38.3% 62.4% 37.6%
Year 2001 estimated................... 56.3 43.7 49.5 50.5
Year 2002 estimated................... 44.8 55.2 45.2 54.8
Year 2003 estimated................... 52.3 47.7 51.2 48.8
Year 2004 estimated................... 52.4 47.6 51.3 48.7
- - - - - - - - - - - - ---------------
(a) Terminal value of 4.0x Union Pacific Resources 2005 unlevered discretionary
cash flow and 8.0x Anadarko 2005 unlevered discretionary cash flow.
(b) Terminal value of 5.0x Union Pacific Resources 2005 unlevered discretionary
cash flow and 9.0x Anadarko 2005 unlevered discretionary cash flow.
(13) Pro Forma Merger Analysis. Goldman Sachs prepared pro forma analyses
of the financial impact of the merger. The analyses were prepared using three
different sets of financial projections for 2000 and 2001. Two of the analyses
used Union Pacific Resources management's forecasts and the Anadarko Forecast
and utilized New York Mercantile Exchange forward strip price decks and Goldman
Sachs research price decks. The third analyses used Goldman Sachs published
research estimates. For the fiscal years 2000 and 2001, Goldman Sachs compared
the estimated discretionary cash flow per Union
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Pacific Resources common share and Anadarko common share on a stand-alone basis
to the estimated discretionary cash flow per common share of the combined
company on a pro forma basis. Goldman Sachs performed this analysis using two
scenarios: without the achievement of Synergies and assuming the achievement of
$10 million in pre-tax Synergies in 2000 and $50 million in pre-tax Synergies in
2001. Based on such analyses, the merger would be accretive on a discretionary
cash flow basis to Anadarko stockholders in both fiscal years 2000 and 2001 in
both the no Synergies and Synergies scenarios. The analyses also showed that the
merger would be dilutive on a discretionary cash flow basis to Union Pacific
Resources stockholders in both fiscal years 2000 and 2001 in both the no
Synergies and Synergies scenarios.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
Union Pacific Resources or Anadarko or the contemplated merger.
The analyses were prepared solely for purposes of providing an opinion to
the Union Pacific Resources board of directors as to the fairness from a
financial point of view to Union Pacific Resources stockholders of the exchange
ratio. The analyses do not purport to be appraisals or necessarily reflect the
prices at which businesses or securities actually may be sold. Analyses based
upon forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of Union Pacific Resources, Anadarko, Goldman
Sachs or any other person assumes responsibility if future results are
materially different from those forecast.
As described above, Goldman Sachs' opinion to the Union Pacific Resources
board of directors was one of many factors taken into consideration by the Union
Pacific Resources board of directors in making its determination to approve the
merger. The foregoing summary does not purport to be a complete description of
the analyses performed by Goldman Sachs.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes.
Goldman Sachs is familiar with Union Pacific Resources having provided
certain investment banking services to Union Pacific Resources from time to
time, including having acted as its financial advisor in connection with the
sale of its natural gas midstream gathering and processing business to Duke
Energy Corporation on March 31, 1999 and having acted as financial advisor in
connection with, and having participated in certain of the negotiations leading
to, the merger agreement. Goldman Sachs has also provided certain investment
banking services to Anadarko from time to time, including having acted as
managing underwriter of public offerings of $100 million aggregate principal
amount of 7.20% Debentures due 2029 on March 19, 1999 and $200 million aggregate
principal amount of 7.20% Debentures due 2029 on March 15, 1999, and as managing
underwriter of a public offering of 6.25 million Anadarko common shares on May
4, 1999.
Goldman Sachs provides a full range of financial advisory and securities
services and, in the course of its normal trading activities, may from time to
time effect transactions and hold securities, including derivative securities,
of Union Pacific Resources or Anadarko for its own account and for the accounts
of customers. Goldman Sachs may provide investment banking services to Anadarko
and its subsidiaries in the future.
The Union Pacific Resources Financial Advisors Fee Arrangement. Pursuant to
letter agreements dated March 3, 2000 and March 9, 2000, respectively, Union
Pacific Resources engaged Goldman Sachs
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and Simmons to act as its financial advisors in connection with a strategic
transaction involving the sale of Union Pacific Resources. Pursuant to the terms
of those letter agreements, Union Pacific Resources has agreed to pay Goldman
Sachs and Simmons (i) an annual fee of $180,000 and (ii) a transaction fee equal
to 0.30% of the aggregate consideration paid in the merger. Any fees previously
paid under clause (i) above will be deducted from any fee to which the advisors
are entitled pursuant to clause (ii). Goldman Sachs will receive 79% of all such
fees, and Simmons will receive 21%. Union Pacific Resources also has agreed to
reimburse Goldman Sachs and Simmons for reasonable out-of-pocket expenses,
including attorneys' fees, and to indemnify Goldman Sachs and Simmons against
certain liabilities, including certain liabilities under the federal securities
laws.
OPINION OF ANADARKO'S FINANCIAL ADVISOR
Credit Suisse First Boston has acted as Anadarko's exclusive financial
advisor in connection with the merger. Anadarko selected Credit Suisse First
Boston based on Credit Suisse First Boston's experience, expertise, reputation
and familiarity with Anadarko's business. Credit Suisse First Boston is an
internationally recognized investment banking firm, and is regularly engaged in
the valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for corporate and other purposes.
In connection with Credit Suisse First Boston's engagement, Anadarko
requested that Credit Suisse First Boston evaluate the fairness, from a
financial point of view, to Anadarko of the exchange ratio provided for in the
merger. On April 2, 2000, at a meeting of the Anadarko board of directors held
to consider the merger, Credit Suisse First Boston rendered to the Anadarko
board of directors an oral opinion, which opinion was confirmed by delivery of a
written opinion dated April 2, 2000, to the effect that, as of that date and
based on and subject to the matters described in its opinion, the exchange ratio
was fair, from a financial point of view, to Anadarko.
THE FULL TEXT OF CREDIT SUISSE FIRST BOSTON'S WRITTEN OPINION DATED APRIL
2, 2000 TO THE ANADARKO BOARD OF DIRECTORS, WHICH SETS FORTH THE PROCEDURES
FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW
UNDERTAKEN, IS ATTACHED AS ANNEX E TO AND IS INCORPORATED INTO THIS DOCUMENT BY
REFERENCE. ANADARKO STOCKHOLDERS ARE URGED TO READ THIS OPINION CAREFULLY IN ITS
ENTIRETY. CREDIT SUISSE FIRST BOSTON'S OPINION IS ADDRESSED TO THE ANADARKO
BOARD OF DIRECTORS AND ONLY RELATES TO THE FAIRNESS OF THE EXCHANGE RATIO FROM A
FINANCIAL POINT OF VIEW TO ANADARKO. CREDIT SUISSE FIRST BOSTON'S OPINION DOES
NOT ADDRESS ANY OTHER ASPECT OF THE PROPOSED MERGER OR ANY RELATED TRANSACTION,
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO ANY MATTERS
RELATING TO THE MERGER. THE SUMMARY OF CREDIT SUISSE FIRST BOSTON'S OPINION IN
THIS DOCUMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
OPINION.
In arriving at its opinion, Credit Suisse First Boston reviewed the merger
agreement and related documents, as well as publicly available business and
financial information relating to Anadarko and Union Pacific Resources. Credit
Suisse First Boston also reviewed other information relating to Anadarko and
Union Pacific Resources, including financial forecasts, which Anadarko and Union
Pacific Resources provided to and discussed with Credit Suisse First Boston, and
met with Anadarko's and Union Pacific Resources' managements to discuss the
businesses and prospects of Anadarko and Union Pacific Resources.
Credit Suisse First Boston also considered financial and stock market data
of Anadarko and Union Pacific Resources, and compared those data with similar
data for other publicly held companies in businesses similar to Anadarko and
Union Pacific Resources and considered, to the extent publicly available, the
financial terms of other business combinations and transactions recently
announced or completed. Credit Suisse First Boston also considered other
information, financial studies, analyses and investigations, and financial,
economic and market criteria that it deemed relevant.
In connection with its review, Credit Suisse First Boston did not assume
any responsibility for independent verification of any of the information that
was provided to or otherwise reviewed by it and
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relied on that information being complete and accurate in all material respects.
With respect to financial forecasts, Credit Suisse First Boston was advised, and
assumed, that the forecasts were reasonably prepared on bases reflecting the
best currently available estimates and judgments of Anadarko's and Union Pacific
Resources' managements as to the future financial performance of Anadarko and
Union Pacific Resources and the potential synergies and strategic benefits
anticipated to result from the merger, including the amount, timing and
achievability of those synergies and benefits. Credit Suisse First Boston also
assumed, with Anadarko's consent, that the merger will be treated as a purchase
in accordance with generally accepted accounting principles and as a tax-free
reorganization for U.S. federal income tax purposes.
Credit Suisse First Boston was not requested to, and did not, make an
independent evaluation or appraisal of the assets or liabilities, contingent or
otherwise, of Anadarko or Union Pacific Resources, and was not furnished with
any evaluations or appraisals. Credit Suisse First Boston's opinion was
necessarily based on information available to, and financial, economic, market
and other conditions as they existed and could be evaluated by, Credit Suisse
First Boston on the date of its opinion. Credit Suisse First Boston did not
express any opinion as to what the value of Anadarko common shares actually
would be when issued in the merger or the prices at which Anadarko common shares
would trade after the merger. Although Credit Suisse First Boston evaluated the
exchange ratio from a financial point of view, Credit Suisse First Boston was
not requested to, and did not, recommend the specific consideration payable in
the merger, which consideration was determined between Anadarko and Union
Pacific Resources. No other limitations were imposed on Credit Suisse First
Boston with respect to the investigations made or procedures followed in
rendering its opinion.
In preparing its opinion to the Anadarko board of directors, Credit Suisse
First Boston performed a variety of financial and comparative analyses,
including those described below. The summary of Credit Suisse First Boston's
analyses described below is not a complete description of the analyses
underlying Credit Suisse First Boston's opinion. The preparation of a fairness
opinion is a complex analytical process involving various determinations as to
the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances; therefore, a
fairness opinion is not readily susceptible to summary description. In arriving
at its opinion, Credit Suisse First Boston made qualitative judgments as to the
significance and relevance of each analysis and factor that it considered.
Accordingly, Credit Suisse First Boston believes that its analyses must be
considered as a whole, and that selecting portions of its analyses and factors
or focusing on information presented in tabular format, without considering all
analyses and factors or the narrative description of the analyses, could create
a misleading or incomplete view of the processes underlying its analyses and
opinion.
In its analyses, Credit Suisse First Boston considered industry
performance, regulatory, general business, economic, market and financial
conditions, and other matters, many of which are beyond the control of Anadarko
and Union Pacific Resources. No company, transaction or business used in Credit
Suisse First Boston's analyses as a comparison is identical to Anadarko or Union
Pacific Resources or the proposed merger, and an evaluation of the results of
those analyses is not entirely mathematical. Rather, the analyses involve
complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the companies, business segments or transactions
analyzed.
The estimates contained in Credit Suisse First Boston's analyses and the
ranges of valuations resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those suggested by the analyses. In
addition, analyses relating to the value of businesses or securities do not
necessarily purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, Credit Suisse First
Boston's analyses and estimates are inherently subject to substantial
uncertainty.
Credit Suisse First Boston's opinion and financial analyses were only one
of many factors considered by the Anadarko board of directors in its evaluation
of the proposed merger, and should not be viewed as
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determinative of the views of the Anadarko board of directors or Anadarko's
management with respect to the merger or the exchange ratio.
The following is a summary of the material financial analyses underlying
Credit Suisse First Boston's opinion dated April 2, 2000 delivered to the
Anadarko board of directors in connection with the merger. THE FINANCIAL
ANALYSES SUMMARIZED BELOW INCLUDE INFORMATION PRESENTED IN TABULAR FORMAT. IN
ORDER TO UNDERSTAND FULLY CREDIT SUISSE FIRST BOSTON'S FINANCIAL ANALYSES, THE
TABLES MUST BE READ TOGETHER WITH THE TEXT OF EACH SUMMARY. THE TABLES ALONE DO
NOT CONSTITUTE A COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES. CONSIDERING THE
DATA IN THE TABLES BELOW WITHOUT CONSIDERING THE FULL NARRATIVE DESCRIPTION OF
THE FINANCIAL ANALYSES, INCLUDING THE METHODOLOGIES AND ASSUMPTIONS UNDERLYING
THE ANALYSES, COULD CREATE A MISLEADING OR INCOMPLETE VIEW OF CREDIT SUISSE
FIRST BOSTON'S FINANCIAL ANALYSES.
Exchange Ratio Reference Range Analyses. Credit Suisse First Boston derived
implied exchange ratio reference ranges based on a discounted cash flow
analysis, selected companies analysis and sum-of-the-parts analysis for Anadarko
and Union Pacific Resources, as more fully described below. Credit Suisse First
Boston then compared the exchange ratio in the merger of 0.455 with the exchange
ratio reference ranges implied by these analyses.
Discounted Cash Flow Analysis. Credit Suisse First Boston estimated the
present value of the stand-alone, unlevered, after-tax free cash flows that each
of Anadarko and Union Pacific Resources could produce over calendar years 2000
through 2004. Credit Suisse First Boston performed its analysis based on two
scenarios, a management case and an adjusted management case. The management
cases for Anadarko and Union Pacific Resources were based on adjustments to
internal estimates of Anadarko's and Union Pacific Resources' managements
provided by and discussed with Anadarko's and Union Pacific Resources'
managements to reflect implied forward prices based on the New York Mercantile
Exchange forward strip in the oil and natural gas futures market. The adjusted
management cases were based on adjustments to the management cases for Anadarko
and Union Pacific Resources provided to or discussed with Anadarko management to
reflect, among other things, the potential for reduced oil and gas production
growth, and, in the case of Anadarko, lower capital expenditures.
Credit Suisse First Boston calculated ranges of estimated terminal values
by multiplying calendar year 2004 earnings before interest, taxes, depreciation,
amortization and exploration expense, commonly referred to as EBITDAX, by
EBITDAX multiples ranging from 7.5x to 8.5x in the case of Anadarko and 5.5x to
6.5x in the case of Union Pacific Resources. The estimated after-tax free cash
flows and terminal values of Anadarko and Union Pacific Resources were then
discounted to present value using discount rates of 10.0% to 11.0%. This
analysis indicated an implied exchange ratio reference range of 0.39 to 0.65 for
the management case and 0.30 to 0.54 for the adjusted management case.
Selected Companies Analysis. Credit Suisse First Boston compared financial,
operating and stock market data of Anadarko and Union Pacific Resources to
corresponding data of the following publicly traded companies in the oil and gas
exploration and production business:
- Apache Corp.
- Burlington Resources Inc.
- Devon Energy Corp.
- EOG Resources, Inc.
- Kerr-McGee Corp.
- Noble Affiliates, Inc.
- Ocean Energy, Inc.
- Pioneer Natural Resources Company
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- Unocal Corp.
- Vastar Resources, Inc.
Credit Suisse First Boston reviewed enterprise values, calculated as equity
value, plus total debt, preferred stock and minority interest, less cash, as
multiples of EBITDAX for calendar year 1999 and estimated calendar years 2000
and 2001. Credit Suisse First Boston also reviewed enterprise values as
multiples of calendar year 1999 proved reserves and the standardized measure of
discounted future net cash flows relating to proved reserves, commonly referred
to as after-tax SEC value. Credit Suisse First Boston then applied a range of
selected multiples derived from the selected companies of calendar year 1999 and
estimated calendar years 2000 and 2001 EBITDAX and calendar year 1999 proved
reserves and after-tax SEC value to corresponding data of Anadarko and Union
Pacific Resources. All multiples were based on closing stock prices on March 31,
2000. Estimated financial data for the selected companies were based on publicly
available research analysts' estimates and estimated financial data for Anadarko
and Union Pacific Resources were based on the adjusted management cases for
Anadarko and Union Pacific Resources. This analysis indicated an implied
exchange ratio reference range of 0.27 to 0.59.
Sum-of-the-Parts Analysis. Credit Suisse First Boston separately analyzed
each of Anadarko's and Union Pacific Resources' domestic and foreign exploration
and production business segments and Union Pacific Resources' minerals business.
For purposes of this analysis, Credit Suisse First Boston reviewed the estimated
stand-alone, unlevered, after-tax free cash flows of these business segments,
the trading multiples of selected publicly traded companies with similar
businesses and purchase prices payable in selected merger and acquisition
transactions in similar industries. This analysis indicated an implied exchange
ratio reference range of 0.25 to 0.57.
Relative Analyses. Credit Suisse First Boston also conducted the following
relative analyses and compared the exchange ratio in the merger of 0.455 with
the exchange ratios implied by these analyses:
Relative Contribution Analysis. Credit Suisse First Boston performed an
exchange ratio analysis based on the adjusted management cases for Anadarko and
Union Pacific Resources, comparing the relative contributions of Anadarko and
Union Pacific Resources to the combined company's calendar year 1999 and
estimated calendar years 2000 through 2004 EBITDAX and after-tax cash flow,
calendar year 1999 and estimated calendar year 2000 earnings before interest and
taxes, commonly referred to as EBIT, calendar year 1999 and estimated calendar
year 2000 oil and gas production, and calendar year 1999 proved reserves and
after-tax SEC value. This analysis yielded an implied exchange ratio reference
range of 0.17 to 1.98, as indicated in the following table:
IMPLIED
EBITDAX EXCHANGE RATIOS
- - - - - - - - - - - - ------- ---------------
1999................................................. 1.98
2000E................................................ 1.19
2001E................................................ 0.73
2002E................................................ 0.55
2003E................................................ 0.47
2004E................................................ 0.40
AFTER-TAX CASH FLOW
- - - - - - - - - - - - -------------------
1999................................................. 1.64
2000E................................................ 1.18
2001E................................................ 0.78
2002E................................................ 0.68
2003E................................................ 0.59
2004E................................................ 0.58
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EBIT
- - - - - - - - - - - - ----
1999................................................. 0.17
2000E................................................ 0.59
OIL AND GAS PRODUCTION
- - - - - - - - - - - - ----------------------
1999................................................. 1.63
2000E................................................ 1.18
PROVED RESERVES
- - - - - - - - - - - - ---------------
1999................................................. 0.32
AFTER-TAX SEC VALUE
- - - - - - - - - - - - -------------------
1999................................................. 0.39
Historical Stock Trading Analysis. Credit Suisse First Boston performed an
exchange ratio analysis comparing the closing prices for Anadarko common shares
and Union Pacific Resources common shares on March 31, 2000, and the average
daily closing share prices for the one week, one month, three months, six
months, one year, two years and three years preceding March 31, 2000. Credit
Suisse First Boston also reviewed the premiums implied by the exchange ratio in
the merger to the relative historical trading relationship of Anadarko common
shares and Union Pacific Resources common shares over those periods. This
comparison yielded an implied exchange ratio reference range of 0.3506 to 0.5356
and an implied premium/(discount) reference range of 29.8% to (15.1)%, as
indicated in the following table:
IMPLIED
IMPLIED PREMIUM/(DISCOUNT)
PERIOD EXCHANGE RATIO AT MERGER EXCHANGE RATIO
- - - - - - - - - - - - ------ -------------- --------------------------
March 31, 2000.................................. 0.3748 21.4%
One week........................................ 0.3722 22.2%
One month....................................... 0.3568 27.5%
Three months.................................... 0.3506 29.8%
Six months...................................... 0.3985 14.2%
One year........................................ 0.4145 9.8%
Two years....................................... 0.4198 8.4%
Three years..................................... 0.5356 (15.1)%
Pro Forma Merger Analysis. Credit Suisse First Boston analyzed the
potential pro forma effect of the merger on Anadarko's earnings per share and
cash flow per share for estimated calendar years 2000 and 2001, both before and
after giving effect to potential cost savings and other synergies anticipated by
Anadarko's and Union Pacific Resources' managements to result from the merger.
For purposes of this analysis, Credit Suisse First Boston utilized the adjusted
management cases for Anadarko and Union Pacific Resources, and assumed that the
merger would be accounted for as a purchase and that the combined company would
utilize full-cost accounting. Based on the exchange ratio in the merger of
0.455, this analysis indicated that the proposed merger would be accretive in
estimated calendar year 2000, and dilutive in estimated calendar year 2001, to
Anadarko's earnings per share and accretive in each of the years analyzed to
Anadarko's cash flow per share, in each case, both before and after giving
effect to potential synergies. The actual results achieved by the combined
company may vary from projected results and the variations may be material.
Other Factors. In the course of preparing its opinion, Credit Suisse First
Boston also reviewed and considered other information and data, including:
- the trading characteristics of Anadarko common shares and Union Pacific
Resources common shares;
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- the pro forma capitalization and credit statistics of the combined
company;
- with respect to Union Pacific Resources, purchase prices paid or proposed
to be paid in selected merger and acquisition transactions in the oil and
gas exploration and production business; and
- selected market premium data in selected transactions in the oil and gas
industry announced since June 1997.
Miscellaneous. Anadarko has agreed to pay Credit Suisse First Boston for
its services upon completion of the merger an aggregate financial advisory fee
of $12.0 million. Anadarko also has agreed to reimburse Credit Suisse First
Boston for its reasonable out-of-pocket expenses, including fees and expenses of
legal counsel and any other advisor retained by Credit Suisse First Boston, and
to indemnify Credit Suisse First Boston and related parties against liabilities,
including liabilities under the U.S. federal securities laws, arising out of its
engagement.
Credit Suisse First Boston and its affiliates have in the past provided
services to Anadarko and Union Pacific Resources, and currently are providing
services to Anadarko, unrelated to the proposed merger, for which services
Credit Suisse First Boston and its affiliates have received and will receive
compensation. In the ordinary course of business, Credit Suisse First Boston and
its affiliates may actively trade the debt and equity securities of both
Anadarko and Union Pacific Resources for their own accounts and for the accounts
of customers, and, accordingly, may at any time hold long or short positions in
those securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Union Pacific Resources Directors and 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 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.
- 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 stock options and elimination of all forfeiture
provisions on restricted shares, other than options or restricted shares
subject to performance targets that at the time the stockholders approve
the merger have not been met, which 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
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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, 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.
If each of Union Pacific Resources' seven executive officers were
terminated "without cause" 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 for
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
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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 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. 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; and (d) 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 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 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
thirteen directors. 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 independent directors who are currently 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 independent
directors who are currently 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.
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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 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 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 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.
REGULATORY APPROVALS
Under the Hart-Scott-Rodino Act, the merger may not be consummated unless
certain filings have been submitted to the Federal Trade Commission and the
Antitrust Division of the U.S. Department of Justice and certain waiting period
requirements have been satisfied. On April 24, 2000, Anadarko and Union Pacific
Resources submitted the required filings to the Federal Trade Commission and the
Antitrust Division. The waiting period under the Hart-Scott-Rodino Act was
terminated on May 10, 2000.
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The Federal Trade Commission and the Antitrust Division frequently
scrutinize the legality under the antitrust laws of transactions like the
merger. At any time before or after the completion of the merger, the Federal
Trade Commission or the Antitrust Division could take any action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the completion of the merger or seeking the
divestiture of substantial assets of Union Pacific Resources or Anadarko. Union
Pacific Resources and Anadarko believe that the completion of the merger will
not violate the antitrust laws. There can be no assurance, however, that a
challenge to the merger on antitrust grounds will not be made, or, if such a
challenge is made, what the result will be.
In addition, under the laws of certain foreign nations, we may not complete
the merger unless we make various filings with these nations' antitrust
regulatory authorities and these authorities approve the merger. We expect that
the merger will not violate any foreign antitrust laws and that all the foreign
antitrust regulatory authorities whose approval we must seek will approve the
merger.
Other than as we describe in this document, the merger does not require the
approval of any U.S. federal or state or foreign agency. We will, however, be
required to make various filings with U.S. federal and state and foreign
governmental authorities to complete the merger.
LEGAL PROCEEDINGS
Union Pacific Resources and its directors have been named as defendants in
a lawsuit, Miller v. Union Pacific Resources Group, Inc., in the District Court
for Salt Lake County, Utah, alleging that the directors of Union Pacific
Resources violated their fiduciary obligations in approving the merger and stock
option agreements and agreeing to the merger. Union Pacific Resources and its
directors intend to contest the lawsuit vigorously.
RIGHTS OF DISSENTING STOCKHOLDERS
Union Pacific Resources Stockholders. Union Pacific Resources stockholders
will not be entitled to any dissenters' rights under the Utah Revised Business
Corporation Act or any other applicable law in connection with the merger.
Anadarko Stockholders. Anadarko stockholders will not be entitled to
appraisal rights under the Delaware General Corporation Law or any other
applicable law in connection with the merger.
FEDERAL SECURITIES LAW CONSEQUENCES
All Anadarko common shares that Union Pacific Resources stockholders will
receive in the merger will be freely transferable, except for Anadarko common
shares that are received by persons who are deemed to be "affiliates" of Union
Pacific Resources under the Securities Act of 1933, as amended, at the time of
the Union Pacific Resources special meeting. These affiliates may resell the
Anadarko common shares they receive in the merger only in transactions permitted
by Rule 145 under the Securities Act or as otherwise permitted under the
Securities Act. Persons who may be deemed to be affiliates of Union Pacific
Resources for the above purposes generally include individuals or entities that
control, are controlled by or are under common control with Union Pacific
Resources, and include directors and certain executive officers of Union Pacific
Resources. The merger agreement requires that Union Pacific Resources cause each
of these affiliates to deliver to Anadarko, not less than 30 days before the
Union Pacific Resources special meeting, a written agreement to the effect that
these persons will not sell, transfer or otherwise dispose of any of the
Anadarko common shares issued to them in the merger in violation of the
Securities Act or the related SEC rules.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following general discussion summarizes the anticipated material U.S.
federal income tax consequences of the merger to Union Pacific Resources
stockholders. This discussion addresses only those stockholders who hold their
Union Pacific Resources common shares as a capital asset, and does not
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address all of the U.S. federal income tax consequences that may be relevant to
particular Union Pacific Resources stockholders in light of their individual
circumstances, or to Union Pacific Resources stockholders that are subject to
special rules, such as:
- financial institutions,
- mutual funds,
- tax-exempt organizations,
- insurance companies,
- dealers in securities or foreign currencies,
- traders in securities who elect to apply a mark-to-market method of
accounting,
- foreign holders,
- persons who hold Union Pacific Resources common shares as a hedge against
currency risk or as part of a straddle, constructive sale or conversion
transaction, or
- holders who acquired their Union Pacific Resources common shares upon the
exercise of employee stock options or otherwise as compensation.
The following discussion is not binding on the Internal Revenue Service. It
is based upon the Internal Revenue Code of 1986, as amended, regulations,
rulings and decisions in effect as of the date of this document, all of which
are subject to change, possibly with retroactive effect. Tax consequences under
state, local and foreign laws and U.S. federal laws other than U.S. federal
income tax laws, are not addressed.
UNION PACIFIC RESOURCES STOCKHOLDERS ARE STRONGLY URGED TO CONSULT THEIR
TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER,
INCLUDING THE APPLICABILITY AND EFFECT OF U.S. FEDERAL, STATE AND LOCAL AND
FOREIGN INCOME AND OTHER TAX LAWS IN THEIR PARTICULAR CIRCUMSTANCES.
Satisfying a condition to the merger, Morgan, Lewis & Bockius LLP, counsel
to Union Pacific Resources, delivered an opinion to Union Pacific Resources to
the effect that the merger will qualify as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code. The opinion is based on
customary assumptions and customary representations made by, among others, Union
Pacific Resources, Anadarko and Dakota Merger Corp. An opinion of counsel
represents counsel's best legal judgment and is not binding on the Internal
Revenue Service or any court. No ruling has been, or will be, sought from the
Internal Revenue Service as to the U.S. federal income tax consequences of the
merger.
Assuming the merger qualifies as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, holders of Union Pacific Resources
common shares that receive Anadarko common shares in the merger will not
recognize gain or loss for U.S. federal income tax purposes, except with respect
to cash, if any, they receive in lieu of a fractional Anadarko common share.
Each stockholder's aggregate tax basis in the Anadarko common shares received in
the merger will be the same as his aggregate tax basis in the Union Pacific
Resources common shares surrendered in the merger, decreased by the amount of
any tax basis allocable to any fractional share interest for which cash is
received. The holding period of the Anadarko common shares received in the
merger by a holder of Anadarko common shares will include the holding period of
Union Pacific Resources common shares that he surrendered in the merger.
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A holder of Union Pacific Resources common shares that receives cash in
lieu of a fractional Anadarko common share will recognize gain or loss equal to
the difference between the amount of cash received and his tax basis in the
Anadarko common shares that is allocable to the fractional share. That gain or
loss generally will constitute capital gain or loss. In the case of an
individual stockholder, any of this capital gain generally will be subject to a
maximum U.S. federal income tax rate of 20% if the individual has held his Union
Pacific Resources common shares for more than 12 months on the date of the
merger. The deductibility of capital losses is subject to limitations for both
individuals and corporations.
Because Anadarko common shares remain unchanged in the merger, the merger
will not cause Anadarko stockholders to recognize any gain or loss. No gain or
loss will be recognized by Anadarko, Union Pacific Resources and Dakota Merger
Corp.
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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 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 Anadarko and the Union
Pacific Resources special meetings, assuming our stockholders approve the merger
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 that 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,
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.
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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 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.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties made
by each of us relating to, among other things:
- corporate organization and good standing,
- ownership of subsidiaries,
- corporate power and authority to enter into the merger agreement,
- capitalization,
- absence of a breach of the charter, bylaws, material agreements or law as
a result of the merger,
- consents and approvals required to enter into the merger agreement or to
complete the transactions contemplated by the merger agreement,
- brokerage and finders' fees,
- actions that would prevent the merger from receiving certain tax
treatment under the Internal Revenue Code,
- absence of certain adverse changes or events,
- timely and accurate filings with the SEC,
- tax matters,
- compliance with applicable laws,
- accuracy of information supplied for inclusion in the registration
statement,
- absence of undisclosed material litigation,
- employee benefits,
- validity of contracts,
- labor matters,
- undisclosed liabilities,
- possession of required permits,
- environmental matters,
- opinions of financial advisors,
- required board of directors' votes and recommendations to stockholders,
and
- state takeover laws and stockholder rights plans.
The merger agreement also contains representations and warranties relating
to Dakota Merger Corp., including due organization, corporate authorization,
capitalization and contravention.
The representations and warranties contained in the merger agreement will
not survive the merger, but they form the basis of certain conditions to our
obligations to complete the merger.
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COVENANTS
Mutual Covenants. We have undertaken to perform certain covenants in the
merger agreement. The principal covenants are as follows:
- Each of us will:
(a) complete the filings required under the Hart-Scott-Rodino Act and
comply with any request under the Hart-Scott-Rodino Act for additional
information, documents or other materials received from the Federal Trade
Commission, the Antitrust Division or any other governmental authority;
(b) use reasonable efforts to resolve any objections asserted by any
governmental authority under the antitrust laws with respect to the merger
transactions; and
(c) use reasonable efforts to take all actions necessary, proper or
advisable to complete the merger, including:
(1) obtaining all other necessary authorizations, orders and
approvals from governmental entities and completing all other necessary
registrations and filings,
(2) obtaining from third parties all necessary consents, approvals
or waivers related to the merger,
(3) preparation of this document and the registration statement,
and
(4) execution and delivery of any additional instruments necessary
to complete the merger transactions.
- Each of us will not be required to hold separate, including by trust or
otherwise, or divest any businesses or assets, or to take or agree to
take any action or agree to any limitation, that could reasonably be
expected to have a material adverse effect on each of us, respectively,
or a material adverse effect on the assets, liabilities, results of
operations, financial condition or prospects of the combined entity after
the effective time of the merger.
- Each of us will use reasonable best efforts to cause the merger to
constitute a tax-free "reorganization" under section 368(a) of the
Internal Revenue Code, and to cooperate with one another in obtaining an
opinion from Morgan, Lewis & Bockius LLP to the effect that the merger
will constitute a section 368(a) reorganization.
- Neither of us will enter into certain farmouts.
Covenants of Anadarko. Anadarko has agreed:
- to take all action in accordance with the U.S. federal securities laws,
the Delaware General Corporation Law and Anadarko's restated certificate
of incorporation and bylaws necessary (1) to hold the Anadarko special
meeting on the earliest practical date, and (2) to obtain the consent and
approval of Anadarko stockholders of (a) the issuance of Anadarko common
shares and (b) the amendment to Anadarko's restated certificate of
incorporation to increase the maximum size of the Anadarko board of
directors to at least 13 directors,
- to have the Anadarko board of directors recommend approval of the share
issuance and the amendment to Anadarko's restated certificate of
incorporation, subject to the Anadarko board of directors' fiduciary
duties under applicable law (see "-- No Solicitation"),
- as soon as reasonably possible, to prepare and file this document and the
registration statement with the SEC, to use reasonable efforts to have
the registration statement declared effective by the SEC as soon as
possible and to maintain the effectiveness of the registration statement
through the completion of the merger,
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- to use reasonable efforts to cause the Anadarko common shares issuable
pursuant to the merger, including pursuant to Anadarko stock options, to
be approved for listing on the New York Stock Exchange before the
completion of the merger, and
- following the merger, to indemnify the present and former officers and
directors of Union Pacific Resources in respect of acts or omissions
occurring prior to the effective time of the merger to the extent
provided under the Union Pacific Resources charter and bylaws, and to use
reasonable best efforts to maintain for six years policies of directors'
and officers' liability insurance with respect to acts or omissions
occurring prior to the effective time of the merger at an aggregate
annual cost not to exceed 200% of the estimated annual cost of current
coverage.
Covenants of Union Pacific Resources. Union Pacific Resources has agreed:
- to take all action in accordance with the U.S. federal securities laws,
the Utah Revised Business Corporation Act and the Union Pacific Resources
charter and bylaws necessary (1) to hold the Union Pacific Resources
special meeting on the earliest practical date, and (2) to take all
lawful action to solicit the approval of the merger by Union Pacific
Resources stockholders,
- to have the Union Pacific Resources board of directors recommend approval
of the merger agreement and the transactions contemplated by the merger
agreement, including the merger, by Union Pacific Resources stockholders,
subject to the Union Pacific Resources board of directors' fiduciary
duties under applicable law (see "-- No Solicitation"), and
- to cause each person that may be at the effective time of the merger, or
was on the date of the merger agreement an "affiliate" of Union Pacific
Resources for purposes of Rule 145 of the Securities Act, to execute and
deliver to Anadarko certain written undertakings at least 30 days before
the date of the Union Pacific Resources special meeting.
Operations of the Companies Pending Closing. We have agreed to conduct
operations in the ordinary course of business, except as expressly contemplated
by the merger agreement and related transactions, and to use reasonable efforts
to maintain and preserve the business organization and material rights and
franchises and other constituencies of our respective businesses. We also have
agreed to limitations, prohibitions and other provisions relating to the conduct
of our respective businesses during the period from the date of the merger
agreement to the effective time of the merger with respect to:
- changes in capital stock and payment of dividends,
- disposition of property or assets,
- changes in our respective charters or bylaws,
- merger or consolidations,
- acquisitions of a material amount of assets or capital stock,
- modifications of our respective rights agreements,
- incurrence or repayment of indebtedness,
- increases, funding or acceleration of funding of compensation or benefits
provided to officers, directors, consultants or employees,
- adoption or amendment of employee benefit plans or employment agreements,
- actions that could give rise to severance benefits pursuant to
change-in-control agreements,
- changes in method or principle of accounting,
- settlement of actions,
- adoption or modification of confidentiality agreements,
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- write ups, write downs or write offs of the book value of assets,
- incurrence of or commitment to capital expenditures,
- payments on policies of directors' and officers' liability insurance,
- actions to exempt individuals or entities from state takeover law or
state law that purports to limit or restrict business combinations or the
ability to acquire or vote shares,
- actions affecting the representations and warranties set forth in the
merger agreement, and
- tax elections, claims, returns or accounting.
No Solicitation. We have agreed that, during the term of the merger
agreement, each of us will not, and will not authorize or permit any of our
subsidiaries or any of our or our subsidiaries' directors, officers, employees,
agents or representatives, directly or indirectly, to:
- solicit, initiate, encourage or facilitate, or furnish or disclose
non-public information in furtherance of, any inquiries or the making of
any proposal with respect to a competing transaction as defined below,
- negotiate, explore or otherwise engage in discussions with any third
party with respect to any competing transaction, or
- enter into any agreement, arrangement or understanding requiring the
abandonment, termination or failure to complete the merger.
A "competing transaction" is any recapitalization, merger, consolidation or
other business combination involving the company subject to the competing
transaction, or any acquisition of 15% or more of the capital stock (other than
upon exercise of stock options outstanding as of the date of the merger
agreement) or of 30% or more of the assets of the company and any one of its
subsidiaries, taken as a whole, in a single transaction or a series of related
transactions, or any combination of the foregoing.
However, at any time before the approval by Anadarko stockholders of the
issuance of Anadarko common shares in the merger or the approval by Union
Pacific Resources stockholders of the merger, Anadarko or Union Pacific
Resources, respectively, may furnish information to, and engage in discussions
with, any third party who delivers a superior proposal as defined below. Before
furnishing information to, or engaging in discussion with, any third party, the
company receiving the superior proposal must receive an executed confidentiality
agreement from that third party.
A "superior proposal" is a written proposal for a competing transaction
that was not solicited or encouraged after the date of the merger agreement in
violation of the merger agreement, if and so long as the board of directors of
the company receiving the proposal determines in good faith by resolution duly
adopted, after consultation with its outside counsel, that the failure to take
such action would reasonably be expected to constitute a breach of its fiduciary
duties under applicable law, and determines that such a proposal is, after
consulting with its financial advisor, more favorable to its stockholders from a
financial point of view than the transactions contemplated by the merger
agreement, including any adjustment to the terms and conditions proposed by the
other company which is a party to the merger agreement in response to such
competing transaction.
Each company has agreed to cease immediately all existing activities,
discussions and negotiations with any parties conducted before the signing of
the merger agreement with respect to any proposal for a competing transaction,
and to request the return of all confidential information regarding itself
provided to any such parties before the date of the merger agreement pursuant to
the terms of any confidentiality agreements or otherwise.
If, before the approval by Anadarko stockholders of the issuance of
Anadarko common shares issuable in the merger or the approval by Union Pacific
Resources stockholders of the merger, the Anadarko board of directors or the
Union Pacific Resources board of directors, respectively, receives a superior
proposal
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that was not solicited or encouraged in violation of the merger agreement, and
determines in good faith by resolution duly adopted, after consultation with its
outside counsel, that the failure to take such action would reasonably be
expected to constitute a breach of its fiduciary duties under applicable law,
the board of directors receiving the superior proposal may:
- in the case of Anadarko, withdraw, modify or change, in a manner adverse
to Union Pacific Resources, its recommendation that Anadarko stockholders
approve and authorize the issuance of Anadarko common shares issuable in
the merger, and the amendment to Anadarko's restated certificate of
incorporation to increase the maximum size of the Anadarko board of
directors to at least 13 directors,
- in the case of Union Pacific Resources, withdraw, modify or change, in a
manner adverse to Anadarko, its recommendation that Union Pacific
Resources stockholders approve the merger agreement and the transactions
contemplated by the merger agreement, including the merger, or
- in either case, comply with Rule 14e-2 promulgated under the Securities
Exchange Act with respect to a competing transaction.
However, the company receiving the superior proposal must give the other company
which is a party to the merger agreement three business days' prior written
notice of its intention to take any of these actions, which in no way limits or
otherwise affects the other company's right to terminate the merger agreement,
if:
- in the case of Anadarko, the Union Pacific Resources board of directors
withdraws or modifies, in a manner adverse to Anadarko, its approval or
recommendation of the merger agreement or the merger, or recommends a
competing transaction, or
- in the case of Union Pacific Resources, the Anadarko board of directors
withdraws or modifies, in a manner adverse to Union Pacific Resources,
its approval or recommendation of the issuance of Anadarko common shares
issuable in the merger, or recommends a proposal related to a competing
transaction.
Any withdrawal, modification or change of board of directors recommendation will
not change the approval of the board of directors for purposes of causing any
state takeover statute or other state law to be inapplicable to the transactions
contemplated by the merger agreement, including the merger or the stock option
agreements, or change the obligation to present the issuance of Anadarko common
shares issuable in the merger for approval, in the case of Anadarko, or the
merger for approval, in the case of Union Pacific Resources, at a duly called
special meeting on the earliest practicable date determined in consultation with
the other company.
From and after the execution of the merger agreement, each company will
promptly, and in any event within one calendar day, advise the other in writing
of the receipt, directly or indirectly, of any inquiries, discussions,
negotiations or proposals relating to a competing transaction, including the
specific terms of such transaction and the identity of the other party or
parties involved, and promptly furnish to the other company a copy of any such
written proposal in addition to any information provided to or by any third
party relating to such proposal. In addition, each company will promptly, and in
any event within one calendar day, advise the other in writing if its board of
directors makes any determination as to any competing transaction.
The Board of Directors of Anadarko following the Merger. 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. See
"Proposed Amendments to Anadarko's Restated Certificate of
Incorporation -- Maximum Board Size Proposal." If this amendment is approved,
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 independent directors who are currently directors of the
Union Pacific Resources board of directors,
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as may be mutually agreed by the chief executive officers of Anadarko and Union
Pacific Resources. If this amendment is not approved, 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
independent directors who are currently 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. Approval of this amendment is not a
condition to the completion of the merger.
The former Union Pacific Resources directors elected as Anadarko directors
will be appointed among the three classes of the Anadarko board of directors,
with a minimum of one director per class.
Union Pacific Resources Employees and Employee Benefits. After the
effective time of the merger, Anadarko will assume and honor all Union Pacific
Resources plans and employment agreements, subject to any amendment or
termination that may be permitted by their terms. Until at least the first
anniversary of the effective time of the merger, Anadarko will provide Union
Pacific Resources employees who are not subject to collective bargaining with
employee benefits, other than equity-based benefits, comparable to the benefits,
other than equity-based benefits, provided under the Union Pacific Resources
plans. Following the end of the first anniversary of the effective time of the
merger (or, at its discretion, before the end of such period), Anadarko will
provide benefits to Union Pacific Resources employees that are, in the
aggregate, comparable to those provided to similarly situated Anadarko
employees.
Each Union Pacific Resources employee who is not subject to collective
bargaining and who is provided benefits under Anadarko plans after the effective
time of the merger will be credited for the years of service with Union Pacific
Resources recognized under comparable plans, except for purposes of benefit
accrual under defined benefit pension plans and except as would result in a
duplication of benefits. In addition, after the effective time of the merger,
- Union Pacific Resources employees who are not subject to collective
bargaining will be immediately eligible to participate in any and all
Anadarko employee benefits plans to the extent coverage under these
Anadarko employee benefit plans replaces coverage under comparable Union
Pacific Resources employee benefit plans in which the employees
participated immediately before the effective time of the merger; and
- for purposes of each Anadarko employee benefit plan providing medical,
dental, pharmaceutical and/or vision benefits to Union Pacific Resources
employees who are not subject to collective bargaining, Anadarko will
cause all pre-existing condition exclusions and actively-at-work
requirements of the Anadarko employment or employee benefit plan to be
waived and will cause any eligible expenses incurred during the portion
of the plan year of the comparable Union Pacific Resources employee
benefit plan to be taken into account for purposes of satisfying all
deductible, coinsurance and maximum out-of-pocket requirements applicable
to the employee and covered dependants for the applicable plan year as if
such amounts had been paid in accordance with the Anadarko employment or
employee benefit plan.
Following the effective time of the merger agreement, and until such time
as Anadarko otherwise determines, the Union Pacific Resources employees thrift
plan will continue in effect, holding the Anadarko common shares that it
receives in the merger, and the Union Pacific Resources employee thrift plan's
loans will continue to remain outstanding and be repaid in accordance with their
terms.
CONDITIONS
Mutual Conditions. Our respective obligations to complete the merger are
subject to the satisfaction or waiver of various conditions, the most
significant of which are as follows:
- the merger agreement and the merger have been approved and adopted by
Union Pacific Resources stockholders and the issuance of Anadarko common
shares issuable in the merger has been approved by Anadarko stockholders;
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- the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
relating to the merger has expired or terminated, which occurred on May
10, 2000, and any other approvals of any governmental authority have been
obtained;
- no provision of any applicable law or regulation and no judgment,
injunction, order or decree prohibits or enjoins the completion of the
merger or limits the ownership or operation by either company or any of
its subsidiaries of any material portion of its business or assets;
- there is not pending any action instituted by any governmental authority
challenging or seeking to restrain or prohibit the completion of the
merger;
- the SEC has declared the registration statement effective under the
Securities Act, and no stop order or similar restraining order suspending
the effectiveness of the registration statement is in effect and no
proceedings for such purpose is pending before, or threatened by, the SEC
or any state securities administrator;
- Anadarko common shares to be issued in the merger have been approved for
listing on the New York Stock Exchange, subject to official notice of
issuance; and
- Union Pacific Resources has received the opinion of Morgan, Lewis &
Bockius LLP to the effect that the merger will constitute a
"reorganization" under section 368(a) of the Internal Revenue Code and
that we will each be a party to that reorganization.
Conditions to Obligations of Union Pacific Resources to Complete the
Merger. The conditions to Union Pacific Resources' obligations to complete the
merger include the following:
- each of the representations and warranties of Anadarko and Dakota Merger
Corp. set forth in the merger agreement (other than the representations
and warranties of Anadarko regarding its capitalization) is true and
correct, as qualified for materiality;
- the representations and warranties of Anadarko regarding its
capitalization are true and correct;
- each of Anadarko and Dakota Merger Corp. has performed in all material
respects all obligations and agreements and has complied in all material
respects with all covenants under the merger agreement; and
- at any time after the date of the merger agreement, there will not have
been any one or more events or occurrences that, individually or in the
aggregate, has had or is likely to have a material adverse effect on
Anadarko.
Conditions to Obligations of Anadarko and Dakota Merger Corp. to Complete
the Merger. The conditions to Anadarko's and Dakota Merger Corp.'s obligations
to complete the merger include the following:
- each of the representations and warranties of Union Pacific Resources set
forth in the merger agreement (other than the representations and
warranties of Union Pacific Resources regarding its capitalization) is
true and correct, as qualified for materiality;
- the representations and warranties of Union Pacific Resources regarding
its capitalization are true and correct;
- Union Pacific Resources has performed in all material respects all
obligations and agreements and has complied in all material respects with
all covenants under the merger agreement;
- an employment agreement by and between Anadarko and Mr. Lindahl is in
full force and effect as of the completion of the merger; and
- at any time after the date of the merger agreement, there will not have
been any one or more events or occurrences that, individually or in the
aggregate, has had or is likely to have a material adverse effect on
Union Pacific Resources.
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TERMINATION
Termination by Anadarko or Union Pacific Resources. Either one of us, by
action of our respective boards of directors, may terminate the merger agreement
and abandon the merger at any time before the merger if:
- both of us agree to terminate effective by mutual written consent;
- the merger has not been completed by December 31, 2000; provided,
however, that, if an extension is necessary to obtain governmental
approvals of the merger under the antitrust laws and if all other
conditions to completion of the merger are satisfied or capable of being
immediately satisfied, the December 31, 2000 date will be extended for a
period not to exceed the lesser of 90 days or the fifth business day
after the entrance by the court in which such litigation is pending of
its decision (whether or not subject to appeal or rehearing); and
provided, further, that the right to terminate the merger agreement under
this provision will not be available to any party whose failure or whose
affiliate's failure to perform or observe in any material respect any of
its obligations under the merger agreement in any manner has been the
cause of, or resulted in, the failure of the merger to occur on or before
such date;
- the Anadarko special meeting for the purpose of approving the issuance of
Anadarko common shares issuable in the merger has been held and Anadarko
stockholder approval has not been obtained, or the Union Pacific
Resources special meeting for the purpose of approving the merger
agreement and the merger has been held and Union Pacific Resources
stockholder approval has not been obtained; or
- a U.S. federal or state court, or governmental, regulatory or
administrative agency or commission, has taken any action permanently
prohibiting the merger and the action has become final and non-
appealable; provided, however, that the party seeking to terminate the
merger agreement pursuant to this provision has complied with the merger
agreement requirements for Hart-Scott-Rodino Act filings, and with
respect to other matters, has used its commercially reasonable best
efforts to remove such prohibition.
Termination by Anadarko. Anadarko, by action of the Anadarko board of
directors, after consultation with its legal advisors, may terminate the merger
agreement and abandon the merger at any time before the merger if:
- there (a) has been a breach by Union Pacific Resources of any
representation, warranty, covenant or agreement set forth in the merger
agreement or if any representation or warranty of Union Pacific Resources
has become untrue, in either case such that the closing condition
relating to the accuracy of Union Pacific Resources' representations and
warranties would not be satisfied, and (b) such breach is not curable or,
if curable, is not cured within 45 days after written notice of such
breach is given to Union Pacific Resources by Anadarko; provided,
however, that the right to terminate the merger agreement under this
provision is not available to Anadarko if it, at such time, is in
material breach of any representation, warranty, covenant or agreement
set forth in the merger agreement; or
- the Union Pacific Resources board of directors has withdrawn or modified,
in a manner adverse to Anadarko, its approval or recommendation of the
merger agreement or the merger, or recommended a competing transaction.
Termination by Union Pacific Resources. Union Pacific Resources, by action
of the Union Pacific Resources board of directors, after consultation with its
legal advisors, may terminate the merger agreement and abandon the merger at any
time before the merger if:
- there (a) has been a breach by Anadarko or Dakota Merger Corp. of any
representation, warranty, covenant or agreement set forth in the merger
agreement or if any representation or warranty of Anadarko or Dakota
Merger Corp. has become untrue, in either case such that the closing
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condition relating to the accuracy of Anadarko's or Dakota Merger Corp.'s
representations and warranties would not be satisfied, and (b) such
breach is not curable or, if curable, is not cured within 45 days after
written notice of such breach is given to Anadarko by Union Pacific
Resources; provided, however, that the right to terminate the merger
agreement under this provision is not available to Union Pacific
Resources if it, at such time, is in material breach of any
representation, warranty, covenant or agreement set forth in the merger
agreement; or
- the Anadarko board of directors has withdrawn or modified, in a manner
adverse to Union Pacific Resources, its approval or recommendation of the
issuance of Anadarko common shares issuable in the merger, or recommended
a competing transaction.
EFFECT OF TERMINATION
Fees Payable by Union Pacific Resources Relating to Termination.
- Union Pacific Resources has agreed to pay Anadarko a fee of $25 million
(subject to reduction under the Union Pacific Resources stock option
agreement) if:
(a) after the public announcement of a proposal relating to a
competing transaction received by Union Pacific Resources, the merger
agreement is terminated by either of us after the Union Pacific Resources
special meeting has been held and Union Pacific Resources stockholder
approval for the merger agreement and the merger has not been obtained; or
(b) after the public announcement or receipt by the Union Pacific
Resources board of directors of a proposal relating to a competing
transaction, the merger agreement is terminated by Anadarko after the Union
Pacific Resources board of directors has withdrawn or modified, in a manner
adverse to Anadarko, its approval or recommendation of the merger agreement
or the merger, or recommended a competing transaction.
- Union Pacific Resources has agreed to pay Anadarko an additional fee of $100
million (subject to reduction under the Union Pacific Resources stock option
agreement) if, within one year after termination giving rise to a $25
million termination fee as described above, Union Pacific Resources enters
into a definitive agreement for or completes:
(a) a competing transaction giving rising to the termination;
(b) a consolidation, exchange of shares or merger of Union Pacific
Resources with any person, other than Anadarko or one of its subsidiaries,
and, in the case of a merger, in which Union Pacific Resources is not the
continuing or surviving corporation;
(c) a merger of Union Pacific Resources with a person, other than
Anadarko or one of its subsidiaries, in which Union Pacific Resources is
the continuing or surviving corporation but the then-outstanding Union
Pacific Resources common shares are changed into or exchanged for stock or
other securities of Union Pacific Resources or any other person, cash or
any other property, or the Union Pacific Resources common shares
outstanding immediately before such merger represent after such merger less
than 50% of the voting stock of Union Pacific Resources outstanding
immediately after the merger;
(d) the acquisition of beneficial ownership of 50% or more of the
voting stock of Union Pacific Resources by any person; or
(e) a sale, lease or other transfer of 50% or more of the assets of
Union Pacific Resources to any person, other than Anadarko or one of its
subsidiaries.
The $100 million fee is payable at the time a qualifying transaction is
completed.
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Fees Payable by Anadarko Relating to Termination.
- Anadarko has agreed to pay Union Pacific Resources a fee of $25 million
(subject to reduction under the Anadarko stock option agreement) if:
(a) after the public announcement of a proposal relating to a
competing transaction received by Anadarko, the merger agreement is
terminated by either of us after the Anadarko special meeting has been held
and Anadarko stockholder approval for the issuance of Anadarko common
shares issuable in the merger has not been obtained; or
(b) after the public announcement or receipt by the Anadarko board of
directors of a proposal relating to a competing transaction, the merger
agreement is terminated by Union Pacific Resources after the Anadarko board
of directors has withdrawn or modified, in a manner adverse to Union
Pacific Resources, its approval or recommendation of the issuance of
Anadarko common shares issuable in the merger, or recommended a competing
transaction.
- Anadarko has agreed to pay Union Pacific Resources an additional fee of $100
million (subject to reduction under the Anadarko stock option agreement) if,
within one year after termination giving rise to a $25 million fee as
described above, Anadarko enters into a definitive agreement for or
completes:
(a) a competing transaction giving rising to the termination;
(b) a consolidation, exchange of shares or merger of Anadarko with any
person, other than Union Pacific Resources or one of its subsidiaries, and,
in the case of a merger, in which Anadarko is not the continuing or
surviving corporation;
(c) a merger of Anadarko with a person, other than Union Pacific
Resources or one of its subsidiaries, in which Anadarko is the continuing
or surviving corporation but the then-outstanding Anadarko common shares
are changed into or exchanged for stock or other securities of Anadarko or
any other person, cash or any other property, or the Anadarko common shares
outstanding immediately before such merger represent after such merger less
than 50% of the voting stock of Anadarko outstanding immediately after the
merger;
(d) the acquisition of beneficial ownership of 50% or more of the
voting stock of Anadarko by any person; or
(e) a sale, lease or other transfer of 50% or more of the assets of
Anadarko to any person, other than Union Pacific Resources or one of its
subsidiaries.
The $100 million fee is payable at the time a qualifying transaction is
completed.
AMENDMENT AND WAIVER
We may amend the merger agreement in writing by action taken by our
respective boards of directors at any time, but, after any approval of the
merger agreement by Union Pacific Resources stockholders, we may not make any
amendment that by law requires further approval or authorization by Union
Pacific Resources stockholders without this further approval or authorization.
We may not amend the merger agreement, except by an instrument in writing signed
on behalf of each of us.
At any time before the effective time of the merger, Anadarko (with respect
to Union Pacific Resources) and Union Pacific Resources (with respect to
Anadarko and Dakota Merger Corp.), by action taken by their respective boards of
directors, may, to the extent legally allowed,
- extend the time for the performance of any obligations or other acts of
the other company,
- waive any inaccuracies in the representations and warranties contained in
the merger agreement or in any document delivered under the merger
agreement, and
- waive compliance with any of the agreements or conditions contained in
the merger agreement.
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Any agreement to any extension or waiver will be valid only if set forth in
a signed written instrument.
COSTS AND EXPENSES
Except as described under "-- Termination" and "-- Effect of Termination,"
all costs and expenses incurred in connection with the merger agreement will be
paid by the party incurring such expenses, except that those expenses incurred
in connection with filing, printing and mailing the registration statement and
this document (including related filing fees) will be shared equally by Anadarko
and Union Pacific Resources.
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THE STOCK OPTION AGREEMENTS
The following is a summary of the material terms of the stock option
agreements, which are attached as Annexes B and C to this document and are
incorporated in this document by reference. This summary is qualified in its
entirety by reference to the stock option agreements. You should read the stock
option agreements because they, and not this document, are the legal documents
that govern the stock options.
THE STOCK OPTIONS
At the same time that we entered into the merger agreement, we also entered
into reciprocal stock option agreements. Under the terms of the option granted
by Anadarko to Union Pacific Resources, Union Pacific Resources may purchase up
to 25,886,726 Anadarko common shares (representing approximately 19.9% of the
outstanding Anadarko common shares as of March 31, 2000) at an exercise price of
$38.6875 per share. Under the terms of the option granted by Union Pacific
Resources to Anadarko, Anadarko may purchase up to 50,138,515 Union Pacific
Resources common shares (representing approximately 19.9% of the outstanding
Union Pacific Resources common shares as of March 31, 2000) at an exercise price
equal to the lesser of (a) $17.60 per share and (b) 0.455 multiplied by the
closing price of Anadarko common shares on the date of exercise of the option.
The exercise price and the type and number of shares or securities subject to
the options will be adjusted appropriately for any stock dividend, split-up,
combination, recapitalization, exchange of shares or similar transactions.
The terms of these stock option agreements, other than with respect to
exercise price, are substantially identical and are summarized below.
WHEN THE STOCK OPTIONS MAY BE EXERCISED
Anadarko can exercise the option granted to it, in whole or in part, at any
time after the occurrence of an event that would entitle it to receive the $25
million termination fee under the merger agreement and before the termination of
the option. Union Pacific Resources can exercise the option granted to it, in
whole or in part, at any time after the occurrence of an event that would
entitle it to receive the $25 million termination fee under the merger agreement
and before the termination of the option.
The right to exercise an option terminates upon the earliest to occur of
the following:
- completion of the merger;
- the first anniversary of the receipt of written notice from the option
grantor that the option has become exercisable; and
- termination of the merger agreement in accordance with its terms before
the option becomes exercisable, unless the termination itself makes the
option exercisable.
ELECTION TO REPURCHASE OPTIONS
The stock option agreements provide that, at any time after an exercise
event and prior to the earlier of 120 days after the expiration of the term of
the option and 120 days after the occurrence of an event that would entitle the
option holder to receive the additional $100 million termination fee under the
merger agreement, the option holder may put to the option grantor (a) that
portion of the option relating to any unexercised common shares and (b) any of
the option grantor's common shares purchased pursuant to the option and still
owned by the option holder for aggregate consideration equal to:
(1) the aggregate exercise price paid by the option holder for the
option grantor's common shares owned by the option holder and purchased
pursuant to the option in respect of which the option holder is exercising
the put right;
(2) the number of the option grantor's common shares in respect of
which the put right is being exercised (whether or not those shares (a) are
purchased pursuant to the option and still owned by
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the option holder, or (b) remain subject to the option) multiplied by the
difference between the exercise price and the highest of:
- the highest purchase price per share paid pursuant to a third party's
tender or exchange offer prior to the date the put right is exercised;
- the price per share to be paid by any third person for the option
grantor's common shares pursuant to a business combination transaction
involving the option grantor entered into on or prior to the date the
put right is exercised; and
- the average closing price of the option grantor's common shares as
reported on the New York Stock Exchange during the 10 consecutive
trading days prior to the exercise of the put right.
The stock option agreements further provide that, to the extent the put right
has not been exercised, at the request of the option grantor made at any time
during the 120-day period commencing at the earlier of 120 days after the
expiration of the term of the option and 120 days after the occurrence of an
event that would entitle the option holder to receive the additional $100
million termination fee under the merger agreement, the option grantor may
repurchase from the option holder all (but not less than all) of the option
grantor's common shares purchased by the option holder pursuant to the option
and then owned by the option holder for a price per share equal to the greater
of (1) the average closing price of the option grantor's common shares as
reported on the New York Stock Exchange during the 10 consecutive days prior to
the exercise of the right and (2) the exercise price.
RIGHT OF FIRST REFUSAL
During the two years after the first exercise of the option, if an option
holder desires to sell to a third party any common shares purchased pursuant to
the option, the option holder must first give the option grantor the right to
buy these common shares. The option holder must offer the option grantor the
same terms, conditions and price that the option holder offered to the third
party. There are exceptions to this right of first refusal, which include sales
to third parties that would own no more than 2% of the outstanding voting power
of the option grantor after the sale, and sales by means of a registered
offering under the Securities Act.
REGISTRATION RIGHTS
During the two years after the first exercise of the option, the option
holder may require the option grantor to register under the Securities Act and
to qualify for sale under state securities laws any common shares purchased
pursuant to the option if registration or qualification is necessary to resell
the common shares. The option holder may require up to two registrations.
LIMITATION ON TOTAL PROFIT
Each of the stock option agreements limits the total profit that the option
holder is permitted to receive under the stock option agreement and the
termination provisions of the merger agreement. If an event has occurred that
would entitle the option holder to receive the additional $100 million
termination fee under the merger agreement, then the limitation on total profit
is $125 million in the aggregate. Otherwise, the limitation is $25 million in
the aggregate.
EFFECT OF STOCK OPTION AGREEMENTS
The stock option agreements may have the effect of making a third party's
acquisition of, or other business combination with, Anadarko or Union Pacific
Resources costly because of the need to acquire any common shares issued
pursuant to the stock option agreement or because of any cash payments made
pursuant to the stock option agreement. Moreover, we believe that, if either
option becomes exercisable, it is likely to hinder other parties from attaining
pooling-of-interests accounting treatment under
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U.S. generally accepted accounting principles in any merger or business
combination transaction with the option grantor for the following two years.
The stock option agreements may, therefore, discourage some third parties
from proposing an alternative transaction to the current merger proposed by us,
including one that might be more favorable from a financial point of view to the
stockholders of Anadarko or Union Pacific Resources.
The boards of directors of Anadarko and Union Pacific Resources considered
the impact of the stock option agreements on potential third-party acquirors in
their approval of the merger agreement and the stock option agreements.
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THE COMPANIES
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 comprised 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 comprised 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 comprised 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 1988, 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 Group Inc. 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."
70
77
BUSINESS OF ANADARKO
Founded in 1959, Anadarko has substantially expanded its operations from
its early days as a southwest Kansas natural gas producer to become one of the
world's largest and most successful independent oil and gas exploration and
production companies.
At the end of 1999, Anadarko had proved reserves of 573.2 million barrels
of crude oil, condensate and natural gas liquids and 2.51 trillion cubic feet of
natural gas. Combined, these proved reserves are equivalent of 991 million
barrels of oil or 5.95 trillion cubic feet of gas, the highest level in Anadarko
history. About 71% of these reserves are located in the United States, with the
remaining 29% located in Algeria. U.S. natural gas reserves account for about
42% of total proved reserves.
Anadarko employs the latest technology and risk management tools in its
search for new hydrocarbon reserves. Anadarko maintains a broad portfolio of
exploration and development drilling opportunities, carefully balanced for
potential risk and reward. Anadarko continues to focus on regions where it
believes significant hydrocarbon systems can be found and developed under
favorable commercial terms. Worldwide, Anadarko held interests in more than 8
million gross lease acres at year-end 1999.
U.S. drilling and production operations are located primarily in Alaska,
the Gulf of Mexico, Kansas, Oklahoma and Texas. Anadarko also has significant
oil production in Algeria, and participates in exploration ventures in Tunisia,
the North Atlantic Ocean and other selected areas.
Anadarko's exploration and development drilling program is supported by its
worldwide business development activities, which include the purchase and sale
of producing properties. Anadarko has a mix of innovative marketing services
designed to optimize the value of Anadarko's production volumes, as well as
volumes purchased from other oil and gas companies.
Anadarko always endeavors to conduct its business in compliance with all
applicable laws and regulations, and in a way that safeguards human health and
the environment. Anadarko continues to integrate safety and environmental
protection into all work programs in order to develop natural resources in a
prudent and responsible manner.
At year-end 1999, Anadarko had 1,431 employees worldwide. Anadarko's
headquarters are located at 17001 Northchase Drive, Houston, Texas 77060-2141,
its telephone number is (281) 875-1101, and its website is
http://www.anadarko.com. Anadarko also has offices in Liberal, Kansas; Midland,
Texas; Anchorage, Alaska; Washington, D.C.; Uxbridge, England; and Algiers,
Algeria.
Additional information concerning Anadarko and its subsidiaries is included
in the Anadarko documents filed with the SEC, which are incorporated by
reference in this document. See "Where You Can Find More Information."
DAKOTA MERGER CORP.
Dakota Merger Corp. is a newly formed, wholly owned subsidiary of Anadarko
formed for the purpose of effecting the Merger.
Dakota Merger Corp.'s headquarters are located at 17001 Northchase Drive,
Houston, Texas 77060-2141, and its telephone number is (281) 875-1101.
71
78
NEW ANADARKO PETROLEUM CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
should be read in conjunction with the historical consolidated financial
statements, including the notes thereto, of Anadarko and Union Pacific
Resources, which are incorporated by reference in this document. The unaudited
pro forma financial statements are presented for illustration purposes only, in
accordance with the assumptions set forth below, and are not necessarily
indicative of the operating results or financial position that would have
occurred if the merger had been completed. Nor is it necessarily indicative of
future operating results or the financial position of the combined enterprise.
The unaudited pro forma condensed combined financial statements do not reflect
any adjustments to conform accounting practices, other than to conform Union
Pacific Resources' accounting for oil and gas activities to the full-cost method
of accounting, or to reflect any cost savings or other synergies anticipated as
a result of the merger or any future merger related expenses.
72
79
NEW ANADARKO PETROLEUM CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1999
UNION PACIFIC PRO FORMA PRO FORMA
ANADARKO RESOURCES ADJUSTMENTS COMBINED
-------- ------------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
REVENUES
Gas sales................................ $357,530 $ 854,933 $ -- $1,212,463
Oil and condensate sales................. 249,666 504,933 -- 754,599
Natural gas liquid sales................. 88,039 113,386 -- 201,425
Minerals................................. -- 120,494 -- 120,494
Other.................................... 5,869 133,726 (92,663)(a) 46,932
-------- ---------- --------- ----------
Total............................... 701,104 1,727,472 (92,663) 2,335,913
-------- ---------- --------- ----------
COSTS AND EXPENSES
Operating expenses....................... 141,719 668,491 (249,960)(b) 383,256
(176,994)(c)
Administrative and general............... 102,946 86,928 63,654(c) 207,520
(46,008)(d)
Minerals................................. -- (2,797) 2,797(c) --
Depreciation, depletion and
amortization........................... 218,091 827,710 (827,710)(e) 978,690
760,599(f)
Other taxes.............................. 35,407 -- 110,543(c) 145,950
Restructuring charge..................... -- 11,375 -- 11,375
Impairments related to international
properties............................. 24,000 -- -- 24,000
Amortization of goodwill................. -- -- 52,530(g) 52,530
-------- ---------- --------- ----------
Total............................... 522,163 1,591,707 (310,549) 1,803,321
-------- ---------- --------- ----------
Operating Income......................... 178,941 135,765 217,886 532,592
OTHER INCOME (EXPENSE)................... -- 31,722 -- 31,722
INTEREST EXPENSE......................... 74,124 218,658 (167,565)(h) 125,217
-------- ---------- --------- ----------
Income (Loss) Before Income Taxes........ 104,817 (51,171) 385,451 439,097
INCOME TAXES............................. 62,238 (140,348) 145,480(i) 67,370
-------- ---------- --------- ----------
NET INCOME FROM CONTINUING OPERATIONS.... $ 42,579 $ 89,177 $ 239,971 $ 371,727
Preferred stock dividends................ 10,920 -- -- 10,920
-------- ---------- --------- ----------
NET INCOME FROM CONTINUING OPERATIONS
AVAILABLE TO COMMON STOCKHOLDERS....... $ 31,659 $ 89,177 $ 239,971 $ 360,807
-------- ---------- --------- ----------
Earnings per share -- basic.............. $ 0.25 $ 1.51
Earnings per share -- diluted............ $ 0.25 $ 1.50
-------- ----------
AVERAGE SHARES OUTSTANDING............... 125,187 113,459(j) 238,646
AVERAGE SHARES OUTSTANDING -- DILUTED.... 125,906 113,862(k) 239,768
-------- --------- ----------
See accompanying notes to unaudited pro forma condensed combined financial
statements.
73
80
NEW ANADARKO PETROLEUM CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
QUARTER ENDED MARCH 31, 2000
UNION PACIFIC PRO FORMA PRO FORMA
ANADARKO RESOURCES ADJUSTMENTS COMBINED
-------- ------------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
REVENUES
Gas sales................................. $102,143 $243,674 $ -- $345,817
Oil and condensate sales.................. 101,751 188,311 -- 290,062
Natural gas liquids sales................. 41,602 47,852 -- 89,454
Minerals.................................. -- 37,516 -- 37,516
Other..................................... 1,555 4,949 (168)(a) 6,336
-------- -------- --------- --------
Total................................ 247,051 522,302 (168) 769,185
-------- -------- --------- --------
COSTS AND EXPENSES
Operating expenses........................ 42,939 138,205 (25,157)(b) 106,501
(49,486)(c)
Administrative and general................ 30,086 18,803 13,700(c) 52,391
(10,198)(d)
Minerals.................................. -- 540 (540)(c) --
Depreciation, depletion and
amortization............................ 57,308 176,230 (176,230)(e) 237,606
180,298(f)
Other taxes............................... 11,321 -- 36,326(c) 47,647
Amortization of goodwill.................. -- -- 13,132(g) 13,132
-------- -------- --------- --------
Total................................ 141,654 333,778 (18,155) 457,277
-------- -------- --------- --------
Operating Income.......................... 105,397 188,524 17,987 311,908
OTHER INCOME (EXPENSE).................... -- (14,839) -- (14,839)
INTEREST EXPENSE.......................... 21,094 48,925 (37,862)(h) 32,157
-------- -------- --------- --------
Income Before Income Taxes................ 84,303 124,760 55,849 264,912
INCOME TAXES.............................. 42,504 32,049 21,424(i) 95,977
-------- -------- --------- --------
NET INCOME FROM CONTINUING OPERATIONS..... $ 41,799 $ 92,711 $ 34,425 $168,935
Preferred stock dividends................. 2,730 -- -- 2,730
-------- -------- --------- --------
NET INCOME FROM CONTINUING OPERATIONS
AVAILABLE TO COMMON STOCKHOLDERS........ $ 39,069 $ 92,711 $ 34,425 $166,205
-------- -------- --------- --------
Earnings per share -- basic............... $ 0.31 $ 0.69
Earnings per share -- diluted............. $ 0.30 $ 0.68
-------- --------
AVERAGE SHARES OUTSTANDING................ 128,046 113,459(j) 241,505
AVERAGE SHARES OUTSTANDING -- DILUTED..... 131,464 113,862(k) 245,326
-------- --------- --------
See accompanying notes to unaudited pro forma condensed combined financial
statements.
74
81
NEW ANADARKO PETROLEUM CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2000
UNION PACIFIC PRO FORMA PRO FORMA
ANADARKO RESOURCES ADJUSTMENTS COMBINED
---------- ------------- ------------ -----------
(IN THOUSANDS)
ASSETS
Current assets..................... $ 322,726 $ 470,102 $ 40,000(l) $ 832,828
---------- ----------- ------------ -----------
Properties and equipment........... 6,095,154 11,084,333 (11,084,333)(m) 14,416,354
8,321,200(n)
Less accumulated depreciation,
depletion and amortization....... 2,287,451 5,670,830 (5,670,830)(m) 2,287,451
---------- ----------- ------------ -----------
Net properties and equipment....... 3,807,703 5,413,503 2,907,697 12,128,903
---------- ----------- ------------ -----------
Deferred charges................... 89,412 175,887 52,000(o) 317,299
Goodwill........................... -- -- 1,050,593(p) 1,050,593
---------- ----------- ------------ -----------
Total......................... $4,219,841 $ 6,059,492 $ 4,050,290 $14,329,623
========== =========== ============ ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities................ $ 297,165 $ 549,553 $ 134,926(l) $ 1,175,344
193,700(q)
Long-term debt..................... 1,573,217 2,606,073 (203,000)(r) 3,976,290
Deferred income taxes.............. 614,997 1,334,818 1,120,471(s) 3,070,286
Deferred credits................... 147,833 548,537 (283,400)(t) 412,970
Preferred stock.................... 200,000 -- -- 200,000
Stockholders' equity............... 1,386,629 1,020,511 3,087,593(u) 5,494,733
---------- ----------- ------------ -----------
Total......................... $4,219,841 $ 6,059,492 $ 4,050,290 $14,329,623
========== =========== ============ ===========
CAPITALIZATION RATIOS
Long-term debt..................... 50% 72% 41%
Stockholders' equity............... 50% 28% 59%
See accompanying notes to unaudited pro forma condensed combined financial
statements.
75
82
NEW ANADARKO PETROLEUM CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(a) To record the pro forma reversal of historical Union Pacific Resources
gains and losses related to the sale of oil and gas properties to conform
to the full-cost method of accounting for oil and gas activities.
(b) To record the pro forma capitalization of historical Union Pacific
Resources exploration expense to conform to the full-cost method of
accounting for oil and gas activities.
(c) To reclassify certain amounts in Union Pacific Resources historical
financial statements to conform to Anadarko's presentation.
(d) To record the pro forma capitalization of Union Pacific Resources
exploration and development overhead costs to conform to the full-cost
method of accounting for oil and gas activities.
(e) To record the reversal of historical Union Pacific Resources depreciation,
depletion and amortization expense recorded in accordance with the
successful efforts method of accounting for oil and gas activities and the
reversal of historical Union Pacific Resources impairment of oil and gas
properties recorded in accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of."
(f) To record pro forma depreciation, depletion and amortization expense (i) in
accordance with the full-cost method of accounting for oil and gas
activities and (ii) on the estimated fair value of the depreciable and
depletable assets. Full-cost ceiling tests were performed on the combined
basis resulting in no incremental impairment of oil and gas properties for
the periods presented.
(g) To record the pro forma amortization of goodwill, which will be amortized
over a period of 20 years.
(h) To record pro forma capitalization of interest on significant investments
in unevaluated properties and major development projects and to adjust
Union Pacific Resources historical interest expense to reflect the
estimated fair value of historical debt pursuant to the purchase method of
accounting, including the reversal of amortization of historical debt
issuance costs.
(i) To record income tax expense on the pro forma adjustments based on the
applicable statutory tax rates.
(j) To reflect the issuance of Anadarko common stock pursuant to the merger
agreement.
(k) To reflect the issuance of Anadarko common stock pursuant to the merger
agreement and common stock equivalents related to stock options issued in
accordance with the merger agreement.
(l) To record the estimated fair value of derivatives and other current
liabilities in accordance with the purchase method of accounting.
(m) To reverse historical Union Pacific Resources property and equipment
balances and the related accumulated depreciation, depletion and
amortization.
(n) To record the estimated pro forma allocation of the purchase price of the
acquisition of Union Pacific Resources, including estimated merger costs,
to properties and equipment in accordance with
76
83
NEW ANADARKO PETROLEUM CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(CONTINUED)
the purchase method of accounting. The following is a calculation and
allocation of the purchase price to the assets acquired and liabilities assumed
based on their relative fair values.
CALCULATION OF PURCHASE PRICE (IN THOUSANDS EXCEPT SHARES)
Estimated number of shares of common stock to be issued..... 113,459,310
Average of Anadarko common stock price five days before and
after the merger announcement............................. $ 35.58
------------
Fair value of estimated common stock to be issued........... $ 4,036,667
Add: Fair value of vested Union Pacific Resources employee
stock options to be assumed by Anadarko................... 71,437
------------
4,108,104
Add: Estimated merger related costs (See note (q)).......... 134,926
------------
Purchase Price.............................................. $ 4,243,030
============
ALLOCATION OF PURCHASE PRICE (IN THOUSANDS)
Current assets.............................................. $ 510,102
Properties and equipment.................................... 8,321,200
Deferred charges............................................ 227,887
Goodwill.................................................... 1,050,593
Current liabilities......................................... 878,179
Long-term debt.............................................. 2,403,073
Deferred income taxes....................................... 2,455,289
Deferred credits............................................ 265,137
------------
Stockholders' equity........................................ $ 4,108,104
============
The purchase price allocation is subject to changes in:
- the number of actual shares issued;
- the fair value of Union Pacific Resources working capital and other
assets and liabilities on the effective date; and
- the actual merger costs incurred.
These items will not be known until the effective date of the merger.
Management does not believe the final purchase price allocation will differ
materially from the estimated purchase price allocation.
(o) To record the reversal of the capitalized debt issuance costs related to
Union Pacific Resources historical long-term debt and record deferred
charges at fair value pursuant to the purchase method of accounting.
(p) To record goodwill associated with the acquisition of Union Pacific
Resources pursuant to the purchase method of accounting. Goodwill will be
amortized over a period of 20 years.
(q) To record the liabilities associated with estimated merger related costs,
consisting primarily of bankers' and other professional fees, as well as
costs associated with relocation and severance of Union Pacific Resources
employees and closing the Union Pacific Resources office in Fort Worth,
Texas.
(r) To adjust historical Union Pacific Resources long-term debt to the
estimated fair value using the purchase method of accounting.
77
84
NEW ANADARKO PETROLEUM CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(CONTINUED)
(s) To record the pro forma deferred income tax effect of the fair value
adjustments related to the merger in accordance with the purchase method of
accounting.
(t) To adjust the historical Union Pacific Resources deferred credits to
estimated fair value in accordance with the purchase method of accounting.
(u) To record the pro forma adjustments to stockholders' equity in accordance
with the purchase method of accounting. The adjustment amount is calculated
as follows (in thousands):
Fair value of estimated common stock to be issued, as
calculated in note (n) above.............................. $4,036,667
Add: Fair value of vested Union Pacific Resources employee
stock options to be assumed by Anadarko................... 71,437
----------
4,108,104
Less: Union Pacific Resources historical stockholders'
equity.................................................... 1,020,511
----------
Adjustment to stockholders' equity.......................... $3,087,593
==========
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85
COMPARISON OF STOCKHOLDER RIGHTS
As a result of the merger, Union Pacific Resources stockholders will
receive Anadarko common shares in exchange for their Union Pacific Resources
common shares. The following is a summary of some material differences between
the rights of Union Pacific Resources stockholders and the rights of Anadarko
stockholders. These differences arise in part from the differences between Utah
and Delaware law. Additional differences arise from the charter and bylaws of
the two companies. Although it is impractical to compare all of the ways in
which Utah and Delaware law, and Union Pacific Resources' and Anadarko's
governing instruments, differ with respect to stockholders' rights, the
following discussion summarizes some significant differences.
AMENDMENT OF CHARTER DOCUMENTS
UNION PACIFIC RESOURCES STOCKHOLDER RIGHTS ANADARKO STOCKHOLDER RIGHTS
------------------------------------------ ---------------------------
The Union Pacific Resources' amended and Anadarko's restated certificate of
restated articles of incorporation may be incorporation may generally be amended if the
amended by the Union Pacific Resources board change is proposed by the Anadarko board of
of directors without stockholder action to, directors and approved by the holders of a
among other things, create one or more series majority of outstanding voting stock.
of preferred stock, fix the number of shares However, the vote of at least 80% of the
of each such series, and designate and votes entitled to be cast by the holders of
determine, in whole or in part, the all outstanding shares of voting stock is
preferences, limitations, and relative rights required to amend any charter provision
of each series of preferred stock, all before relating to:
the issuance of shares of such series.
- the number of directors constituting the
The Union Pacific Resources' amended and Anadarko board of directors,
restated articles of incorporation also may
be amended if the change is proposed and - the classification of the Anadarko board of
recommended by the Union Pacific Resources directors,
board of directors and approved by:
- the removal of directors,
- - - - - - - - - - - - - a majority of stockholder votes entitled to
be cast on the amendment by any voting - the procedures for filling vacancies on the
group with respect to which the amendment Anadarko board of directors,
would create dissenters' rights,
- the liability of directors for monetary
- - - - - - - - - - - - - a majority of stockholder votes entitled to damages for breach of fiduciary duty,
be cast on the amendment by any voting
group with respect to which the amendment - a business combination with any interested
would materially and adversely affect stockholder (as that term is defined in
certain rights in respect of the shares of Anadarko's restated certificate of
the voting group, or incorporation),
- - - - - - - - - - - - - in every other case, stockholder votes cast - the cumulative voting for election of
within the voting group favoring the action directors upon a 30% stockholder becoming a
exceeding the votes cast within the voting 30% stockholder, and
group opposing the action at a meeting at
which a quorum is present. - the prohibitions on stockholder action by
written consent.
However, the vote of the holders of at least
80% of the voting stock entitled to vote
generally at an election of directors is
required to amend any charter provision
relating to:
- - - - - - - - - - - - - the limitation of liability of directors,
- - - - - - - - - - - - - the procedures for filling vacancies on the
Union Pacific Resources board of directors,
- - - - - - - - - - - - - the removal of directors, and
- - - - - - - - - - - - - the prohibitions on stockholder action by
written consent.
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86
AMENDMENT OF BYLAWS
UNION PACIFIC RESOURCES STOCKHOLDER RIGHTS ANADARKO STOCKHOLDER RIGHTS
------------------------------------------ ---------------------------
The Union Pacific Resources bylaws may The Anadarko bylaws may be amended at any
generally be amended by a majority of regular or special meeting of the Anadarko
directors present at a meeting at which a board of directors by the vote of a majority
quorum is present, or by the holders of a of the directors in office, or at any regular
majority of the voting stock cast at a or special meeting of Anadarko stockholders
meeting at which a quorum is present. by the holders of a majority of the voting
However, the vote of the holders of at least stock entitled to vote at the meeting.
80% of the voting stock entitled to vote
generally at an election of directors is
required to amend any bylaws relating to:
- - - - - - - - - - - - - indemnification of directors, officer and
employees,
- - - - - - - - - - - - - calling a special meeting of stockholders,
- - - - - - - - - - - - - the nature of business conducted at an
annual or special meeting of stockholders,
- - - - - - - - - - - - - stockholder action by written consent,
- - - - - - - - - - - - - nominations of directors,
- - - - - - - - - - - - - number and tenure of directors,
- - - - - - - - - - - - - removal of directors,
- - - - - - - - - - - - - procedures for filling vacancies on the
Union Pacific Resources board of directors,
and
- - - - - - - - - - - - - procedures for amending any of the
foregoing bylaw provisions
REMOVAL OF DIRECTORS
UNION PACIFIC RESOURCES STOCKHOLDER RIGHTS ANADARKO STOCKHOLDER RIGHTS
------------------------------------------ ---------------------------
Any Union Pacific Resources director, or the Any Anadarko director, or the entire Anadarko
entire Union Pacific Resources board of board of directors, may be removed from
directors, may be removed from office at any office at any time, but only for cause, by
time, but only for cause, by the vote of the vote of the holders of a majority of the
holders of at least 80% of the voting stock voting stock entitled to vote at an election
entitled to vote at an election of directors of directors.
at a meeting of Union Pacific Resources
stockholders.
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87
VACANCIES ON THE BOARD
UNION PACIFIC RESOURCES STOCKHOLDER RIGHTS ANADARKO STOCKHOLDER RIGHTS
------------------------------------------ ---------------------------
Newly created Union Pacific Resources Any vacancy on the Anadarko board of
directorships resulting from any increase in directors that results from an increase in
the authorized number of directors and any the number of directors may be filled by a
vacancies on the Union Pacific Resources majority of the directors then in office,
board of directors are filled by a majority provided that a quorum is present. Any other
of the directors in office, even if less than vacancy may be filled by a majority of the
a quorum, or by a sole remaining director. directors then in office, even if less than a
Union Pacific Resources stockholders may also quorum, or by a sole remaining director. Any
fill a vacancy at an annual meeting. director elected to fill a vacancy not
resulting from an increase in the number of
directors will have the same remaining term
as that of his or her predecessor.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
UNION PACIFIC RESOURCES STOCKHOLDER RIGHTS ANADARKO STOCKHOLDER RIGHTS
------------------------------------------ ---------------------------
Utah law provides that a corporation may Delaware law provides that a corporation may
indemnify a director or officer against any indemnify a director or officer against
liability incurred in a proceeding if the liability (other than in an action by or in
individual's conduct was in good faith, the the right of the corporation) and other
individual reasonably believed that the costs incurred by such individual, provided
conduct was in, or not opposed to, the the individual acted in good faith and in a
corporation's best interests, and the manner the individual reasonably believed to
individual, in the case of any criminal be in, or at least not opposed to, the best
proceeding, had no reasonable cause to interests of the corporation and, with
believe the conduct was unlawful. A respect to any criminal proceeding, had no
corporation may not indemnify a director or reason to believe the conduct was unlawful.
officer in connection with a proceeding by For actions or suits brought by or in the
or in the right of the corporation in which name of the corporation, a corporation may
the individual was adjudged liable to the indemnify a director or officer against
corporation, or in connection with any other expenses incurred if the individual acted in
proceeding in which the individual was good faith and in a manner the individual
adjudged liable on the basis that the reasonably believed to be in, or at least
individual derived an improper personal not opposed to, the best interests of the
benefit, unless a court determines it is corporation, except that if the individual
appropriate to indemnify for expenses. is adjudged to be liable to the corporation,
Unless limited by its articles of the individual can be indemnified if and
incorporation, a corporation must indemnify only to the extent that a court determines
a director or officer who was successful, on that despite the adjudication of liability,
the merits or otherwise, in the defense of the individual is fairly and reasonably
any proceeding to which the individual was a entitled to indemnity.
party in the capacity of director or
officer, against reasonable expenses
incurred.
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88
LIMITATION ON LIABILITY OF DIRECTORS
UNION PACIFIC RESOURCES STOCKHOLDER RIGHTS ANADARKO STOCKHOLDER RIGHTS
------------------------------------------ ---------------------------
Utah law provides that if so provided in a Delaware law provides that a corporation may
corporation's articles of incorporation, include in its certificate of incorporation a
bylaws or board resolution, a corporation may provision eliminating or limiting the
eliminate or limit the liability of a personal liability of a director to the
director to a corporation or its shareholders corporation or its stockholders for monetary
for monetary damages for any action taken or damages for breach of fiduciary duty as a
any failure to take any action as a director, director. However, the provision may not
except for: eliminate or limit the liability of a
director for:
- - - - - - - - - - - - - the amount of financial benefit received by
a director to which the director is not - breach of the duty of loyalty,
entitled,
- acts or omissions not in good faith or that
- - - - - - - - - - - - - an intentional infliction of harm on the involve intentional misconduct or a knowing
corporation or its shareholders, violation of law.
- - - - - - - - - - - - - voting for or assenting to an unlawful - unlawful payments of dividends, certain
distribution of assets, or stock repurchases or redemptions, or
- - - - - - - - - - - - - an intentional violation of criminal law. - any transaction from which the director
derived an improper personal benefit.
The Union Pacific Resources' amended and
restated articles of incorporation Anadarko's restated certificate of
indemnifies Union Pacific Resources directors incorporation contains a provision
to the fullest extent permitted by Utah law eliminating the personal liability of an
for monetary damages for any action taken or Anadarko director to Anadarko and its
any failure to take any action as a director. stockholders for monetary damages for breach
of fiduciary duty as a director, except as
restricted by Delaware law.
RIGHT TO CALL SPECIAL MEETINGS OF STOCKHOLDERS
UNION PACIFIC RESOURCES STOCKHOLDER RIGHTS ANADARKO STOCKHOLDER RIGHTS
------------------------------------------ ---------------------------
Special meetings of Union Pacific Resources Special meetings of Anadarko stockholders may
stockholders may be called by: be called by the Anadarko board of directors.
- - - - - - - - - - - - - the Union Pacific Resources board of
directors,
- - - - - - - - - - - - - the chairman of the board of directors,
- - - - - - - - - - - - - any person authorized by resolution adopted
by a majority of the entire Union Pacific
Resources board of directors, or
- - - - - - - - - - - - - the holders of shares representing at least
10% of all votes entitled to be cast on any
issue proposed to be considered at the
special meeting.
STOCKHOLDER ACTION WITHOUT A MEETING
UNION PACIFIC RESOURCES STOCKHOLDER RIGHTS ANADARKO STOCKHOLDER RIGHTS
------------------------------------------ ---------------------------
Union Pacific Resources stockholders may not Anadarko stockholders do not have the power
consent in writing without a meeting to the to consent in writing without a meeting to
taking of any action, unless all Union the taking of any action.
Pacific Resources stockholders entitled to
vote consent in writing.
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CLASS VOTING
UNION PACIFIC RESOURCES STOCKHOLDER RIGHTS ANADARKO STOCKHOLDER RIGHTS
------------------------------------------ ---------------------------
Utah law provides that holders of the Delaware law requires voting by separate
outstanding shares of a class are entitled classes only with respect to certificate of
to vote as a separate voting group if the incorporation amendments that adversely
rights of that class are affected in certain affect the holders of those classes or that
respects by certain plans of merger, plans increase or decrease the aggregate number of
of share exchange or articles of authorized shares or the par value of the
incorporation amendments. shares of any of those classes.
CUMULATIVE VOTING
UNION PACIFIC RESOURCES STOCKHOLDER RIGHTS ANADARKO STOCKHOLDER RIGHTS
------------------------------------------ ---------------------------
Neither Utah law nor the Union Pacific Resources' In any election of Anadarko directors on or after the
amended and restated articles of incorporation date on which any Anadarko stockholder becomes a 30%
provides Union Pacific Resources stockholders with Anadarko stockholder, and until such time as no 30%
the right to cumulate their votes for the election of Anadarko stockholder exists, there will be cumulative
directors. voting for election of directors.
Under cumulative voting for the election of
directors, a holder of voting stock has the number of
votes equal to the number of directors to be elected
multiplied by the number of votes the holder would
have had absent cumulative voting, and may cast all
votes for a single director candidate or distribute
votes among any number of director candidates.
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PROVISIONS AFFECTING CONTROL SHARE ACQUISITIONS AND BUSINESS COMBINATIONS
UNION PACIFIC RESOURCES STOCKHOLDER RIGHTS ANADARKO STOCKHOLDER RIGHTS
------------------------------------------ ---------------------------
Utah law generally provides that when a person Delaware law generally provides that any person that
acquires shares of an "issuing public corporation" acquires 15% or more of a corporation's voting stock
within a 90-day period or pursuant to a plan, that may not engage in a wide range of business
when added to the person's other shares would entitle combinations with the corporation for a period of
the person to exercise voting power of at least 20%, three years, unless:
33 1/3% or 50% of all voting power, a stockholders'
meeting must be held within 50 days of the acquiring - the board of directors of the corporation has
person's request for a special meeting to vote on approved, prior to the acquisition date, either the
whether this person may exercise voting rights with business combination or the transaction that
respect to the acquired shares. If no request for a resulted in the person becoming an interested
special meeting is made by the acquiring person, the stockholder,
vote will be held at the next special or annual
meeting of stockholders. For this person to have - upon consummation of the transaction that resulted
voting rights with respect to the acquired shares, in the person becoming an interested stockholder,
the acquisition must be approved: the person owns at least 85% of the corporation's
voting stock (excluding shares owned by directors
- - - - - - - - - - - - - with respect to each voting group entitled to vote who are officers and shares owned by employee stock
separately, by a majority of all the votes entitled plans in which participants do not have the right
to be cast by that group, excluding all interested to determine confidentially whether shares will be
shares, and tendered in a tender or exchange offer), or
- - - - - - - - - - - - - if the proposed control share acquisition would - the business combination is approved by the board
have certain adverse affects on a class of shares, of directors and authorized by the vote of at least
by a majority of all the holders of the outstanding two-thirds of the outstanding voting stock not
shares of the class. owned by the interested stockholder.
An "issuing public corporation" is a Utah corporation These restrictions on interested stockholders do not
that has (a) 100 or more stockholders, (b) its apply under some circumstances, including if the
principal place of business, its principal officer or corporation, by action of its stockholders, adopts an
substantial assets within Utah, and (c) (1) more than amendment to its certificate of incorporation or
10% of its stockholders as residents of Utah, (2) bylaws expressly electing not to be governed by these
more than 10% of its shares owned by Utah residents, provisions of Delaware law. The amendment will be
or (3) 10,000 stockholders resident in Utah. effective twelve months thereafter.
Neither Anadarko's restated certificate of
incorporation nor Anadarko's bylaws contain a
provision electing not to be governed by these
provisions of Delaware law. Rather, Anadarko's
restated certificate of incorporation provides that,
with some exceptions, a business combination with a
person that is the beneficial owner of voting stock
representing 5% or more of the votes entitled to be
cast by the holders of all outstanding voting stock
requires the affirmative vote of at least 80% of the
votes entitled to be cast by the holders of all
outstanding voting stock.
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MERGERS, ACQUISITIONS, SHARE PURCHASES AND CERTAIN OTHER TRANSACTIONS
UNION PACIFIC RESOURCES STOCKHOLDER RIGHTS ANADARKO STOCKHOLDER RIGHTS
------------------------------------------ ---------------------------
Utah law requires approval of mergers and share Delaware law requires approval of mergers or
exchanges by a majority of the voting stock entitled consolidations by a majority of the outstanding
to be cast on the plan by each voting group entitled voting stock, unless the corporation's certificate of
to vote separately, unless the corporation's articles incorporation specifies a different percentage.
of incorporation, bylaws or board resolution Anadarko's restated certificate of incorporation does
specifies a higher percentage. Union Pacific not provide for a different percentage.
Resources has not approved a higher percentage.
RIGHTS OF DISSENTING STOCKHOLDERS
UNION PACIFIC RESOURCES STOCKHOLDER RIGHTS ANADARKO STOCKHOLDER RIGHTS
------------------------------------------ ---------------------------
Utah law provides that a stockholder, whether or not Delaware law provides that appraisal rights are
entitled to vote, is entitled to dissent from, and available to dissenting stockholders in connection
obtain payment of the fair value of shares held by with certain mergers or consolidations. However,
such stockholder in connection with some mergers, unless a corporation's certificate of incorporation
share exchanges or the sale of all, or substantially otherwise provides, Delaware law does not provide for
all, of the assets of the corporation. However, appraisal rights if:
unless a corporation's articles of incorporation,
bylaws or board resolution otherwise provides, a - the shares of the corporation are listed on a
stockholder is not entitled to dissent and obtain national securities exchange or designated as a
payment of the fair value of shares that were either: national market systems security on an interdealer
quotations system by the National Association of
- - - - - - - - - - - - - listed on a national securities exchange or Securities Dealers, Inc.,
designated as a national market systems security on
an interdealer quotations system by the National - the shares of the corporation are held of record by
Association of Securities Dealers, Inc., or more than 2,000 stockholders, or
- - - - - - - - - - - - - held of record by more than 2,000 stockholders. - the corporation is the surviving corporation and
the merger did not require for its approval the
Union Pacific Resources has not provided otherwise. vote of the stockholders of the surviving
Utah law does not provide appraisal rights to corporation.
stockholders who dissent from an amendment to a
corporation's articles of incorporation. Anadarko's restated certificate of incorporation does
not provide otherwise. Delaware law does not provide
appraisal rights to stockholders who dissent from the
sale of all or substantially all of a corporation's
assets or an amendment to a corporation's certificate
of incorporation, although a corporation's
certificate of incorporation may so provide.
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DIVIDENDS
UNION PACIFIC RESOURCES STOCKHOLDER RIGHTS ANADARKO STOCKHOLDER RIGHTS
------------------------------------------ ---------------------------
The Union Pacific Resources' amended and restated Delaware law provides that directors of a
articles of incorporation provides that dividends may corporation, subject to its certificate of
be paid on outstanding Union Pacific Resources common incorporation, may declare and pay dividends either
shares if declared by the Union Pacific Resources out of surplus or, in case there is no surplus, out
board of directors out of funds legally available for of net profits for the fiscal year in which the
such dividends. dividend is declared and/or the preceding year. If
the capital of the corporation diminished by
Utah law provides that a corporation may not make a depreciation in the value of its property, or by
dividend, or other distribution, to its stockholders losses, or otherwise, to an amount less than the
if, after giving effect to the dividend, or other aggregate amount of the capital represented by the
distribution, (a) the corporation would not be able issued and outstanding stock of all classes having a
to pay its debts as they become due in the usual preference upon the distribution of assets, the
course of business, or (b) the corporation's total directors may not declare and pay out of net profits
assets would be less than the sum of its total any dividends until the deficiency has been repaired.
liabilities.
PREEMPTIVE RIGHTS OF STOCKHOLDERS
UNION PACIFIC RESOURCES STOCKHOLDER RIGHTS ANADARKO STOCKHOLDER RIGHTS
------------------------------------------ ---------------------------
Utah law provides that no stockholder will have any Delaware law provides that no stockholder will have
preemptive rights to purchase additional securities any preemptive rights to purchase additional
of a corporation unless the corporation's articles of securities of a corporation unless the corporation's
incorporation expressly grants such rights. The Union certificate of incorporation expressly grants such
Pacific Resources' amended and restated articles of rights. Anadarko's restated certificate of
incorporation does not provide for preemptive rights. incorporation does not provide for preemptive rights.
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PROPOSED AMENDMENTS TO ANADARKO'S RESTATED
CERTIFICATE OF INCORPORATION
MAXIMUM BOARD SIZE PROPOSAL
The Anadarko board of directors has unanimously approved an amendment to
Article Seventh of Anadarko's restated certificate of incorporation to increase
the maximum size of the Anadarko board of directors from nine to 15 directors,
and recommends that Anadarko stockholders approve and adopt the amendment. The
full text of Article Seventh reflecting this proposed amendment is attached as
Annex F to this document.
If this amendment is approved, 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 independent directors who
are currently directors of Union Pacific Resources, as may be mutually agreed by
the chief executive officers of Anadarko and Union Pacific Resources. If this
amendment is not approved, 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 independent directors who are
currently directors of Union Pacific Resources, as may be mutually agreed by the
chief executive officers of Anadarko and Union Pacific Resources. The former
Union Pacific Resources directors who are elected as Anadarko directors will be
appointed among the three classes of directors on the Anadarko board of
directors, with at least one director in each class.
The Anadarko board of directors believes that it is desirable to increase
the maximum size of the Anadarko board of directors to allow the addition of
five Union Pacific Resources directors. These directors possess expertise and
knowledge of Union Pacific Resources that may assist the combined entity in
integrating the operations of the two companies and in taking advantage of their
complementary skills. In addition, under the merger agreement, if the amendment
is not approved, two of the current Anadarko directors would have to resign to
make room for the new Union Pacific Resources directors. With these
resignations, Anadarko would lose experienced and knowledgeable directors who
have helped the company grow and enhance its value to Anadarko stockholders.
Under Anadarko's restated certificate of incorporation, the affirmative
vote of the holders of not less than 80% of the outstanding Anadarko common
shares is required for the approval of this amendment. FOR THE REASONS STATED
ABOVE, THE ANADARKO BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT ANADARKO
STOCKHOLDERS VOTE FOR THE AMENDMENT. Approval of the amendment is not a
condition to the completion of the merger.
AUTHORIZED COMMON SHARES PROPOSAL
The Anadarko board of directors has unanimously approved an amendment to
Article Fourth of Anadarko's restated certificate of incorporation to increase
the authorized number of Anadarko common shares from 300,000,000 to 450,000,000,
and recommends that Anadarko stockholders approve and adopt the amendment. The
full text of Article Fourth reflecting this proposed amendment is attached as
Annex G to this document.
The additional Anadarko common shares for which authorization is sought
would have the same rights and privileges as the Anadarko common shares
presently outstanding. Holders of Anadarko common shares have no preemptive
rights to subscribe for any additional Anadarko common shares.
As of March 31, 2000, 300,000,000 Anadarko common shares were authorized,
of which 130,075,884 Anadarko common shares were issued and outstanding, no
Anadarko common shares were issued and held in treasury, 26,106,400 Anadarko
common shares were reserved for issuance under Anadarko's dividend reinvestment
and stock purchase plans upon the exercise or conversion of stock options,
warrants or convertible securities granted and issuable by Anadarko, and
25,885,726 Anadarko common shares were reserved for future issuance under the
Anadarko stock option agreement. Although Anadarko has no present plan,
agreement or commitment for the issuance of additional Anadarko common shares,
other
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than in connection with the merger, the existing dividend reinvestment and stock
purchase plan, existing employee stock and benefit plans and the amendment to
Anadarko's 1999 stock incentive plan, the Anadarko board of directors believes
that the number of Anadarko common shares currently available for issuance will
be insufficient to meet the future needs of Anadarko.
The Anadarko board of directors believes that it is desirable to have
additional authorized but unissued Anadarko common shares available for possible
future stock dividends or splits, employee benefit programs, financing and
acquisition transactions and other general corporate purposes. Like the
presently authorized but unissued Anadarko common shares, the additional
Anadarko common shares would be available for issuance without further action by
Anadarko stockholders, unless further action is required by applicable law, the
rules of the New York Stock Exchange or any other stock exchange on which
Anadarko common shares may be listed in the future. The authorization of
additional Anadarko common shares will enable Anadarko, as the need may arise,
to take advantage of market conditions and favorable opportunities without the
delay and expense associated with the holding of a special meeting of Anadarko
stockholders.
In addition, the additional authorized and unissued Anadarko common shares
could be issued for the purpose of discouraging an attempt by another individual
or entity, through the acquisition of a substantial number of Anadarko common
shares, to acquire control of Anadarko because the issuance of Anadarko common
shares could be used to dilute the ownership or voting rights of such an
individual or entity. Further, any of the authorized but unissued Anadarko
common shares could be privately placed with purchasers who might support
incumbent management, making a change in control of Anadarko more difficult to
effect.
Under Delaware law, the affirmative vote of the holders of a majority of
the outstanding Anadarko common shares is required for the approval of this
amendment. FOR THE REASONS STATED ABOVE, THE ANADARKO BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT ANADARKO STOCKHOLDERS VOTE FOR THE AMENDMENT.
Approval of the amendment is not a condition to the completion of the merger.
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PROPOSED AMENDMENT TO ANADARKO'S 1999 STOCK INCENTIVE PLAN
The Anadarko board of directors has unanimously approved an amendment to
Anadarko's 1999 stock incentive plan, subject to stockholder approval at this
meeting, and recommends that Anadarko stockholders approve and adopt the
amendment. The full text of the original plan is attached as Annex H to this
document, and the full text of the amendment is attached as Annex I to this
document.
Anadarko's 1999 stock incentive plan was approved by Anadarko stockholders
on April 29, 1999. The plan currently authorizes for issuance 4,000,000 Anadarko
common shares to Anadarko employees in the form of stock options, stock
appreciation rights, restricted stock, performance awards and specified stock
compensation. Anadarko considers the plan an essential element of total
compensation, and believes the plan promotes the interests of Anadarko and its
stockholders by attracting and retaining employees, motivating employees by
means of performance-related incentives and enabling employees to participate in
Anadarko's long-term growth and financial success.
Following stockholder approval of the merger transaction, Anadarko's 1999
stock incentive plan will be the plan for purposes of making any future
stock-based awards to employees of the combined entity. Outstanding options
under Union Pacific Resources plans will be exchanged for Anadarko options based
on the exchange ratio, and any shares authorized for issuance under any Union
Pacific Resources plans that have not been granted will no longer be available
for grant.
The proposed amendment would increase the number of Anadarko common shares
that may be granted under Anadarko's 1999 stock incentive plan by 10,000,000.
This increase would be used to offer equity compensation to the expanded number
of eligible employees of the combined company. The other proposed changes to the
plan are described under "-- Amendment to 1999 Stock Incentive Plan."
SUMMARY OF ANADARKO'S 1999 STOCK INCENTIVE PLAN
The following summary of Anadarko's original 1999 stock incentive plan is
qualified by reference to the complete text of the original plan, which is
attached as Annex H to this document.
Purpose. The purpose of Anadarko's 1999 stock incentive plan is to promote
the interests of Anadarko and its stockholders by
- attracting and retaining employees;
- motivating employees by means of performance-related incentives to
achieve longer-range performance goals; and
- enabling employees to participate in the long-term growth and financial
success of Anadarko.
Eligibility. At the discretion of Anadarko's compensation and benefits
committee of the board of directors, any employee of Anadarko or its affiliates
may be granted an award under Anadarko's 1999 stock incentive plan.
Administration. Anadarko's compensation and benefits committee administers
Anadarko's 1999 stock incentive plan. The committee
- selects the employees who will receive awards;
- determines the type and terms of awards to be granted, including
-- the amount of each award,
-- the times at which each award may be exercisable or vested, and
-- the performance goals, if any, that may apply with respect to each
award; and
- may take any other action the committee deems necessary or desirable for
the administration of the plan.
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The committee cannot reprice options.
Plan Amendment and Termination. Anadarko's compensation and benefits
committee may terminate or amend Anadarko's 1999 stock incentive plan at any
time. However, the committee cannot, without stockholder approval,
- increase the number of shares authorized under the plan;
- 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;
- permit a change in the class of employees eligible to receive awards; or
- materially increase the benefits under the plan.
Shares Available under Anadarko's Original 1999 Stock Incentive Plan. A
total of 4,000,000 Anadarko common shares are authorized for issuance under
Anadarko's original 1999 stock incentive 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 Internal Revenue Code, the following additional limitations are imposed
under the original plan:
- 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;
- no more than an aggregate of 500,000 shares may be granted as restricted
stock to any one individual over a performance period; and
- the maximum aggregate shares that may be granted as a performance award
to any one individual over a performance period is 300,000 shares.
The share limitations may be adjusted as a result of action by Anadarko's board
that affects Anadarko's common shares, 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 Anadarko's
1999 stock incentive 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. Anadarko's compensation and benefits committee
determines the form in which payment of the exercise price may be made.
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.
Performance Awards. Anadarko's compensation and benefits committee may
grant performance awards which consist of a right to receive common shares
based upon the achievement of certain performance goals. The performance
goals are based on one or more of the following criteria as determined by
the committee: (i) Anadarko'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.
Stock Compensation. Anadarko's compensation and benefits committee has
the authority to pay all or a portion of any amounts payable under any
Anadarko compensation program in shares of common stock. The committee
determines the number and type of shares distributed in lieu of cash
compensation, as well as the terms and conditions of any stock
compensation.
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Performance Criteria. The vesting of restricted stock and performance
awards may be subject to the attainment of performance goals established by
Anadarko's compensation and benefits committee based on one or more of the
following criteria: (i) Anadarko'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.
Anadarko's board may also take any one or more of the following actions:
- provide for the purchase of any outstanding awards by Anadarko;
- make adjustments to any outstanding awards; or
- allow for the substitution of awards relating to an acquiring company's
stock for any outstanding awards.
AMENDMENT TO 1999 STOCK INCENTIVE PLAN
The following summary of the amendment to Anadarko's 1999 stock incentive
plan is qualified by reference to the complete text of the amendment, which is
attached as Annex I to this document.
Shares Available under Anadarko's Amended 1999 Stock Incentive Plan. Upon
completion of the merger, the number of employees eligible to participate in
Anadarko's 1999 stock incentive plan will significantly increase from
approximately 1,500 current Anadarko employees to a combined workforce of
approximately 3,500 employees. As a result, the number of shares currently
available under the plan (which was designed without the merger in mind) will
not adequately enable Anadarko to continue providing competitive levels of
equity compensation to its employees. Anadarko's directors have therefore
approved, subject to stockholder approval at this meeting, an amendment to the
plan that would add 10,000,000 additional shares to the shares otherwise
available for issuance for grants under the plan. The additional shares, when
added to the number of shares currently available for grant under all of
Anadarko's current stock plans (including employee and director plans), would
increase the shares available for grant to approximately 13,810,000 shares.
Dilution. As of April 30, 2000, the combined number of options granted but
unexercised under all Anadarko and Union Pacific Resources stock programs
following the merger was approximately 13,926,000 (after the conversion of Union
Pacific Resources options to equivalent Anadarko common shares based on the
exchange ratio). Based on Anadarko's estimated 244,717,000 average shares
outstanding following the merger, the calculated dilution effect of the
additional shares equates to approximately the same dilution level that existed
at the time Anadarko's 1999 stock incentive plan was originally approved by
stockholders.
Limitations of Awards. In connection with the proposed increase in shares
available for grant under Anadarko's 1999 stock incentive plan from 4,000,000 to
14,000,000, Anadarko also proposes to increase the maximum aggregate number of
shares that may be granted as restricted stock from 800,000 shares to 2,800,000
shares. This proposal limits the aggregate number of restricted shares to no
more than 20% of the total plan shares available for grant and is the same
percentage as was approved by Anadarko stockholders in 1999.
To the extent awards under Anadarko's 1999 stock incentive plan are
intended to qualify as performance-based compensation under Section 162(m) of
the Internal Revenue Code, Anadarko proposes to increase the following
limitations under the plan:
- increase 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 from 1,500,000 shares to 2,500,000 shares; and
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- increase the maximum aggregate number of shares that may be granted as
performance awards to any one individual over a performance period from
300,000 shares to 500,000 shares.
Vesting of Restricted Shares. Anadarko's 1999 stock incentive plan
currently provides that non-performance based restricted stock awards will not
be 100% vested prior to three years from the date of grant. However, in
specified circumstances, employment may be terminated due to no fault of the
employee. Therefore, Anadarko proposes that the 1999 stock incentive plan be
amended to provide that non-performance based restricted stock awards will not
be 100% vested prior to three years from the date of grant, except for
restricted stock awards that may be vested as a result of (i) disability, (ii)
death, (iii) termination of employment due to a reduction in work force, due to
job abolishment or at Anadarko's convenience, or (iv) with consent of Anadarko's
compensation and benefits committee, retirement.
FEDERAL INCOME TAX CONSEQUENCES
At the discretion of Anadarko's compensation and benefits committee, an
option granted under Anadarko's 1999 stock incentive plan may take the form of
either an "incentive stock option," which is intended to qualify for favorable
tax treatment under the Internal Revenue Code, or a "nonqualified stock option,"
which is not intended to qualify for this tax treatment. An employee generally
will not recognize taxable income upon grant or exercise of an incentive stock
option. Anadarko will not be entitled to any business expense deduction on the
grant or exercise of an incentive stock option. If the employee 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 employee, 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 employee does not
satisfy these holding period requirements, the employee will recognize ordinary
income at the time of the disposition of the shares at a price at or above the
fair market value of the shares at the time the options was exercised. If the
employee sells the shares prior to the satisfaction of the holding periods 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. Anadarko will
be allowed a business expense deduction to the extent the employee recognizes
ordinary income.
An employee will not recognize any income at the time of grant of a
nonqualified stock option. Upon exercise of a nonqualified stock option, the
employee will recognize ordinary income in an amount equal to the amount by
which the fair market value of the shares on the date of exercise exceeds the
exercise price of the option. Anadarko will be entitled to a business expense
deduction in the same amount and at the same time as the employee recognizes
ordinary income.
When stock appreciation rights are exercised or when performance awards are
settled or paid, the amount of cash and the fair market value of property
received by the employee (including shares) will be compensation income, unless
the property is subject to transfer restrictions or forfeiture.
Anadarko believes that its 1999 stock incentive plan meets the
performance-based exemption under Section 162(m) of the Internal Revenue Code,
and that it can deduct for federal income tax purposes an amount equal to the
amount of compensation income received by the employee.
In the absence of an election by the employee under Section 83(b) of the
Internal Revenue Code, the grant of restricted stock will not result in taxable
income to the employee or a deduction to Anadarko in the year of grant. The
employee will be treated as receiving compensation income in the year the
restrictions lapse. The amount of compensation income the employee receives will
be equal to the fair market value of the shares of common stock on the date the
restrictions lapse. The shares acquired will have a cost basis equal to the fair
market value on the date the restrictions lapse. When the employee disposes of
the shares acquired, any amount received in excess of the share's cost basis
will be treated as long or short-term capital gain, depending upon the holding
period of the shares. If the amount the employee receives is less than the cost
basis of the shares, the loss will be treated as long- or short-term capital
loss, depending upon the holding period of the shares.
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Dividends paid on the restricted shares prior to the lapse of restrictions
will be taxable as additional compensation income to the employee in the year
received.
Anadarko will be entitled to a federal tax deduction in an amount equal to
the compensation income attributable to the employee, subject to certain
limitations, in the year the employee recognizes the compensation income.
NEW PLAN BENEFITS
The grant of awards under Anadarko's 1999 stock incentive plan as amended
is subject to the discretion of Anadarko's compensation and benefits committee.
The committee has not granted any awards under the plan as amended. Accordingly,
Anadarko cannot currently determine the number of Anadarko common shares that
may be subject to awards granted under the plan in the future to key employees.
The affirmative vote of the holders of a majority of Anadarko common shares
voting on the amendment, where the total vote cast on the amendment represents
over 50% of outstanding Anadarko common shares, is required for the approval of
this amendment. FOR THE REASONS STATED ABOVE, THE ANADARKO BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT ANADARKO STOCKHOLDERS VOTE FOR THE AMENDMENT.
Approval of the amendment is not a condition to the completion of the merger.
SUMMARY COMPENSATION TABLE FOR LAST FISCAL YEAR
ANNUAL COMPENSATION
---------------------------------
OTHER
ANNUAL
COMPEN-
SALARY BONUS SATION
NAME PRINCIPAL POSITION YEAR ($) ($) ($)
- - - - - - - - - - - - ---- ------------------ ---- --------- --------- --------
Robert J. Allison, Jr........ Chairman and Chief Executive Officer 1999 1,000,000 2,000,000 0
Chairman, President and Chief Executive
Officer 1998 1,000,000 1,350,000(1) 0
Chairman, President and Chief Executive
Officer 1997 1,000,000 1,200,000 60,253
John N. Seitz................ President and Chief Operating Officer 1999 475,000 800,000 0
Executive Vice President, Exploration &
Production 1998 425,000 400,000 0
Executive Vice President, Exploration &
Production 1997 387,083 325,000 0
Michael E. Rose.............. Senior Vice President, Finance 1999 370,000 333,000 0
Senior Vice President, Finance 1998 370,000 207,000 0
Senior Vice President, Finance 1997 350,000 186,000 0
Charles G. Manley............ Senior Vice President, Administration 1999 355,000 320,000 0
Senior Vice President, Administration 1998 355,000 199,000 0
Senior Vice President, Administration 1997 345,000 183,000 0
William D. Sullivan.......... Vice President, International Operations 1999 270,000 216,000 55,080(2)
Vice President, International Operations 1998 270,000 135,000 233,805
Vice President, Algeria 1997 250,000 113,000 126,083
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LONG-TERM COMPENSATION
---------------------------------------
AWARDS
--------------------------
SECURITIES
UNDERLYING ALL OTHER
RESTRICTED OPTIONS(3)/ LTIP COMPEN-
STOCK SARS(4) PAYOUTS(5) SATION(6)
NAME ($) (#) ($) ($)
- - - - - - - - - - - - ---- ---------- ----------- ---------- ---------
Robert J. Allison, Jr. .................... 0 650,000 10,312,500 316,615
0 0 0 383,013
0 0 0 349,812
John N. Seitz.............................. 0 0 0 98,564
244,219(7) 280,000 0 132,046
0 80,000 0 83,778
Michael E. Rose............................ 0 0 0 94,747
0 186,000 0 133,789
0 54,000 0 96,398
Charles G. Manley.......................... 0 0 0 95,831
0 186,000 0 136,515
0 48,000 0 103,179
William D. Sullivan........................ 0 0 0 48,546
0 128,000 0 271,850
0 48,000 0 229,277
- - - - - - - - - - - - ---------------
(1) 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 Anadarko.
(2) Represents certain perquisites, including $17,218 for financial counseling
services and $37,862 attributable to the net payment of taxes by Anadarko on
Mr. Sullivan's behalf associated with his foreign assignment that ended in
1998. None of the other four individuals listed above had total perquisites
exceeding $50,000 or 10% of annual compensation for 1999.
(3) Adjusted for 2-for-1 stock split, effective July 1, 1998.
(4) No SARs are outstanding.
(5) Represents long-term incentive plan payout of 300,000 shares pursuant to
performance shares awarded in 1996 under Anadarko's 1993 Stock Incentive
Plan for the performance period which began January 1, 1996 and ended on
December 31, 1999. Under the terms of the Performance Share Agreement with
Mr. Allison, this payment is equal to the maximum number of performance
shares provided under the agreement multiplied by the average of the high
and low stock price on January 26, 2000, the date on which Anadarko's
compensation and benefits committee approved final payout of the award.
(6) This column includes (a) Anadarko 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 and (d) the value of Anadarko paid split-dollar insurance. The 1999
amounts for items (a), (b), (c) and (d) for each of the individuals named in
the table are for Mr. Allison, $141,000, $49,655, $30,796 and $93,230; Mr.
Seitz, $52,500, $8,054, $7,662 and $30,348; Mr. Rose, $34,620, $23,153,
$6,272 and $30,702; Mr. Manley, $33,240, $24,155, $6,411 and $32,025; and
Mr. Sullivan, $24,300, $0, $4,844 and $14,591, respectively. In addition,
Mr. Allison's amount includes $1,934 attributable to the annual cost of term
life insurance available to Mr. Allison under a policy purchased by
Anadarko. At the end of 1998, Anadarko entered into 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.
Upon the death of both Mr. and Mrs. Allison, their beneficiaries will
receive the term life insurance proceeds, and Anadarko will receive cash
under
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the policy sufficient to compensate Anadarko for the premium paid. The
balance of the proceeds, if any, will be paid to Mr. and Mrs. Allison's
designees. Additionally, Mr. Sullivan's amount includes $4,811 applicable to
relocation payments associated with his repatriation to the United States in
1998 from foreign assignment. No deferrals have been made under the
Executive Deferred Compensation Plan since 1990. Grants under the Annual
Override Bonus Plan 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.
(7) As of December 31, 1999, Mr. Seitz held 5,625 restricted shares valued at
the year-end close of $191,953. The restricted stock awarded to Mr. Seitz in
1998 vests 25% per year. Dividends will be paid on unvested shares.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL RELIABLE VALUE AT ASSUMED
SECURITIES OPTIONS/SARS ANNUAL RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR OPTION TERM(3)
OPTIONS/SARS EMPLOYERS IN OR BASE EXPIRATION -----------------------------------
NAME GRANTED(1)(#) FISCAL YEAR PRICE(2)($/SH) DATE 0%($) 5%($) 10%($)
- - - - - - - - - - - - ---- ------------- ------------ -------------- ---------- ------ ----------- ------------
Robert J. Allison, Jr. ... 650,000 57% $30.66 11/02/06 0 $8,112,112 $18,904,671
John N. Seitz............. 0 0% n/a n/a 0 0 0
Michael E. Rose........... 0 0% n/a n/a 0 0 0
Charles G. Manley......... 0 0% n/a n/a 0 0 0
William D. Sullivan....... 0 0% n/a n/a 0 0 0
- - - - - - - - - - - - ---------------
(1) No SARs were granted in 1999. Stock options granted on November 2, 1999,
were granted under Anadarko's 1999 Stock Incentive Plan. Twenty-five percent
(25%) of the options become exercisable each year on the anniversary date of
the date of grant beginning on November 2, 2000. In the event of a change of
control, any outstanding options will automatically vest. The board may also
take any one or more of the following actions: (i) provide for the purchase
of any outstanding awards by Anadarko; (ii) make adjustments to any
outstanding awards; or (iii) allow for the substitution of any outstanding
awards by the acquiring company's stock.
(2) The exercise price equals the fair market value of Anadarko common shares on
the date of grant.
(3) The dollar amounts under these columns are the results of calculation at 0%
and at the 5% and 10% rates set by the SEC and are not intended to forecast
possible future appreciation, if any, of Anadarko's stock price. Anadarko
did not use an alternative formula for a grant date valuation as Anadarko is
not aware of any formula which will determine with reasonable accuracy a
present value based on future unknown or volatility factors.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
NUMBER OF
SHARES SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY
ON VALUE OPTIONS/SARS AT OPTIONS/SARS AT
EXERCISE REALIZED FISCAL YEAR-END (#) FISCAL YEAR-END ($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE*
- - - - - - - - - - - - ---- -------- --------- -------------------------- --------------------------
Robert J. Allison, Jr. ..... 0 0 1,080,000/1,130,000 11,542,500/5,408,125
John N. Seitz............... 24,000 622,017 338,000/ 280,000 3,067,125/ 0
Michael E. Rose............. 0 0 150,000/ 186,000 582,000/ 0
Charles G. Manley........... 0 0 294,000/ 186,000 2,663,625/ 0
William D. Sullivan......... 108,000 1,859,870 84,000/ 128,000 77,625/ 0
- - - - - - - - - - - - ---------------
* Computed based upon the difference between aggregate fair market value on
December 31, 1999 ($33.96875 per share) and aggregate exercise price.
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PENSION PLAN TABLE
Anadarko 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 formula which considers length of service and final
average pay. For this purpose, "pay" generally includes the amounts shown in the
salary and bonus columns of the summary compensation table. The following table
reflects the estimated single life annuity payable annually at normal retirement
at age 65 in specified remuneration and years-of-service classifications, based
on the benefit formula in effect on December 31, 1999.
YEARS OF SERVICE
------------------------------------------------------------
REMUNERATION 15 20 25 30 35
- - - - - - - - - - - - ------------ -------- ---------- ---------- ---------- ----------
$ 250,000 $ 66,000 $ 87,000 $ 109,000 $ 131,000 $ 153,000
300,000 79,000 105,000 132,000 158,000 184,000
400,000 106,000 141,000 177,000 212,000 247,000
500,000 133,000 177,000 222,000 266,000 310,000
600,000 160,000 213,000 267,000 320,000 373,000
700,000 187,000 249,000 312,000 374,000 436,000
800,000 214,000 285,000 357,000 428,000 499,000
900,000 241,000 321,000 402,000 482,000 562,000
1,000,000 268,000 357,000 447,000 536,000 625,000
1,100,000 295,000 393,000 492,000 590,000 688,000
1,200,000 322,000 429,000 537,000 644,000 751,000
1,300,000 349,000 465,000 582,000 698,000 814,000
1,400,000 376,000 501,000 627,000 752,000 877,000
1,500,000 403,000 537,000 672,000 806,000 940,000
1,600,000 430,000 573,000 717,000 860,000 1,003,000
1,700,000 457,000 609,000 762,000 914,000 1,066,000
1,800,000 484,000 645,000 807,000 968,000 1,129,000
1,900,000 511,000 681,000 852,000 1,022,000 1,192,000
2,000,000 538,000 717,000 897,000 1,076,000 1,255,000
2,100,000 565,000 753,000 942,000 1,130,000 1,318,000
2,200,000 592,000 789,000 987,000 1,184,000 1,381,000
2,300,000 619,000 825,000 1,032,000 1,238,000 1,444,000
2,400,000 646,000 861,000 1,077,000 1,292,000 1,507,000
2,500,000 673,000 897,000 1,122,000 1,346,000 1,570,000
2,600,000 700,000 933,000 1,167,000 1,400,000 1,633,000
2,700,000 727,000 969,000 1,212,000 1,454,000 1,696,000
2,800,000 754,000 1,005,000 1,257,000 1,508,000 1,759,000
2,900,000 781,000 1,041,000 1,302,000 1,562,000 1,822,000
3,000,000 808,000 1,077,000 1,347,000 1,616,000 1,885,000
3,100,000 835,000 1,113,000 1,392,000 1,670,000 1,948,000
3,200,000 862,000 1,149,000 1,437,000 1,724,000 2,011,000
3,300,000 889,000 1,185,000 1,482,000 1,778,000 2,074,000
3,400,000 916,000 1,221,000 1,527,000 1,832,000 2,137,000
3,500,000 943,000 1,257,000 1,572,000 1,886,000 2,200,000
3,600,000 970,000 1,293,000 1,617,000 1,940,000 2,263,000
Messrs. Allison, Seitz, Rose, Manley, and Sullivan, respectively, have 26,
22, 22, 26 and 18 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 Anadarko's
supplemental retirement restoration plan, rather than from the retirement plan,
due to limitations imposed by the Internal Revenue Code which restrict the
amount of benefits payable under tax-qualified plans.
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COMPENSATION OF DIRECTORS
Directors that 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, Anadarko
common shares or a combination of both, are as follows:
1. an annual Board retainer of $40,000;
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 additional annual committee retainer of $3,000 for serving as
committee chair.
1998 Director Stock Plan. Under this plan, the directors may grant
stock-based awards to non-employee directors. In October 1999, the directors
granted each non-employee director an option to purchase 5,000 shares of
Anadarko common shares. The option price is 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 2000, each current non-employee director
received phantom stock units equal to $14,500 to be held until the director
terminates service from the board. 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.
CHANGE-IN-CONTROL ARRANGEMENTS
Anadarko has entered into key employee change of control contracts with
each of the named executive officers and with certain other key executives.
These severance contracts have an initial three-year term that is automatically
extended for one year upon each anniversary, unless a notice not to extend is
given by Anadarko. If a change of control of Anadarko (as defined below) occurs
during the term of the severance contract, then the contract becomes operative
for a fixed three-year period. The severance contracts generally provide that
the executive's terms and conditions of employment (including position, work
location, compensation and benefits) will not be adversely changed during the
three-year period after a change of control of Anadarko. If Anadarko terminates
the executive's employment (other than for cause, death or disability), the
executive terminates for good reason during such three-year period, or the
executive terminates employment for any reason during the 30-day period
following the first anniversary of the change of control, and upon certain
terminations prior to a change of control or in connection with or in
anticipation of a change of control, the executive is generally entitled to
receive the following payment and benefits:
(i) earned but unpaid compensation;
(ii) up to 2.9 times the executive's base salary plus annual bonus
(based on historical annual bonus);
(iii) Anadarko matching contributions which would have been made had
the executive continued to participate in the Anadarko Employee Savings
Plan and the Savings Restoration Plan for up to an additional three years;
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(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 which
would have been received had the executive continued service for up to an
additional three years; and
(vi) the present value of the amounts of deferred compensation and
interest, if any, under the Executive Deferred Compensation Plan which
would have been received had the executive continued service through age
65.
In addition, the severance contract provides for a continuation of various
medical, dental, 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 enforcing any right or
benefit provided by the severance contracts. The severance contract provides
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 Internal Revenue Code.
As a condition to receipt of these severance benefits, the executive must
agree to retain in confidence any and all confidential information known to him
concerning Anadarko and its business so long as the information is not otherwise
publicly disclosed. In addition, certain severance benefits will be reduced or
eliminated if the executive provides services to another employer. As of the
date of this document, no amounts have been paid under the severance contracts.
In addition, pursuant to Anadarko's Stock Plans, upon a change of control
of Anadarko (as defined below):
- Outstanding options and stock appreciation rights that are not vested and
exercisable become fully vested and exercisable;
- The restrictions on restricted stock lapse; and
- Performance-based restricted stock awards become fully vested and the
performance goals are deemed to be earned unless otherwise provided in
the participant's award agreement.
For purposes of the severance contracts and Anadarko's Stock Plans, a
change of control is generally defined as:
(1) Any individual, entity or group acquiring beneficial ownership of
20% or more of either outstanding Anadarko common shares or the combined
voting power of the outstanding voting securities of Anadarko entitled to
vote generally for the election of directors;
(2) Individuals who constitute the board on the date hereof cease to
constitute a majority of the board, provided that an individual whose
election or nomination as a director is approved by a vote of at least a
majority of the directors as of the date hereof will be deemed a member of
the incumbent board;
(3) Approval by Anadarko stockholders of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of
the assets of Anadarko or the acquisition of assets of another entity,
unless following the business combination:
(a) all or substantially all of the beneficial owners of
outstanding Anadarko common shares prior to the business combination own
more than 60% of the outstanding common stock of the corporation
resulting from the business combination;
(b) no person, entity or group owns 20% or more of the outstanding
voting securities of the corporation resulting from the business
combination; and
(c) at least a majority of the board of the corporation resulting
from the business combination were members of Anadarko's board prior to
the business combination; or
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(4) Approval by Anadarko stockholders of a complete liquidation or
dissolution of Anadarko.
LEGAL MATTERS
The validity of the Anadarko common shares to be issued in the merger will
be passed upon for Anadarko by Wachtell, Lipton, Rosen & Katz, special counsel
to Anadarko.
Morgan, Lewis & Bockius LLP, counsel to Union Pacific Resources, has
rendered an opinion that the merger will qualify as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code.
EXPERTS
The consolidated financial statements of Anadarko as of December 31, 1999
and 1998, and for each of the years in the three-year period ended December 31,
1999, have been incorporated by reference in reliance upon the report of KPMG
LLP, independent certified accountants, which is incorporated by reference, and
upon that firm as experts in accounting and auditing.
The consolidated financial statements of Union Pacific Resources Group Inc.
as of and for the years ended December 31, 1999 and 1998 included in Union
Pacific Resources Group Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1999, incorporated by reference in this document have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports. With respect to the
unaudited interim financial information for the quarters ended March 31, 2000
and 1999, Arthur Andersen LLP has applied limited procedures in accordance with
professional standards for a review of that information. However, their separate
report thereon states that they did not audit and they do not express an opinion
on that interim financial information. Accordingly, the degree of reliance on
their report on that information should be restricted in light of the limited
nature of the review procedures applied. In addition, the accountants are not
subject to the liability provisions of Section 11 of the Securities Act of 1933
for their report on the unaudited interim financial information because that
report is not a "report" or a "part" of the registration statement prepared or
certified by the accountants within the meaning of Sections 7 and 11 of the
Securities Act.
The consolidated statements of income, changes in shareholders' equity and
cash flows of Union Pacific Resources Group Inc. for the year ended December 31,
1997 (which have been restated and are no longer presented in Union Pacific
Resources Group Inc.'s Annual Report on Form 10-K for the year ended December
31, 1999), incorporated by reference in this document, have been audited by
Deloitte & Touche LLP, independent public accountants, as stated in their report
with respect thereto, which is incorporated by reference, and has been so
incorporated in reliance upon their authority as experts in accounting and
auditing.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of KPMG LLP, current independent certified accountants of
Anadarko, expect to be present at the Anadarko special meeting and will be
available to respond to appropriate questions from Anadarko stockholders in
attendance. Although these representatives have stated that they do not intend
to make any statements at the Anadarko special meeting, they will have the
opportunity to do so.
Representatives of Arthur Andersen LLP, current independent public
accountants of Union Pacific Resources, expect to be present at the Union
Pacific Resources special meeting and will be available to respond to
appropriate questions from Union Pacific Resources stockholders in attendance.
Although these representatives have stated that they do not intend to make any
statements at the Union Pacific Resources special meeting, they will have the
opportunity to do so.
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OTHER MATTERS
Pursuant to the Anadarko bylaws, the business that may be conducted at the
Anadarko special meeting is confined to the purpose described in the notice of
special meeting of stockholders that accompanies this document.
Pursuant to Utah law and Union Pacific Resources' bylaws, the business that
may be conducted at the Union Pacific Resources special meeting is confined to
the purpose described in the notice of special meeting of stockholders that
accompanies this document.
CERTAIN PROXY CARD MATTERS
The proxy card for a participant in the Anadarko Dividend Reinvestment and
Stock Purchase Plan and the Anadarko Employee Savings Plan includes both the
number of Anadarko common shares registered in the participant's name and the
number of Anadarko common shares credited to the participant's plan account,
unless the registrations are different. Anadarko stockholders having Anadarko
common shares registered in different names will receive a proxy card for each
registration. If your Anadarko common shares are held by a broker as nominee,
you will receive a voter information form from your broker. All these Anadarko
common shares will be voted in accordance with the instructions on the proxy
card.
STOCKHOLDER PROPOSALS
Any Anadarko stockholder who intends to present a proposal at Anadarko's
2001 annual meeting of stockholders for inclusion in the proxy statement and
form of proxy relating to that meeting is advised that the proposal must be
received by Anadarko at its principal executive offices not later than November
28, 2000. Anadarko will not be required to include in its proxy statement a form
of proxy or stockholder proposal that is received after that date or that
otherwise fails to meet the requirements for stockholder proposals established
by regulations of the SEC.
In addition, any Anadarko stockholder desiring to raise a matter at
Anadarko's 2001 annual meeting of stockholders, where the stockholder has not
sought inclusion of the matter in the proxy statement and proxy relating to such
meeting, must comply with the advance notification provisions in Anadarko's
bylaws. Pursuant to this advance notice provision, a stockholder's notice must
be delivered to or mailed and received at Anadarko's principal executive offices
not less than 50 days nor more than 75 days prior to the meeting. However, in
the event that less than 65 days' prior public disclosure of the date of the
meeting is made to stockholders, a notice by the stockholder will be timely if
it is received not later than the close of business on the fifteenth day
following the day on which the public disclosure was made or notice of the date
of the meeting was mailed, whichever first occurs.
Any Union Pacific Resources stockholder who intends to present a proposal
at Union Pacific Resources' 2001 annual meeting of stockholders for inclusion in
the proxy statement and form of proxy relating to that meeting is advised that
the written proposal and any written statement in support of the proposal must
be received by the Secretary of Union Pacific Resources at the principal
executive offices not later than November 30, 2000. Union Pacific Resources will
not be required to include in its proxy statement a form of proxy or stockholder
proposal that is received after that date or that otherwise fails to meet the
requirements for stockholder proposals established by regulations of the SEC. If
the merger is consummated as currently contemplated, there will be no 2001
annual meeting of Union Pacific Resources stockholders.
In addition, any Union Pacific Resources stockholder desiring to raise a
matter, including nominating an individual for election as a director, at the
Union Pacific Resources' 2001 annual meeting of stockholders, where the
stockholder has not sought inclusion of the matter in the proxy statement and
proxy relating to such meeting, must comply with the advance notification
provisions in the Union Pacific Resources' bylaws. Such provisions require that
notice of stockholder matters to be raised at an annual
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meeting of stockholders be received by Union Pacific Resources' Secretary not
later than the tenth day following the date on which notice of the date of an
annual meeting of stockholders for 2001 is mailed or public disclosure of the
date of the meeting of stockholders is made, whichever first occurs. Since Union
Pacific Resources did not have its 2000 annual meeting within 30 days before or
after the anniversary of the 1999 meeting, this time period applies under Union
Pacific Resources' bylaws. A stockholder who desires to raise such matters
should contact Union Pacific Resources' Secretary for the specific requirements
prescribed by the bylaws.
WHERE YOU CAN FIND MORE INFORMATION
Anadarko has filed with the SEC a registration statement on Form S-4 under
the Securities Act that registers the Anadarko common shares to be issued in the
merger to Union Pacific Resources stockholders. The registration statement,
including the attached exhibits and schedules, contains additional relevant
information about Anadarko and Union Pacific Resources. The rules and
regulations of the SEC allow us to omit certain information included in the
registration statement from this document.
In addition, Anadarko and Union Pacific Resources file reports, proxy
statements and other information with the SEC under the Securities Exchange Act
of 1934, as amended. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. You may read and copy this
information at the following locations of the SEC:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois
60661-2511
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. The SEC also maintains an Internet website that
contains reports, proxy statements and other information about issuers, like
Anadarko and Union Pacific Resources, who file electronically with the SEC. The
address of that website is http://www.sec.gov. You can also inspect reports,
proxy statements and other information about Anadarko and Union Pacific
Resources at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
The SEC allows Anadarko and Union Pacific Resources to "incorporate by
reference" information into this document. This means that the companies can
disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is considered
to be a part of this document, except for any information that is superseded by
information that is included directly in this document.
This document incorporates by reference the documents listed below that
Anadarko and Union Pacific Resources have previously filed with the SEC. They
contain important information about our companies and their financial condition.
Some of these filings have been amended by later filings, which are also listed.
ANADARKO COMMISSION FILINGS (FILE NO. 1-8968) DESCRIPTION OR PERIOD
- - - - - - - - - - - - --------------------------------------------- ---------------------
Annual Report on Form 10-K, filed on Year Ended December 31, 1999
March 16, 2000
Quarterly Report on Form 10-Q, filed on May Quarter Ended March 31, 2000
15, 2000
Current Reports on Form 8-K Filed March 7, 2000 and April 5, 2000
Proxy Statement on Schedule 14A, filed on For Anadarko's 2000 annual meeting of
March 14, 2000 stockholders held April 27, 2000
101
108
ANADARKO COMMISSION FILINGS (FILE NO. 1-8968) DESCRIPTION OR PERIOD
- - - - - - - - - - - - --------------------------------------------- ---------------------
Registration Statement on Form S-3, filed on Description of Anadarko common shares
September 30, 1999
Registration Statement on Form 8-A/A, filed Description of Anadarko preferred share
on April 27, 2000 purchase rights
UNION PACIFIC RESOURCES COMMISSION FILINGS (FILE
NO. 1-11885) DESCRIPTION OR PERIOD
- - - - - - - - - - - - ------------------------------------------------ ---------------------
Annual Report on Form 10-K, filed on March 27, Year Ended December 31, 1999
2000, as amended by Form 10-K/A on
May 1, 2000
Quarterly Reports on Form 10-Q, filed on May 15, Quarter Ended March 31, 2000
2000
Current Reports on Form 8-K Filed January 28, 2000, February 17, 2000 and
April 7, 2000
Registration Statement on Form 8-A/A, filed on Description of Union Pacific Resources
May 2, 2000 preferred share purchase rights
Anadarko and Union Pacific Resources incorporate by reference additional
documents that either company may file with the SEC between the date of this
document and the dates of the Anadarko special meeting and the Union Pacific
Resources special meeting. These documents include periodic reports, such as
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K, as well as proxy statements.
You can obtain any of the documents incorporated by reference in this
document through Anadarko or Union Pacific Resources as the case may be, or from
the SEC through the SEC's website at the address described above. Documents
incorporated by reference are available from the companies without charge,
excluding any exhibits to those documents unless the exhibit is specifically
incorporated by reference as an exhibit in this document. You can obtain
documents incorporated by reference as an exhibit in this document by requesting
them in writing or by telephone from the appropriate company at the following
addresses:
FOR ANADARKO STOCKHOLDERS: FOR UNION PACIFIC RESOURCES STOCKHOLDERS:
-------------------------- -----------------------------------------
Anadarko Petroleum Corporation Union Pacific Resources Group Inc.
17001 Northchase Drive 777 Main Street
Houston, Texas 77060-2141 Fort Worth, Texas 76102
(281) 875-1101 (817) 321-6000
If you would like to request documents, please do so promptly to receive
them before the special meetings. If you request any incorporated documents from
us, we will mail them to you by first class mail, or another equally prompt
means, within one business day after we receive your request.
WE HAVE AUTHORIZED NO ONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ABOUT THE MERGER OR OUR COMPANIES THAT DIFFERS FROM OR ADDS TO
THE INFORMATION CONTAINED IN THIS DOCUMENT OR IN THE DOCUMENTS OUR COMPANIES
HAVE PUBLICLY FILED WITH THE SEC. THEREFORE, IF ANYONE SHOULD GIVE YOU ANY
DIFFERENT OR ADDITIONAL INFORMATION, YOU SHOULD NOT RELY ON IT.
IF YOU LIVE IN A JURISDICTION IN WHICH IT IS UNLAWFUL TO OFFER TO EXCHANGE
OR SELL, OR TO ASK FOR OFFERS TO EXCHANGE OR BUY, THE SECURITIES OFFERED BY THIS
DOCUMENT, OR TO ASK FOR PROXIES, OR IF YOU ARE A PERSON TO WHOM IT IS UNLAWFUL
TO DIRECT SUCH ACTIVITIES, THEN THE OFFER PRESENTED BY THIS DOCUMENT DOES NOT
EXTEND TO YOU.
102
109
THE INFORMATION CONTAINED IN THIS DOCUMENT SPEAKS ONLY AS OF THE DATE
INDICATED ON THE COVER OF THIS DOCUMENT UNLESS THE INFORMATION SPECIFICALLY
INDICATES THAT ANOTHER DATE APPLIES.
With respect to the information contained in this document, Anadarko has
supplied the information concerning Anadarko and Dakota Merger Corp., and Union
Pacific Resources has supplied the information concerning Union Pacific
Resources.
103
110
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
ANADARKO PETROLEUM CORPORATION
("Anadarko"),
DAKOTA MERGER CORP.
a wholly owned direct subsidiary of Anadarko
("Subcorp"),
and
UNION PACIFIC RESOURCES GROUP INC.
("UPR")
April 2, 2000
111
TABLE OF CONTENTS
PAGE
----
AGREEMENT AND PLAN OF MERGER........................................ A-1
PRELIMINARY STATEMENTS.............................................. A-1
AGREEMENT........................................................... A-1
ARTICLE I. THE MERGER.............................................. A-1
1.1 The Merger.................................................. A-1
1.2 Effective Time.............................................. A-1
1.3 Effects of the Merger....................................... A-2
1.4 Articles of Incorporation and By-laws....................... A-2
1.5 Directors and Officers of the Surviving Corporation......... A-2
1.6 Additional Actions.......................................... A-2
ARTICLE II. CONVERSION OF SECURITIES............................... A-2
2.1 Conversion of Capital Stock................................. A-2
2.2 Exchange Ratio; Fractional Shares; Adjustments.............. A-2
2.3 Exchange of Certificates.................................... A-3
(a) Exchange Agent..................................... A-3
(b) Exchange Procedures................................ A-3
(c) Distributions with Respect to Unexchanged Shares... A-4
(d) No Further Ownership Rights in UPR Common Stock.... A-4
(e) Termination of Exchange Fund....................... A-4
(f) No Liability....................................... A-4
(g) Investment of Exchange Fund........................ A-5
(h) Withholding Rights................................. A-5
2.4 Treatment of Stock Options.................................. A-5
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF ANADARKO AND
SUBCORP........................................................... A-6
3.1 Organization and Standing................................... A-6
3.2 Subsidiaries and Investments................................ A-6
3.3 Corporate Power and Authority............................... A-6
3.4 Capitalization of Anadarko and Subcorp...................... A-7
3.5 Conflicts; Consents and Approval............................ A-7
3.6 Brokerage and Finder's Fees................................. A-8
3.7 Reorganization.............................................. A-8
3.8 No Material Adverse Change.................................. A-8
3.9 Anadarko SEC Documents...................................... A-8
3.10 Taxes....................................................... A-9
3.11 Compliance with Law......................................... A-10
3.12 Registration Statement; Joint Proxy Statement............... A-10
3.13 Litigation.................................................. A-11
3.14 Anadarko Employee Benefit Plans............................. A-11
3.15 Contracts................................................... A-14
3.16 Labor Matters............................................... A-14
3.17 Undisclosed Liabilities..................................... A-14
3.18 Permits; Compliance......................................... A-14
3.19 Environmental Matters....................................... A-14
3.20 Opinion of Financial Advisor................................ A-15
3.21 Board Recommendation; Required Vote......................... A-15
3.22 State Takeover Laws; Rights Agreement....................... A-15
A-i
112
PAGE
----
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF UPR.................. A-16
4.1 Organization and Standing................................... A-16
4.2 Subsidiaries and Investments................................ A-16
4.3 Corporate Power and Authority............................... A-16
4.4 Capitalization of UPR....................................... A-17
4.5 Conflicts; Consents and Approvals........................... A-17
4.6 Brokerage and Finder's Fees................................. A-18
4.7 Reorganization.............................................. A-18
4.8 No Material Adverse Change.................................. A-18
4.9 UPR SEC Documents........................................... A-18
4.10 Taxes....................................................... A-18
4.11 Compliance with Law......................................... A-19
4.12 Registration Statement; Joint Proxy Statement............... A-20
4.13 Litigation.................................................. A-20
4.14 UPR Employee Benefit Plans.................................. A-20
4.15 Contracts................................................... A-23
4.16 Labor Matters............................................... A-23
4.17 Undisclosed Liabilities..................................... A-23
4.18 Permits; Compliance......................................... A-23
4.19 Environmental Matters....................................... A-23
4.20 Opinion of Financial Advisor................................ A-24
4.21 Board Recommendation; Required Vote......................... A-24
4.22 State Takeover Laws; Rights Agreement....................... A-24
ARTICLE V. COVENANTS OF THE PARTIES................................ A-24
5.1 Mutual Covenants............................................ A-24
(a) HSR Act Filings; Reasonable Efforts; A-24
Notification...........................................
(b) Tax-Free Treatment................................. A-26
(c) Public Announcements............................... A-26
(d) Farmouts........................................... A-26
5.2 Covenants of Anadarko....................................... A-26
(a) Anadarko Stockholders Meeting...................... A-26
(b) Preparation of Registration Statement.............. A-26
(c) Conduct of Anadarko's Operations................... A-27
(d) No Solicitation.................................... A-29
(e) Indemnification; Directors' and Officers' A-30
Insurance..........................................
(f) NYSE Listing....................................... A-31
(g) Access............................................. A-31
(h) Board of Directors of Anadarko..................... A-31
(i) Subsequent Financial Statements.................... A-31
(j) Employees and Employee Benefits.................... A-31
5.3 Covenants of UPR............................................ A-32
(a) UPR Stockholders Meeting........................... A-32
(b) Information for the Registration Statement and
Preparation of Joint Proxy
Statement.......................................... A-32
(c) Conduct of UPR's Operations........................ A-33
(d) No Solicitation.................................... A-35
(e) Affiliates of UPR.................................. A-36
(f) Access............................................. A-36
(g) Subsequent Financial Statements.................... A-36
A-ii
113
PAGE
----
ARTICLE VI. CONDITIONS............................................. A-36
6.1 Conditions to the Obligations of Each Party................. A-36
6.2 Conditions to Obligations of UPR............................ A-37
6.3 Conditions to Obligations of Anadarko and Subcorp........... A-38
ARTICLE VII. TERMINATION AND AMENDMENT............................. A-38
7.1 Termination by Mutual Consent............................... A-38
7.2 Termination by UPR or Anadarko.............................. A-38
7.3 Termination by Anadarko..................................... A-39
7.4 Termination by UPR.......................................... A-39
7.5 Effect of Termination....................................... A-40
7.6 Amendment................................................... A-41
7.7 Extension; Waiver........................................... A-41
ARTICLE VIII. MISCELLANEOUS...................................... A-41
8.1 Survival of Representations and Warranties.................. A-41
8.2 Notices..................................................... A-41
8.3 Interpretation.............................................. A-42
8.4 Counterparts................................................ A-42
8.5 Entire Agreement............................................ A-43
8.6 Third-Party Beneficiaries................................... A-43
8.7 Governing Law............................................... A-43
8.8 Consent to Jurisdiction; Venue.............................. A-43
8.9 Specific Performance........................................ A-43
8.10 Assignment.................................................. A-43
8.11 Expenses.................................................... A-43
A-iii
114
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and entered
into as of the 2nd day of April, 2000, by and among Anadarko Petroleum
Corporation, a Delaware corporation ("Anadarko"), Dakota Merger Corp., a Utah
corporation and a wholly owned subsidiary of Anadarko ("Subcorp"), and Union
Pacific Resources Group Inc., a Utah corporation ("UPR").
PRELIMINARY STATEMENTS
A. The Board of Directors of Anadarko has determined that the merger of
Subcorp with and into UPR, with UPR as the surviving corporation (the "Merger"),
pursuant to which each share of UPR Common Stock (as defined in Section 4.4)
outstanding at the Effective Time (as defined in Section 1.2) will be converted
into the right to receive Anadarko Common Shares (as defined in Section 3.4(a))
as more fully provided herein, is consistent with and in furtherance of the
long-term business strategy of Anadarko and Anadarko desires to combine its
businesses with the businesses operated by UPR.
B. The Board of Directors of UPR has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of UPR and
UPR desires to combine its businesses with the businesses operated by Anadarko
and for the holders of shares of UPR Common Stock ("UPR Stockholders") to have a
continuing equity interest in the combined Anadarko/UPR businesses through the
ownership of Anadarko Common Shares.
C. The parties intend that the Merger constitute a tax-free
"reorganization" within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
D. The respective Boards of Directors of Anadarko, Subcorp and UPR have
determined the Merger in the manner contemplated herein to be desirable and in
the best interests of their respective shareholders, and, by resolutions duly
adopted, have approved and adopted this Agreement.
AGREEMENT
Now, therefore, in consideration of these premises and the mutual and
dependent promises hereinafter set forth, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof, and
in accordance with the provisions of the Utah Revised Business Corporation Act
(the "UBCA"), Subcorp shall be merged with and into UPR at the Effective Time.
As a result of the Merger, the separate corporate existence of Subcorp shall
cease and UPR shall continue its existence under the laws of the State of Utah.
UPR, in its capacity as the corporation surviving the Merger, is hereinafter
sometimes referred to as the "Surviving Corporation."
1.2 Effective Time. As promptly as possible on the Closing Date (as
defined below), the parties hereto shall cause the Merger to be consummated by
filing with the Division of Corporations and Commercial Code of the State of
Utah (the "Utah Division") articles of merger (the "Articles of Merger") in such
form as is required by and executed in accordance with Section 16-10a-1105 of
the UBCA. The Merger shall become effective (the "Effective Time") when the
Articles of Merger have been filed with the Utah Division or at such later time
as shall be agreed upon by Anadarko and UPR and specified in the Articles of
Merger. Prior to the filing referred to in this Section 1.2, a closing (the
"Closing") shall be held at the principal business offices of Anadarko, or such
other place as the parties hereto may agree as soon as practicable (but in any
event within three business days) following the date upon which all conditions
set forth in Article VI have been satisfied or waived, or at such other date as
Anadarko and UPR may agree; provided, that the conditions set forth in Article
VI have been satisfied or
A-1
115
waived at or prior to such date. The date on which the Closing takes place is
referred to herein as the "Closing Date."
1.3 Effects of the Merger. From and after the Effective Time, the Merger
shall have the effects set forth in Section 16-10a-1106 of the UBCA.
1.4 Articles of Incorporation and By-laws. The Articles of Merger shall
provide that at the Effective Time (i) the Articles of Incorporation of the
Surviving Corporation as in effect immediately prior to the Effective Time shall
be amended as of the Effective Time so as to contain the provisions, and only
the provisions, contained immediately prior thereto in the Articles of
Incorporation of Subcorp, except for Article I thereof, which shall continue to
read "The name of the corporation is 'UNION PACIFIC RESOURCES GROUP INC.' ", and
(ii) the By-laws of Subcorp in effect immediately prior to the Effective Time
shall be the By-laws of the Surviving Corporation; in each case, until amended
in accordance with the UBCA.
1.5 Directors and Officers of the Surviving Corporation. From and after
the Effective Time, the officers of UPR shall be the officers of the Surviving
Corporation and the directors of Subcorp shall be the directors of the Surviving
Corporation, in each case, until their respective successors are duly elected
and qualified. On or prior to the Closing Date, UPR shall deliver to Anadarko
evidence satisfactory to Anadarko of the resignations of the directors of UPR,
such resignations to be effective as of the Effective Time.
1.6 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable to
(a) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of UPR, or (b) otherwise carry out the provisions of this
Agreement, UPR and its officers and directors shall be deemed to have granted to
the Surviving Corporation an irrevocable power of attorney to execute and
deliver all such deeds, assignments or assurances in law and to take all acts
necessary, proper or desirable to vest, perfect or confirm title to and
possession of such rights, properties or assets in the Surviving Corporation and
otherwise to carry out the provisions of this Agreement, and the officers and
directors of the Surviving Corporation are authorized in the name of UPR or
otherwise to take any and all such action.
ARTICLE II.
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Anadarko, Subcorp or UPR or their
respective shareholders:
(a) Each share of common stock of Subcorp ("Subcorp Common Stock")
issued and outstanding immediately prior to the Effective Time shall be
converted into one share of common stock of the Surviving Corporation. Such
newly issued shares shall thereafter constitute all of the issued and
outstanding capital stock of the Surviving Corporation.
(b) Subject to the other provisions of this Article II, each share of
UPR Common Stock issued and outstanding immediately prior to the Effective
Time shall be converted into and represent a number of Anadarko Common
Shares equal to the Exchange Ratio.
(c) Each share of capital stock of UPR held by UPR shall be cancelled
and retired and no payment shall be made in respect thereof.
2.2 Exchange Ratio; Fractional Shares; Adjustments.
(a) The "Exchange Ratio" shall be equal to 0.4550.
(b) No certificates for fractional Anadarko Common Shares shall be
issued as a result of the conversion provided for in Section 2.1(b) and
such fractional share interests will not entitle the owner
A-2
116
thereof to vote or have any rights of an Anadarko Stockholder (as defined
in Section 3.3) or a holder of Anadarko Common Shares.
(c) In lieu of any such fractional Anadarko Common Shares, the holder
of a certificate previously evidencing UPR Common Stock, upon presentation
of such fractional interest represented by an appropriate certificate for
UPR Common Stock to the Exchange Agent (as defined in Section 2.3(a))
pursuant to Section 2.3, shall be entitled to receive a cash payment
therefor in an amount equal to the value (determined with reference to the
closing price of Anadarko Common Shares as reported on the New York Stock
Exchange ("NYSE") Composite Tape ("NYSE Composite Tape") on the last full
trading day immediately prior to the Closing Date) of such fractional
interest. Such payment with respect to fractional shares is merely intended
to provide a mechanical rounding off of, and is not a separately bargained
for, consideration. If more than one certificate representing shares of UPR
Common Stock shall be surrendered for the account of the same holder, the
number of Anadarko Common Shares for which certificates have been
surrendered shall be computed on the basis of the aggregate number of
shares represented by the certificates so surrendered.
(d) In the event that, prior to the Effective Time, Anadarko shall
declare a stock dividend or other distribution payable in Anadarko Common
Shares or securities convertible into Anadarko Common Shares, or effect a
stock split, reclassification, combination or other change with respect to
Anadarko Common Shares, the Exchange Ratio set forth in this Section 2.2
shall be adjusted to reflect such dividend, distribution, stock split,
reclassification, combination or other change.
2.3 Exchange of Certificates.
(a) Exchange Agent. Promptly following the Effective Time, Anadarko
shall deposit with ChaseMellon Shareholder Services, L.L.C. or such other
exchange agent as may be designated by Anadarko (the "Exchange Agent"), for
the benefit of UPR Stockholders, for exchange in accordance with this
Section 2.3, certificates representing Anadarko Common Shares issuable
pursuant to Section 2.1 in exchange for outstanding shares of UPR Common
Stock and shall from time-to-time deposit cash in an amount reasonably
expected to be paid pursuant to Section 2.2 (such Anadarko Common Shares
and cash, together with any dividends or distributions with respect
thereto, the "Exchange Fund").
(b) Exchange Procedures. As soon as practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates (the "Certificates") that immediately prior to
the Effective Time represented outstanding shares of UPR Common Stock whose
shares were converted into the right to receive Anadarko Common Shares
pursuant to Section 2.1(b), (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent, and shall be in such form and have such other customary
provisions as Anadarko may reasonably specify) and (ii) instructions for
effecting the surrender of the Certificates in exchange for certificates
representing Anadarko Common Shares. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with a duly executed letter of
transmittal, the holder of such Certificate shall be entitled to receive in
exchange therefor (i) a certificate or certificates representing that whole
number of Anadarko Common Shares which such holder has the right to receive
pursuant to Section 2.1 in such denominations and registered in such names
as such holder may request and (ii) a check representing the amount of cash
in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, which such holder has the right to receive pursuant
to the provisions of this Article II, after giving effect of any required
withholding tax. The shares represented by the Certificate so surrendered
shall forthwith be cancelled. No interest will be paid or accrued on the
cash in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, payable to holders of shares of UPR Common Stock. In
the event of a transfer of ownership of shares of UPR Common Stock that is
not registered on the transfer records of UPR, a certificate representing
the proper number of Anadarko Common Shares, together with a check for the
cash to be paid in lieu of fractional shares, if any, and unpaid
A-3
117
dividends and distributions, if any, may be issued to such transferee if
the Certificate representing such shares of UPR Common Stock held by such
transferee is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.3, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon
surrender a certificate representing Anadarko Common Shares and cash in
lieu of fractional shares, if any, and unpaid dividends and distributions,
if any, as provided in this Article II. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and,
if required by Anadarko, the posting by such person of a bond in such
reasonable amount as Anadarko may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange
Agent will deliver in exchange for such lost, stolen or destroyed
Certificate, a certificate representing the proper number of Anadarko
Common Shares, together with a check for the cash to be paid in lieu of
fractional shares, if any, with respect to the shares of UPR Common Stock
formerly represented thereby, and unpaid dividends and distributions on
Anadarko Common Shares, if any, as provided in this Article II.
(c) Distributions with Respect to Unexchanged Shares. Notwithstanding
any other provisions of this Agreement, no dividends or other distributions
declared or made after the Effective Time with respect to Anadarko Common
Shares having a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate, and no cash payment in lieu of
fractional shares shall be paid to any such holder, until the holder shall
surrender such Certificate as provided in this Section 2.3. Subject to the
effect of Applicable Laws (as defined in Section 3.11), following surrender
of any such Certificate, there shall be paid to the holder of the
certificates representing whole Anadarko Common Shares issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount
of dividends or other distributions with a record date after the Effective
Time theretofore payable with respect to such whole Anadarko Common Shares
and not paid, less the amount of any withholding taxes that may be required
thereon, and (ii) at the appropriate payment date subsequent to surrender,
the amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole Anadarko Common Shares, less
the amount of any withholding taxes which may be required thereon.
(d) No Further Ownership Rights in UPR Common Stock. All Anadarko
Common Shares issued upon surrender of Certificates in accordance with the
terms hereof (including any cash paid pursuant to this Article II) shall be
deemed to have been issued in full satisfaction of all rights pertaining to
such shares of UPR Common Stock represented thereby, and, as of the
Effective Time, the stock transfer books of UPR shall be closed and there
shall be no further registration of transfers on the stock transfer books
of UPR of shares of UPR Common Stock outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation for any reason, they shall be cancelled and
exchanged as provided in this Section 2.3. Certificates surrendered for
exchange by any person constituting an "affiliate" of UPR for purposes of
Rule 145(c) under the Securities Act of 1933, as amended (together with the
rules and regulations thereunder, the "Securities Act"), shall not be
exchanged until Anadarko has received written undertakings from such person
in the form attached as Exhibit A to this Agreement.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund
that remains undistributed to UPR Stockholders six months after the date of
the mailing required by Section 2.3(b) shall be delivered to Anadarko, upon
demand thereby, and holders of Certificates previously representing shares
of UPR Common Stock who have not theretofore complied with this Section 2.3
shall thereafter look only to Anadarko for payment of any claim to Anadarko
Common Shares, cash in lieu of fractional shares thereof, or dividends or
distributions, if any, in respect thereof.
(f) No Liability. None of Anadarko, the Surviving Corporation or the
Exchange Agent shall be liable to any person in respect of any shares of
UPR Common Stock (or dividends or distributions
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with respect thereto) or cash from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law. If any Certificates shall not have been surrendered prior to seven
years after the Effective Time (or immediately prior to such earlier date
on which any cash, any cash in lieu of fractional shares or any dividends
or distributions with respect to whole shares of UPR Common Stock in
respect of such Certificate would otherwise escheat to or become the
property of any Governmental Authority (as defined in Section 3.4(d)), any
such cash, dividends or distributions in respect of such Certificate shall,
to the extent permitted by Applicable Laws, become the property of
Anadarko, free and clear of all claims or interest of any person previously
entitled thereto.
(g) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Anadarko, on a daily
basis. Any interest and other income resulting from such investments shall
be paid to Anadarko upon termination of the Exchange Fund pursuant to
Section 2.3(e).
(h) Withholding Rights. Each of the Surviving Corporation and Anadarko
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of UPR Common
Stock such amounts as it is required to deduct and withhold with respect to
the making of such payment under the Code and the rules and regulations
promulgated thereunder, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by the Surviving
Corporation or Anadarko, as the case may be, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the
holder of the shares of UPR Common Stock in respect of which such deduction
and withholding was made by the Surviving Corporation or Anadarko, as the
case may be.
2.4 Treatment of Stock Options.
(a) Prior to the Effective Time, Anadarko and UPR shall take all such
actions as may be necessary to cause each unexpired and unexercised
outstanding option granted or issued under stock option plans of UPR in
effect on the date hereof (each, a "UPR Option") to be automatically
converted at the Effective Time into an option (a "Anadarko Exchange
Option") to purchase that number of Anadarko Common Shares equal to the
number of shares of UPR Common Stock subject to the UPR Option immediately
prior to the Effective Time (without regard to any actual restrictions on
exerciseability) multiplied by the Exchange Ratio (and rounded to the
nearest share), with an exercise price per share equal to the exercise
price per share that existed under the corresponding UPR Option divided by
the Exchange Ratio (and rounded to the nearest cent), and with other terms
and conditions that are the same as the terms and conditions of such UPR
Option immediately before the Effective Time provided, that Anadarko shall
equitably adjust the applicable performance target under any UPR Option
that contains performance targets; provided further that, with respect to
any UPR Option that is an "incentive stock option" within the meaning of
Section 422 of the Code, the foregoing conversion shall be carried out in a
manner satisfying the requirements of Section 424(a) of the Code.
(b) In connection with the issuance of Anadarko Exchange Options,
Anadarko shall (i) reserve for issuance the number of Anadarko Common
Shares that will become subject to Anadarko Exchange Options pursuant to
this Section 2.4 and (ii) from and after the Effective Time, upon exercise
of Anadarko Exchange Options, make available for issuance all Anadarko
Common Shares covered thereby, subject to the terms and conditions
applicable thereto.
(c) Anadarko agrees to use its reasonable efforts to file with the
Securities and Exchange Commission (the "Commission") within 30 days after
the Closing Date a registration statement on Form S-8 or other appropriate
form under the Securities Act to register Anadarko Common Shares issuable
upon exercise of the Anadarko Exchange Options and to use its reasonable
efforts to cause such registration statement to remain effective until the
exercise or expiration of such options and rights. Prior to the Effective
Time, the Board of Directors of Anadarko, or an appropriate committee
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of non-employee directors thereof, shall adopt a resolution consistent with
the interpretive guidance of the Commission so that the acquisition by any
officer or director of Anadarko who may become a covered person of UPR for
purposes of Section 16 of the Securities Exchange Act of 1934, as amended
(together with the rules and regulations thereunder, the "Exchange Act")
and the rules and regulations thereunder ("Section 16") of Anadarko Common
Shares or options to acquire Anadarko Common Shares pursuant to this
Agreement and the Merger shall be an exempt transaction for purposes of
Section 16.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF ANADARKO AND SUBCORP
In order to induce UPR to enter into this Agreement, Anadarko and Subcorp
hereby represent and warrant to UPR that the statements contained in this
Article III are true, correct and complete.
3.1 Organization and Standing. Each of Anadarko and Subcorp is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation with full corporate power and authority to own,
lease, use and operate its properties and to conduct its business as and where
now owned, leased, used, operated and conducted. Each of Anadarko and Subcorp,
and each subsidiary of Anadarko, is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of the business conducted by
it or the property it owns, leases or operates, requires it to so qualify,
except where the failure to be so qualified or in good standing in such
jurisdiction would not have a Material Adverse Effect (as defined in Section
8.3) on Anadarko or Subcorp, as the case may be. Anadarko is not in default in
the performance, observance or fulfillment of any provision of the Anadarko
Restated Certificate of Incorporation, as amended (the "Anadarko Certificate"),
or the Anadarko By-Laws, as amended (the "Anadarko By-Laws"), and Subcorp is not
in default in the performance, observance or fulfillment of any provisions of
its Articles of Incorporation or By-laws. Anadarko has heretofore furnished to
UPR a complete and correct copy of (i) the Anadarko Certificate and the Anadarko
By-Laws, each as in effect as of the date of this Agreement, and (ii) the
Articles of Incorporation of Subcorp and the By-laws of Subcorp.
3.2 Subsidiaries and Investments. Anadarko does not own, directly or
indirectly, any equity or other ownership interest in any corporation,
partnership, joint venture or other entity or enterprise, except for the
subsidiaries, as set forth in Section 3.2 to the disclosure schedule delivered
by Anadarko to UPR and dated the date hereof (the "Anadarko Disclosure
Schedule"), Anadarko owns, directly or indirectly, each of the outstanding
shares of capital stock (or other ownership interests having by their terms
ordinary voting power to elect a majority of directors or others performing
similar functions with respect to such subsidiary) of each of Anadarko's
subsidiaries. Each of the outstanding shares of capital stock of each of
Anadarko's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and is owned, directly or indirectly, by Anadarko free and clear
of all liens, pledges, security interests, claims or other encumbrances. There
are no outstanding subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type relating to
the issuance, sale or transfer of any securities of any subsidiary of Anadarko,
nor are there outstanding any securities that are convertible into or
exchangeable for any shares of capital stock of any subsidiary of Anadarko, and
neither Anadarko nor any subsidiary of Anadarko has any obligation of any kind
to issue any additional securities or to pay for or repurchase any securities of
any subsidiary of Anadarko or any predecessor thereof.
3.3 Corporate Power and Authority. Each of Anadarko and Subcorp has all
requisite corporate power and authority to enter into and deliver this
Agreement, subject to approval of the issuance of Anadarko Common Shares
issuable in the Merger and the transactions contemplated hereby by the holders
of Anadarko Common Shares (the "Anadarko Stockholders") (the "Share Issuance"),
to perform its obligations hereunder and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby by Anadarko and Subcorp
have been duly authorized by all necessary corporate action on the part of each
of Anadarko and Subcorp, subject to approval by the Anadarko Stockholders of the
Share Issuance. This
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Agreement has been duly executed and delivered by each of Anadarko and Subcorp,
and constitutes the legal, valid and binding obligation of each of Subcorp and
Anadarko enforceable against each of them in accordance with its terms.
3.4 Capitalization of Anadarko and Subcorp.
(a) As of March 31, 2000, Anadarko's authorized capital stock
consisted solely of (A) 300,000,000 shares of common stock, $0.10 par value
("Anadarko Common Shares"), of which (i) 130,079,024 shares were issued and
outstanding, (ii) no shares were issued and held in treasury (which does
not include Anadarko Common Shares reserved for issuance as set forth in
clause (iii)), (iii) 26,106,400 shares were reserved for issuance upon the
exercise or conversion of options, warrants or convertible securities
granted or issuable by Anadarko and (iv) 25,885,726 Anadarko Common Shares
were reserved for future issuance under the Stock Option Agreement dated
April 2, 2000, between UPR and Anadarko (the "Anadarko Stock Option
Agreement"), and (B) 2,000,000 shares of Preferred Stock, $1.00 par value,
of which (i) 200,000 shares of 5.46% Series B Cumulative Preferred Stock
were issued and outstanding and (ii) 200,000 shares have been designated as
Series C Junior Participating Preferred Stock were reserved for issuance
pursuant to the rights issued under the Agreement, dated as of October 29,
1998, between Anadarko and the Chase Manhattan Bank, as rights agent (the
"Anadarko Rights Agreement"). Each outstanding share of Anadarko capital
stock is, and all Anadarko Common Shares to be issued in connection with
the Merger will be, duly authorized and validly issued, fully paid and
nonassessable, and each outstanding share of Anadarko capital stock has not
been, and all Anadarko Common Shares to be issued in connection with the
Merger will not be, issued in violation of any preemptive or similar
rights. As of the date hereof, other than as set forth in the first
sentence hereof, in Section 3.4 to the Anadarko Disclosure Schedule or as
contemplated by the Anadarko Stock Option Agreement, there are no
outstanding subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type relating
to the issuance, sale, repurchase, transfer or registration by Anadarko of
any equity securities of Anadarko, nor are there outstanding any securities
that are convertible into or exchangeable for any shares of capital stock
of Anadarko and Anadarko has no obligation of any kind to issue any
additional securities. The issuance and sale of all of the shares of
capital stock described in this Section 3.3(a) have been in compliance with
federal and state securities laws. The Anadarko Common Shares (including
those Anadarko Common Shares to be issued in the Merger) are registered
under the Exchange Act. Other than pursuant to the Anadarko Stock Option
Agreement, Anadarko has not agreed to register any securities under the
Securities Act or under any state securities law or granted registration
rights to any person or entity (which rights are currently exercisable).
(b) Subcorp's authorized capital stock consists solely of 1,000 shares
of Subcorp Common Stock, of which, as of the date hereof, 100 shares were
issued and outstanding and none were reserved for issuance. As of the date
hereof, all of the outstanding shares of Subcorp Common Stock are owned
free and clear of any liens, claims or encumbrances by Anadarko.
3.5 Conflicts; Consents and Approval. Neither the execution and delivery of
this Agreement by Anadarko or Subcorp, or the Anadarko Stock Option Agreement by
Anadarko, nor the consummation of the transactions contemplated hereby will:
(a) conflict with, or result in a breach of any provision of the
Anadarko Certificate or the Anadarko By-laws or the Articles of
Incorporation or By-laws of Subcorp;
(b) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event that, with the giving of notice,
the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or
otherwise) to terminate, accelerate, modify or call a default under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Anadarko or any of its
subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license,
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contract, undertaking, agreement, lease or other instrument or obligation
to which Anadarko or any of its subsidiaries is a party;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Anadarko or any of its subsidiaries or any of
their respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by Anadarko or any of its affiliates with, any third
party or any local, domestic, foreign or multi-national court, arbitral
tribunal, administrative agency or commission or other governmental or
regulatory body, agency, instrumentality or authority (a "Governmental
Authority"), other than (i) approval by the Anadarko Stockholders of the
Share Issuance, (ii) authorization for inclusion of the Anadarko Common
Shares to be issued in the Merger and the transactions contemplated hereby
on the NYSE, subject to official notice of issuance, (iii) actions required
by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(together with the rules and regulations thereunder, the "HSR Act"), (iv)
registrations or other actions required under federal and state securities
laws as are contemplated by this Agreement, or (v) consents or approvals of
any Governmental Authority set forth in Section 3.5 to the Anadarko
Disclosure Schedule;
except in the case of clauses (b), (c) and (d) for any of the foregoing that
would not, individually or in the aggregate, have a Material Adverse Effect on
Anadarko or a material adverse effect on the ability of the parties hereto to
consummate the transactions contemplated hereby.
3.6 Brokerage and Finder's Fees. Except as set forth in Section 3.6 to the
Anadarko Disclosure Schedule, neither Anadarko nor any stockholder, director,
officer or employee thereof has incurred or will incur on behalf of Anadarko any
financial advisory, brokerage, finder's or similar fee in connection with the
transactions contemplated by this Agreement. Copies of all agreements relating
to such obligations have been provided to UPR.
3.7 Reorganization. To the knowledge of Anadarko and Subcorp, neither
Anadarko nor Subcorp, nor any of their affiliates has taken or agreed to take
any action that (without giving effect to any actions taken or agreed to be
taken by UPR or any of its affiliates) would prevent the Merger from
constituting a "reorganization" qualifying under the provisions of Section
368(a) of the Code.
3.8 No Material Adverse Change. Except as disclosed in the Anadarko SEC
Documents filed prior to the date of this Agreement, since January 1, 2000,
there has been no material adverse change in the business, assets, liabilities,
results of operations, financial condition or prospects of Anadarko and its
subsidiaries taken as a whole, or any event, occurrence or development that
would reasonably be expected to have a Material Adverse Effect on Anadarko or a
material adverse effect on the ability of Anadarko to consummate the
transactions contemplated hereby.
3.9 Anadarko SEC Documents. Anadarko has timely filed with the Commission
all forms, reports, schedules, statements and other documents required to be
filed by it since January 1, 1997 under the Exchange Act or the Securities Act
(such documents, as supplemented and amended since the time of filing,
collectively, the "Anadarko SEC Documents"). The Anadarko SEC Documents,
including, without limitation, any financial statements or schedules included
therein, at the time filed (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively and, in the case of any Anadarko SEC Document amended or superseded
by a filing prior to the date of this Agreement, then on the date of such
amending or superseding filing) (a) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and (b) complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be. The financial statements of Anadarko included in the
Anadarko SEC Documents at the time filed (and, in the case of registration
statements and proxy statements, on the dates of effectiveness and the dates of
mailing, respectively, and, in the case of any Anadarko SEC Document amended or
superseded by a filing prior to the date of this Agreement, then on
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the date of such amending or superseding filing) complied as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the Commission with respect thereto, were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q of
the Commission), and fairly present (subject, in the case of unaudited
statements, to normal, recurring audit adjustments) the consolidated financial
position of Anadarko and its consolidated subsidiaries as at the dates thereof
and the consolidated results of their operations and cash flows for the periods
then ended. No subsidiary of Anadarko is subject to the periodic reporting
requirements of the Exchange Act or required to file any form, report or other
document with the Commission, the NYSE, any other stock exchange or any other
comparable Governmental Authority.
3.10 Taxes.
(a) Anadarko and its subsidiaries have duly filed all material
federal, state, local and foreign income, franchise, excise, real and
personal property and other Tax Returns (as defined below) (including, but
not limited to, those filed on a consolidated, combined or unitary basis)
required to have been filed by Anadarko or its subsidiaries prior to the
date hereof. All of the foregoing Tax Returns and reports are true and
correct (except for such inaccuracies that are, individually or in the
aggregate, immaterial), and Anadarko and its subsidiaries have within the
time and manner prescribed by Applicable Law paid or, prior to the
Effective Time, will pay all Taxes (as defined below), interest and
penalties required to be paid in respect of the periods covered by such
returns or reports or otherwise due to any federal, state, foreign, local
or other taxing authority. Except as set forth in Section 3.10 to the
Anadarko Disclosure Schedule, neither Anadarko nor any of its subsidiaries
have any material liability for any Taxes in excess of the amounts so paid
or reserves so established and neither Anadarko nor any of its subsidiaries
is delinquent in the payment of any material Tax. Except as set forth in
Section 3.10 to the Anadarko Disclosure Schedule, neither Anadarko nor any
of its subsidiaries has requested or filed any document having the effect
of causing any extension of time within which to file any returns in
respect of any fiscal year which have not since been filed. No deficiencies
for any material Tax have been proposed in writing, asserted or assessed
(tentatively or definitely), in each case, by any taxing authority, against
Anadarko or any of its subsidiaries for which there are not adequate
reserves. Neither Anadarko nor any of its subsidiaries is the subject of
any currently ongoing Tax audit except for those that are, individually or
in the aggregate, immaterial. There are no pending requests for waivers of
the time to assess any material Tax, other than those made in the ordinary
course and for which payment has been made or there are adequate reserves.
Except as set forth in Section 3.10 to the Anadarko Disclosure Schedule,
neither Anadarko nor any of its subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency. There are no liens with respect
to material Taxes upon any of the properties or assets, real or personal,
tangible or intangible of Anadarko or any of its subsidiaries (other than
liens for Taxes not yet due). To the knowledge of Anadarko, no claim has
ever been made in writing by an authority in a jurisdiction where none of
Anadarko and its subsidiaries files Tax Returns that Anadarko or any of its
subsidiaries is or may be subject to taxation by that jurisdiction. Neither
Anadarko nor any of its subsidiaries has filed an election under Section
341(f) of the Code to be treated as a consenting corporation.
(b) Except as set forth in Section 3.10 to the Anadarko Disclosure
Schedule, neither Anadarko nor any of its subsidiaries is obligated by any
contract, agreement or other arrangement to indemnify any other person with
respect to material Taxes. Except as set forth in Section 3.10 to the
Anadarko Disclosure Schedule, neither Anadarko nor any of its subsidiaries
are now or have ever been a party to or bound by any agreement or
arrangement (whether or not written and including, without limitation, any
arrangement required or permitted by law) binding Anadarko or any of its
subsidiaries that (i) requires Anadarko or any of its subsidiaries to make
any Tax payment to or for the account of any other person, (ii) affords any
other person the benefit of any net operating loss, net capital loss,
investment Tax credit, foreign Tax credit, charitable deduction or any
other credit or Tax attribute
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which could reduce Taxes (including, without limitation, deductions and
credits related to alternative minimum Taxes) of Anadarko or any of its
subsidiaries, or (iii) requires or permits the transfer or assignment of
income, revenues, receipts or gains to Anadarko or any of its subsidiaries,
from any other person.
(c) Anadarko and its subsidiaries have withheld and paid all material
Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor,
shareholder or other third party.
(d) Neither Anadarko nor any of its subsidiaries is responsible for
any material Taxes of any other person (other than that of Anadarko and its
subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee, by contract,
or otherwise.
(e) Neither Anadarko nor any of its subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" (within
the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock
intended to qualify for tax-free treatment under Section 355 of the Code
(i) in the two years prior to the date of this Agreement (or will
constitute such a corporation in the two years prior to the date of the
Effective Time) or (ii) in a distribution which otherwise constitutes part
of a "plan" or "series of related transactions" (within the meaning of
Section 355(e) of the Code) in conjunction with the Merger.
(f) "Tax Returns" means returns, reports and forms required to be
filed with any Governmental Authority of the United States or any other
jurisdiction responsible for the imposition or collection of Taxes.
(g) "Taxes" means (i) all taxes (whether federal, state, local or
foreign) based upon or measured by income and any other tax whatsoever,
including, without limitation, gross receipts, profits, sales, use,
occupation, value added, ad valorem, transfer, franchise, withholding,
payroll, employment, excise, or property taxes, together with any interest
or penalties imposed with respect thereto and (ii) any obligations under
any agreements or arrangements with respect to any taxes described in
clause (i) above.
3.11 Compliance with Law. Anadarko is in compliance, and at all times since
January 1, 1997 has been in compliance, with all applicable laws, statutes,
orders, rules, regulations, policies or guidelines promulgated, or judgments,
decisions or orders entered by any Governmental Authority (collectively,
"Applicable Laws") relating to Anadarko or its business or properties, except
where the failure to be in compliance with such Applicable Laws, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on Anadarko. Except as set forth in Section 3.11 to the Anadarko
Disclosure Schedule, to the knowledge of Anadarko, no investigation or review by
any Governmental Authority with respect to Anadarko or its subsidiaries is
pending or threatened, nor has any Governmental Authority indicated in writing
an intention to conduct the same, other than those the outcome of which would
not reasonably be expected to have a Material Adverse Effect on Anadarko.
3.12 Registration Statement; Joint Proxy Statement. None of the information
provided by Anadarko for inclusion in the registration statement on Form S-4
(such registration statement as amended, supplemented or modified, the
"Registration Statement") to be filed with the Commission by Anadarko under the
Securities Act, including the prospectus relating to Anadarko Common Shares to
be issued in the Merger (as amended, supplemented or modified, the "Prospectus")
and the joint proxy statement and form of proxies relating to the vote of UPR
Stockholders with respect to the Merger and the vote of Anadarko Stockholders
with respect to the Share Issuance (as amended, supplemented or modified, the
"Joint Proxy Statement"), at the time the Registration Statement becomes
effective or, in the case of the Joint Proxy Statement, at the date of mailing
and at the date of the UPR Stockholders Meeting (as defined in Section 5.3(a))
or the Anadarko Stockholders Meeting (as defined in Section 5.2(a)) to consider
the Merger and the transactions contemplated thereby, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make
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the statements therein, in light of the circumstances under which they are made,
not misleading. The Registration Statement and Joint Proxy Statement, except for
such portions thereof that relate only to UPR or its subsidiaries, will each
comply as to form in all material respects with the provisions of the Securities
Act and the Exchange Act.
3.13 Litigation. Except as set forth in Section 3.13 to the Anadarko
Disclosure Schedule, there is no suit, claim, action, proceeding, hearing,
notice of violation, demand letter or investigation (an "Action") pending or, to
the knowledge of Anadarko (or its executive officers or directors), threatened
against Anadarko or any executive officer or director of Anadarko that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Anadarko or a material adverse effect on the ability
of Anadarko to consummate the transactions contemplated hereby. Anadarko is not
subject to any outstanding order, writ, injunction or decree that, individually
or in the aggregate, insofar as can be reasonably foreseen, would have a
Material Adverse Effect on Anadarko or a material adverse effect on the ability
of Anadarko to consummate the transactions contemplated hereby.
3.14 Anadarko Employee Benefit Plans.
(a) For purposes of this Agreement, the following terms have the
definitions given below:
"Anadarko Controlled Group Liability" means any and all liabilities
(i) under Title IV of ERISA, (ii) under section 302 of ERISA, (iii)
under sections 412 and 4971 of the Code, (iv) as a result of a failure
to comply with the continuation coverage requirements of section 601 et
seq. of ERISA and section 4980B of the Code, and (v) under corresponding
or similar provisions of foreign laws or regulations, other than such
liabilities that arise solely out of, or relate solely to, the Anadarko
Employee Benefit Plans listed in Section 3.14 of the Anadarko Disclosure
Schedule.
"Anadarko Employee Benefit Plans" means any Anadarko Employee
Benefit Plans, program, policy, practices, or other arrangement
providing benefits to any current or former employee, officer or
director of Anadarko or any of its subsidiaries or any beneficiary or
dependent thereof that is sponsored or maintained by Anadarko or any of
its subsidiaries or to which Anadarko or any of its subsidiaries
contributes or is obligated to contribute, whether or not written,
including without limitation any employee welfare benefit plan within
the meaning of Section 3(1) of ERISA, any employee pension benefit plan
within the meaning of Section 3(2) of ERISA (whether or not such plan is
subject to ERISA) and any bonus, incentive, deferred compensation,
vacation, stock purchase, stock option, severance, employment, change of
control or fringe benefit plan, program or agreement.
"Anadarko Employment Agreement" means a contract, offer letter or
agreement of Anadarko or any subsidiary with or addressed to any
individual who is rendering or has rendered services thereto as an
employee or consultant pursuant to which Anadarko or any subsidiary has
any actual or contingent liability or obligation to provide compensation
and/or benefits in consideration for past, present or future services.
"Anadarko Material Employment Agreement" means an Anadarko
Employment Agreement pursuant to which Anadarko or any subsidiary has or
could have any obligation to provide compensation and/or benefits
(including without limitation severance pay or benefits) in an amount or
having a value in excess of $100,000 per year or $500,000 in the
aggregate.
"Anadarko Plan" means any Anadarko Employee Benefit Plans other
than a Multiemployer Plan.
"ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a
group described in Section 414(b), (c), (m) or (o) of the Code or
Section 4001(b)(1) of ERISA that includes the first entity, trade or
business, or that is a member of the same "controlled group" as the
first entity, trade or business pursuant to Section 4001(a)(14) of
ERISA.
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"Multiemployer Plan" means any "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan,
as those terms are defined in Part I of Subtitle E of Title IV of ERISA.
(a) Section 3.14(a) to the Anadarko Disclosure Schedule includes a
complete list of all material Anadarko Employee Benefit Plans and all
Anadarko Material Employment Agreements.
(b) With respect to each Anadarko Plan, Anadarko has delivered or made
available to UPR a true, correct and complete copy of: (i) each writing
constituting a part of such Anadarko Plan, including without limitation all
plan documents, employee communications, benefit schedules, trust
agreements, and insurance contracts and other funding vehicles; (ii) the
most recent Annual Report (Form 5500 Series) and accompanying schedule, if
any; (iii) the current summary plan description and any material
modifications thereto, if any (in each case, whether or not required to be
furnished under ERISA); (iv) the most recent annual financial report, if
any; (v) the most recent actuarial report, if any; and (vi) the most recent
determination letter from the Internal Revenue Service, if any. Anadarko
has delivered or made available to UPR a true, complete and correct copy of
each Anadarko Material Employment Agreement. Except as specifically
provided in the foregoing documents delivered or made available to UPR,
there are no amendments to any Anadarko Plan or Anadarko Material
Employment Agreement that have been adopted or approved nor has Anadarko or
any of its subsidiaries undertaken to make any such amendments or to adopt
or approve any new Anadarko Plan or Anadarko Material Employment Agreement.
(c) Section 3.14(c) to the Anadarko Disclosure Schedule identifies
each Anadarko Plan that is intended to be a "qualified plan" within the
meaning of Section 401(a) of the Code ("Anadarko Qualified Plans"). The
Internal Revenue Service has issued a favorable determination letter with
respect to each Anadarko Qualified Plan and the related trust that has not
been revoked, and there are no circumstances and, to the knowledge of
Anadarko, no events have occurred that could adversely affect the qualified
status of any Anadarko Qualified Plan or the related trust. Section 3.14(c)
to the Anadarko Disclosure Schedule identifies each Anadarko Plan which is
intended to meet the requirements of Code Section 501(c)(9), and each such
plan meets such requirements.
(d) All material contributions required to be made to any Anadarko
Plan by applicable law or regulation or by any plan document or other
contractual undertaking, and all material premiums due or payable with
respect to insurance policies funding any Anadarko Plan, for any period
through the date hereof have been timely made or paid in full or, to the
extent not required to be made or paid on or before the date hereof, either
(i) have been fully reflected on the financial statements included in the
Anadarko SEC Documents, or (ii) items omitted from the Anadarko SEC
Documents could not reasonably be expected to have a Material Adverse
Effect on Anadarko. Each Anadarko Employee Benefit Plan that is an employee
welfare benefit plan under Section 3(1) of ERISA is either (i) funded
through an insurance company contract and is not a "welfare benefit fund"
with the meaning of Section 419 of the Code or (ii) unfunded.
(e) Except as set forth in Section 3.13(e) to the Anadarko Disclosure
Schedule, with respect to each Anadarko Employee Benefit Plan, Anadarko and
its subsidiaries have complied, and are now in compliance, in all material
respects, with all provisions of ERISA, the Code and all laws and
regulations applicable to such Anadarko Employee Benefit Plans and each
Anadarko Employee Benefit Plan has been administered in all material
respects in accordance with its terms. There is not now, nor, to the
knowledge of Anadarko, do any circumstances currently exist that could give
rise to, any requirement for the posting of security with respect to an
Anadarko Plan or the imposition of any lien on the assets of Anadarko or
any of its subsidiaries under ERISA or the Code.
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(f) With respect to each Anadarko Plan that is subject to Title IV or
Section 302 of ERISA or Section 412 or 4971 of the Code: (i) there does not
exist any accumulated funding deficiency within the meaning of Section 412
of the Code or Section 302 of ERISA, whether or not waived; (ii) no
reportable event within the meaning of Section 4043(c) of ERISA for which
the 30-day notice requirement has not been waived has occurred, and the
consummation of the transactions contemplated by this agreement will not
result in the occurrence of any such reportable event; (iii) all premiums
to the Pension Benefit Guaranty Corporation (the "PBGC") have been timely
paid in full; (iv) no liability (other than for premiums to the PBGC) under
Title IV of ERISA has been or is expected to be incurred by Anadarko or any
of its subsidiaries; and (v) the PBGC has not instituted proceedings to
terminate any such Anadarko Plan and, to Anadarko's knowledge, no condition
exists that presents a risk that such proceedings will be instituted or
which would constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any such
Anadarko Plan.
(g) (i) No Anadarko Employee Benefit Plan is a Multiemployer Plan or a
plan that has two or more contributing sponsors at least two of whom are
not under common control, within the meaning of Section 4063 of ERISA (a
"Multiple Employer Plan"); (ii) none of Anadarko and its subsidiaries nor
any of their respective ERISA Affiliates has, at any time during the last
six years, contributed to or been obligated to contribute to any
Multiemployer Plan or Multiple Employer Plan; and (iii) none of Anadarko
and its subsidiaries nor any of their respective ERISA Affiliates has
incurred any material Withdrawal Liability that has not been satisfied in
full. With respect to each Anadarko Plan that is a Multiemployer Plan: (i)
if Anadarko or any of its subsidiaries or any of their respective ERISA
Affiliates were to experience a withdrawal or partial withdrawal from such
plan, no material Withdrawal Liability would be incurred; and (ii) none of
Anadarko and its subsidiaries, nor any of their respective ERISA Affiliates
has received any notification, nor does Anadarko have any knowledge, that
any such Anadarko Plan is in reorganization, has been terminated, is
insolvent, or may reasonably be expected to be in reorganization, to be
insolvent, or to be terminated.
(h) There does not now exist, nor, to the knowledge of Anadarko, do
any circumstances exist that could reasonably be expected to result in, any
material Anadarko Controlled Group Liability that would be a liability of
Anadarko or any of its subsidiaries following the Closing. Without limiting
the generality of the foregoing, neither Anadarko nor any of its
subsidiaries, nor any of their respective ERISA Affiliates, has engaged in
any transaction described in Section 4069 or Section 4204 or 4212 of ERISA.
(i) Section 3.14(i) to the Anadarko Disclosure Schedule sets forth a
list of each Anadarko Employment Agreement under which the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby could (either alone or in conjunction with any other
event) result in, cause the accelerated vesting, funding or delivery of, or
materially increase the amount or value of, any payment or benefit to any
employee, officer or director of Anadarko or any of its subsidiaries, or
could limit the right of Anadarko or any of its subsidiaries to amend,
merge, terminate or receive a reversion of assets from any Anadarko
Employee Benefit Plan or related trust or any Anadarko Material Employment
Agreement or related trust.
(j) None of Anadarko and its subsidiaries nor, to the knowledge of
Anadarko, any other person, including any fiduciary, has engaged in any
"prohibited transaction" (as defined in Section 4975 of the Code or Section
406 of ERISA), which could subject any of the Anadarko Employee Benefit
Plans or their related trusts, Anadarko, any of its subsidiaries or any
person that Anadarko or any of its subsidiaries has an obligation to
indemnify, to any material tax or material penalty imposed under Section
4975 of the Code or Section 502 of ERISA.
(k) Except as set forth in Section 3.14(k) to the Anadarko Disclosure
Schedule, there are no pending or threatened claims (other than claims for
benefits in the ordinary course), lawsuits or arbitrations which have been
asserted or instituted, and to Anadarko's knowledge, no set of
circumstances exists which may reasonably give rise to a claim or lawsuit,
against the Anadarko
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Plans, any fiduciaries thereof with respect to their duties to the Anadarko
Plans or the assets of any of the trusts under any of the Anadarko Plans
which could reasonably be expected to result in any material liability of
Anadarko or any of its subsidiaries to the PBGC, the Department of
Treasury, the Department of Labor, any Multiemployer Plan, any Anadarko
Plan or any participant in an Anadarko Plan.
(l) Anadarko, its subsidiaries and each member of their respective
business enterprises have in all material respects complied with the Worker
Adjustment and Retraining Notification Act and in all material respects,
with all similar state, local and foreign laws.
(m) All Anadarko Employee Benefit Plans subject to the laws of any
jurisdiction outside of the United States (i) have been maintained in
accordance with all applicable requirements, (ii) if they are intended to
qualify for special tax treatment, meet all requirements for such
treatment, and (iii) if they are intended to be funded and/or book-reserved
are funded and/or book-reserved in all material respects, as appropriate,
based upon reasonable actuarial assumptions.
3.15 Contracts. All written or oral contracts, agreements, guarantees,
leases and executory commitments other than Anadarko Plans to which Anadarko or
its subsidiaries is a party or by which its assets are bound which are material
to Anadarko (each an "Anadarko Contract"), are valid and binding obligations of
Anadarko and, to the knowledge of Anadarko, the valid and binding obligation of
each other party thereto except such Anadarko Contracts that if not so valid and
binding would not, individually or in the aggregate, have a Material Adverse
Effect on Anadarko. Neither Anadarko nor, to the knowledge of Anadarko, any
other party thereto is in violation of or in default in respect of, nor has
there occurred an event or condition that with the passage of time or giving of
notice (or both) would constitute a default under or permit the termination of,
any such Anadarko Contract except such violations or defaults under or
terminations that, individually or in the aggregate, would not have a Material
Adverse Effect on Anadarko.
3.16 Labor Matters. Anadarko does not have any labor contracts or
collective bargaining agreements with any persons employed by Anadarko or any
persons otherwise performing services primarily for Anadarko. There is no labor
strike, dispute or stoppage pending or, to the knowledge of Anadarko, threatened
against Anadarko, and Anadarko has not experienced any labor strike, dispute or
stoppage or other material labor difficulty involving its employees since
January 1, 1998. To the knowledge of Anadarko, since January 1, 1998, no
campaign or other attempt for recognition has been made by any labor
organization or employees with respect to employees of Anadarko or any of its
subsidiaries.
3.17 Undisclosed Liabilities. Except (i) as and to the extent disclosed or
reserved against on the balance sheet of Anadarko as of December 31, 1999
included in the Anadarko SEC Documents, or (ii) as incurred after the date
thereof in the ordinary course of business consistent with prior practice and
not prohibited by this Agreement, Anadarko does not have any liabilities or
obligations of any nature, whether absolute, accrued, contingent or otherwise
and whether due or to become due, that, individually or in the aggregate, have
had or would reasonably be expected to have a Material Adverse Effect on
Anadarko.
3.18 Permits; Compliance. Anadarko is in possession of all material
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted (collectively, the "Anadarko Permits"), and there is no Action pending
or, to the knowledge of Anadarko, threatened regarding any of the Anadarko
Permits. Anadarko is not in conflict with, or in default or violation of any of
the Anadarko Permits, except for any such conflicts, defaults or violations
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on Anadarko.
3.19 Environmental Matters. Except as disclosed in the Anadarko SEC
Documents, (i) the properties, operations and activities of Anadarko and its
subsidiaries are in compliance with all applicable Environmental Laws (as
defined below) and all past noncompliance of Anadarko or any Anadarko subsidiary
with any Environmental Laws or Environmental Permits (as defined below), has
been resolved without any pending, ongoing or future obligation, cost or
liability; (ii) Anadarko and its subsidiaries and
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the properties and operations of Anadarko and its subsidiaries are not subject
to any existing, pending or, to the knowledge of Anadarko, threatened Action by
or before any court or Governmental Authority under any Environmental Law; (iii)
except as allowed by Environmental Permits or Environmental Laws, there has been
no release of any hazardous substance, pollutant or contaminant into the
environment by Anadarko or its subsidiaries or in connection with their
properties or operations; and (iv) except as allowed by Environmental Permits or
Environmental Laws, there has been no exposure of any person or property to any
hazardous substance, pollutant or contaminant in connection with the properties,
operations and activities of Anadarko and its subsidiaries, in each case, other
than those matters that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect on Anadarko. The term
"Environmental Laws" means all federal, state, local or foreign laws relating to
pollution, or protection of human health from Hazardous Materials (as defined
below) or the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata), including, without
limitation, laws relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, or industrial, toxic or
hazardous substances or wastes (collectively, "Hazardous Materials") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, injunctions, judgments, licenses,
notices, orders, permits, plans or regulations issued, entered, promulgated or
approved thereunder. "Environmental Permit" means any permit, approval, license
or other authorization required under or issued pursuant to any applicable
Environmental Law.
3.20 Opinion of Financial Advisor. Anadarko has received the written
opinion of Credit Suisse First Boston Corporation, its financial advisor (the
"Anadarko Financial Advisor"), to the effect that, as of the date of this
Agreement, the Exchange Ratio is fair to Anadarko from a financial point of
view. Anadarko has heretofore provided copies of such opinion to UPR and such
opinion has not been withdrawn or revoked or modified in any material respect.
3.21 Board Recommendation; Required Vote. The Board of Directors of
Anadarko, at a meeting duly called and held, has by unanimous vote of those
directors present (i) determined that this Agreement and the transactions
contemplated hereby, including the Merger, and the Anadarko Stock Option
Agreement and the transactions contemplated thereby, taken together, are fair to
and in the best interests of Anadarko and the Anadarko Stockholders, and (ii)
resolved to recommend that the Anadarko Stockholders approve and authorize the
Share Issuance and the Anadarko Board Amendment (as defined in Section 5.2(h))
(the "Anadarko Board Recommendation"). The affirmative vote of holders of a
majority of the Anadarko Common Shares present and voting at the Anadarko
Stockholders Meeting to approve the Share Issuance and the affirmative vote of
holders of 80% of the outstanding Anadarko Common Shares to approve the Anadarko
Board Amendment are the only votes of the Anadarko Stockholders necessary to
adopt this Agreement and approve the transactions contemplated hereby.
3.22 State Takeover Laws; Rights Agreement. Prior to the execution of this
Agreement, the Board of Directors of Anadarko has taken all action necessary to
exempt under or make not subject to any state takeover law or state law that
purports to limit or restrict business combinations or the ability to acquire or
vote shares: (i) the execution of this Agreement, and the Anadarko Stock Option
Agreement, (ii) the Merger and (iii) the transactions contemplated hereby and by
the Anadarko Stock Option Agreement. The Anadarko Rights Agreement has been
amended so that UPR is exempt from the definition of "Acquiring Person"
contained in the Anadarko Rights Agreement and no "Shares Acquisition Date" or
"Distribution Date" (as such terms are defined in the Anadarko Rights Agreement)
will occur as a result of the execution of the Anadarko Stock Option Agreement
or the acquisition or transfer of Anadarko Common Shares by UPR pursuant to the
Anadarko Stock Option Agreement. Copies of all such amendments to the Anadarko
Rights Agreement have been previously provided to UPR.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF UPR
In order to induce Subcorp and Anadarko to enter into this Agreement, UPR
hereby represents and warrants to Anadarko and Subcorp that the statements
contained in this Article IV are true, correct and complete, subject to, in each
of the following representations to the specified section of the disclosure
schedule delivered by UPR to Anadarko and dated the date hereof (the "UPR
Disclosure Schedule") provided that items listed in any Section to the UPR
Disclosure Schedule shall apply only to the corresponding section of this
Agreement (except to the extent that there is a specific cross-reference to
another section of the UPR Disclosure Schedule).
4.1 Organization and Standing. UPR is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah with full
corporate power and authority to own, lease, use and operate its properties and
to conduct its business as and where now owned, leased, used, operated and
conducted. Each of UPR and each subsidiary of UPR is duly qualified to do
business and in good standing in each jurisdiction in which the nature of the
business conducted by it or the property it owns, leases or operates requires it
to so qualify, except where the failure to be so qualified or in good standing
in such jurisdiction would not have a Material Adverse Effect on UPR. UPR is not
in default in the performance, observance or fulfillment of any provision of its
Amended and Restated Articles of Incorporation (the "UPR Articles"), or its
By-laws, as in effect on the date hereof (the "UPR Bylaws"). UPR has heretofore
furnished to Anadarko a complete and correct copy of the UPR Articles and the
UPR Bylaws.
4.2 Subsidiaries and Investments. UPR does not own, directly or indirectly,
any equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise, except for its subsidiaries and other
entities, in each case set forth in Section 4.2 to the UPR Disclosure Schedule.
Section 4.2 of the UPR Disclosure Schedule specifically identifies each of UPR's
"significant subsidiaries" as defined in Rule 1-02(w) of Regulation S-X (the
subsidiaries so identified the "Significant Subsidiaries"). UPR owns, directly
or indirectly, each of the outstanding shares of capital stock (or other
ownership interests having by their terms ordinary voting power to elect a
majority of directors or others performing similar functions with respect to
such subsidiary) of each of UPR's Significant Subsidiaries. Each of the
outstanding shares of capital stock of each of UPR's Significant Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable, and is owned,
directly or indirectly, by UPR free and clear of all liens, pledges, security
interests, claims or other encumbrances. With respect to UPR's subsidiaries
other than the Significant Subsidiaries, to the extent the outstanding shares of
capital stock of each of such Subsidiaries are not (i) duly authorized, validly
issued, fully paid and nonassessable, or (ii) owned, directly or indirectly, by
UPR free and clear of all liens, pledges, security interests, claims or other
encumbrances, there is not, and there could not reasonably be expected to be,
any material impact on the business and operations of UPR and its subsidiaries
taken as a whole. There are no outstanding subscriptions, options, warrants,
puts, calls, agreements, understandings, claims or other commitments or rights
of any type relating to the issuance, sale or transfer of any securities of any
subsidiary of UPR, nor are there outstanding any securities that are convertible
into or exchangeable for any shares of capital stock of any subsidiary of UPR,
and neither UPR nor any subsidiary of UPR has any obligation of any kind to
issue any additional securities or to pay for or repurchase any securities of
any subsidiary of UPR or any predecessor thereof.
4.3 Corporate Power and Authority. UPR has all requisite corporate power
and authority to enter into and deliver this Agreement, to perform its
obligations hereunder and, subject to authorization of the Merger and the
transactions contemplated hereby by UPR Stockholders, to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby by UPR
have been duly authorized by all necessary corporate action on the part of UPR,
subject to authorization of the Merger and the transactions contemplated hereby
by UPR Stockholders. This Agreement has been duly executed and delivered by UPR
and constitutes the legal, valid and binding obligation of UPR enforceable
against it in accordance with its terms.
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4.4 Capitalization of UPR. As of March 31, 2000, UPR's authorized capital
stock consisted solely of (a) 400,000,000 shares of common stock ("UPR Common
Stock"), of which (i) 251,952,336 shares were issued and outstanding, (ii)
4,277,293 shares were issued and held by UPR (which does not include shares of
UPR Common Stock reserved for issuance set forth in clause (iii) below), (iii)
11,194,329 shares were reserved for issuance upon the exercise of outstanding
UPR Options, and (iv) 50,138,515 shares of UPR Common Stock were reserved for
future issuance under the Stock Option Agreement dated April 2, 2000 between
Anadarko and UPR (the "UPR Stock Option Agreement"); and (b) 100,000,000 shares
of preferred stock, of which (i) none was issued and outstanding, and (ii)
3,000,000 shares have been designated as Series A Junior Participating Preferred
Stock reserved for issuance pursuant to the rights issued under the UPR Rights
Agreement (as defined in Section 4.22). Since March 31, 2000, UPR has not issued
any additional shares of capital stock except for the issuance of UPR Common
Stock in connection with the exercise of UPR Options and the issuance of UPR
Common Stock in respect of awards outstanding on the date of this Agreement
under the Executive Deferred Compensation Plan and the Deferred Compensation
Plan for the Board of Directors. Each outstanding share of UPR capital stock is
duly authorized and validly issued, fully paid and nonassessable, and has not
been issued in violation of any preemptive or similar rights. Other than as set
forth in the first sentence hereof or as contemplated by the UPR Stock Option
Agreement, there are no outstanding subscriptions, options, warrants, puts,
calls, agreements, understandings, claims or other commitments or rights of any
type relating to the issuance, sale, repurchase or transfer of any securities of
UPR, nor are there outstanding any securities which are convertible into or
exchangeable for any shares of capital stock of UPR, and neither UPR nor any
subsidiary of UPR has any obligation of any kind to issue any additional
securities or to pay for or repurchase any securities of UPR or any predecessor.
The issuance and sale of all of the shares of capital stock described in this
Section 4.4 have been in compliance with federal and state securities laws and
the UPR Common Stock is registered under the Exchange Act. UPR has previously
provided Anadarko with a schedule setting forth the number of shares of each
class (including the number of shares issuable upon exercise of UPR Options and
the exercise price and the grant date with respect thereto) held by all holders
of options to purchase UPR capital stock. Other than pursuant to the UPR Stock
Option Agreement, UPR has not agreed to register any securities under the
Securities Act or under any state securities law or granted registration rights
to any person or entity; copies of all such agreements have previously been
provided to Anadarko.
4.5 Conflicts; Consents and Approvals. Neither the execution and delivery
of this Agreement or the UPR Stock Option Agreement by UPR, nor the consummation
of the transactions contemplated hereby or thereby will:
(a) conflict with, or result in a breach of any provision of, the UPR
Articles or the UPR Bylaws;
(b) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event that, with the giving of notice,
the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or
otherwise) to terminate, accelerate, modify or call a default under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of UPR or any of its
subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, contract, undertaking,
agreement, lease or other instrument or obligation to which UPR or any of
its subsidiaries is a party;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to UPR or any of its subsidiaries or any of their
respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by UPR or any of its affiliates with, any third
party or any Governmental Authority, other than (i) authorization of the
Merger and the transactions contemplated hereby by UPR Stockholders, (ii)
actions required by the HSR Act, (iii) registrations or other actions
required under federal and state securities laws as are contemplated by
this Agreement and (iv) consents or approvals of any Governmental
Authority;
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except in the case of clauses (b), (c) and (d) for any of the foregoing that
would not, individually or in the aggregate, have a Material Adverse Effect on
UPR or a material adverse effect on the ability of the parties hereto to
consummate the transaction contemplated hereby.
4.6 Brokerage and Finder's Fees. Except for UPR's obligations to Goldman,
Sachs & Co. and Simmons & Company (the "UPR Financial Advisors") (copies of all
agreements relating to such obligations having previously been provided to
Anadarko), neither UPR nor any stockholder, director, officer or employee
thereof, has incurred or will incur on behalf of UPR, any financial advisory,
brokerage, finder's or similar fee in connection with the transactions
contemplated by this Agreement.
4.7 Reorganization. To the knowledge of UPR, neither UPR nor any of its
affiliates has taken or agreed to take any action that (without giving effect to
any actions taken or agreed to be taken by Anadarko or any of its affiliates)
would prevent the Merger from constituting a "reorganization" qualifying under
the provisions of Section 368(a) of the Code.
4.8 No Material Adverse Change. As disclosed in the UPR SEC Documents
filed prior to the date of this Agreement, since January 1, 2000, there has been
no material adverse change in the business, assets, liabilities, results of
operations, financial condition or prospects of UPR and its subsidiaries taken
as a whole, or any event, occurrence or development that would reasonably be
expected to have a Material Adverse Effect on UPR or a material adverse effect
on the ability of UPR to consummate the transactions contemplated hereby.
4.9 UPR SEC Documents. UPR has timely filed with the Commission all forms,
reports, schedules, statements and other documents required to be filed by it
since January 1, 1997 under the Exchange Act or the Securities Act (such
documents, as supplemented and amended since the time of filing, collectively,
the "UPR SEC Documents"). The UPR SEC Documents, including, without limitation,
any financial statements or schedules included therein, at the time filed (and,
in the case of registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively and, in the case of any UPR
SEC Document amended or superseded by a filing prior to the date of this
Agreement, then on the date of such amending or superseding filing) (a) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be. The
financial statements of UPR included in the UPR SEC Documents at the time filed
(and, in the case of registration statements and proxy statements, on the dates
of effectiveness and the dates of mailing, respectively, and, in the case of any
UPR SEC Document amended or superseded by a filing prior to the date of this
Agreement, then on the date of such amending or superseding filing) complied as
to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the Commission with respect thereto,
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q of the Commission), and fairly present (subject, in the
case of unaudited statements, to normal, recurring audit adjustments) the
consolidated financial position of UPR and its consolidated subsidiaries as at
the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended. No subsidiary of UPR is subject to the
periodic reporting requirements of the Exchange Act or required to file any
form, report or other document with the Commission, the NYSE, any other stock
exchange or any other comparable Governmental Authority.
4.10 Taxes.
(a) UPR and its subsidiaries have duly filed all material federal,
state, local and foreign income, franchise, excise, real and personal
property and other Tax Returns (including, but not limited to, those filed
on a consolidated, combined or unitary basis) required to have been filed
by UPR or its subsidiaries prior to the date hereof. All of the foregoing
Tax Returns and reports are true and correct (except for such inaccuracies
that are, individually or in the aggregate, immaterial), and UPR and its
subsidiaries have within the time and manner prescribed by Applicable Law
paid or, prior to the
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Effective Time, will pay all Taxes, interest and penalties required to be
paid in respect of the periods covered by such returns or reports or
otherwise due to any federal, state, foreign, local or other taxing
authority. Neither UPR nor any of its subsidiaries have any material
liability for any Taxes in excess of the amounts so paid or reserves so
established and neither UPR nor any of its subsidiaries is delinquent in
the payment of any material Tax. Neither UPR nor any of its subsidiaries
has requested or filed any document having the effect of causing any
extension of time within which to file any returns in respect of any fiscal
year which have not since been filed. No deficiencies for any material Tax
have been proposed in writing, asserted or assessed (tentatively or
definitely), in each case, by any taxing authority, against UPR or any of
its subsidiaries for which there are not adequate reserves. Neither UPR nor
any of its subsidiaries is the subject of any currently ongoing Tax audit
except for those that are, individually or in the aggregate, immaterial.
There are no pending requests for waivers of the time to assess any
material Tax, other than those made in the ordinary course and for which
payment has been made or there are adequate reserves. Neither UPR nor any
of its subsidiaries has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment
or deficiency. There are no liens with respect to material Taxes upon any
of the properties or assets, real or personal, tangible or intangible of
UPR or any of its subsidiaries (other than liens for Taxes not yet due). To
the knowledge of UPR, no claim has ever been made in writing by an
authority in a jurisdiction where none of UPR and its subsidiaries files
Tax Returns that UPR or any of its subsidiaries is or may be subject to
taxation by that jurisdiction. Neither UPR nor any of its subsidiaries has
filed an election under Section 341(f) of the Code to be treated as a
consenting corporation.
(b) Neither UPR nor any of its subsidiaries is obligated by any
contract, agreement or other arrangement to indemnify any other person with
respect to material Taxes. Neither UPR nor any of its subsidiaries are now
or have ever been a party to or bound by any agreement or arrangement
(whether or not written and including, without limitation, any arrangement
required or permitted by law) binding UPR or any of its subsidiaries that
(i) requires UPR or any of its subsidiaries to make any Tax payment to or
for the account of any other person, (ii) affords any other person the
benefit of any net operating loss, net capital loss, investment Tax credit,
foreign Tax credit, charitable deduction or any other credit or Tax
attribute which could reduce Taxes (including, without limitation,
deductions and credits related to alternative minimum Taxes) of UPR or any
of its subsidiaries, or (iii) requires or permits the transfer or
assignment of income, revenues, receipts or gains to UPR or any of its
subsidiaries, from any other person.
(c) UPR and its subsidiaries have withheld and paid all material Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, shareholder or
other third party.
(d) Neither UPR nor any of its subsidiaries is responsible for any
material Taxes of any other person under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee, by contract, or otherwise.
(e) Neither UPR nor any of its subsidiaries has constituted either a
"distributing corporation" or a "controlled corporation" (within the
meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock
intended to qualify for tax-free treatment under Section 355 of the Code
(i) in the two years prior to the date of this Agreement (or will
constitute such a corporation in the two years prior to the date of the
Effective Time) or (ii) in a distribution which otherwise constitutes part
of a "plan" or "series of related transactions" (within the meaning of
Section 355(e) of the Code) in conjunction with the Merger.
4.11 Compliance with Law. UPR is in compliance, and at all times since
January 1, 1997 has been in compliance, with all Applicable Laws relating to UPR
or its business or properties, except where the failure to be in compliance with
such Applicable Laws, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on UPR. To the knowledge of UPR, no
investigation or review by any Governmental Authority with respect to UPR is
pending or threatened, nor
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has any Governmental Authority indicated in writing an intention to conduct the
same, other than those the outcome of which would not reasonably be expected to
have a Material Adverse Effect on UPR.
4.12 Registration Statement; Joint Proxy Statement. None of the
information provided by UPR for inclusion in the Registration Statement at the
time it becomes effective and, in the case of the Joint Proxy Statement, at the
date of mailing and at the date of the UPR Stockholders Meeting or the Anadarko
Stockholders Meeting, will contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Registration Statement and Joint Proxy
Statement, except for such portions thereof that relate only to Anadarko or its
subsidiaries, will each comply as to form in all material respects with the
provisions of the Securities Act and the Exchange Act.
4.13 Litigation. There is no Action pending or, to the knowledge of UPR,
threatened against UPR or any executive officer or director of UPR that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on UPR or a material adverse effect on the ability of
UPR to consummate the transactions contemplated hereby. UPR is not subject to
any outstanding order, writ, injunction or decree that, individually or in the
aggregate, insofar as can be reasonably foreseen, would have a Material Adverse
Effect on UPR or a material adverse effect on the ability of UPR to consummate
the transactions contemplated hereby.
4.14 UPR Employee Benefit Plans
(a) For purposes of this Agreement, the following terms have the
definitions given below:
"UPR Controlled Group Liability" means any and all liabilities (i)
under Title IV of ERISA, (ii) under section 302 of ERISA, (iii) under
sections 412 and 4971 of the Code, (iv) as a result of a failure to
comply with the continuation coverage requirements of section 601 et
seq. of ERISA and section 4980B of the Code, and (v) under corresponding
or similar provisions of foreign laws or regulations, other than such
liabilities that arise solely out of, or relate solely to, the UPR
Employee Benefit Plans listed in Section 4.14 of the UPR Disclosure
Schedule.
"UPR Employee Benefit Plan" means any UPR Employee Benefit Plan,
program, policy, practices, or other arrangement providing benefits to
any current or former employee, officer or director of UPR or any of its
subsidiaries or any beneficiary or dependent thereof that is sponsored
or maintained by UPR or any of its subsidiaries or to which UPR or any
of its subsidiaries contributes or is obligated to contribute, whether
or not written, including without limitation any employee welfare
benefit plan within the meaning of Section 3(1) of ERISA, any employee
pension benefit plan within the meaning of Section 3(2) of ERISA
(whether or not such plan is subject to ERISA) and any bonus, incentive,
deferred compensation, vacation, stock purchase, stock option,
severance, employment, change of control or fringe benefit plan, program
or agreement.
"UPR Employment Agreement" means a contract, offer letter or
agreement of UPR or any subsidiary with or addressed to any individual
who is rendering or has rendered services thereto as an employee or
consultant pursuant to which UPR or any subsidiary has any actual or
contingent liability or obligation to provide compensation and/or
benefits in consideration for past, present or future services.
"UPR Material Employment Agreement" means an UPR Employment
Agreement pursuant to which UPR or any subsidiary has or could have any
obligation to provide compensation and/or benefits (including without
limitation severance pay or benefits) in an amount or having a value in
excess of $100,000 per year or $500,000 in the aggregate.
"UPR Plan" means any UPR Employee Benefit Plan other than a
Multiemployer Plan.
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(a) Section 4.14(a) to the UPR Disclosure Schedule includes a complete
list of all material UPR Employee Benefit Plans and all UPR Material
Employment Agreements.
(b) With respect to each UPR Plan, UPR has delivered or made available
to Anadarko a true, correct and complete copy of: (i) each writing
constituting a part of such UPR Plan, including without limitation all plan
documents, employee communications, benefit schedules, trust agreements,
and insurance contracts and other funding vehicles; (ii) the most recent
Annual Report (Form 5500 Series) and accompanying schedule, if any; (iii)
the current summary plan description and any material modifications
thereto, if any (in each case, whether or not required to be furnished
under ERISA); (iv) the most recent annual financial report, if any; (v) the
most recent actuarial report, if any; and (vi) the most recent
determination letter from the Internal Revenue Service, if any. UPR has
delivered or made available to Anadarko a true, complete and correct copy
of each UPR Material Employment Agreement. Except as specifically provided
in the foregoing documents delivered or made available to Anadarko, there
are no amendments to any UPR Plan or UPR Material Employment Agreement that
have been adopted or approved.
(c) Section 4.14(c) to the UPR Disclosure Schedule identifies each UPR
Plan that is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Code ("UPR Qualified Plans"). The Internal Revenue
Service has issued a favorable determination letter with respect to each
UPR Qualified Plan and the related trust that has not been revoked, or such
a letter will be timely applied for, and, to the knowledge of UPR, there
are no circumstances and no events have occurred that could adversely
affect the qualified status of any UPR Qualified Plan or the related trust.
Section 4.14(c) to the UPR Disclosure Schedule identifies each UPR Plan
which is intended to meet the requirements of Code Section 501(c)(9), and
each such plan meets such requirements.
(d) All material contributions required to be made to any UPR Plan by
applicable law or regulation or by any plan document or other contractual
undertaking, and all material premiums due or payable with respect to
insurance policies funding any UPR Plan, for any period through the date
hereof have been timely made or paid in full or, to the extent not required
to be made or paid on or before the date hereof, either (i) have been fully
reflected on the financial statements included in the UPR SEC Documents, or
(ii) items omitted from the UPR SEC Documents could not reasonably be
expected to have a Material Adverse Effect on UPR. Each UPR Employee
Benefit Plan that is an employee welfare benefit plan under Section 3(1) of
ERISA is either (i) funded through an insurance company contract and is not
a "welfare benefit fund" with the meaning of Section 419 of the Code or
(ii) unfunded.
(e) With respect to each UPR Employee Benefit Plan, UPR and its
subsidiaries have complied, and are now in compliance, in all material
respects, with all provisions of ERISA, the Code and all laws and
regulations applicable to such UPR Employee Benefit Plans and each UPR
Employee Benefit Plan has been administered in all material respects in
accordance with its terms. There is not now, nor, to the knowledge of UPR,
do any circumstances currently exist that could give rise to, any
requirement for the posting of security with respect to a UPR Plan or the
imposition of any lien on the assets of UPR or any of its subsidiaries
under ERISA or the Code.
(f) With respect to each UPR Plan that is subject to Title IV or
Section 302 of ERISA or Section 412 or 4971 of the Code: (i) there does not
exist any accumulated funding deficiency within the meaning of Section 412
of the Code or Section 302 of ERISA, whether or not waived; (ii) no
reportable event within the meaning of Section 4043(c) of ERISA for which
the 30-day notice requirement has not been waived has occurred, and the
consummation of the transactions contemplated by this agreement will not
result in the occurrence of any such reportable event; (iii) all premiums
to the PBGC have been timely paid in full; (iv) no liability (other than
for premiums to the PBGC) under Title IV of ERISA has been or is expected
to be incurred by UPR or any of its subsidiaries; and (v) the PBGC has not
instituted proceedings to terminate any such UPR Plan and, to UPR's
knowledge, no condition exists that presents a risk that such proceedings
will be instituted
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or which would constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any such UPR
Plan.
(g) (i) No UPR Employee Benefit Plan is a Multiemployer Plan or a
Multiple Employer Plan; (ii) none of UPR and its subsidiaries nor any of
their respective ERISA Affiliates has, at any time during the last six
years, contributed to or been obligated to contribute to any Multiemployer
Plan or Multiple Employer Plan; and (iii) none of UPR and its subsidiaries
nor any of their respective ERISA Affiliates has incurred any material
Withdrawal Liability that has not been satisfied in full. With respect to
each UPR Plan that is a Multiemployer Plan: (i) if UPR or any of its
subsidiaries or any of their respective ERISA Affiliates were to experience
a withdrawal or partial withdrawal from such plan, no material Withdrawal
Liability would be incurred; and (ii) none of UPR and its subsidiaries, nor
any of their respective ERISA Affiliates has received any notification, nor
does UPR have any knowledge that any such UPR Plan is in reorganization,
has been terminated, is insolvent, or may reasonably be expected to be in
reorganization, to be insolvent, or to be terminated.
(h) There does not now exist, nor, to the knowledge of UPR, do any
circumstances exist that could reasonably be expected to result in, any
material UPR Controlled Group Liability that would be a liability of UPR or
any of its subsidiaries following the Closing. Without limiting the
generality of the foregoing, neither UPR nor, to the knowledge of UPR any
of its subsidiaries, nor any of their respective ERISA Affiliates, has
engaged in any transaction described in Section 4069 or Section 4204 or
4212 of ERISA.
(i) Section 4.14(i) to the UPR Disclosure Schedule sets forth a list
of each UPR Employee Benefit Plan or UPR Employment Agreement under which
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby could (either alone or in conjunction with
any other event) result in, cause the accelerated vesting, funding or
delivery of, or materially increase the amount or value of, any payment or
benefit to any employee, officer or director of UPR or any of its
subsidiaries, or could limit the right of UPR or any of its subsidiaries to
amend, merge, terminate or receive a reversion of assets from any UPR
Employee Benefit Plan or related trust or any UPR Material Employment
Agreement or related trust.
(j) None of UPR and its subsidiaries nor, to the knowledge of UPR, any
other person, including any fiduciary, has engaged in any "prohibited
transaction" (as defined in Section 4975 of the Code or Section 406 of
ERISA), which could subject any of the UPR Employee Benefit Plans or their
related trusts, UPR, any of its subsidiaries or any person that UPR or any
of its subsidiaries has an obligation to indemnify, to any material tax or
material penalty imposed under Section 4975 of the Code or Section 502 of
ERISA.
(k) There are no pending or threatened claims (other than claims for
benefits in the ordinary course), lawsuits or arbitrations which have been
asserted or instituted, and to UPR's knowledge, no set of circumstances
exists which may reasonably give rise to a claim or lawsuit, against the
UPR Plans, any fiduciaries thereof with respect to their duties to the UPR
Plans or the assets of any of the trusts under any of the UPR Plans which
could reasonably be expected to result in any material liability of UPR or
any of its subsidiaries to the PBGC, the Department of Treasury, the
Department of Labor, any Multiemployer Plan, any UPR Plan or any
participant in a UPR Plan.
(l) UPR, its subsidiaries and each member of their respective business
enterprises have, in all material respects, complied with the Worker
Adjustment and Retraining Notification Act and, in all material respects,
all similar state, local and foreign laws.
(m) All UPR Employee Benefit Plans subject to the laws of any
jurisdiction outside of the United States (i) have been maintained in
accordance with all applicable requirements, (ii) if they are intended to
qualify for special tax treatment, meet all requirements for such
treatment, and (iii) if they are intended to be funded and/or book-reserved
are funded and/or book-reserved in all material respects, as appropriate,
based upon reasonable actuarial assumptions.
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(o) The UPR Employees Thrift Plan (the "ESOP") and the UPR TRASOP (the
"TRASOP") are each "employee stock ownership plans" within the meaning of
Section 4975(e)(7) of the Code. Each loan under which the ESOP is a
borrower (each, a "Loan") meets the requirements of Section 4975(d)(3) of
the Code. The Securities of UPR that were acquired with such Loans are in
each case pledged as collateral for the Loan with which they were acquired,
except to the extent they have been released from such pledge and allocated
to the accounts of participants in the ESOP in accordance with the
requirements of Treasury Regulations Sections 54.4975-7 and 54.4975-11. The
TRASOP has no outstanding indebtedness.
4.15 Contracts. All written or oral contracts, agreements, guarantees,
leases and executory commitments other than UPR Plans to which UPR or its
subsidiaries is a party or by which its assets are bound which are material to
UPR (each a "UPR Contract"), are valid and binding obligations of UPR and, to
the knowledge of UPR, the valid and binding obligation of each other party
thereto except such UPR Contracts that if not so valid and binding would not,
individually or in the aggregate, have a Material Adverse Effect on UPR. Neither
UPR nor, to the knowledge of UPR, any other party thereto is in violation of or
in default in respect of, nor has there occurred an event or condition that with
the passage of time or giving of notice (or both) would constitute a default
under or permit the termination of, any such UPR Contract except such violations
or defaults under or terminations that, individually or in the aggregate, would
not have a Material Adverse Effect on UPR. Set forth in Section 4.15 to the UPR
Disclosure Schedule is the amount of the annual premium currently paid by UPR
for its directors' and officers' liability insurance.
4.16 Labor Matters. UPR does not have any labor contracts or collective
bargaining agreements with any persons employed by UPR or any persons otherwise
performing services primarily for UPR. There is no labor strike, dispute or
stoppage pending or, to the knowledge of UPR, threatened against UPR, and UPR
has not experienced any labor strike, dispute or stoppage or other material
labor difficulty involving its employees since January 1, 1998. To the knowledge
of UPR, since January 1, 1998, no campaign or other attempt for recognition has
been made by any labor organization or employees with respect to employees of
UPR or any of its subsidiaries.
4.17 Undisclosed Liabilities. Except (i) as and to the extent disclosed or
reserved against on the balance sheet of UPR as of December 31, 1999 included in
the UPR SEC Documents, or (ii) as incurred after the date thereof in the
ordinary course of business consistent with prior practice and not prohibited by
this Agreement, UPR does not have any liabilities or obligations of any nature,
whether, absolute, accrued, contingent or otherwise and whether due or to become
due, that, individually or in the aggregate, have had or would reasonably be
expected to have a Material Adverse Effect on UPR.
4.18 Permits; Compliance. UPR is in possession of all material franchises,
grants, authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders necessary to own, lease and operate
its properties and to carry on its business as it is now being conducted
(collectively, the "UPR Permits"), and there is no Action pending or, to the
knowledge of UPR, threatened regarding any of the UPR Permits. UPR is not in
conflict with, or in default or violation of any of the UPR Permits, except for
any such conflicts, defaults or violations which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
UPR.
4.19 Environmental Matters. Except as disclosed in the UPR SEC Documents,
(i) the properties, operations and activities of UPR and its subsidiaries are in
compliance with all applicable Environmental Laws and all past noncompliance of
UPR or any UPR subsidiary with any Environmental Laws or Environmental Permits,
has been resolved without any pending, ongoing or future obligation, cost or
liability; (ii) UPR and its subsidiaries and the properties and operations of
UPR and its subsidiaries are not subject to any existing, pending or, to the
knowledge of UPR, threatened Action by or before any court or Governmental
Authority under any Environmental Law; (iii) except as allowed by Environmental
Permits or Environmental Laws, there has been no release of any hazardous
substance, pollutant or contaminant into the environment by UPR or its
subsidiaries or in connection with their properties or operations; and (iv)
except as allowed by Environmental Permits or Environmental Laws, there has been
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no exposure of any person or property to any hazardous substance, pollutant or
contaminant in connection with the properties, operations and activities of UPR
and its subsidiaries, in each case, other than those matters that, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on UPR.
4.20 Opinion of Financial Advisor. UPR has received the written opinion of
Goldman, Sachs & Co., to the effect that, as of the date of this Agreement, the
Exchange Ratio is fair to the UPR Stockholders from a financial point of view.
UPR has heretofore provided copies of such opinions to Anadarko and such
opinions have not been withdrawn or revoked or modified.
4.21 Board Recommendation; Required Vote. The Board of Directors of UPR, at
a meeting duly called and held, has by unanimous vote of those directors present
(i) determined that this Agreement and the transactions contemplated hereby,
including the Merger, and the UPR Stock Option Agreement and the transactions
contemplated thereby, taken together, are fair to and in the best interests of
the UPR Stockholders, and (ii) resolved to recommend that the holders of the
shares of UPR Common Stock approve this Agreement and the transactions
contemplated herein, including the Merger (the "UPR Board Recommendation"). The
affirmative vote of holders of a majority of the outstanding shares of UPR
Common Stock to approve the Merger is the only vote of the holders of any class
or series of UPR Common Stock necessary to adopt the Agreement and approve the
transactions contemplated hereby.
4.22 State Takeover Laws; Rights Agreement. Prior to the execution of this
Agreement, the Board of Directors of UPR has taken all action necessary to
exempt under or make not subject to any state takeover law or state law that
purports to limit or restrict business combinations or the ability to acquire or
vote shares: (i) the execution of this Agreement, and the UPR Stock Option
Agreement, (ii) the Merger and (iii) the transactions contemplated hereby and by
the UPR Stock Option Agreement. The Amended and Restated Rights Agreement, dated
as of December 1, 1998 (the "UPR Rights Agreement"), between UPR and Harris
Trust and Savings Bank, as Rights Agent, has been amended so that Anadarko and
Subcorp are each exempt from the definition of "Acquiring Person" contained in
the UPR Rights Agreement, no "Stock Acquisition Date" or "Distribution Date" or
"Triggering Event" (as such terms are defined in the UPR Rights Agreement) will
occur as a result of the execution of this Agreement or the UPR Stock Option
Agreement or the consummation of the Merger pursuant to this Agreement or the
acquisition or transfer of shares of UPR Common Stock by Anadarko pursuant to
the UPR Stock Option Agreement and the UPR Rights Agreement will expire
immediately prior to the Effective Time, and the UPR Rights Agreement, as so
amended, has not been further amended or modified. Copies of all such amendments
to the UPR Rights Agreement have been previously provided to Anadarko.
ARTICLE V.
COVENANTS OF THE PARTIES
The parties hereto agree that:
5.1 Mutual Covenants.
(a) HSR Act Filings; Reasonable Efforts; Notification.
(i) Each of Anadarko and UPR shall (A) make or cause to be made the
filings required of such party or any of its subsidiaries or affiliates
under the HSR Act with respect to the transactions contemplated hereby
as promptly as practicable and in any event within fifteen business days
after the date of this Agreement, (B) comply at the earliest practicable
date with any request under the HSR Act for additional information,
documents, or other materials received by such party or any of its
subsidiaries from the Federal Trade Commission or the Department of
Justice or any other Governmental Authority in respect of such filings
or such transactions, and (C) cooperate with the other party in
connection with any such filing (including, with respect to the party
making a filing, providing copies of all such documents to
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the non-filing party and its advisors prior to filing (other than
documents containing confidential business information that shall be
shared only with outside counsel to the non-filing party)). Each party
shall use its reasonable efforts to furnish to each other all
information required for any application or other filing to be made
pursuant to any Applicable Law in connection with the Merger and the
other transactions contemplated by this Agreement. Each party shall
promptly inform the other party of any substantive communication with,
and any proposed understanding, undertaking, or agreement with, any
Governmental Authority regarding any such filings or any such
transaction. The parties hereto will consult and cooperate with one
another, in connection with any analyses, appearances, presentations,
memoranda, briefs, arguments, opinions and proposals made or submitted
by or on behalf of any party hereto in connection with proceedings under
or relating to the HSR Act or other Antitrust Laws.
(ii) Each of Anadarko and UPR shall use its reasonable efforts to
resolve such objections, if any, as may be asserted by any Governmental
Authority with respect to the transaction contemplated by this Agreement
under the HSR Act, the Sherman Act, as amended, the Clayton Act, as
amended, the Federal Trade Commission Act, as amended, and any other
federal, state or foreign statutes, rules, regulations, orders, decrees,
administrative or judicial doctrines or other laws that are designed to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade (collectively, "Antitrust Laws").
In connection therewith, if any administrative or judicial action or
proceeding is instituted (or threatened to be instituted) challenging
any transaction contemplated by this Agreement as violative of any
Antitrust Law, each of Anadarko and UPR shall cooperate and use its
reasonable efforts vigorously to contest and resist any such action or
proceeding, including any legislative, administrative or judicial
action, and to have vacated, lifted, reversed, or overturned any decree,
judgment, injunction or other order whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents, or restricts
consummation of the Merger or any other transactions contemplated by
this Agreement. Notwithstanding the foregoing or any other provision of
this Agreement, nothing in this Section 5.1(a) shall limit a party's
right to terminate this Agreement pursuant to Article VII, so long as
such party has up to then complied in all material respects with its
obligations under this Section 5.1(a). Each of Anadarko and UPR shall
use all reasonable efforts to take such action as may be required to
cause the expiration of the notice periods under the HSR Act or other
Antitrust Laws with respect to such transactions as promptly as possible
after the execution of this Agreement.
(iii) Each of the parties hereto agrees to use its reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause
to be done, and to assist and cooperate with the other parties hereto in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and
the other transactions contemplated by this Agreement, including (A) the
obtaining of all other necessary actions or nonactions, waivers,
consents, licenses, permits, authorizations, orders and approvals from
Governmental Authorities and the making of all other necessary
registrations and filings (including other filings with Governmental
Authorities, if any), (B) the obtaining of all consents, approvals or
waivers from third parties related to or required in connection with the
Merger that are necessary to consummate the Merger and the transactions
contemplated by this Agreement or required to prevent a Material Adverse
Effect on Anadarko or UPR from occurring prior to or after the Effective
Time, (C) the preparation of the Joint Proxy Statement, the Prospectus
and the Registration Statement, and (D) the execution and delivery of
any additional instruments necessary to consummate the transaction
contemplated by, and to fully carry out the purposes of, this Agreement.
(iv) Notwithstanding anything to the contrary in this Agreement,
(A) neither Anadarko nor any of its subsidiaries shall be required to
hold separate (including by trust or otherwise) or to divest any of
their respective businesses or assets, or to take or agree to take any
action or agree to any limitation that could reasonably be expected to
have a Material Adverse Effect on
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Anadarko and its subsidiaries taken as a whole or a material adverse
effect on the business, assets, liabilities, results of operations,
financial condition or prospects of Anadarko combined with the Surviving
Corporation after the Effective Time, (B) prior to the Effective Time,
neither UPR nor its subsidiaries shall be required to hold separate
(including by trust or otherwise) or to divest any of their respective
businesses or assets, or to take or agree to take any other action or
agree to any limitation that could reasonably be expected to have a
Material Adverse Effect on UPR and its subsidiaries taken as a whole,
(C) neither Anadarko nor UPR nor their respective subsidiaries shall be
required to take any action that could reasonably be expected to
substantially impair the overall benefits expected, as of the date
hereof, to be realized from consummation of the Merger and (D) neither
Anadarko nor UPR shall be required to waive any of the conditions to the
Merger set forth in Article VI as they apply to such party.
(b) Tax-Free Treatment. Each of the parties shall use its reasonable
efforts to cause the Merger to constitute a "reorganization" under Section
368(a) of the Code and to cooperate with one another in obtaining an
opinion to UPR from Morgan Lewis & Bockius LLP, counsel to UPR, as provided
for in Section 6.1(g), including, but not limited to, making such filings
and maintaining such records as are required by Treasury Regulation Section
1.368-3.
(c) Public Announcements. The initial press release concerning the
Merger and the transactions contemplated hereby shall be a joint press
release. Unless otherwise required by Applicable Laws or requirements of
the NYSE (and, in that event, only if time does not permit), at all times
prior to the earlier of the Effective Time or termination of this Agreement
pursuant to Section 7.1, Anadarko and UPR shall consult with each other
before issuing any press release with respect to the Merger and the
transactions contemplated thereby and shall not issue any such press
release prior to such consultation.
(d) Farmouts. Except as set forth below, neither Anadarko nor UPR
shall enter into any farmouts except farmouts in accordance with the
guidelines for farmouts or similar transactions jointly developed by their
respective Chief Executive Officers. Prior to the time such guidelines are
established, neither Anadarko nor UPR shall enter into any farmouts without
first consulting with the other party.
5.2 Covenants of Anadarko.
(a) Anadarko Stockholders Meeting. Anadarko shall take all action in
accordance with the federal securities laws, the Delaware General
Corporation Law, the Anadarko Certificate and the Anadarko By-laws,
necessary to duly call, give notice of, convene and hold a special meeting
of Anadarko Stockholders (the "Anadarko Stockholders Meeting") to be held
on the earliest practical date determined in consultation with UPR, and to
obtain the consent and approval of Anadarko Stockholders with respect to
the Share Issuance, the Anadarko Board Amendment and the transactions
contemplated hereby. Anadarko shall take all lawful action to solicit the
approval of the Share Issuance and the Anadarko Board Amendment by the
Anadarko Stockholders and the Board of Directors of Anadarko shall
recommend approval of the Share Issuance and the Anadarko Board Amendment
by the Anadarko Stockholders (to the extent not previously withdrawn
pursuant to Section 5.2(d)).
(b) Preparation of Registration Statement. Anadarko shall, as soon as
is reasonably practicable, prepare the Joint Proxy Statement for filing
with the Commission and shall file the Joint Proxy Statement. Consistent
with the timing for the Anadarko Stockholders Meeting and the UPR
Stockholders Meeting as determined by Anadarko after consultation with UPR,
Anadarko shall prepare and file the Registration Statement with the
Commission as soon as is reasonably practicable following clearance of the
Joint Proxy Statement by the Commission and shall use its reasonable
efforts to have the Registration Statement declared effective by the
Commission as promptly as practicable and to maintain the effectiveness of
the Registration Statement through the Effective Time. If, at any time
prior to the Effective Time, Anadarko shall obtain knowledge of any
information
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pertaining to Anadarko contained in or omitted from the Registration
Statement that would require an amendment or supplement to the Registration
Statement or the Joint Proxy Statement, Anadarko will so advise UPR in
writing and will promptly take such action as shall be required to amend or
supplement the Registration Statement and/or the Joint Proxy Statement.
Anadarko shall promptly furnish to UPR all information concerning it as may
be required for supplementing the Joint Proxy Statement. Anadarko shall
cooperate with UPR in the preparation of the Joint Proxy Statement in a
timely fashion and shall use its reasonable efforts to assist UPR in
clearing the Joint Proxy Statement with the Staff of the Commission.
Consistent with the timing of the Anadarko Stockholders Meeting and the UPR
Stockholder Meeting, Anadarko shall use all reasonable efforts to mail at
the earliest practicable date to Anadarko Stockholders the Joint Proxy
Statement, which Joint Proxy Statement shall include all information
required under Applicable Law to be furnished to Anadarko Stockholders in
connection with the Share Issuance and shall include the Anadarko Board
Recommendation to the extent not previously withdrawn in compliance with
Section 5.2(d) and the written opinion of the Anadarko Financial Advisor
described in Section 3.21. Anadarko shall also take such other reasonable
actions (other than qualifying to do business in any jurisdiction in which
it is not so qualified) required to be taken under any applicable state
securities laws in connection with the issuance of Anadarko Common Shares
in the Merger. No filing of, or amendment or supplement to, the
Registration Statement or to the Joint Proxy Statement will be made by
Anadarko without providing UPR the opportunity to review and comment
thereon. Anadarko will advise UPR, promptly after it receives notice
thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, the issuance of any stop
order, the suspension of the qualification of Anadarko Common Shares
issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the Commission for amendment of the Joint
Proxy Statement or the Registration Statement or comments thereon and
responses thereto or requests by the Commission for additional information.
(c) Conduct of Anadarko's Operations. Anadarko shall conduct its
operations in the ordinary course except as expressly contemplated by this
Agreement and the transactions contemplated hereby and shall use all
reasonable efforts to maintain and preserve its business organization and
its material rights and franchises and to retain the services of its
officers and key employees and maintain relationships with customers,
suppliers, lessees, joint venture partners, licensees and other third
parties, and to maintain all of its operating assets in their current
condition (normal wear and tear excepted), to the end that their goodwill
and ongoing business shall not be impaired in any material respect. Without
limiting the generality of the foregoing, during the period from the date
of this Agreement to the Effective Time, Anadarko shall not, except as
otherwise expressly contemplated by this Agreement and the transactions
contemplated hereby or as set forth in Section 5.2(c) to the Anadarko
Disclosure Schedule, without the prior consent of the Chief Executive
Officer of UPR (which consent shall not be unreasonably withheld):
(i) do or effect any of the following actions with respect to its
securities: (A) adjust, split, combine or reclassify its capital stock,
(B) make, declare or pay any dividend (other than regular quarterly
dividends on Anadarko Common Shares of $0.05 per share with record and
payment dates consistent with past practice) or distribution on, or,
directly or indirectly, redeem, purchase or otherwise acquire, any
shares of its capital stock or any securities or obligations convertible
into or exchangeable for any shares of its capital stock, (C) grant any
person any right or option to acquire any shares of its capital stock,
(D) issue, deliver or sell or agree to issue, deliver or sell any
additional shares of its capital stock or any securities or obligations
convertible into or exchangeable or exercisable for any shares of its
capital stock or such securities (except pursuant to the exercise of
Anadarko Options that are outstanding as of the date hereof), or (E)
enter into any agreement, understanding or arrangement with respect to
the sale, voting, registration or repurchase of its capital stock;
(ii) directly or indirectly sell, transfer, lease, pledge,
mortgage, encumber or otherwise dispose of any of its property or assets
other than: (A) dispositions of oil, gas and other minerals
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in the ordinary course of business, consistent with past practice, (B)
pledges, mortgages or encumbrances in the ordinary course of business,
consistent with past practice, or (C) sales, leases or dispositions with
a total value not to exceed $50 million individually or in the
aggregate, it being understood that sub-clauses (A), (B) and (C) do not
apply to farmouts;
(iii) except to the extent contemplated by this Agreement, make or
propose any changes in the Anadarko Certificate or the Anadarko By-laws;
(iv) merge or consolidate with any other person (other than mergers
among wholly owned subsidiaries of Anadarko and mergers between Anadarko
and its wholly owned subsidiaries);
(v) acquire a material amount of assets or capital stock of any
other person (other than acquisition of assets in the ordinary course of
business, consistent with past practice with a total value not to exceed
$25 million individually, or in the aggregate);
(vi) amend or modify, or propose to amend or modify, the Anadarko
Rights Agreement, as amended as of the date hereof;
(vii) incur, create, assume or otherwise become liable for any
indebtedness for borrowed money or assume, guarantee, endorse or
otherwise as an accommodation become responsible or liable for the
obligations of any other individual, corporation or other entity, other
than in the ordinary course of business, consistent with past practice,
which in no event shall exceed $200 million in the aggregate;
(viii) except as may be required by Applicable Law or by the terms
of Anadarko Plans or Anadarko Employment Agreements in effect as of the
date hereof, enter into or modify any employment, severance, termination
or similar agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination pay to, any officer, director,
consultant or employee, or otherwise increase, fund or accelerate the
funding of any compensation or benefits provided to any officer,
director, consultant or employee, contribute any assets to any grantor
trust, or grant, reprice, or accelerate the exercise or payment of any
Anadarko Options or other equity-based awards other than any payment of
bonuses or increases in salary that are both consistent with the past
practice of Anadarko and not material;
(ix) enter into, adopt or amend any Anadarko Employee Benefit Plan
or Anadarko Employment Agreement, except as may be required by
Applicable Law, other than amendments in the ordinary course, consistent
with past practice that do not increase, reduce or accelerate benefits,
make payout options more favorable to participants, or otherwise result
in any increased cost to Anadarko;
(x) take any action that could give rise to a right to severance
benefits pursuant to any change in control agreement;
(xi) change any method or principle of accounting in a manner that
is inconsistent with past practice except to the extent required by
United States generally accepted accounting principles as advised by
Anadarko's regular independent accountants;
(xii) settle any Actions, whether now pending or hereafter made or
brought involving, individually an amount in excess of $1 million, or in
the aggregate, an amount in excess of $20 million;
(xiii) modify, amend or terminate, or waive, release or assign any
material rights or claims with respect to any confidentiality agreement
to which Anadarko is a party;
(xiv) enter into any confidentiality agreements or arrangements
other than in the ordinary course of business consistent with past
practice (other than as permitted, in each case, by Section 5.2(d));
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(xv) write up, write down or write off the book value of any
assets, individually or in the aggregate, in excess of $5 million except
for depreciation and amortization and provisions (e.g., surrendered
leases) in accordance with generally accepted accounting principles
consistently applied or as otherwise required by generally accepted
accounting principles;
(xvi) incur or commit to any capital expenditures not included in
the dollar limits of the Anadarko Capital Budget as in effect on the
date of this Agreement (a copy of which included in Section 5.2(c) to
the Anadarko Disclosure Schedule);
(xvii) make any payments in respect of policies of directors' and
officers' liability insurance (premiums or otherwise) other than
premiums paid in respect of its current policies and renewals thereof at
the same policy limits;
(xviii) take any action to exempt or make not subject to the
provisions of any state takeover law or state law that purports to limit
or restrict business combinations or the ability to acquire or vote
shares, any person or entity (other than UPR or its subsidiaries) or any
action taken thereby, which person, entity or action would have
otherwise been subject to the restrictive provisions thereof and not
exempt therefrom;
(xix) take any action that would likely result in the
representations and warranties set forth in Article III becoming false
or inaccurate in any material respect;
(xx) enter into or carry out any other transaction other than in
the ordinary and usual course of business;
(xxi) permit or cause any subsidiary to do any of the foregoing or
agree or commit to do any of the foregoing;
(xxii) except as otherwise required by law, make any material Tax
election, settle or compromise any material Tax claim, file any Tax
Return (other than in a manner consistent with past practice) or change
any method of Tax accounting; or
(xxiii) agree in writing or otherwise to take any of the foregoing
actions.
(d) No Solicitation. Anadarko agrees that, during the term of this
Agreement, it shall not, and shall not authorize or permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers,
employees, agents or representatives, directly or indirectly, to solicit,
initiate, encourage or facilitate, or furnish or disclose non-public
information in furtherance of, any inquiries or the making of any proposal
with respect to any recapitalization, merger, consolidation or other
business combination involving Anadarko, or any acquisition of 15% or more
of the capital stock (other than upon exercise of Anadarko Options that are
outstanding as of the date hereof) or 30% or more of the assets of Anadarko
and its subsidiaries, taken as a whole, in a single transaction or a series
of related transactions, or any combination of the foregoing (an "Anadarko
Competing Transaction"), or negotiate, explore or otherwise engage in
discussions with any person (other than UPR, Subcorp or their respective
directors, officers, employees, agents and representatives) with respect to
any Anadarko Competing Transaction or enter into any agreement, arrangement
or understanding requiring it to abandon, terminate or fail to consummate
the Merger or any other transactions contemplated by this Agreement;
provided that, at any time prior to the approval of the Share Issuance by
the Anadarko Stockholders, Anadarko may furnish information to, and engage
in discussions with, any party who delivers a written proposal for an
Anadarko Competing Transaction which was not solicited or encouraged after
the date of this Agreement in violation of this Agreement if and so long as
the Board of Directors of Anadarko determines in good faith by resolution
duly adopted after consultation with its outside counsel (who may be its
regularly engaged outside counsel) that the failure to take such action
would reasonably be expected to constitute a breach of its fiduciary duties
under Applicable Law and determines that such a proposal is, after
consulting with the Anadarko Financial Advisor, more favorable to Anadarko
Stockholders from a financial point of view than the transactions
contemplated by this Agreement (including any adjustment to the terms
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and conditions proposed by UPR in response to such Anadarko Competing
Transaction) (an "Anadarko Superior Proposal"); provided, further, that
prior to furnishing information to, or engaging in discussions with, any
party pursuant to the foregoing proviso, Anadarko shall have received an
executed agreement from such party in the same form as the Confidentiality
Agreement (other than Section 8 thereof which shall be waived for UPR under
the Confidentiality Agreement upon the execution of such agreement).
Anadarko will immediately cease all existing activities, discussions and
negotiations with any parties conducted heretofore with respect to any
proposal for an Anadarko Competing Transaction and request the return of
all confidential information regarding Anadarko provided to any such
parties prior to the date hereof pursuant to the terms of any
confidentiality agreements or otherwise. In the event that prior to the
approval of the Share Issuance by the Anadarko Stockholders, the Board of
Directors of Anadarko receives an Anadarko Superior Proposal that was not
solicited or encouraged after the date of this Agreement in violation of
this Agreement, and the Board of Directors of Anadarko determines in good
faith by resolution duly adopted after consultation with its outside
counsel (who may be its regularly engaged outside counsel) that the failure
to take such action would reasonably be expected to constitute a breach of
its fiduciary duties under Applicable Law, the Board of Directors of
Anadarko may (subject to this and the following sentences) withdraw, modify
or change, in a manner adverse to UPR, the Anadarko Board Recommendation
and/or comply with Rule 14e-2 promulgated under the Exchange Act with
respect to an Anadarko Competing Transaction, provided that it gives UPR
three business days' prior written notice of its intention to do so
(provided that the foregoing shall in no way limit or otherwise affect
UPR's right to terminate this Agreement pursuant to Section 7.4(b)). Any
such withdrawal, modification or change of the Anadarko Board
Recommendation shall not change the approval of the Board of Directors of
Anadarko for purposes of causing any state takeover statute or other state
law to be inapplicable to the transactions contemplated hereby, including
the Merger or the Anadarko Stock Option Agreement or change the obligation
of Anadarko to present the Share Issuance for approval at a duly called
Anadarko Stockholders Meeting on the earliest practicable date determined
in consultation with UPR. From and after the execution of this Agreement,
Anadarko shall promptly (but in any event within one calendar day) advise
UPR in writing of the receipt, directly or indirectly, of any inquiries,
discussions, negotiations, or proposals relating to an Anadarko Competing
Transaction (including the specific terms thereof and the identity of the
other party or parties involved) and promptly furnish to UPR a copy of any
such written proposal in addition to any information provided to or by any
third party relating thereto. In addition, Anadarko shall promptly (but in
any event within one calendar day) advise UPR, in writing, if the Board of
Directors of Anadarko shall make any determination as to any Anadarko
Competing Transaction as contemplated by the proviso to the first sentence
of this Section 5.2(d).
(e) Indemnification; Directors' and Officers' Insurance.
(i) From and after the Effective Time, Anadarko shall cause the
Surviving Corporation to indemnify and hold harmless (including
providing funding therefor) the present and former officers and
directors of UPR in respect of acts or omissions occurring prior to the
Effective Time to the extent provided under the UPR Articles or the UPR
Bylaws, and
(ii) Anadarko shall use all reasonable best efforts to cause the
Surviving Corporation or Anadarko to obtain and maintain in effect for a
period of six years after the Effective Time policies of directors' and
officers' liability insurance at no cost to the beneficiaries thereof
with respect to acts or omissions occurring prior to the Effective Time
with substantially the same coverage and containing substantially
similar terms and conditions as existing policies; provided, however,
that neither the Surviving Corporation nor Anadarko shall be required to
pay an aggregate premium for such insurance coverage in excess of 200%
of the amount set forth in Section 4.15 to the UPR Disclosure Schedule;
provided, further, that if the annual premiums of such insurance
coverage exceed such amount, Anadarko shall be obligated to obtain a
policy with the best coverage available, in the reasonable judgment of
the Board of Directors of Anadarko, for a cost not exceeding such
amount.
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(f) NYSE Listing. Anadarko shall use its reasonable efforts to cause
the Anadarko Common Shares issuable pursuant to the Merger (including
pursuant to Anadarko Exchange Options) to be approved for listing on the
NYSE, subject to official notice of issuance, prior to the Effective Time.
(g) Access. Anadarko shall permit representatives of UPR to have
access at all reasonable times to Anadarko's premises, properties, books,
records, contracts, documents, customers and suppliers. Information
obtained by UPR pursuant to this Section 5.2 shall be subject to the
provisions of the confidentiality agreement between Anadarko and UPR dated
February 22, 2000 (the "Confidentiality Agreement"), which agreement
remains in full force and effect. No investigation conducted pursuant to
this Section 5.2 shall affect or be deemed to modify any representation or
warranty made in this Agreement.
(h) Board of Directors of Anadarko. At the Anadarko Stockholders
Meeting, Anadarko shall take all action necessary in accordance with
Applicable Law, the Anadarko Certificate and the Anadarko By-Laws to have
the Anadarko Stockholders consider and vote upon an amendment to the
Anadarko Certificate to increase the size of the Board of Directors of
Anadarko to at least 13 members (the "Anadarko Board Amendment"). In the
event that the Anadarko Board Amendment is approved, then the Board of
Directors of Anadarko shall take all action necessary immediately following
the Effective Time to elect as directors of Anadarko Mr. CEO, and four
other independent directors who are currently members of the Board of
Directors of UPR as may be mutually agreed by the Chief Executive Officer
of Anadarko and the Chief Executive Officer of UPR prior to the Effective
Time. In the event that the Anadarko Stockholders do not approve the
Anadarko Board Amendment, the Board of Directors of Anadarko shall take all
action necessary immediately following the Effective Time to elect as
directors of Anadarko Mr. George Lindahl III, and two other independent
directors who are currently members of the Board of Directors of UPR as may
be mutually agreed by the Chief Executive Officer of Anadarko and the Chief
Executive Officer of UPR prior to the Effective Time. The former UPR
directors elected as directors of Anadarko shall be appointed among Classes
I, II and III with a minimum of one director per Class.
(i) Subsequent Financial Statements. Anadarko shall consult with UPR
prior to making publicly available its financial results for any period
after the date of this Agreement and prior to filing any Anadarko SEC
Documents after the date of this Agreement.
(j) Employees and Employee Benefits.
(A) From and after the Effective Time, the Surviving Corporation shall
assume and honor all UPR Plans and UPR Employment Agreements in accordance with
their terms as in effect immediately before the Effective Time, subject to any
amendment or termination thereof that may be permitted by such terms. Until at
least the first anniversary of the Effective Time (the "Benefits Transition
Period"), Anadarko shall provide, or shall cause to be provided, to individuals
who are, immediately before the Effective Time, employees of UPR and its
subsidiaries who are not subject to collective bargaining (the "UPR Employees"),
employee benefits, other than equity-based benefits, that are, in the aggregate,
comparable to the benefits, other than equity-based benefits, provided to UPR
Employees under the UPR Plans immediately before the Effective Time (the "UPR
Benefits"). Following the end of the Benefits Transition Period, or, at its
discretion, prior to the end of the Benefits Transition Period, in lieu of the
UPR Benefits, Anadarko shall provide, or cause to be provided, to UPR employees,
employee benefits that are in the aggregate comparable to those provided, to
similarly situated employees of Anadarko. The foregoing shall not be construed
to prevent the termination of employment of any UPR Employee or the amendment or
termination of any particular UPR Employee Benefit Plan to the extent permitted
by its terms as in effect immediately before the Effective Time.
(B) For all purposes under the employee benefit plans of Anadarko and its
affiliates (including the Surviving Corporation) providing benefits to any UPR
Employees after the Effective Time (the "New Plans"), each UPR Employee shall be
credited with his or her years of service with UPR and its subsidiaries before
the Effective Time, to the same extent as such UPR Employee was entitled, before
the
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Effective Time, to credit for such service under any similar UPR Employee
Benefit Plans, except for purposes of benefit accrual under defined benefit
pension plans and except as would result in a duplication of benefits. In
addition, and without limiting the generality of the foregoing: (i) each UPR
Employee shall be immediately eligible to participate, without any waiting time,
in any and all New Plans to the extent coverage under such New Plan replaces
coverage under a comparable UPR Employee Benefit Plan in which such UPR Employee
participated immediately before the Effective Time (such plans, collectively,
the "Old Plans"); and (ii) for purposes of each New Plan providing medical,
dental, pharmaceutical and/or vision benefits to any UPR Employee, Anadarko
shall cause all pre-existing condition exclusions and actively-at-work
requirements of such New Plan to be waived for such employee and his or her
covered dependents, and Anadarko shall cause any eligible expenses incurred by
such employee and his or her covered dependents during the portion of the plan
year of the Old Plan ending on the date such employee's participation in the
corresponding New Plan begins to be taken into account under such New Plan for
purposes of satisfying all deductible, coinsurance and maximum out-of-pocket
requirements applicable to such employee and his or her covered dependents for
the applicable plan year as if such amounts had been paid in accordance with
such New Plan.
(C) Without limiting the generality of the foregoing, following the
Effective Time, and until such time as Anadarko shall otherwise determine, the
ESOP shall continue in effect holding the Anadarko Common Shares that it
receives in the Merger, and the Loans shall continue to remain outstanding and
be repaid in accordance with their terms.
5.3 Covenants of UPR.
(a) UPR Stockholders Meeting. UPR shall take all action in accordance
with the federal securities laws, the UBCA and the UPR Articles and the UPR
Bylaws necessary to duly call, give notice of, convene and hold a special
meeting of UPR Stockholders (the "UPR Stockholders Meeting") to be held on
the earliest practicable date determined in consultation with Anadarko to
consider and vote upon approval of the Merger, this Agreement and the
transactions contemplated hereby. UPR shall take all lawful actions to
solicit the approval of the Merger, this Agreement and the transactions
contemplated hereby, by the UPR Stockholders, and the Board of Directors of
UPR shall recommend approval of the Merger, this Agreement and the
transactions contemplated hereby by the UPR Stockholders (to the extent not
previously withdrawn pursuant to Section 5.3(d)).
(b) Information for the Registration Statement and Preparation of
Joint Proxy Statement. UPR shall promptly furnish Anadarko with all
information concerning it as may be required for inclusion in the Joint
Proxy Statement and the Registration Statement. UPR shall cooperate with
Anadarko in the preparation of the Joint Proxy Statement and the
Registration Statement in a timely fashion and shall use all reasonable
efforts to assist Anadarko in having the Registration Statement declared
effective by the Commission as promptly as practicable consistent with the
timing for the Anadarko Stockholders Meeting and the UPR Stockholders
Meeting as determined by Anadarko after consultation with UPR. If, at any
time prior to the Effective Time, UPR obtains knowledge of any information
pertaining to UPR that would require any amendment or supplement to the
Registration Statement or the Joint Proxy Statement, UPR shall so advise
Anadarko and shall promptly furnish Anadarko with all information as shall
be required for such amendment or supplement and shall promptly amend or
supplement the Registration Statement and/or Joint Proxy Statement. UPR
shall use all reasonable efforts to cooperate with Anadarko in the
preparation and filing of the Joint Proxy Statement with the Commission.
Consistent with the timing for the Anadarko Stockholders Meeting and the
UPR Stockholders Meeting as determined by Anadarko after consultation with
UPR, UPR shall use all reasonable efforts to mail at the earliest
practicable date to UPR Stockholders the Joint Proxy Statement, which shall
include all information required under Applicable Law to be furnished to
UPR Stockholders in connection with the Merger and the transactions
contemplated thereby and shall include the UPR Board Recommendation to the
extent not previously withdrawn in compliance with Section 5.3(d) and the
written opinion of Goldman, Sachs & Co. described in Section 4.21.
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(c) Conduct of UPR's Operations. UPR shall conduct its operations in
the ordinary course except as expressly contemplated by this Agreement and
the transactions contemplated hereby and shall use all reasonable efforts
to maintain and preserve its business organization and its material rights
and franchises and to retain the services of its officers and key employees
and maintain relationships with customers, suppliers, lessees, joint
venture partners, licensees and other third parties, and to maintain all of
its operating assets in their current condition (normal wear and tear
excepted), to the end that their goodwill and ongoing business shall not be
impaired in any material respect. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the
Effective Time, UPR shall not, except as otherwise expressly contemplated
by this Agreement and the transactions contemplated hereby or as set forth
in Section 5.3(c) to the UPR Disclosure Schedule, without the prior consent
of the Chief Executive Officer of Anadarko (which consent shall not be
unreasonably withheld):
(i) do or effect any of the following actions with respect to its
securities: (A) adjust, split, combine or reclassify its capital stock,
(B) make, declare or pay any dividend (other than regular quarterly
dividends on UPR Common Stock of $0.05 per share with record and payment
dates consistent with past practice) or distribution on, or, directly or
indirectly, redeem, purchase or otherwise acquire, any shares of its
capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, (C) grant any person
any right or option to acquire any shares of its capital stock, (D)
issue, deliver or sell or agree to issue, deliver or sell any additional
shares of its capital stock or any securities or obligations convertible
into or exchangeable or exercisable for any shares of its capital stock
or such securities (except pursuant to the exercise of UPR Options that
are outstanding as of the date hereof), or (E) enter into any agreement,
understanding or arrangement with respect to the sale, voting,
registration or repurchase of its capital stock;
(ii) directly or indirectly sell, transfer, lease, pledge,
mortgage, encumber or otherwise dispose of any of its property or assets
other than: (A) dispositions of oil, gas and other minerals in the
ordinary course of business, consistent with past practice, (B) pledges,
mortgages, encumbrances in the ordinary course of business consistent
with past practice, or (c) sales, leases or dispositions with a total
value not to exceed $50 million individually or in the aggregate, it
being understood that sub-clauses (A), (B) and (C) do not apply to
farmouts;
(iii) make or propose any changes in the UPR Articles or the UPR
Bylaws;
(iv) merge or consolidate with any other person (other than mergers
among wholly owned subsidiaries of UPR and mergers between UPR and its
wholly owned subsidiaries);
(v) acquire a material amount of assets or capital stock of any
other person; (other than acquisitions of assets in the ordinary course
of business, consistent with past practice with a total value not to
exceed $25 million individually or in the aggregate);
(vi) amend or modify, or propose to amend or modify, the UPR Rights
Agreement, as amended as of the date hereof;
(vii) incur, create, assume or otherwise become liable for any
indebtedness for borrowed money or assume, guarantee, endorse or
otherwise as an accommodation become responsible or liable for the
obligations of any other individual, corporation or other entity, other
than in the ordinary course of business, consistent with past practice,
which in no event shall exceed $200 million in the aggregate;
(viii) except as may be required by Applicable Law or by the terms
of UPR Plans or UPR Employment Agreements that are in effect as of the
date hereof, enter into or modify any employment, severance, termination
or similar agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination pay to, any officer, director,
consultant or employee, or otherwise increase, fund or accelerate the
funding of any compensation or benefits provided to any officer,
director, consultant or employee, contribute any assets to any grantor
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trust, or grant, reprice, or accelerate the exercise or payment of any
UPR Options or other equity-based awards, other than any payment of
bonuses or increases in salary that are both consistent with the past
practice of UPR and are not material;
(ix) enter into, adopt or amend any UPR Employee Benefit Plan or
UPR Employment Agreement, except as may be required by Applicable Law,
other than amendments in the ordinary course consistent with past
practice that do not increase, reduce or accelerate benefits, make
payout options more favorable to participants, or otherwise result in
any increased cost to UPR; provided, however, that UPR may amend its
Supplemental Pension Plan for Exempt Salaried Employees to add a lump
sum distribution option if the cost of such distribution option is
determined in a manner consistent with the actuarial assumptions set
forth in Section 5.3(c)(ix) of the UPR Disclosure Schedule;
(x) take any action that could give rise to a right to severance
benefits pursuant to any Change in Control Agreement;
(xi) change any method or principle of accounting in a manner that
is inconsistent with past practice except to the extent required by
United States generally accepted accounting principles as advised by
UPR's regular independent accountants;
(xii) settle any Actions, whether now pending or hereafter made or
brought involving, individually an amount in excess of $1 million or in
the aggregate, an amount in excess of $20 million;
(xiii) modify, amend or terminate, or waive, release or assign any
material rights or claims with respect to any confidentiality agreement
to which UPR is a party;
(xiv) enter into any confidentiality agreements or arrangements
other than in the ordinary course of business consistent with past
practice (other than as permitted, in each case, by Section 5.3(d));
(xv) write up, write down or write off the book value of any
assets, individually or in the aggregate, in excess of $5 million except
for depreciation and amortization and provision (e.g., surrendered
leases) in accordance with generally accepted accounting principles
consistently applied utilizing successful efforts accounting or as
otherwise required by generally accepted accounting principles;
(xvi) incur or commit to any capital expenditures not included
within the dollar limits of the UPR Capital Budget as in effect on the
date of this Agreement (a copy of which included in Section 5.3(c) to
the UPR Disclosure Schedule);
(xvii) make any payments in respect of policies of directors' and
officers' liability insurance (premiums or otherwise) other than
premiums paid in respect of its current policies and renewals thereof at
the same policy limits;
(xviii) take any action to exempt or make not subject to the
provisions of any state takeover law or state law that purports to limit
or restrict business combinations or the ability to acquire or vote
shares, any person or entity (other than Anadarko or its subsidiaries)
or any action taken thereby, which person, entity or action would have
otherwise been subject to the restrictive provisions thereof and not
exempt therefrom;
(xix) take any action that would likely result in the
representations and warranties set forth in Article IV becoming false or
inaccurate in any material respect;
(xx) enter into or carry out any other transaction other than in
the ordinary and usual course of business;
(xxi) permit or cause any subsidiary to do any of the foregoing or
agree or commit to do any of the foregoing;
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(xxii) except as otherwise required by law, make any material Tax
election, settle or compromise any material Tax claim, file any Tax
Return (other than in a manner consistent with past practice) or change
any method of Tax accounting; or
(xxiii) agree in writing or otherwise to take any of the foregoing
actions.
(d) No Solicitation. UPR agrees that, during the term of this
Agreement, it shall not, and shall not authorize or permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers,
employees, agents or representatives, directly or indirectly, to solicit,
initiate, encourage or facilitate, or furnish or disclose non-public
information in furtherance of, any inquiries or the making of any proposal
with respect to any recapitalization, merger, consolidation or other
business combination involving UPR, or any acquisition of 15% or more of
the capital stock (other than upon exercise of UPR Options that are
outstanding as of the date hereof) or 30% or more of the assets of UPR and
its subsidiaries, taken as a whole, in a single transaction or a series of
related transactions, or any combination of the foregoing (a "UPR Competing
Transaction"), or negotiate, explore or otherwise engage in discussions
with any person (other than Anadarko, Subcorp or their respective
directors, officers, employees, agents and representatives) with respect to
any UPR Competing Transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by this Agreement; provided
that, at any time prior to the approval of the Merger by the UPR
Stockholders, UPR may furnish information to, and engage in discussions
with, any party who delivers a written proposal for a UPR Competing
Transaction which was not solicited or encouraged after the date of this
Agreement in violation of this Agreement if and so long as the Board of
Directors of UPR determines in good faith by resolution duly adopted after
consultation with its outside counsel (who may be its regularly engaged
outside counsel) that the failure to take such action would reasonably be
expected to constitute a breach of its fiduciary duties under Applicable
Law and determines that such a proposal is, after consulting with the UPR
Financial Advisors, more favorable to UPR Stockholders from a financial
point of view than the transactions contemplated by this Agreement
(including any adjustment to the terms and conditions proposed by Anadarko
in response to such UPR Competing Transaction) (a "UPR Superior Proposal");
provided, further, that prior to furnishing information to, or engaging in
discussions with, any party pursuant to the foregoing proviso, UPR shall
have received an executed agreement from such party in the same form as the
Confidentiality Agreement (other than Section 8 thereof which shall be
waived for Anadarko under the Confidentiality Agreement upon the execution
of such agreement). UPR will immediately cease all existing activities,
discussions and negotiations with any parties conducted heretofore with
respect to any proposal for a UPR Competing Transaction and request the
return of all confidential information regarding UPR provided to any such
parties prior to the date hereof pursuant to the terms of any
confidentiality agreements or otherwise. In the event that prior to the
approval of the Merger by the UPR Stockholders the Board of Directors of
UPR receives a UPR Superior Proposal that was not solicited or encouraged
after the date of this Agreement in violation of this Agreement, and the
Board of Directors of UPR determines in good faith by resolution duly
adopted after consultation with its outside counsel (who may be its
regularly engaged outside counsel) that the failure to take such action
would reasonably be expected to constitute a breach of its fiduciary duties
under Applicable Law, the Board of Directors of UPR may (subject to this
and the following sentences) withdraw, modify or change, in a manner
adverse to Anadarko, the UPR Board Recommendation and/or comply with Rule
14e-2 promulgated under the Exchange Act with respect to a UPR Competing
Transaction, provided that it gives Anadarko three business days' prior
written notice of its intention to do so (provided that the foregoing shall
in no way limit or otherwise affect Anadarko's right to terminate this
Agreement pursuant to Section 7.3(b)). Any such withdrawal, modification or
change of the UPR Board Recommendation shall not change the approval of the
Board of Directors of UPR for purposes of causing any state takeover
statute or other state law to be inapplicable to the transactions
contemplated hereby, including the Merger or the UPR Stock Option Agreement
or change the obligation of UPR to present the Merger for approval at a
duly called UPR Stockholders Meeting on the earliest practicable date
determined in
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consultation with Anadarko. From and after the execution of this Agreement,
UPR shall promptly (but in any event within one calendar day) advise
Anadarko in writing of the receipt, directly or indirectly, of any
inquiries, discussions, negotiations, or proposals relating to a UPR
Competing Transaction (including the specific terms thereof and the
identity of the other party or parties involved) and promptly furnish to
Anadarko a copy of any such written proposal in addition to any information
provided to or by any third party relating thereto. In addition, UPR shall
promptly (but in any event within one calendar day) advise Anadarko, in
writing, if the Board of Directors of UPR shall make any determination as
to any UPR Competing Transaction as contemplated by the proviso to the
first sentence of this Section 5.3(d).
(e) Affiliates of UPR. UPR shall cause each such person who may be at
the Effective Time or was on the date hereof an "affiliate" of UPR for
purposes of Rule 145 under the Securities Act, to execute and deliver to
Anadarko no less than 30 days prior to the date of the UPR Stockholders
Meeting, the written undertakings in the form attached hereto as Exhibit A
(the "UPR Affiliate Letter"). No later than 45 days prior to such date,
UPR, after consultation with its outside counsel, shall provide Anadarko
with a letter (reasonably satisfactory to outside counsel to Anadarko)
specifying all of the persons or entities who, in UPR's opinion, may be
deemed to be "affiliates" of UPR under the preceding sentence. The
foregoing notwithstanding, Anadarko shall be entitled to place legends as
specified in the UPR Affiliate Letter on the certificates evidencing any of
the Anadarko Common Shares to be received by (i) any such "affiliate" of
UPR specified in such letter or (ii) any person Anadarko reasonably
identifies (by written notice to UPR) as being a person who may be deemed
an "affiliate" for purposes of Rule 145 under the Securities Act, pursuant
to the terms of this Agreement, and to issue appropriate stop transfer
instructions to the transfer agent for the Anadarko Common Shares,
consistent with the terms of the UPR Affiliate Letter, regardless of
whether such person has executed the UPR Affiliate Letter and regardless of
whether such person's name appears on the letter to be delivered pursuant
to the preceding sentence.
(f) Access. UPR shall permit representatives of Anadarko to have
access at all reasonable times to UPR's premises, properties, books,
records, contracts, documents, customers and suppliers. Information
obtained by Anadarko pursuant to this Section 5.3(f) shall be subject to
the provisions of the Confidentiality Agreement, which agreement remains in
full force and effect. No investigation conducted pursuant to this Section
5.3(f) shall affect or be deemed to modify any representation or warranty
made in this Agreement.
(g) Subsequent Financial Statements. UPR shall consult with Anadarko
prior to making publicly available its financial results for any period
after the date of this Agreement and prior to filing any UPR SEC Documents
after the date of this Agreement.
ARTICLE VI.
CONDITIONS
6.1 Conditions to the Obligations of Each Party. The obligations of UPR,
Anadarko and Subcorp to consummate the Merger shall be subject to the
satisfaction of the following conditions:
(a) (i) This Agreement, the Merger and the transactions contemplated
hereby shall have been approved and adopted by the UPR Stockholders in the
manner required by any Applicable Law, and (ii) the Share Issuance shall
have been approved by the Anadarko Stockholders in the manner required by
any Applicable Law and the applicable rules of the NYSE.
(b) Any applicable waiting periods under the HSR Act relating to the
Merger and the transactions contemplated by this Agreement shall have
expired or been terminated and any other approvals of any Governmental
Authority shall have been obtained.
(c) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit or enjoin the consummation of
the Merger or the transactions contemplated by
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this Agreement or limiting the ownership or operation by Anadarko, UPR or
any of their respective subsidiaries of any material portion of the
business or assets of Anadarko or UPR.
(d) There shall not be pending any Action instituted by any
Governmental Authority challenging or seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions contemplated by
this Agreement.
(e) The Commission shall have declared the Registration Statement
effective under the Securities Act, and no stop order or similar
restraining order suspending the effectiveness of the Registration
Statement shall be in effect and no proceedings for such purpose shall be
pending before or threatened by the Commission or any state securities
administrator.
(f) The Anadarko Common Shares to be issued in the Merger (including
pursuant to Anadarko Exchange Options) shall have been approved for listing
on the NYSE, subject to official notice of issuance.
(g) UPR shall have received the opinion of Morgan Lewis & Bockius LLP,
dated on or prior to the effective date of the Registration Statement, to
the effect that (i) the Merger will constitute a reorganization under
section 368(a) of the Code, and (ii) UPR, Anadarko and Subcorp will each be
a party to that reorganization. In rendering such opinion, counsel shall be
entitled to rely on customary representation letters of UPR, Anadarko,
Subcorp and others, in form and substance reasonably satisfactory to such
counsel.
6.2 Conditions to Obligations of UPR. The obligations of UPR to consummate
the Merger and the transactions contemplated hereby shall be subject to the
fulfillment of the following conditions unless waived by UPR:
(a) Each of the representations and warranties of each of Anadarko and
Subcorp set forth in Article III (other than the representations and
warranties of Anadarko set forth in Section 3.4) shall be true and correct
in all respects (but without regard to any materiality qualifications or
references to Material Adverse Effect contained in any specific
representation or warranty) on the date of this Agreement and on and as of
the Closing Date as though made on and as of the Closing Date (except for
representations and warranties made as of a specified date, the accuracy of
which will be determined as of the specified date), unless the failure or
failures of representations and warranties to be true and correct in all
respects, individually and taken together with all other such failures,
would not reasonably be expected to have a Material Adverse Effect on
Anadarko. The representations and warranties of Anadarko set forth in
Section 3.4 of this Agreement shall be true and correct in all respects
(other than de minimis variations) on the date of this Agreement and on and
as of the Closing Date as though made on and as of the Closing Date (except
for representations and warranties made as of a specified date, the
accuracy of which will be determined as of the specified date).
(b) Each of Anadarko and Subcorp shall have performed in all material
respects all obligations and agreements and shall have complied in all
material respects with all covenants to be performed and complied with by
it hereunder at or prior to the Effective Time.
(c) Each of Anadarko and Subcorp shall have furnished UPR with a
certificate dated the Closing Date signed on behalf of it by the Chairman
or President to the effect that the conditions set forth in Sections 6.2(a)
and (b) have been satisfied.
(d) At any time after the date of this Agreement, there shall not have
been any one or more events or occurrences that individually or in the
aggregate has had or is likely to have a Material Adverse Effect on
Anadarko.
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6.3 Conditions to Obligations of Anadarko and Subcorp. The obligations of
Anadarko and Subcorp to consummate the Merger and the other transactions
contemplated hereby shall be subject to the fulfillment of the following
conditions unless waived by Anadarko:
(a) Each of the representations and warranties of UPR set forth in
Article IV (other than the representations and warranties of UPR set forth
in Section 4.4) shall be true and correct in all respects (but without
regard to any materiality qualifications or references to Material Adverse
Effect contained in any specific representation or warranty) on the date of
this Agreement and on and as of the Closing Date as though made on and as
of the Closing Date (except for representations and warranties made as of a
specified date, the accuracy of which will be determined as of the
specified date), unless the failure or failures of representations and
warranties to be true and correct in all respects, individually and taken
together with all other such failures, would not reasonably be expected to
have a Material Adverse Effect on UPR. The representations and warranties
of UPR set forth in Section 4.4 of this Agreement shall be true and correct
in all respects (other than de minimis variations) on the date of this
Agreement and on and as of the Closing Date as though made on and as of the
Closing Date (except for representations and warranties made as of a
specified date, the accuracy of which will be determined as of the
specified date).
(b) UPR shall have performed in all material respects all obligations
and agreements and shall have complied in all material respects with all
covenants to be performed and complied with by it hereunder at or prior to
the Effective Time.
(c) UPR shall have furnished Anadarko with a certificate dated the
Closing Date signed on its behalf by its Chairman or President to the
effect that the conditions set forth in Sections 6.3(a) and (b) have been
satisfied.
(d) The agreement referred to in Section 6.3 to the Anadarko
Disclosure Schedule shall be in full force and effect and shall not have
been terminated.
(e) At any time after the date of this Agreement, there shall not have
been any one or more events or occurrences that individually or in the
aggregate has had or is likely to have a Material Adverse Effect on UPR.
ARTICLE VII.
TERMINATION AND AMENDMENT
7.1 Termination by Mutual Consent. This Agreement maybe terminated at any
time prior to the Effective Time by the mutual written consent of Anadarko and
UPR.
7.2 Termination by UPR or Anadarko. This Agreement may be terminated by
action of the Board of Directors of UPR or of Anadarko if:
(a) the Merger shall not have been consummated by December 31, 2000;
provided, however, that in the event that Section 6.1(b), Section 6.1(c) or
Section 6.1(d), or any combination thereof, are the only conditions that
are not satisfied or capable of being immediately satisfied as a result of
any action by any Governmental Authority pursuant to any Antitrust Laws,
such December 31, 2000 date shall be extended for a period not to exceed
the lesser of 90 days or the fifth business day after the entrance by the
court in which such litigation is pending of its decision (whether or not
subject to appeal or rehearing) in such litigation; and provided, further,
that the right to terminate this Agreement pursuant to this clause (a)
shall not be available to any party whose failure or whose affiliate's
failure to perform or observe in any material respect any of its
obligations under this Agreement in any manner shall have been the cause
of, or resulted in, the failure of the Merger to occur on or before such
date; or
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(b) the Anadarko Stockholders Meeting (including adjournments and
postponements) for the purpose of approving the Share Issuance shall have
been held and such stockholder approval shall not have been obtained; or
(c) the UPR Stockholders Meeting (including adjournments and
postponements) for the purpose of approving this Agreement and the Merger
shall have been held and such stockholder approval shall not have been
obtained; or
(d) a United States federal or state court of competent jurisdiction
or United States federal or state governmental, regulatory or
administrative agency or commission shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and non-appealable; provided, however, that
the party seeking to terminate this Agreement pursuant to this clause (d)
shall have complied with Section 5.1(a) and with respect to other matters
not covered by Section 5.1(a) shall have used its commercially reasonable
best efforts to remove such injunction, order or decree.
7.3 Termination by Anadarko. This Agreement may be terminated prior to the
Effective Time, by action of the Board of Directors of Anadarko after
consultation with its legal advisors, if
(a) (i) there has been a breach by UPR of any representation,
warranty, covenant or agreement set forth in this Agreement or if any
representation or warranty of UPR shall have become untrue, in either case
such that the conditions set forth in Section 6.3(a) would not be satisfied
and (ii) such breach is not curable, or, if curable, is not cured within 45
days after written notice of such breach is given to UPR by Anadarko;
provided, however, that the right to terminate this Agreement pursuant to
this Section 7.3(a) shall not be available to Anadarko if it, at such time,
is in material breach of any representation, warranty, covenant or
agreement set forth in this Agreement such that the condition set forth in
Section 6.2(a) shall not be satisfied; or
(b) the Board of Directors of UPR shall have withdrawn or modified, in
a manner adverse to Anadarko, its approval or recommendation of this
Agreement or the Merger or recommended a UPR Competing Transaction, or
resolved to do so.
7.4 Termination by UPR. This Agreement may be terminated at any time prior
to the Effective Time, by action of the Board of Directors of UPR after
consultation with its legal advisors, if:
(a) (i) there has been a breach by Anadarko or Subcorp of any
representation, warranty, covenant or agreement set forth in this Agreement
or if any representation or warranty of Anadarko or Subcorp shall have
become untrue, in either case such that the conditions set forth in Section
6.2(a) would not be satisfied and (ii) such breach is not curable, or, if
curable, is not cured within 45 days after written notice of such breach is
given by UPR to Anadarko; provided, however, that the right to terminate
this Agreement pursuant to this Section 7.4(a) shall not be available to
UPR if it, at such time, is in material breach of any representation,
warranty, covenant or agreement set forth in this Agreement such that the
conditions set forth in Section 6.3(a) shall not be satisfied; or
(b) the Board of Directors of Anadarko shall have withdrawn or
modified, in a manner adverse to UPR, its approval or recommendation of
Share Issuance or recommended a proposal relating to an Anadarko Competing
Transaction, or resolved to do so.
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7.5 Effect of Termination.
(a) If this Agreement is terminated
(i) after the public announcement of a proposal relating to a UPR
Competing Transaction, by Anadarko or UPR pursuant to Section 7.2(c); or
(ii) after the public announcement or receipt by UPR's Board of
Directors of a proposal relating to a UPR Competing Transaction, by
Anadarko pursuant to Section 7.3(b);
then UPR shall pay Anadarko a fee of $25 million (subject to reduction
pursuant to Section 9 of the UPR Stock Option Agreement) at the time of
such termination in cash by wire transfer to an account designated by
Anadarko. In addition, if within one year after such termination, UPR
enters into a definitive agreement with respect to a UPR Acquisition (as
hereinafter defined) or a UPR Acquisition is consummated, then upon the
consummation of such UPR Acquisition, UPR shall pay Anadarko an additional
fee of $100 million (subject to reduction pursuant to Section 9 of the UPR
Stock Option Agreement) at the time of such consummation in cash by wire
transfer to an account designated by Anadarko. For purposes of this
Agreement, "UPR Acquisition" means (i) consummation of the UPR Competing
Transaction giving rise to the termination described in Section 7.5(a)(i)
or 7.5(a)(ii), (ii) a consolidation, exchange of shares or merger of UPR
with any person, other than Anadarko or one of its subsidiaries, and, in
the case of a merger, in which UPR shall not be the continuing or surviving
corporation, (iii) a merger of UPR with a person, other than Anadarko or
one of its subsidiaries, in which UPR shall be the continuing or surviving
corporation but the then outstanding shares of UPR Common Stock shall be
changed into or exchanged for stock or other securities of UPR or any other
person or cash or any other property or the shares of UPR Common Stock
outstanding immediately before such merger shall after such merger
represent less than 50% of the voting stock of UPR outstanding immediately
after the merger, (iv) the acquisition of beneficial ownership of 50% or
more of the voting stock of UPR by any person (as such term is used under
Section 13(d) of the Exchange Act), or (v) a sale, lease or other transfer
of 50% or more of the assets of UPR to any person, other than Anadarko or
one of its subsidiaries.
(b) If this Agreement is terminated
(i) after the public announcement of a proposal relating to an
Anadarko Competing Transaction, by Anadarko or UPR pursuant to Section
7.2(b); or
(ii) after the public announcement or receipt by Anadarko's Board
of Directors of a proposal relating to an Anadarko Competing
Transaction, by UPR pursuant to Section 7.4(b);
then Anadarko shall pay UPR a fee of $25 million (subject to reduction
pursuant to Section 9 of the Anadarko Stock Option Agreement) at the time
of such termination in cash by wire transfer to an account designated by
UPR. In addition, if within one year after such termination, Anadarko
enters into a definitive agreement with respect to an Anadarko Acquisition
or an Anadarko Acquisition is consummated, then upon the consummation of
such Anadarko Acquisition, Anadarko shall pay UPR an additional fee of $100
million (subject to reduction pursuant to Section 9 of the Anadarko Stock
Option Agreement) at the time of such consummation in cash by wire transfer
to an account designated by UPR. For purposes of this Agreement, "Anadarko
Acquisition" means (i) consummation of the Anadarko Competing Transaction
giving rise to the termination described in Section 7.5(b)(i) or
7.5(b)(ii), (ii) a consolidation, exchange of shares or merger of Anadarko
with any person, other than UPR or one of its subsidiaries, and, in the
case of a merger, in which Anadarko shall not be the continuing or
surviving corporation, (iii) a merger of Anadarko with a person, other than
UPR or one of its Subsidiaries, in which Anadarko shall be the continuing
or surviving corporation but the then outstanding Anadarko Common Shares
shall be changed into or exchanged for stock or other securities of
Anadarko or any other person or cash or any other property or the Anadarko
Common Shares outstanding immediately before such merger shall after such
merger represent less than 50% of the voting stock of Anadarko outstanding
immediately after the merger, (iv) the acquisition of beneficial ownership
of 50% or more of the voting stock of Anadarko
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by any person (as such term is used under Section 13(d) of the Exchange
Act), or (v) a sale, lease or other transfer of 50% or more of the assets
of Anadarko to any person, other than UPR or one of its subsidiaries.
(c) In the event of the termination of this Agreement pursuant to
Section 7.1, Section 7.2, Section 7.3 or Section 7.4, this Agreement,
except for the provisions of the second sentence of each of Section 5.2(g)
and Section 5.3(f) and the provisions of Sections 7.5 and 8.11, shall
become void and have no effect, without any liability on the part of any
party or its directors, officers or stockholders. Notwithstanding the
foregoing, nothing in this Section 7.5 shall relieve any party to this
Agreement of liability for a material breach of any provision of this
Agreement and provided, further, however, that if it shall be judicially
determined that termination of this Agreement was caused by an intentional
breach of this Agreement, then, in addition to other remedies at law or
equity for breach of this Agreement, the party so found to have
intentionally breached this Agreement shall indemnify and hold harmless the
other parties for their respective out-of-pocket costs, fees and expenses
of their counsel, accountants, financial advisors and other experts and
advisors as well as fees and expenses incident to negotiation, preparation
and execution of this Agreement and related documentation and shareholders'
meetings and consents.
7.6 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after adoption of this Agreement by UPR Stockholders, but after any
such approval, no amendment shall be made which by law requires further approval
or authorization by the UPR Stockholders without such further approval or
authorization. Notwithstanding the foregoing, this Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
7.7 Extension; Waiver. At any time prior to the Effective Time, Anadarko
(with respect to UPR) and UPR (with respect to Anadarko and Subcorp) by action
taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of such party, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
ARTICLE VIII.
MISCELLANEOUS
8.1 Survival of Representations and Warranties. The representations and
warranties made herein by the parties hereto shall not survive the Effective
Time. This Section 8.1 shall not limit any covenant or agreement of the parties
hereto, which by its terms contemplates performance after the Effective Time or
after the termination of this Agreement.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed) or dispatched by a nationally recognized overnight courier service to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Anadarko or Subcorp:
Anadarko Petroleum Corporation
17001 Northchase Drive
Houston, Texas 77060
Attention: J. Stephen Martin
Telecopy No.: (281) 874-3296
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with a copy to:
Daniel A. Neff, Esq.
David A. Katz, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy No.: (212) 403-2000
(b) if to UPR:
UPR
UPR Plaza, 777 Main Street
Fort Worth, Texas 76102
Attention: Kerry R. Brittain
Telecopy No.: (817) 321-7026
with a copy to:
Howard L. Shecter, Esq.
Morgan Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Telecopy No: (212) 309-6273
8.3 Interpretation. When a reference is made in this Agreement to an
Article or Section, such reference shall be to an Article or Section of this
Agreement unless otherwise indicated. The headings and the table of contents
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When a reference is
made in this Agreement to UPR, such reference shall be deemed to include any and
all subsidiaries of UPR, individually and in the aggregate, except for Sections
4.1, 4.2, 4.3, 4.4, 4.5, 4.8, 4.10, 4.19, 4.20, 4.21 and 4.22. When a reference
is made in this Agreement to Anadarko, such reference shall be deemed to include
any and all subsidiaries of Anadarko, individually and in the aggregate, except
for Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.8, 3.10, 3.19, 3.20, 3.21 and 3.22. For
purposes of any provision of this Agreement, references to "knowledge" with
respect to Anadarko shall be deemed to be to the actual knowledge of persons
listed in Section 8.3 to the Anadarko Disclosure Schedule, and references to
"knowledge" with respect to UPR shall be deemed to be to the actual knowledge of
persons listed in Section 8.3 to the UPR Disclosure Schedule. For the purposes
of any provision of this Agreement, a "Material Adverse Effect" with respect to
any party shall be deemed to occur if the aggregate consequences of all breaches
and inaccuracies of covenants and representations of such party under this
Agreement, when read without any exception or qualification for a material
adverse effect, are reasonably likely to have a material adverse effect on the
business, assets, liabilities, results of operations, financial condition or
prospects of such party and its subsidiaries taken as a whole, other than any
change, circumstance or effect relating to (x) the economy or financial markets
in general, or (y) the price of oil or gas. For purposes of this Agreement, a
"subsidiary" when used with respect to any party means any corporation or other
organization, incorporated or unincorporated, (i) of which such party or another
subsidiary of such party is a general partner or (ii) 50% or more of the
securities or other interests of which having by their terms ordinary voting
power to elect at least 50% of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party or one or more of its
subsidiaries (or if there are no such voting securities or interests, 50% or
more of the equity interests of which is directly or indirectly owned or
controlled by such party or one or more of its subsidiaries).
8.4 Counterparts. This Agreement may be executed in counterparts, which
together shall constitute one and the same Agreement. The parties may execute
more than one copy of the Agreement, each of which shall constitute an original.
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8.5 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein), the Anadarko Stock Option Agreement, the UPR
Stock Option Agreement and the Confidentiality Agreement constitute the entire
agreement among the parties and supersede all prior agreements and
understandings, agreements or representations by or among the parties, written
and oral, with respect to the subject matter hereof and thereof.
8.6 Third-Party Beneficiaries. Except for the agreement set forth in
Section 5.2(e), nothing in this Agreement, express or implied, is intended or
shall be construed to create any third-party beneficiaries.
8.7 Governing Law. Except to the extent that the laws of the jurisdiction
of organization of any party hereto, or any other jurisdiction, are mandatorily
applicable to the Merger or to matters arising under or in connection with this
Agreement, this Agreement shall be governed by the laws of the State of
Delaware. All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined in any state or federal court sitting in
the City of Wilmington, Delaware.
8.8 Consent to Jurisdiction; Venue.
(a) Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the state courts of Delaware and to the jurisdiction of the
United States District Court for the District of Delaware, for the purpose
of any action or proceeding arising out of or relating to this Agreement
and each of the parties hereto irrevocably agrees that all claims in
respect to such action or proceeding may be heard and determined
exclusively in any Delaware state or federal court sitting in the City of
Wilmington, Delaware. Each of the parties hereto agrees that a final
judgment in any action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
(b) Each of the parties hereto irrevocably consents to the service of
any summons and complaint and any other process in any other action or
proceeding relating to the Merger, on behalf of itself or its property, by
the personal delivery of copies of such process to such party. Nothing in
this Section 8.8 shall affect the right of any party hereto to serve legal
process in any other manner permitted by law.
8.9 Specific Performance. The transactions contemplated by this Agreement
are unique. Accordingly, each of the parties acknowledges and agrees that, in
addition to all other remedies to which it may be entitled, each of the parties
hereto is entitled to a decree of specific performance, provided such party is
not in material default hereunder.
8.10 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
8.11 Expenses. Subject to the provisions of Section 7.5, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses, except that those expenses incurred in connection with filing,
printing and mailing the Registration Statement and the Joint Proxy Statement
(including filing fees related thereto) will be shared equally by Anadarko and
UPR.
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IN WITNESS WHEREOF, Anadarko, Subcorp and UPR have signed this Agreement as
of the date first written above.
ANADARKO PETROLEUM CORPORATION
By: /s/ ROBERT J. ALLISON
----------------------------------
Name: Robert J. Allison
Title: Chairman and Chief
Executive Officer
DAKOTA MERGER CORP.
By: /s/ ROBERT J. ALLISON
----------------------------------
Name: Robert J. Allison
Title: Chairman
UNION PACIFIC RESOURCES GROUP INC.
By: /s/ GEORGE LINDAHL, III
----------------------------------
Name: George Lindahl, III
Title: Chairman, President and
Chief Executive Officer
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ANNEX B
ANADARKO
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT dated as of April 2, 2000 is by and between
Anadarko Petroleum Corporation, a Delaware corporation ("Anadarko"), and Union
Pacific Resources Group Inc., a Utah corporation (the "Grantee").
RECITALS
The Grantee, Anadarko and Subcorp propose to enter into the Merger
Agreement providing, among other things, for the Merger pursuant to the Merger
Agreement of Subcorp with and into the Grantee which shall be the surviving
corporation.
As a condition and inducement to the Grantee's willingness to enter into
the Merger Agreement, the Grantee has requested that Anadarko agree, and
Anadarko has agreed, to grant the Grantee the Anadarko Stock Option.
As a condition and inducement to Anadarko's willingness to enter into the
Merger Agreement, Anadarko has separately requested that the Grantee agree, and
the Grantee has agreed, to grant Anadarko the UPR Stock Option pursuant to a
Stock Option Agreement dated as of April 2, 2000 by and between the Grantee and
Anadarko.
The Board of Directors of the Grantee has approved the Merger Agreement,
the Merger and this Agreement and has recommended approval of the Merger
Agreement by the holders of UPR Common Stock.
The Board of Directors of Anadarko has approved the Merger Agreement, the
Merger and this Agreement and has recommended approval of the issuance of
Anadarko Common Shares pursuant to the Merger Agreement by the holders of
Anadarko Common Shares.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, Anadarko and the Grantee agree as follows:
1. Capitalized Terms. Those capitalized terms used but not defined
herein that are defined in the Merger Agreement are used herein with the
same meanings as ascribed to them therein. Those capitalized terms used in
this Agreement that are not defined in the Merger Agreement or in this
Agreement are defined in Annex A hereto and are used herein with the
meanings ascribed to them therein.
2. The Anadarko Stock Option.
(a) Grant of Anadarko Stock Option. Subject to the terms and
conditions set forth herein, Anadarko hereby grants to the Grantee an
irrevocable option to purchase, out of the authorized but unissued
Anadarko Common Shares, 25,886,726 shares of Anadarko Common Shares (as
adjusted as set forth herein) (the "Anadarko Stock Option Shares"), at
the Exercise Price.
(b) Exercise Price. The exercise price (the "Exercise Price") of
the Anadarko Stock Option shall be $38.6875 per Anadarko Stock Option
Share.
(c) Term. The Anadarko Stock Option shall be exercisable at any
time and from time to time following the occurrence of an Exercise Event
and shall remain in full force and effect until the earliest to occur of
(i) the Effective Time, (ii) the first anniversary of the receipt by
Grantee of written notice from Anadarko of the occurrence of an Exercise
Event and (iii) termination of the Merger Agreement in accordance with
its terms prior to the occurrence of an Exercise Event unless such
termination itself constitutes an Exercise Event (the "Anadarko Stock
Option
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Term"). If the Anadarko Stock Option is not theretofore exercised, the
rights and obligations set forth in this Agreement shall terminate at
the expiration of the Anadarko Stock Option Term.
(d) Exercise of Anadarko Stock Option.
(i) The Grantee may exercise the Anadarko Stock Option, in whole or
in part, at any time and from time to time during the Anadarko Stock
Option Term. Notwithstanding the expiration of the Anadarko Stock Option
Term, the Grantee shall be entitled to purchase those Anadarko Stock
Option Shares with respect to which it has exercised the Anadarko Stock
Option in accordance with the terms hereof prior to the expiration of
the Anadarko Stock Option Term.
(ii) If the Grantee wishes to exercise the Anadarko Stock Option,
it shall send a written notice (an "Exercise Notice") (the date of which
being herein referred to as the "Notice Date") to Anadarko specifying
(i) the total number of Anadarko Stock Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and a date (the
"Closing Date") not earlier than three Business Days nor later than 15
Business Days from the Notice Date for the closing of the purchase and
sale pursuant to the Anadarko Stock Option (the "Closing").
(iii) If the Closing cannot be effected by reason of the
application of any Applicable Law, the Closing Date shall be extended to
the tenth Business Day following the expiration or termination of the
restriction imposed by such Applicable Law. Without limiting the
foregoing, if prior notification to, or Authorization of, any
Governmental Authority is required in connection with the purchase of
such Anadarko Stock Option Shares by virtue of the application of such
Applicable Law, the Grantee and, if applicable, Anadarko shall promptly
file the required notice or application for Authorization and the
Grantee, with the cooperation of Anadarko, shall expeditiously process
the same.
(iv) Notwithstanding Section 2(d)(iii), if the Closing Date shall
not have occurred within nine months after the related Notice Date as a
result of one or more restrictions imposed by the application of any
Applicable Law, the exercise of the Anadarko Stock Option effected on
the Notice Date shall be deemed to have expired.
(e) Payment and Delivery of Certificates.
(i) At each Closing, the Grantee shall pay to Anadarko in
immediately available funds by wire transfer to a bank account
designated by Anadarko an amount equal to the Exercise Price
multiplied by the number of Anadarko Stock Option Shares to be
purchased on such Closing Date.
(ii) At each Closing, simultaneously with the delivery of
immediately available funds as provided above, Anadarko shall deliver
to the Grantee a certificate or certificates representing the
Anadarko Stock Option Shares to be purchased at such Closing, which
Anadarko Stock Option Shares shall be duly authorized, validly
issued, fully paid and nonassessable and free and clear of all Liens,
and the Grantee shall deliver to Anadarko its written agreement that
the Grantee will not offer to sell or otherwise dispose of such
Anadarko Stock Option Shares in violation of applicable Law or the
provisions of this Agreement.
(f) Certificates. Certificates for the Anadarko Stock Option Shares
delivered at each Closing shall be endorsed with a restrictive legend
that shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF APRIL 2,
2000. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY ANADARKO OF A WRITTEN REQUEST THEREFOR.
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A new certificate or certificates evidencing the same number of Anadarko Common
Shares will be issued to the Grantee in lieu of the certificate bearing the
above legend, and such new certificate shall not bear such legend, insofar as it
applies to the Securities Act, if the Grantee shall have delivered to Anadarko a
copy of a letter from the staff of the Commission, or an opinion of counsel in
form and substance reasonably satisfactory to Anadarko and its counsel, to the
effect that such legend is not required for purposes of the Securities Act.
(g) If at the time of issuance of any Anadarko Common Shares
pursuant to any exercise of the Anadarko Stock Option, Anadarko shall
have issued any share purchase rights or similar securities to holders
of Anadarko Common Shares, then each Anadarko Stock Option Share
purchased pursuant to the Anadarko Stock Option shall also include
rights with terms substantially the same as and at least as favorable to
the Grantee as those issued to other holders of Anadarko Common Shares.
3. Adjustment Upon Changes in Capitalization, Etc.
(a) In the event of any change in Anadarko Common Shares by reason
of a stock dividend, split-up, combination, recapitalization, exchange
of shares or similar transaction, the type and number of shares or
securities subject to the Anadarko Stock Option, and the Exercise Price
therefor, shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction, so that the Grantee
shall receive upon exercise of the Anadarko Stock Option the same class
and number of outstanding shares or other securities or property that
Grantee would have received in respect of Anadarko Common Shares if the
Anadarko Stock Option had been exercised immediately prior to such
event, or the record date therefor, as applicable.
(b) If any additional Anadarko Common Shares are issued after the
date of this Agreement (other than pursuant to an event described in
Section 3(a) above), the number of Anadarko Common Shares then remaining
subject to the Anadarko Stock Option shall be adjusted so that, after
such issuance of additional shares, such number of shares then remaining
subject to the Anadarko Stock Option, together with shares theretofore
issued pursuant to the Anadarko Stock Option, equals 19.9% of the number
of Anadarko Common Shares then issued and outstanding.
(c) To the extent any of the provisions of this Agreement apply to
the Exercise Price, they shall be deemed to refer to the Exercise Price
as adjusted pursuant to this Section 3.
4. Retention of Beneficial Ownership. To the extent that the Grantee
shall exercise the Anadarko Stock Option, the Grantee shall, unless the
Grantee shall exercise the Put Right or Anadarko shall exercise the Call
Right, retain sole ownership of the Anadarko Common Shares so acquired
through the end of the Call Period.
5. Repurchase at the Option of Grantee.
(a) At the request of the Grantee made at any time and from time to
time after the occurrence of an Exercise Event and prior to the earlier
of (i) 120 days after the expiration of the Anadarko Stock Option Term
and (ii) 120 days after the conditions to the payment by Anadarko of the
additional $100 million fee under Section 7.5(b) of the Merger Agreement
shall have occurred (the "Put Period"), Anadarko (or any successor
thereto) shall, at the election of the Grantee (the "Put Right"),
repurchase from the Grantee (i) that portion of the Anadarko Stock
Option relating to all or any part of the Unexercised Anadarko Stock
Option Shares (or as to which the Anadarko Stock Option has been
exercised but the Closing has not occurred) and (ii) all or any portion
of the Anadarko Stock Option Shares purchased by the Grantee pursuant
hereto and with respect to which the Grantee then has ownership. The
date on which the
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Grantee exercises its rights under this Section 5 is referred to as the
"Put Date." Such repurchase shall be at an aggregate price (the "Put
Consideration") equal to the sum of:
(i) the aggregate Exercise Price paid by the Grantee for any
Anadarko Stock Option Shares which the Grantee owns and as to which
the Grantee is exercising the Put Right;
(ii) the excess, if any, of the Applicable Price over the
Exercise Price paid by the Grantee for each Anadarko Stock Option
Share as to which the Grantee is exercising the Put Right multiplied
by the number of such shares; and
(iii) the excess, if any, of (x) the Applicable Price per share
of Anadarko Common Shares over (y) the Exercise Price multiplied by
the number of Unexercised Anadarko Stock Option Shares as to which
the Grantee is exercising the Put Right.
(b) If the Grantee exercises its rights under this Section 5,
Anadarko shall, within five Business Days after the Put Date, pay the
Put Consideration to the Grantee in immediately available funds, and the
Grantee shall surrender to Anadarko the Anadarko Stock Option or portion
of the Anadarko Stock Option and the certificates evidencing the
Anadarko Stock Option Shares purchased thereunder. The Grantee shall
warrant to Anadarko that, immediately prior to the repurchase thereof
pursuant to this Section 5, the Grantee had sole record and Beneficial
Ownership of the Anadarko Stock Option or such shares, or both, as the
case may be, and that the Anadarko Stock Option or such shares, or both,
as the case may be, were then held free and clear of all Liens.
(c) If the Anadarko Stock Option has been exercised, in whole or in
part, as to any Anadarko Stock Option Shares subject to the Put Right
but the Closing thereunder has not occurred, the payment of the Put
Consideration shall, to that extent, render such exercise null and void.
(d) Notwithstanding any provision to the contrary in this
Agreement, the Grantee may not exercise its rights pursuant to this
Section 5 in a manner that would result in Total Profit of more than the
Profit Cap; provided, however, that nothing in this sentence shall limit
the Grantee's ability to exercise the Anadarko Stock Option in
accordance with its terms.
6. Repurchase at the Option of Anadarko.
(a) To the extent the Grantee shall not have previously exercised
its rights under Section 5, at the request of Anadarko made at any time
during the 120-day period commencing at the expiration of the Put Period
(the "Call Period"), Anadarko may repurchase from the Grantee, and the
Grantee shall sell, or cause to be sold, to Anadarko, all (but not less
than all) of the Anadarko Common Shares acquired by the Grantee pursuant
hereto and with respect to which the Grantee has ownership at the time
of such repurchase at a price per share equal to the greater of (A) the
Current Market Price and (B) the Exercise Price per share in respect of
the shares so acquired (such price per share multiplied by the number of
Anadarko Common Shares to be repurchased pursuant to this Section 6
being herein called the "Call Consideration"). The date on which
Anadarko exercises its rights under this Section 6 is referred to as the
"Call Date."
(b) If Anadarko exercises its rights under this Section 6, Anadarko
shall, within five Business Days pay the Call Consideration in
immediately available funds, and the Grantee shall surrender to Anadarko
certificates evidencing the Anadarko Common Shares purchased hereunder,
and the Grantee shall warrant to Anadarko that, immediately prior to the
repurchase thereof pursuant to this Section 6, the Grantee had sole
record and Beneficial Ownership of such shares and that such shares were
then held free and clear of all Liens.
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7. Registration Rights.
(a) Anadarko shall, if requested by the Grantee at any time and
from time to time during the Registration Period, as expeditiously as
practicable, prepare, file and cause to be made effective up to two
registration statements under the Securities Act if such registration is
required in order to permit the offering, sale and delivery of any or
all Anadarko Common Shares or other securities that have been acquired
by or are issuable to the Grantee upon exercise of the Anadarko Stock
Option in accordance with the intended method of sale or other
disposition stated by the Grantee, including, at the sole discretion of
Anadarko, a "shelf" registration statement under Rule 415 under the
Securities Act or any successor provision, and Anadarko shall use all
reasonable efforts to qualify such shares or other securities under any
applicable state securities laws. Anadarko shall use all reasonable
efforts to cause each such registration statement to become effective,
to obtain all consents or waivers of other parties that are required
therefor and to keep such registration statement effective for such
period not in excess of 180 days from the day such registration
statement first becomes effective as may be reasonably necessary to
effect such sale or other disposition. The obligations of Anadarko
hereunder to file a registration statement and to maintain its
effectiveness may be suspended for one or more periods of time not
exceeding 60 days in the aggregate if the Board of Directors of Anadarko
shall have determined in good faith that the filing of such registration
or the maintenance of its effectiveness would require disclosure of
nonpublic information that would materially and adversely affect
Anadarko. For purposes of determining whether two requests have been
made under this Section 7, only requests relating to a registration
statement that has become effective under the Securities Act and
pursuant to which the Grantee has disposed of all shares covered thereby
in the manner contemplated therein shall be counted. Notwithstanding any
other provision of this Section 7, any request for registration shall
permit Anadarko, upon notice given within 20 days of the request for
registration, to repurchase from the Grantee any shares as to which the
Grantee requests registration at a price per share equal to the Current
Market Price at the date Anadarko notifies the Grantee of its decision
to so repurchase.
(b) The Registration Expenses shall be for the account of Anadarko;
provided, however, that Anadarko shall not be required to pay any
Registration Expenses with respect to such registration if the
registration request is subsequently withdrawn at the request of the
Grantee unless the Grantee agrees to forfeit its right to request one
registration.
(c) The Grantee shall provide all information reasonably requested
by Anadarko for inclusion in any registration statement to be filed
hereunder. If during the Registration Period Anadarko shall propose to
register under the Securities Act the offering, sale and delivery of
Anadarko Common Shares for cash for its own account or for any other
stockholder of Anadarko pursuant to a firm underwriting, it shall, in
addition to Anadarko's other obligations under this Section 7, allow the
Grantee the right to participate in such registration provided that the
Grantee participates in the underwriting; provided, however, that, if
the managing underwriter of such offering advises Anadarko in writing
that in its opinion the number of Anadarko Common Shares requested to be
included in such registration exceeds the number that can be sold in
such offering, Anadarko shall, after fully including therein all
securities to be sold by Anadarko, include the shares requested to be
included therein by Grantee pro rata (based on the number of shares
intended to be included therein) with the shares intended to be included
therein by Persons other than Anadarko.
(d) In connection with any offering, sale and delivery of Anadarko
Common Shares pursuant to a registration statement effected pursuant to
this Section 7, Anadarko and the Grantee shall provide each other and
each underwriter of the offering with customary representations,
warranties and covenants, including covenants of indemnification and
contribution.
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8. First Refusal. Subject to the provisions of Sections 5 and 6
herein, at any time after the first occurrence of an Exercise Event and
prior to the second anniversary of the first purchase of shares of Anadarko
Common Shares pursuant to the Anadarko Stock Option, if the Grantee shall
desire to sell, assign, transfer or otherwise dispose of all or any of the
Anadarko Stock Option Shares or other securities acquired by it pursuant to
the Anadarko Stock Option, it shall give Anadarko written notice of the
proposed transaction (an "Offeror's Notice"), identifying the proposed
transferee, accompanied by a copy of a binding offer to purchase such
shares or other securities signed by such transferee and setting forth the
terms of the proposed transaction. An Offeror's Notice shall be deemed an
offer by the Grantee to Anadarko, which may be accepted, in whole but not
in part, within 20 Business Days of the receipt of such Offeror's Notice,
on the same terms and conditions and at the same price at which the Grantee
is proposing to transfer such shares or other securities to such
transferee. The purchase of any such shares or other securities by Anadarko
shall be settled within 20 Business Days of the date of the acceptance of
the offer and the purchase price shall be paid to the Grantee in
immediately available funds. If Anadarko shall fail or refuse to purchase
all the shares or other securities covered by an Offeror's Notice, the
Grantee may, within 60 days from the date of the Offeror's Notice, sell
all, but not less than all, of such shares or other securities to the
proposed transferee at no less than the price specified and on terms no
more favorable than those set forth in the Offeror's Notice; provided,
however, that the provisions of this sentence shall not limit the rights
the Grantee may otherwise have if Anadarko has accepted the offer contained
in the Offeror's Notice and wrongfully refuses to purchase the shares or
other securities subject thereto. The requirements of this Section 8 shall
not apply to (a) any disposition as a result of which the proposed
transferee would own beneficially not more than 2% of the outstanding
voting power of Anadarko, (b) any disposition of Anadarko Common Shares or
other securities by a Person to whom the Grantee has assigned its rights
under the Anadarko Stock Option with the consent of Anadarko, (c) any sale
by means of a public offering registered under the Securities Act or (d)
any transfer to a wholly owned subsidiary of the Grantee which agrees in
writing to be bound by the terms hereof.
9. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit exceed the Profit Cap and, if it
otherwise would exceed such amount, the Grantee, at its sole election,
shall either (i) deliver to Anadarko for cancellation Anadarko Stock
Option Shares previously purchased by Grantee, (ii) pay cash or other
consideration to Anadarko, (iii) reduce the amount of the fee payable to
Grantee under Section 7.5(b) of the Merger Agreement or (iv) undertake
any combination thereof, so that the Grantee's Total Profit shall not
exceed the Profit Cap after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this
Anadarko Stock Option may not be exercised for a number of Anadarko
Stock Option Shares that would, as of the Notice Date, result in a
Notional Total Profit of more than the Profit Cap, and, if exercise of
the Anadarko Stock Option otherwise would exceed the Profit Cap, the
Grantee, at its sole option, may increase the Exercise Price for that
number of Anadarko Stock Option Shares set forth in the Exercise Notice
so that the Notional Total Profit shall not exceed the Profit Cap;
provided, however, that nothing in this sentence shall restrict any
exercise of the Anadarko Stock Option otherwise permitted by this
Section 9(b) on any subsequent date at the Exercise Price set forth in
Section 2(b) if such exercise would not then be restricted under this
Section 9(b).
10. Listing. If Anadarko Common Shares or any other securities then
subject to the Anadarko Stock Option are then listed on the NYSE, Anadarko,
upon the occurrence of an Exercise Event, will promptly file an application
to list on the NYSE the Anadarko Common Shares or other securities then
subject to the Anadarko Stock Option and will use all reasonable efforts to
cause such listing application to be approved as promptly as practicable.
11. Replacement of Agreement. Upon receipt by Anadarko of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or
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destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Agreement, if mutilated, Anadarko will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
shall constitute an additional contractual obligation of Anadarko, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any
time be enforceable by anyone.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in the Merger Agreement
or as otherwise expressly provided herein, each of the parties hereto
shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
(c) Entire Agreement; No Third Party Beneficiary; Severability.
Except as otherwise set forth in the Merger Agreement, this Agreement
(including the Merger Agreement and the other documents and instruments
referred to herein and therein) (i) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and
(ii) is not intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
(d) Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is
not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent
possible.
(e) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Delaware,
regardless of the Applicable Laws that might otherwise govern under
applicable principles of conflicts of law. All actions and proceedings
arising out of or relating to this Agreement shall be exclusively heard
and determined in any state or federal court sitting in the city of
Wilmington, Delaware.
(f) Descriptive Headings. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
(g) Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses or
sent by electronic transmission to the telecopier number specified
below:
If to Anadarko to:
Anadarko Petroleum Corporation
17001 Northchase Drive
Houston, Texas 77060
Attention: J. Stephen Martin, Esq.
Telecopy No.: (281) 874-3296
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with a copy to:
Daniel A. Neff, Esq.
David A. Katz, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy No.: (212) 403-2000
If to Grantee to:
Union Pacific Resources Group Inc.
UPR Plaza
777 Main Street
Fort Worth, Texas
Attention: Kerry R. Brittain, Esq.
Telecopy No.: (817) 321-7026
with a copy to:
Howard L. Shecter, Esq.
Morgan Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Telecopy No.: (212) 309-6273
(h) Counterparts. This Agreement and any amendments hereto may be
executed in counterparts, each of which shall be deemed an original and
all of which taken together shall constitute but a single document.
(i) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Anadarko Stock Option
shall be sold, assigned or otherwise disposed of or transferred by
either of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other party, except that the
Grantee may assign this Agreement to a wholly owned subsidiary of the
Grantee; provided, however, that no such assignment shall have the
effect of releasing the Grantee from its obligations hereunder. Subject
to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(j) Further Assurances. In the event of any exercise of the
Anadarko Stock Option by the Grantee, Anadarko and the Grantee shall
execute and deliver all other documents and instruments and take all
other action that may be reasonably necessary in order to consummate the
transactions provided for by such exercise.
(k) Specific Performance. The parties hereto hereby acknowledge and
agree that the failure of any party to this Agreement to perform its
agreements and covenants hereunder will cause irreparable injury to the
other party to this Agreement for which damages, even if available, will
not be an adequate remedy. Accordingly, each of the parties hereto
hereby consents to the granting of equitable relief (including specific
performance and injunctive relief) by any court of competent
jurisdiction to enforce any party's obligations hereunder. The parties
further agree to waive any requirement for the securing or posting of
any bond in connection with the obtaining of any such equitable relief
and that this provision is without prejudice to any other rights that
the parties hereto may have for any failure to perform this Agreement.
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IN WITNESS WHEREOF, Anadarko and the Grantee have caused this Anadarko
Stock Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of the day and year first written above.
ANADARKO PETROLEUM CORPORATION
By: /s/ ROBERT J. ALLISON, JR.
----------------------------------
Name: Robert J. Allison, Jr.
Title: Chairman and Chief
Executive Officer
UNION PACIFIC RESOURCES GROUP INC.
By: /s/ GEORGE LINDAHL, III
----------------------------------
Name: George Lindahl, III
Title: Chairman, President and
Chief Executive Officer
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ANNEX A TO THE ANADARKO STOCK OPTION AGREEMENT
SCHEDULE OF DEFINED TERMS
The following terms when used in the Stock Option Agreement shall have the
meanings set forth below unless the context shall otherwise require:
"Agreement" shall mean this Stock Option Agreement.
"Anadarko Stock Option" shall mean the option granted by Anadarko to
Grantee pursuant to Section 2 herein.
"Anadarko Stock Option Shares" shall have the meaning ascribed to such
term in Section 2 herein.
"Anadarko Stock Option Term" shall have the meaning ascribed to such
term in Section 2 herein.
"Applicable Price" means the highest of (i) the highest purchase price
per share paid pursuant to a third party's tender or exchange offer made
for Anadarko Common Shares after the date hereof and on or prior to the Put
Date, (ii) the price per share to be paid by any third Person for Anadarko
Common Shares pursuant to an agreement for a Anadarko Acquisition entered
into on or prior to the Put Date, and (iii) the Current Market Price. If
the consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of
such consideration shall be determined in good faith by an independent
nationally recognized investment banking firm jointly selected by the
Grantee and Anadarko, which determination shall be conclusive for all
purposes of this Agreement.
"Authorization" shall mean any and all permits, licenses,
authorizations, orders certificates, registrations or other approvals
granted by any Governmental Authority.
"Beneficial Ownership," "Beneficial Owner" and "Beneficially Own"
shall have the meanings ascribed to them in Rule 13d-3 under the Exchange
Act.
"Business Day" shall mean a day other than Saturday, Sunday or a
federal holiday.
"Call Consideration" shall have the meaning ascribed to such term in
Section 6 herein.
"Call Date" shall have the meaning ascribed to such term in Section 6
herein.
"Call Period" shall have the meaning ascribed to such term in Section
6 herein.
"Closing" shall have the meaning ascribed to such term in Section 2
herein.
"Closing Date" shall have the meaning ascribed to such term in Section
2 herein.
"Current Market Price" shall mean, as of any date, the average of the
closing prices (or, if such securities should not trade on any trading day,
the average of the bid and asked prices therefor on such day) of Anadarko
Common Shares as reported on the New York Stock Exchange Composite Tape
during the ten consecutive trading days ending on (and including) the
trading day immediately prior to such date or, if the Anadarko Common
Shares are not quoted thereon, on The Nasdaq Stock Market or, if the
Anadarko Common Shares are not quoted thereon, on the principal trading
market (as defined in Regulation M under the Exchange Act) on which such
shares are traded as reported by a recognized source during such ten
Business Day period.
"Exercise Event" shall mean any of the events giving rise to the
obligation of Anadarko to pay the $25 million fee under Section 7.5(b) of
the Merger Agreement.
"Exercise Notice" shall have the meaning ascribed to such term in
Section 2 herein.
"Exercise Price" shall have the meaning ascribed to such term in
Section 2 herein.
"Lien" shall mean any mortgage, pledge, security interest, adverse
claim, encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing), any conditional sale or
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other title retention agreement, any lease in the nature thereof or the
filing of or agreement to give any financing statement under the Applicable
Laws of any jurisdiction.
"Merger Agreement" shall mean that certain Agreement and Plan of
Merger dated as of the date hereof among Anadarko Petroleum Corporation, a
Delaware corporation, Dakota Merger Corp., a Utah corporation, and Union
Pacific Resources Group Inc., a Utah corporation.
"Notice Date" shall have the meaning ascribed to such term in Section
2 herein.
"Notional Total Profit" shall mean, with respect to any number of
Anadarko Stock Option Shares as to which the Grantee may propose to
exercise the Anadarko Stock Option, the Total Profit determined as of the
date of the Exercise Notice assuming that the Anadarko Stock Option were
exercised on such date for such number of Anadarko Stock Option Shares and
assuming such Anadarko Stock Option Shares, together with all other
Anadarko Stock Option Shares held by the Grantee and its Affiliates as of
such date, were sold for cash at the closing market price for Anadarko
Common Shares as of the close of business on the preceding trading day
(less customary brokerage commissions) and including all amounts
theretofore received or concurrently being paid to the Grantee pursuant to
clauses (i), (ii) and (iii) of the definition of Total Profit.
"Offeror's Notice" shall have the meaning ascribed to such term in
Section 8 herein.
"Person" shall have the meaning specified in Sections 3(a)(9) and
13(d)(3) of the Exchange Act.
"Profit Cap" shall mean $25 million, unless the conditions to the
payment by Anadarko of the additional $100 million fee under Section 7.5(b)
of the Merger Agreement shall have occurred, in which case "Profit Cap"
shall mean $125 million.
"Put Consideration" shall have the meaning ascribed to such term in
Section 5 herein.
"Put Date" shall have the meaning ascribed to such term in Section 5
herein.
"Put Period" shall have the meaning ascribed to such term in Section 5
herein.
"Put Right" shall have the meaning ascribed to such term in Section 5
herein.
"Registration Expenses" shall mean the expenses associated with the
preparation and filing of any registration statement pursuant to Section 7
herein and any sale covered thereby (including any fees related to blue sky
qualifications and filing fees in respect of the National Association of
Securities Dealers, Inc.), but excluding underwriting discounts or
commissions or brokers' fees in respect to shares to be sold by the Grantee
and the fees and disbursements of the Grantee's counsel.
"Registration Period" shall mean, subject to Section 4 hereof, the
period of two years following the first exercise of the Anadarko Stock
Option by the Grantee.
"Subcorp" shall mean Dakota Merger Corp., a Utah corporation and a
wholly owned subsidiary of Anadarko.
"Total Profit" shall mean the aggregate (before income taxes) of the
following: (i) all amounts received by the Grantee or concurrently being
paid to the Grantee pursuant to Section 5 for the repurchase of all or part
of the unexercised portion of the Anadarko Stock Option, (ii) (A) the
amounts received by the Grantee or concurrently being paid to the Grantee
pursuant to the sale of Anadarko Stock Option Shares (or any other
securities into which such Anadarko Stock Option Shares are converted or
exchanged), including sales made to Anadarko or pursuant to a registration
statement under the Securities Act or any exemption therefrom, less (B) the
Grantee's purchase price for such Anadarko Stock Option Shares and (iii)
all amounts received by the Grantee from Anadarko or concurrently being
paid to the Grantee pursuant to Section 7.5(b) of the Merger Agreement.
"Unexercised Anadarko Stock Option Shares" shall mean, from and after
the Exercise Date until the expiration of the Anadarko Stock Option Term,
those Anadarko Stock Option Shares as to which the Anadarko Stock Option
remains unexercised from time to time.
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ANNEX C
UPR
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT dated as of April 2, 2000 is by and between
Union Pacific Resources Group Inc., a Utah corporation ("UPR"), and Anadarko
Petroleum Corporation, a Delaware corporation (the "Grantee").
RECITALS
The Grantee, Utah and Subcorp propose to enter into the Merger Agreement
providing, among other things, for the Merger pursuant to the Merger Agreement
of Subcorp with and into UPR which shall be the surviving corporation.
As a condition and inducement to the Grantee's willingness to enter into
the Merger Agreement, the Grantee has requested that UPR agree, and UPR has
agreed, to grant the Grantee the UPR Stock Option.
As a condition and inducement to UPR's willingness to enter into the Merger
Agreement, UPR has separately requested that the Grantee agree, and the Grantee
has agreed, to grant UPR the Anadarko Stock Option pursuant to the Anadarko
Stock Option Agreement dated as of April 2, 2000 by and between the Grantee and
UPR.
The Board of Directors of UPR has approved the Merger Agreement, the Merger
and this Agreement and has recommended approval of the Merger Agreement by the
holders of UPR Common Stock.
The Board of Directors of the Grantee has approved the Merger Agreement,
the Merger and this Agreement and has recommended approval of the issuance of
shares of Anadarko Common Shares pursuant to the Merger Agreement by the holders
of Anadarko Common Shares.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, UPR and the Grantee agree as follows:
1. Capitalized Terms. Those capitalized terms used but not defined
herein that are defined in the Merger Agreement are used herein with the
same meanings as ascribed to them therein. Those capitalized terms used in
this Agreement that are not defined in the Merger Agreement or in this
Agreement are defined in Annex A hereto and are used herein with the
meanings ascribed to them therein.
2. The UPR Stock Option.
(a) Grant of UPR Stock Option. Subject to the terms and conditions
set forth herein, UPR hereby grants to the Grantee an irrevocable option
to purchase, out of the authorized but unissued UPR Common Stock,
50,138,515 shares of UPR Common Stock (as adjusted as set forth herein)
(the "UPR Stock Option Shares"), at the Exercise Price.
(b) Exercise Price. The exercise price (the "Exercise Price") of
the UPR Stock Option shall be the lesser of (i) $17.60 per UPR Stock
Option Share and (ii) the Exchange Ratio multiplied by the closing price
of Anadarko Common Shares on the date of exercise of the UPR Stock
Option.
(c) Term. The UPR Stock Option shall be exercisable at any time and
from time to time following the occurrence of an Exercise Event and
shall remain in full force and effect until the earliest to occur of (i)
the Effective Time, (ii) the first anniversary of the receipt by Grantee
of written notice from UPR of the occurrence of an Exercise Event and
(iii) termination of the Merger Agreement in accordance with its terms
prior to the occurrence of an Exercise Event
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unless such termination itself constitutes an Exercise Event (the "UPR
Stock Option Term"). If the UPR Stock Option is not theretofore
exercised, the rights and obligations set forth in this Agreement shall
terminate at the expiration of the UPR Stock Option Term.
(d) Exercise of UPR Stock Option.
(i) The Grantee may exercise the UPR Stock Option, in whole or
in part, at any time and from time to time during the UPR Stock
Option Term. Notwithstanding the expiration of the UPR Stock Option
Term, the Grantee shall be entitled to purchase those UPR Stock
Option Shares with respect to which it has exercised the UPR Stock
Option in accordance with the terms hereof prior to the expiration of
the UPR Stock Option Term.
(ii) If the Grantee wishes to exercise the UPR Stock Option, it
shall send a written notice (an "Exercise Notice") (the date of which
being herein referred to as the "Notice Date") to UPR specifying (i)
the total number of UPR Stock Option Shares it intends to purchase
pursuant to such exercise and (ii) a place and a date (the "Closing
Date") not earlier than three Business Days nor later than 15
Business Days from the Notice Date for the closing of the purchase
and sale pursuant to the UPR Stock Option (the "Closing").
(iii) If the Closing cannot be effected by reason of the
application of any Applicable Law, the Closing Date shall be extended
to the tenth Business Day following the expiration or termination of
the restriction imposed by such Applicable Law. Without limiting the
foregoing, if prior notification to, or Authorization of, any
Governmental Authority is required in connection with the purchase of
such UPR Stock Option Shares by virtue of the application of such
Applicable Law, the Grantee and, if applicable, UPR shall promptly
file the required notice or application for Authorization and the
Grantee, with the cooperation of UPR, shall expeditiously process the
same.
(iv) Notwithstanding Section 2(d)(iii), if the Closing Date
shall not have occurred within nine months after the related Notice
Date as a result of one or more restrictions imposed by the
application of any Applicable Law, the exercise of the UPR Stock
Option effected on the Notice Date shall be deemed to have expired.
(e) Payment and Delivery of Certificates.
(i) At each Closing, the Grantee shall pay to UPR in immediately
available funds by wire transfer to a bank account designated by UPR
an amount equal to the Exercise Price multiplied by the number of UPR
Stock Option Shares to be purchased on such Closing Date.
(ii) At each Closing, simultaneously with the delivery of
immediately available funds as provided above, UPR shall deliver to
the Grantee a certificate or certificates representing the UPR Stock
Option Shares to be purchased at such Closing, which UPR Stock Option
Shares shall be duly authorized, validly issued, fully paid and
nonassessable and free and clear of all Liens, and the Grantee shall
deliver to UPR its written agreement that the Grantee will not offer
to sell or otherwise dispose of such UPR Stock Option Shares in
violation of applicable Law or the provisions of this Agreement.
(f) Certificates. Certificates for the UPR Stock Option Shares
delivered at each Closing shall be endorsed with a restrictive legend
that shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A UPR STOCK OPTION AGREEMENT DATED AS OF APRIL
2, 2000. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY UPR OF A WRITTEN REQUEST THEREFOR.
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A new certificate or certificates evidencing the same number of shares
of UPR Common Stock will be issued to the Grantee in lieu of the
certificate bearing the above legend, and such new certificate shall not
bear such legend, insofar as it applies to the Securities Act, if the
Grantee shall have delivered to UPR a copy of a letter from the staff of
the Commission, or an opinion of counsel in form and substance
reasonably satisfactory to UPR and its counsel, to the effect that such
legend is not required for purposes of the Securities Act.
(g) If at the time of issuance of any UPR Common Stock pursuant to
any exercise of the UPR Stock Option, UPR shall have issued any share
purchase rights or similar securities to holders of UPR Common Stock,
then each UPR Stock Option Share purchased pursuant to the UPR Stock
Option shall also include rights with terms substantially the same as
and at least as favorable to the Grantee as those issued to other
holders of UPR Common Stock.
3. Adjustment Upon Changes in Capitalization, Etc.
(a) In the event of any change in UPR Common Stock by reason of a
stock dividend, split-up, combination, recapitalization, exchange of
shares or similar transaction, the type and number of shares or
securities subject to the UPR Stock Option, and the Exercise Price
therefor, shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction, so that the Grantee
shall receive upon exercise of the UPR Stock Option the same class and
number of outstanding shares or other securities or property that
Grantee would have received in respect of UPR Common Stock if the UPR
Stock Option had been exercised immediately prior to such event, or the
record date therefor, as applicable.
(b) If any additional shares of UPR Common Stock are issued after
the date of this Agreement (other than pursuant to an event described in
Section 3(a) above), the number of shares of UPR Common Stock then
remaining subject to the UPR Stock Option shall be adjusted so that,
after such issuance of additional shares, such number of shares then
remaining subject to the UPR Stock Option, together with shares
theretofore issued pursuant to the UPR Stock Option, equals 19.9% of the
number of shares of UPR Common Stock then issued and outstanding.
(c) To the extent any of the provisions of this Agreement apply to
the Exercise Price, they shall be deemed to refer to the Exercise Price
as adjusted pursuant to this Section 3.
4. Retention of Beneficial Ownership. To the extent that the Grantee
shall exercise the UPR Stock Option, the Grantee shall, unless the Grantee
shall exercise the Put Right or UPR shall exercise the Call Right, retain
sole ownership of the shares of UPR Common Stock so acquired through the
end of the Call Period.
5. Repurchase at the Option of Grantee.
(a) At the request of the Grantee made at any time and from time to
time after the occurrence of an Exercise Event and prior to the earlier
of (i) 120 days after the expiration of the UPR Stock Option Term and
(ii) 120 days after the conditions to the payment by UPR of the
additional $100 million fee under Section 7.5(a) of the Merger Agreement
shall have occurred (the "Put Period"), UPR (or any successor thereto)
shall, at the election of the Grantee (the "Put Right"), repurchase from
the Grantee (i) that portion of the UPR Stock Option relating to all or
any part of the Unexercised UPR Stock Option Shares (or as to which the
UPR Stock Option has been exercised but the Closing has not occurred)
and (ii) all or any portion of the UPR Stock Option Shares purchased by
the Grantee pursuant hereto and with respect to which the Grantee then
has ownership. The date on which the Grantee exercises its rights under
this Section 5 is referred to as the "Put Date." Such repurchase shall
be at an aggregate price (the "Put Consideration") equal to the sum of:
(i) the aggregate Exercise Price paid by the Grantee for any UPR
Stock Option Shares which the Grantee owns and as to which the
Grantee is exercising the Put Right;
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(ii) the excess, if any, of the Applicable Price over the
Exercise Price paid by the Grantee for each UPR Stock Option Share as
to which the Grantee is exercising the Put Right multiplied by the
number of such shares; and
(iii) the excess, if any, of (x) the Applicable Price per share
of UPR Common Stock over (y) the Exercise Price multiplied by the
number of Unexercised UPR Stock Option Shares as to which the Grantee
is exercising the Put Right.
(b) If the Grantee exercises its rights under this Section 5, UPR
shall, within five Business Days after the Put Date, pay the Put
Consideration to the Grantee in immediately available funds, and the
Grantee shall surrender to UPR the UPR Stock Option or portion of the
UPR Stock Option and the certificates evidencing the UPR Stock Option
Shares purchased thereunder. The Grantee shall warrant to UPR that,
immediately prior to the repurchase thereof pursuant to this Section 5,
the Grantee had sole record and Beneficial Ownership of the UPR Stock
Option or such shares, or both, as the case may be, and that the UPR
Stock Option or such shares, or both, as the case may be, were then held
free and clear of all Liens.
(c) If the UPR Stock Option has been exercised, in whole or in
part, as to any UPR Stock Option Shares subject to the Put Right but the
Closing thereunder has not occurred, the payment of the Put
Consideration shall, to that extent, render such exercise null and void.
(d) Notwithstanding any provision to the contrary in this
Agreement, the Grantee may not exercise its rights pursuant to this
Section 5 in a manner that would result in Total Profit of more than the
Profit Cap; provided, however, that nothing in this sentence shall limit
the Grantee's ability to exercise the UPR Stock Option in accordance
with its terms.
6. Repurchase at the Option of UPR.
(a) To the extent the Grantee shall not have previously exercised
its rights under Section 5, at the request of UPR made at any time
during the 120-day period commencing at the expiration of the Put Period
(the "Call Period"), UPR may repurchase from the Grantee, and the
Grantee shall sell, or cause to be sold, to UPR, all (but not less than
all) of the shares of UPR Common Stock acquired by the Grantee pursuant
hereto and with respect to which the Grantee has ownership at the time
of such repurchase at a price per share equal to the greater of (A) the
Current Market Price and (B) the Exercise Price per share in respect of
the shares so acquired (such price per share multiplied by the number of
shares of UPR Common Stock to be repurchased pursuant to this Section 6
being herein called the "Call Consideration"). The date on which UPR
exercises its rights under this Section 6 is referred to as the "Call
Date."
(b) If UPR exercises its rights under this Section 6, UPR shall,
within five Business Days pay the Call Consideration in immediately
available funds, and the Grantee shall surrender to UPR certificates
evidencing the shares of UPR Common Stock purchased hereunder, and the
Grantee shall warrant to UPR that, immediately prior to the repurchase
thereof pursuant to this Section 6, the Grantee had sole record and
Beneficial Ownership of such shares and that such shares were then held
free and clear of all Liens.
7. Registration Rights.
(a) UPR shall, if requested by the Grantee at any time and from
time to time during the Registration Period, as expeditiously as
practicable, prepare, file and cause to be made effective up to two
registration statements under the Securities Act if such registration is
required in order to permit the offering, sale and delivery of any or
all shares of UPR Common Stock or other securities that have been
acquired by or are issuable to the Grantee upon exercise of the UPR
Stock Option in accordance with the intended method of sale or other
disposition stated by the Grantee, including, at the sole discretion of
UPR, a "shelf" registration statement under Rule 415 under the
Securities Act or any successor provision, and UPR shall use all
reasonable efforts to qualify such shares or other securities under any
applicable state securities laws. UPR
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shall use all reasonable efforts to cause each such registration
statement to become effective, to obtain all consents or waivers of
other parties that are required therefor and to keep such registration
statement effective for such period not in excess of 180 days from the
day such registration statement first becomes effective as may be
reasonably necessary to effect such sale or other disposition. The
obligations of UPR hereunder to file a registration statement and to
maintain its effectiveness may be suspended for one or more periods of
time not exceeding 60 days in the aggregate if the Board of Directors of
UPR shall have determined in good faith that the filing of such
registration or the maintenance of its effectiveness would require
disclosure of nonpublic information that would materially and adversely
affect UPR. For purposes of determining whether two requests have been
made under this Section 7, only requests relating to a registration
statement that has become effective under the Securities Act and
pursuant to which the Grantee has disposed of all shares covered thereby
in the manner contemplated therein shall be counted. Notwithstanding any
other provision of this Section 7, any request for registration shall
permit UPR, upon notice given within 20 days of the request for
registration, to repurchase from the Grantee any shares as to which the
Grantee requests registration at a price per share equal to the Current
Market Price at the date UPR notifies the Grantee of its decision to so
repurchase.
(b) The Registration Expenses shall be for the account of UPR;
provided, however, that UPR shall not be required to pay any
Registration Expenses with respect to such registration if the
registration request is subsequently withdrawn at the request of the
Grantee unless the Grantee agrees to forfeit its right to request one
registration.
(c) The Grantee shall provide all information reasonably requested
by UPR for inclusion in any registration statement to be filed
hereunder. If during the Registration Period UPR shall propose to
register under the Securities Act the offering, sale and delivery of UPR
Common Stock for cash for its own account or for any other stockholder
of UPR pursuant to a firm underwriting, it shall, in addition to UPR's
other obligations under this Section 7, allow the Grantee the right to
participate in such registration provided that the Grantee participates
in the underwriting; provided, however, that, if the managing
underwriter of such offering advises UPR in writing that in its opinion
the number of shares of UPR Common Stock requested to be included in
such registration exceeds the number that can be sold in such offering,
UPR shall, after fully including therein all securities to be sold by
UPR, include the shares requested to be included therein by Grantee pro
rata (based on the number of shares intended to be included therein)
with the shares intended to be included therein by Persons other than
UPR.
(d) In connection with any offering, sale and delivery of UPR
Common Stock pursuant to a registration statement effected pursuant to
this Section 7, UPR and the Grantee shall provide each other and each
underwriter of the offering with customary representations, warranties
and covenants, including covenants of indemnification and contribution.
8. First Refusal. Subject to the provisions of Sections 5 and 6
herein, at any time after the first occurrence of an Exercise Event and
prior to the second anniversary of the first purchase of shares of UPR
Common Stock pursuant to the UPR Stock Option, if the Grantee shall desire
to sell, assign, transfer or otherwise dispose of all or any of the UPR
Stock Option Shares or other securities acquired by it pursuant to the UPR
Stock Option, it shall give UPR written notice of the proposed transaction
(an "Offeror's Notice"), identifying the proposed transferee, accompanied
by a copy of a binding offer to purchase such shares or other securities
signed by such transferee and setting forth the terms of the proposed
transaction. An Offeror's Notice shall be deemed an offer by the Grantee to
UPR, which may be accepted, in whole but not in part, within 20 Business
Days of the receipt of such Offeror's Notice, on the same terms and
conditions and at the same price at which the Grantee is proposing to
transfer such shares or other securities to such transferee. The purchase
of any such shares or other securities by UPR shall be settled within 20
Business Days of the date of the acceptance of the offer and the purchase
price shall be paid to the Grantee in immediately available funds. If UPR
shall fail or refuse to purchase all the shares or other securities covered
by an Offeror's
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Notice, the Grantee may, within 60 days from the date of the Offeror's
Notice, sell all, but not less than all, of such shares or other securities
to the proposed transferee at no less than the price specified and on terms
no more favorable than those set forth in the Offeror's Notice; provided,
however, that the provisions of this sentence shall not limit the rights
the Grantee may otherwise have if UPR has accepted the offer contained in
the Offeror's Notice and wrongfully refuses to purchase the shares or other
securities subject thereto. The requirements of this Section 8 shall not
apply to (a) any disposition as a result of which the proposed transferee
would own beneficially not more than 2% of the outstanding voting power of
UPR, (b) any disposition of UPR Common Stock or other securities by a
Person to whom the Grantee has assigned its rights under the UPR Stock
Option with the consent of UPR, (c) any sale by means of a public offering
registered under the Securities Act or (d) any transfer to a wholly owned
subsidiary of the Grantee which agrees in writing to be bound by the terms
hereof.
9. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit exceed the Profit Cap and, if it
otherwise would exceed such amount, the Grantee, at its sole election,
shall either (i) deliver to UPR for cancellation UPR Stock Option Shares
previously purchased by Grantee, (ii) pay cash or other consideration to
UPR, (iii) reduce the amount of the fee payable to Grantee under Section
7.5(a) of the Merger Agreement or (iv) undertake any combination
thereof, so that the Grantee's Total Profit shall not exceed the Profit
Cap after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this UPR
Stock Option may not be exercised for a number of UPR Stock Option
Shares that would, as of the Notice Date, result in a Notional Total
Profit of more than the Profit Cap, and, if exercise of the UPR Stock
Option otherwise would exceed the Profit Cap, the Grantee, at its sole
UPR Stock Option, may increase the Exercise Price for that number of UPR
Stock Option Shares set forth in the Exercise Notice so that the
Notional Total Profit shall not exceed the Profit Cap; provided,
however, that nothing in this sentence shall restrict any exercise of
the UPR Stock Option otherwise permitted by this Section 9(b) on any
subsequent date at the Exercise Price set forth in Section 2(b) if such
exercise would not then be restricted under this Section 9(b).
10. Listing. If UPR Common Stock or any other securities then subject
to the UPR Stock Option are then listed on the NYSE, UPR, upon the
occurrence of an Exercise Event, will promptly file an application to list
on the NYSE the shares of UPR Common Stock or other securities then subject
to the UPR Stock Option and will use all reasonable efforts to cause such
listing application to be approved as promptly as practicable.
11. Replacement of Agreement. Upon receipt by UPR of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, UPR will execute and deliver
a new Agreement of like tenor and date. Any such new Agreement shall
constitute an additional contractual obligation of UPR, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in the Merger Agreement
or as otherwise expressly provided herein, each of the parties hereto
shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be
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modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
(c) Entire Agreement; No Third Party Beneficiary;
Severability. Except as otherwise set forth in the Merger Agreement,
this Agreement (including the Merger Agreement and the other documents
and instruments referred to herein and therein) (i) constitutes the
entire agreement and supersedes all prior agreements and understandings,
both written and oral, between the parties with respect to the subject
matter hereof and (ii) is not intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder.
(d) Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is
not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent
possible.
(e) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Delaware,
regardless of the Applicable Laws that might otherwise govern under
applicable principles of conflicts of law. All actions and proceedings
arising out of or relating to this Agreement shall be exclusively heard
and determined in any state or federal court sitting in the city of
Wilmington, Delaware.
(f) Descriptive Headings. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
(g) Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses or
sent by electronic transmission to the telecopier number specified
below:
If to UPR to:
Union Pacific Resources Group Inc.
UPR Plaza
777 Main Street
Fort Worth, Texas
Attention: Kerry R. Brittain, Esq.
Telecopy No.: (817) 321-7026
with a copy to:
Howard L. Shecter, Esq.
Morgan Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Telecopy No.: (212) 309-6273
If to Grantee to:
Anadarko Petroleum Corporation
17001 Northchase Drive
Houston, Texas 77060
Attention: J. Stephen Martin, Esq.
Telecopy No.: (281) 874-3296
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with a copy to:
Daniel A. Neff, Esq.
David A. Katz, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Facsimile: (212) 403-2000
(h) Counterparts. This Agreement and any amendments hereto may be
executed in counterparts, each of which shall be deemed an original and
all of which taken together shall constitute but a single document.
(i) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the UPR Stock Option shall
be sold, assigned or otherwise disposed of or transferred by either of
the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other party, except that the Grantee
may assign this Agreement to a wholly owned subsidiary of the Grantee;
provided, however, that no such assignment shall have the effect of
releasing the Grantee from its obligations hereunder. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective
successors and assigns.
(j) Further Assurances. In the event of any exercise of the UPR
Stock Option by the Grantee, UPR and the Grantee shall execute and
deliver all other documents and instruments and take all other action
that may be reasonably necessary in order to consummate the transactions
provided for by such exercise.
(k) Specific Performance. The parties hereto hereby acknowledge and
agree that the failure of any party to this Agreement to perform its
agreements and covenants hereunder will cause irreparable injury to the
other party to this Agreement for which damages, even if available, will
not be an adequate remedy. Accordingly, each of the parties hereto
hereby consents to the granting of equitable relief (including specific
performance and injunctive relief) by any court of competent
jurisdiction to enforce any party's obligations hereunder. The parties
further agree to waive any requirement for the securing or posting of
any bond in connection with the obtaining of any such equitable relief
and that this provision is without prejudice to any other rights that
the parties hereto may have for any failure to perform this Agreement.
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IN WITNESS WHEREOF, UPR and the Grantee have caused this UPR Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
ANADARKO PETROLEUM CORPORATION
By: /s/ ROBERT J. ALLISON, JR.
----------------------------------
Name: Robert J. Allison, Jr.
Title: Chairman and Chief
Executive Officer
UNION PACIFIC RESOURCES GROUP INC.
By: /s/ GEORGE LINDAHL, III
----------------------------------
Name: George Lindahl, III
Title: Chairman, President and
Chief Executive Officer
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ANNEX A TO THE UPR STOCK OPTION AGREEMENT
SCHEDULE OF DEFINED TERMS
The following terms when used in the Stock Option Agreement shall have the
meanings set forth below unless the context shall otherwise require:
"Agreement" shall mean this Stock Option Agreement.
"Applicable Price" means the highest of (i) the highest purchase price
per share paid pursuant to a third party's tender or exchange offer made
for shares of UPR Common Stock after the date hereof and on or prior to the
Put Date, (ii) the price per share to be paid by any third Person for
shares of UPR Common Stock pursuant to an agreement for a UPR Acquisition
entered into on or prior to the Put Date, and (iii) the Current Market
Price. If the consideration to be offered, paid or received pursuant to
either of the foregoing clauses (i) or (ii) shall be other than in cash,
the value of such consideration shall be determined in good faith by an
independent nationally recognized investment banking firm jointly selected
by the Grantee and UPR, which determination shall be conclusive for all
purposes of this Agreement.
"Authorization" shall mean any and all permits, licenses,
authorizations, orders, certificates, registrations or other approvals
granted by any Governmental Authority.
"Beneficial Ownership," "Beneficial Owner" and "Beneficially Own"
shall have the meanings ascribed to them in Rule 13d-3 under the Exchange
Act.
"Business Day" shall mean a day other than Saturday, Sunday or a
federal holiday.
"Call Consideration" shall have the meaning ascribed to such term in
Section 6 herein.
"Call Date" shall have the meaning ascribed to such term in Section 6
herein.
"Call Period" shall have the meaning ascribed to such term in Section
6 herein.
"Closing" shall have the meaning ascribed to such term in Section 2
herein.
"Closing Date" shall have the meaning ascribed to such term in Section
2 herein.
"Current Market Price" shall mean, as of any date, the average of the
closing prices (or, if such securities should not trade on any trading day,
the average of the bid and asked prices therefor on such day) of UPR Common
Stock as reported on the New York Stock Exchange Composite Tape during the
ten consecutive trading days ending on (and including) the trading day
immediately prior to such date or, if the shares of UPR Common Stock are
not quoted thereon, on The Nasdaq Stock Market or, if the shares of UPR
Common Stock are not quoted thereon, on the principal trading market (as
defined in Regulation M under the Exchange Act) on which such shares are
traded as reported by a recognized source during such ten Business Day
period.
"Exercise Event" shall mean any of the events giving rise to the
obligation of UPR to pay the $25 million fee under Section 7.5(a) of the
Merger Agreement.
"Exercise Notice" shall have the meaning ascribed to such term in
Section 2 herein.
"Exercise Price" shall have the meaning ascribed to such term in
Section 2 herein.
"Lien" shall mean any mortgage, pledge, security interest, adverse
claim, encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing), any conditional sale or other title retention
agreement, any lease in the nature thereof or the filing of or agreement to
give any financing statement under the Applicable Laws of any jurisdiction.
"Merger Agreement" shall mean that certain Agreement and Plan of
Merger dated as of the date hereof among Anadarko Petroleum Corporation, a
Delaware corporation, Dakota Merger Corp., a Utah corporation, and Union
Pacific Resources Group Inc., a Utah corporation.
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"Notice Date" shall have the meaning ascribed to such term in Section
2 herein.
"Notional Total Profit" shall mean, with respect to any number of UPR
Stock Option Shares as to which the Grantee may propose to exercise the UPR
Stock Option, the Total Profit determined as of the date of the Exercise
Notice assuming that the UPR Stock Option were exercised on such date for
such number of UPR Stock Option Shares and assuming such UPR Stock Option
Shares, together with all other UPR Stock Option Shares held by the Grantee
and its Affiliates as of such date, were sold for cash at the closing
market price for UPR Common Stock as of the close of business on the
preceding trading day (less customary brokerage commissions) and including
all amounts theretofore received or concurrently being paid to the Grantee
pursuant to clauses (i), (ii) and (iii) of the definition of Total Profit.
"Offeror's Notice" shall have the meaning ascribed to such term in
Section 8 herein.
"Person" shall have the meaning specified in Sections 3(a)(9) and
13(d)(3) of the Exchange Act.
"Profit Cap" shall mean $25 million, unless the conditions to the
payment by UPR of the additional $100 million fee under Section 7.5(a) of
the Merger Agreement shall have occurred, in which case "Profit Cap" shall
mean $125 million.
"Put Consideration" shall have the meaning ascribed to such term in
Section 5 herein.
"Put Date" shall have the meaning ascribed to such term in Section 5
herein.
"Put Period" shall have the meaning ascribed to such term in Section 5
herein.
"Put Right" shall have the meaning ascribed to such term in Section 5
herein.
"Registration Expenses" shall mean the expenses associated with the
preparation and filing of any registration statement pursuant to Section 7
herein and any sale covered thereby (including any fees related to blue sky
qualifications and filing fees in respect of the National Association of
Securities Dealers, Inc.), but excluding underwriting discounts or
commissions or brokers' fees in respect to shares to be sold by the Grantee
and the fees and disbursements of the Grantee's counsel.
"Registration Period" shall mean, subject to Section 4 hereof, the
period of two years following the first exercise of the UPR Stock Option by
the Grantee.
"Subcorp" shall mean Dakota Merger Corp., a Utah corporation and a
wholly owned subsidiary of Grantee.
"Total Profit" shall mean the aggregate (before income taxes) of the
following: (i) all amounts received by the Grantee or concurrently being
paid to the Grantee pursuant to Section 5 for the repurchase of all or part
of the unexercised portion of the UPR Stock Option, (ii)(A) the amounts
received by the Grantee or concurrently being paid to the Grantee pursuant
to the sale of UPR Stock Option Shares (or any other securities into which
such UPR Stock Option Shares are converted or exchanged), including sales
made to UPR or pursuant to a registration statement under the Securities
Act or any exemption therefrom, less (B) the Grantee's purchase price for
such UPR Stock Option Shares and (iii) all amounts received by the Grantee
from UPR or concurrently being paid to the Grantee pursuant to Section
7.5(a) of the Merger Agreement.
"Unexercised UPR Stock Option Shares" shall mean, from and after the
Exercise Date until the expiration of the UPR Stock Option Term, those UPR
Stock Option Shares as to which the UPR Stock Option remains unexercised
from time to time.
"UPR Stock Option" shall mean the UPR Stock Option granted by UPR to
Grantee pursuant to Section 2 herein.
"UPR Stock Option Shares" shall have the meaning ascribed to such term
in Section 2 herein.
"UPR Stock Option Term" shall have the meaning ascribed to such term
in Section 2 herein.
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ANNEX D
[LETTERHEAD OF GOLDMAN, SACHS & CO.]
April 2, 2000
Board of Directors
Union Pacific Resources Group Inc.
777 Main Street
Fort Worth, Texas 76102
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, no par value (the
"UPR Common Stock"), of Union Pacific Resources Group Inc. ("UPR") of the
exchange ratio of 0.455 shares of Common Stock, par value $0.10 per share (the
"Anadarko Common Stock"), of Anadarko Petroleum Corporation ("Anadarko") to be
received for each share of UPR Common Stock (the "Exchange Ratio") pursuant to
the Agreement and Plan of Merger, dated as of April 2, 2000, among Anadarko,
Dakota Merger Sub., a wholly-owned subsidiary of Anadarko, and UPR (the
"Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with UPR having provided certain investment banking services to UPR
from time to time, including having acted as its financial advisor in connection
with the sale of its gas midstream gathering and processing facilities to Duke
Energy Corporation on March 31, 1999 and having acted as its financial advisor
in connection with, and having participated in certain of its negotiations
leading to, the Agreement. We also have provided certain investment banking
services to Anadarko from time to time, including having acted as managing
underwriter of public offerings of $100 million aggregate principal amount of
7.20% Debentures due 2029 on March 19, 1999, and $200 million aggregate
principal amount of 7.20% Debentures due 2029 on March 15, 1999, and as managing
underwriter of a public offering of 6.25 million shares of Anadarko Common Stock
on May 4, 1999. Goldman, Sachs & Co. provides a full range of financial advisory
and securities services and, in the course of its normal trading activities, may
from time to time effect transactions and hold securities, including derivative
securities, of UPR or Anadarko for its own account and for the account of
customers. Goldman, Sachs & Co. may provide investment banking services to
Anadarko and its subsidiaries in the future.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K to UPR
and Anadarko for the four years ended December 31, 1999 and the five years ended
December 31, 1999, respectively; certain interim reports to stockholders and
Quarterly Reports on Form 10-Q of UPR and Anadarko; certain other communications
from UPR and Anadarko to their respective stockholders; certain internal
financial analyses and forecasts for UPR prepared by its management (the "UPR
Forecasts"); certain internal financial analyses and forecasts for Anadarko
prepared by its management; certain internal financial analyses and forecasts
for Anadarko prepared by its management, as adjusted by the management of UPR
(the "Anadarko Forecasts"); and certain cost savings and operating synergies
projected by the managements of UPR and Anadarko to result from the transaction
contemplated by the Agreement (the "Synergies"). We also have reviewed and
discussed with the managements of UPR and Anadarko certain information and
internal estimates relating to their respective oil and gas reserves, including
reserve information for the year ended December 31, 1999, prepared by their
respective managements. We also have held discussions with members of the senior
managements of UPR and Anadarko regarding their assessment of the strategic
rationale for, and the potential benefits of, the transaction contemplated by
the
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Board of Directors
Union Pacific Resources Group Inc.
April 2, 2000
Page 2
Agreement and the past and current business operations, financial condition and
future prospects of their respective companies. In addition, we have reviewed
the reported price and trading activity for shares of UPR Common Stock and
shares of Anadarko Common Stock, compared certain financial and stock market
information for UPR and Anadarko with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the oil and gas industry
specifically and in other industries generally and performed such other studies
and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of its financial
and other information discussed with or reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this opinion. In that
regard, we have assumed with your consent that the UPR Forecasts and the
Anadarko Forecasts, including the Synergies, have been reasonably prepared on a
basis reflecting the best currently available estimates and judgments of the
managements of UPR and Anadarko, as the case may be, and that the Anadarko
Forecasts will be realized in the amounts and time periods contemplated thereby.
In addition, UPR management has advised us that in preparing the Anadarko
Forecasts, UPR management received guidance from outside consultants, Ryder
Scott Company and DeGolyer & MacNaughton. In addition, we have not made an
independent evaluation or appraisal of the assets and liabilities for UPR or
Anadarko or any of their subsidiaries and we have not been furnished with any
such evaluation or appraisal. With respect to oil and gas reserve information,
we are not experts in the evaluation of oil and gas properties and, with your
consent, have relied without independent verification solely upon the reserve
information and internal estimates prepared by the managements of UPR and
Anadarko. We were not requested to solicit, and did not solicit, interest from
other parties with respect to an acquisition of or other business combination
with UPR. Our advisory services and the opinion expressed herein are provided
for the information and assistance of the Board of Directors of UPR in
connection with its consideration of the transaction contemplated by the
Agreement and such opinion does not constitute a recommendation as to how any
holder of shares of UPR Common Stock should vote with respect to such
transaction.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the
Exchange Ratio pursuant to the Agreement is fair from a financial point of view
to the holders of shares of UPR Common Stock.
Very truly yours,
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182
ANNEX E
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
April 2, 2000
Board of Directors
Anadarko Petroleum Corporation
17001 Northchase Drive
Houston, Texas 77060
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to Anadarko Petroleum Corporation ("Anadarko") of the
Exchange Ratio (as defined below) set forth in the Agreement and Plan of Merger,
dated as of April 2, 2000 (the "Merger Agreement"), by and among Anadarko,
Dakota Merger Corp., a wholly owned subsidiary of Anadarko ("Sub"), and Union
Pacific Resources Group Inc. ("UPR"). The Merger Agreement provides for, among
other things, the merger of Sub with and into UPR (the "Merger") pursuant to
which each outstanding share of the common stock, no par value, of UPR ("UPR
Common Stock") will be converted into the right to receive 0.4550 (the "Exchange
Ratio") of a share of the common stock, par value $0.10 per share, of Anadarko
(the "Anadarko Common Stock").
In arriving at our opinion, we have reviewed the Merger Agreement and
certain related documents, and certain publicly available business and financial
information relating to Anadarko and UPR. We have also reviewed certain other
information relating to Anadarko and UPR, including financial forecasts,
provided to and discussed with us by Anadarko and UPR, and have met with the
managements of Anadarko and UPR to discuss the businesses and prospects of
Anadarko and UPR. We have also considered certain financial and stock market
data of Anadarko and UPR, and we have compared those data with similar data for
other publicly held companies in businesses similar to Anadarko and UPR, and we
have considered, to the extent publicly available, the financial terms of
certain other business combinations and other transactions which have recently
been effected. We also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which we
deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
such information being complete and accurate in all material respects. With
respect to the financial forecasts, we have been advised, and have assumed, that
such forecasts have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of Anadarko and
UPR as to the future financial performance of Anadarko and UPR and the potential
synergies and strategic benefits (including the amount, timing and achievability
thereof) anticipated to result from the Merger. We also have assumed, with your
consent, that the Merger will be treated as a purchase in accordance with
generally accepted accounting principles and as a tax-free reorganization for
federal income tax purposes. We have not been requested to make, and have not
made, an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of Anadarko or UPR, nor have we been furnished with
any such evaluations or appraisals. Our opinion is necessarily based upon
information available to us, and financial, economic, market and other
conditions as they exist and can be evaluated, on the date hereof. We are not
expressing any opinion as to what the value of the Anadarko Common Stock
actually will be when issued pursuant to the Merger or the prices at which the
Anadarko Common Stock will trade subsequent to the Merger.
We have acted as financial advisor to Anadarko in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger. We have in the past provided
services to Anadarko and UPR, and currently are providing services to Anadarko,
unrelated to the proposed Merger, for which services we have received and will
receive compensation. In the ordinary course of business, Credit Suisse First
Boston Corporation and its affiliates
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Board of Directors
Anadarko Petroleum Corporation
April 2, 2000
Page 2
may actively trade the securities of Anadarko and UPR for our and such
affiliates' accounts and for the accounts of customers and, accordingly, may at
any time hold long or short positions in such securities.
It is understood that this letter is for the information of the Board of
Directors of Anadarko in connection with its evaluation of the Merger and does
not constitute a recommendation to any stockholder as to how such stockholder
should vote with respect to any matter relating to the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair, from a financial point of view, to
Anadarko.
Very truly yours,
CREDIT SUISSE FIRST BOSTON
CORPORATION
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ANNEX F
PROPOSED ANADARKO MAXIMUM BOARD SIZE CHARTER AMENDMENT
Increase the maximum size of the Anadarko board of directors to 15
directors by amending and restating Article Seventh to read:
"SEVENTH. The business and affairs of the Corporation shall be managed by
or under the direction of a Board of Directors consisting of not less than six
nor more than fifteen directors, the exact number of directors to be determined
from time to time by resolution adopted by affirmative vote of a majority of the
entire Board of Directors. The directors shall be divided into three classes,
designated Class I, Class II and Class III. Each class shall consist, as nearly
as may be possible, of one-third of the total number of directors constituting
the entire Board of Directors. At a special meeting of stockholders held on
August 27, 1986, Class I directors were elected for a term ending at the 1987
Annual Meeting of Stockholders, Class II directors were elected for a term
ending at the 1988 Annual Meeting of Stockholders and Class III directors were
elected for a term ending at the 1989 Annual Meeting of Stockholders, in each
case effective as of the date of filing of this Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware. At each
Annual Meeting of Stockholders beginning in 1987, successors to the class of
directors whose term expires at that Annual Meeting shall be elected for a
three-year term. If the number of directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain the number of directors
in each class as nearly equal as possible, and any additional director of any
class elected to fill a vacancy resulting from an increase in such class shall
hold office for a term that shall coincide with the remaining term of that
class, but in no case will a decrease in the number of directors shorten the
term of any incumbent director. A director shall hold office until the Annual
Meeting for the year in which his term expires and until his successor shall be
elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. Any vacancy on the Board of
Directors that results from an increase in the number of directors may be filled
by a majority of the Board of Directors then in office, provided that a quorum
is present, and any other vacancy occurring on the Board of Directors may be
filled by a majority of the directors then in office, even if less than a
quorum, or by a sole remaining director. Any director elected to fill a vacancy
not resulting from an increase in the number of directors shall have the same
remaining term as that of his predecessor.
Subject to the rights of the holders of any series of Preferred Stock then
outstanding, any director, or the entire Board of Directors, may be removed from
office at any time, but only for cause."
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ANNEX G
PROPOSED ANADARKO AUTHORIZED COMMON SHARES CHARTER AMENDMENT
Increase the authorized number of Anadarko common shares to 450,000,000
from 300,000,000 by amending and restating the first paragraph of Article Fourth
to read:
"FOURTH. The total number of shares which the Corporation shall have
authority to issue is 452,000,000 shares, of which (a) 2,000,000 shares shall be
Preferred Stock, issuable in series, with par value of $1.00 per share and (b)
450,000,000 shares shall be Common Stock, with par value of $0.10 per share."
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ANNEX H
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
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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 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
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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. 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
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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.
(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.
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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);
(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
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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 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
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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 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.
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(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.
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ANNEX I
PROPOSED AMENDMENT TO
1999 STOCK INCENTIVE PLAN
WHEREAS, ANADARKO PETROLEUM CORPORATION (the "Company") has heretofore
adopted the 1999 STOCK INCENTIVE PLAN, as amended (the "Plan"); and
WHEREAS, the Company desires to amend the Plan:
NOW, THEREFORE, the Plan shall be amended, subject to stockholder
approval, as of July 1, 2000.
1. Section 4 (a)(i) shall be amended by replacing the number "4,000,000"
with the number "14,000,000".
2. Section 4 (a)(ii) shall be amended by replacing the number "800,000"
with the number "2,800,000".
3. Section 4 (b)(i) shall be amended by replacing the number "1,500,000"
with the number "2,500,000".
4. Section 4 (b)(iii) shall be amended by replacing the number "300,000"
with the number "500,000".
5. Section 6 (c)(v) shall be amended by having the first sentence
replaced in its entirety with the following:
"Non-performance based Restricted Stock Awards will not be 100% vested
prior to three years from the date of grant except for Restricted Stock Awards
that may be vested earlier due to (i) disability, (ii) death, (iii) termination
of employment due to a reduction in force, job abolishment or at the convenience
of the Company or (iv) with the consent of the Committee, retirement."
2. As amended hereby, the Plan is specifically ratified and reaffirmed.
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed this day of April, 2000.
ATTEST: ANADARKO PETROLEUM CORPORATION
- - - - - - - - - - - - ----------------------------------------------------- By: -------------------------
Charles G. Manley
Senior Vice President,
Administration
I-1
197
PROXY
ANADARKO PETROLEUM CORPORATION
SOLICITED BY THE BOARD OF DIRECTORS
FOR SPECIAL MEETING OF STOCKHOLDERS
JUNE __, 2000
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 with respect to the proposals on the issuance of the Anadarko common
shares pursuant to the proposed merger transaction involving Anadarko and Union
Pacific Resources Group Inc., the amendment to the Restated Certificate of
Incorporation to increase the maximum size of the board of directors, the
amendment to the Restated Certificate of Incorporation to increase the
authorized number of Anadarko common shares, and the amendment to the 1999 Stock
Incentive Plan; and on all other matters which may come before the Special
Meeting of Stockholders of Anadarko Petroleum Corporation to be held on
___________, June __, 2000 at 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, 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 -
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE WAYS:
1. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.
OR
2. Call TOLL FREE 1-800-840-1208 on a Touch Tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.
OR
3. To Vote by Internet at our Internet Address: http://www.eproxy.com/apc
PLEASE VOTE
198
Please mark
your votes
like this [X]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1,2,3 AND 4.
FOR AGAINST ABSTAIN
Item 1-APPROVAL OF THE ISSUANCE OF ANADARKO COMMON [ ] [ ] [ ]
SHARES PURSUANT TO THE PROPOSED
MERGER
FOR AGAINST ABSTAIN
Item 2-APPROVAL OF THE AMENDMENT TO THE RESTATED [ ] [ ] [ ]
CERTIFICATE OF INCORPORATION TO INCREASE THE MAXIMUM
SIZE OF THE BOARD OF DIRECTORS FROM NINE
TO 15 DIRECTORS
FOR AGAINST ABSTAIN
Item 3-APPROVAL OF THE AMENDMENT TO THE RESTATED CER- [ ] [ ] [ ]
TIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED
NUMBER OF ANADARKO COMMON SHARES FROM 300,000,000
TO 450,000,000
FOR AGAINST ABSTAIN
Item 4-APPROVAL OF THE AMENDMENT TO THE 1999 STOCK [ ] [ ] [ ]
INCENTIVE PLAN
ALL OTHER MATTERS THAT MAY COME BEFORE THE MEETING
PLEASE VOTE YOUR PROXY
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 -
VOTE BY TELEPHONE OR INTERNET
QUICK *** EASY *** IMMEDIATE
YOUR VOTE IS IMPORTANT! - YOU CAN VOTE IN ONE OF THREE 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 THE PROPOSAL, PRESS 1
WHEN ASKED, PLEASE CONFIRM BY PRESSING 1.
OR
2. VOTE BY INTERNET: Follow the instructions at our Website Address:
http://www.eproxy.com/apc
OR
3. VOTE BY PROXY CARD: Mark, sign and date your proxy card and return promptly
in the enclosed envelope.
NOTE: IF YOU VOTE BY INTERNET OR TELEPHONE, THERE IS NO NEED TO MAIL BACK YOUR
PROXY CARD.
THANK YOU FOR VOTING
199
PROXY PROXY
UNION PACIFIC RESOURCES GROUP INC.
SOLICITED BY BOARD OF DIRECTORS
SPECIAL MEETING JUNE __, 2000
[ , ]
The undersigned hereby appoints George Lindall III and Kerry R. Brittain as
proxies, or either of them, each with the power to appoint a substitute, and
hereby authorizes either of them to represent and to vote all the shares of
Union Pacific Resources Group Inc. which the undersigned is entitled to vote at
the Special Meeting of Shareholders to be held on June __, 2000, or any
adjournment or postponement thereof, as indicated in this proxy upon all
matters referred to on the reverse side and described in the proxy statement for
the meeting, and, in their discretion, upon any other matters that may properly
come before the meeting. If no direction is made, this proxy will be voted for
all proposals.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND RETURN IT
PROMPTLY IN THE ACCOMPANYING ENVELOPE.
(Continued and to be signed on reverse side.)
- - - - - - - - - - - - -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
200
UNION PACIFIC RESOURCES GROUP INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
Union Pacific Resources Group Inc. Board of Directors recommends a vote FOR
proposal 1.
1. Approval of the Agreement and Plan of Merger, dated as of April 2, 2000, FOR AGAINST ABSTAIN
among Anadarko Petroleum Corporation, Dakota Merger Corp., a wholly owned [ ] [ ] [ ]
subsidiary of Anadarko, and Union Pacific Resources Group Inc., and the
transactions contemplated thereby, including the merger, pursuant to which
Dakota Merger Corp. will be merged with and into Union Pacific Resources and
each share of common stock, no par value, of Union Pacific Resources issued
and outstanding immediately prior to the merger (other than shares held by
Anadarko, Union Pacific Resources or their respective subsidiaries, which
will be canceled) will be converted into the right to receive 0.455 of a
share of common stock, $0.10 par value, of Anadarko.
All other matters that may come before the meeting.
This proxy must be signed exactly as
name appears hereon. Executors,
administrators, trustees, etc.,
should give full title as such. If
the signer is a corporation, please
sign full corporate name by duly
authorized officer.
___________________________________
Signature
___________________________________
Signature (if held jointly)
Dated: _____________________ , 2000
- - - - - - - - - - - - -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
UNION PACIFIC RESOURCES GROUP INC.
If you received more than one set of proxy materials and wish to have it
consolidated, please contact
Harris Trust & Savings Bank
1-800-335-6918
[UPR LOGO]