1
ANADARKO PETROLEUM CORPORATION LOGO
P. O. BOX 1330
HOUSTON, TEXAS 77251-1330
March 21, 1997
TO THE STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders of
the Company which will be held in The Wyndham Hotel, Greenspoint, 12400
Greenspoint Drive, Houston, Texas, on Thursday, April 24, 1997, at 9:30 a.m.
The Notice of the Annual Meeting and Proxy Statement, which are attached,
provide information concerning the matters to be considered at the meeting. In
addition, the general operations of the Company will be discussed and
stockholders will be afforded the opportunity to ask questions.
We would appreciate your signing and returning your proxy in the enclosed
envelope as soon as possible, whether or not you plan to attend the meeting.
Please sign, date and return the enclosed proxy in the self-addressed,
postage-paid return envelope. If you do not return the signed proxy, your proxy
cannot be counted. We value your opinions and encourage you to participate in
this year's Annual Meeting by voting your proxy.
Very truly yours,
/s/ ROBERT J. ALLISON, JR.
ROBERT J. ALLISON, JR.
Chairman, President and
Chief Executive Officer
2
[ANADARKO PETROLEUM CORPORATION LOGO]
P. O. BOX 1330
HOUSTON, TEXAS 77251-1330
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 24, 1997
Notice is hereby given that the Annual Meeting of Stockholders of Anadarko
Petroleum Corporation, a Delaware corporation (the "Company"), will be held in
The Wyndham Hotel, Greenspoint, 12400 Greenspoint Drive, Houston, Texas, on
Thursday, April 24, 1997, at 9:30 a.m., for the purpose of:
(1) Electing two Class II directors for terms of three years, each to
hold office until the expiration of his term and until his successor shall
have been elected and shall have qualified;
(2) Approving an amendment to the 1993 Stock Incentive Plan; and
(3) Transacting such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
A record date of March 3, 1997, has been fixed for determining stockholders
entitled to notice of, and to vote at, the Annual Meeting of Stockholders, and
only holders of Common Stock of record at the close of business on the record
date will be entitled to receive notice of, and to vote at, such meeting or any
adjournment or adjournments thereof.
Whether or not you expect to be present at the meeting, please sign, date
and return the enclosed proxy in the enclosed addressed envelope, which requires
no postage if mailed in the United States.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ SUZANNE SUTER
SUZANNE SUTER
Corporate Secretary
Dated: March 21, 1997
Houston, Texas
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[ANADARKO PETROLEUM CORPORATION LOGO]
P. O. BOX 1330
HOUSTON, TEXAS 77251-1330
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS
APRIL 24, 1997
---------------------
GENERAL INFORMATION
This statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Anadarko Petroleum Corporation, a Delaware
corporation (the "Company" or "Anadarko"), of proxies for use at its Annual
Meeting of Stockholders to be held in The Wyndham Hotel, Greenspoint, 12400
Greenspoint Drive, Houston, Texas, on Thursday, April 24, 1997, at 9:30 a.m.,
for the purposes set forth in the accompanying notice of the meeting. Proxy
material is being mailed to holders of the Company's common stock, par value
$0.10 per share ("Common Stock"), on or about March 21, 1997.
A stockholder may, at any time prior to the meeting, revoke a proxy by
giving written notice of such revocation addressed to the Corporate Secretary of
the Company at P.O. Box 1330, Houston, Texas 77251-1330. Unless revoked prior to
its exercise, any proxy given pursuant to this solicitation will be voted at the
meeting. Also, a stockholder may attend the meeting and vote in person whether
or not the stockholder has previously given a proxy.
RECORD DATE AND VOTING AT THE MEETING
On March 3, 1997, the record date for the determination of stockholders
entitled to vote at the meeting, the Company had 59,617,823 shares of Common
Stock outstanding, each of which will be entitled to one vote at the meeting.
Votes cast by proxy, or in person, at the meeting will be tabulated by the
election inspectors appointed for the meeting. The holders of a majority of the
shares entitled to vote at the meeting, whether present in person or represented
by proxy, will constitute a quorum for the transaction of business at the
meeting. Proxy cards that are not signed or that are not returned are treated as
not voted for any purpose.
All elections for directors shall be decided by a plurality of the votes
cast in respect thereof. If no voting direction is indicated on the proxy card,
the shares will be considered votes for the nominees. In accordance with
Delaware law, a stockholder entitled to vote for the election of directors can
withhold authority to vote for all nominees for directors or can withhold
authority to vote for certain nominees for director.
Abstentions from voting with respect to proposals are treated as votes
against the particular proposal. If a broker indicates on a proxy that it does
not have discretionary authority as to certain shares to vote on a particular
proposal, those shares will not be considered as present and entitled to vote
with respect to that proposal.
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ELECTION OF DIRECTORS
(ITEM NO. 1 ON PROXY CARD)
The Board is divided into three classes of directors serving staggered
three-year terms. Class II and Class III each have two directors and Class I has
three directors.
At the meeting, Messrs. Conrad P. Albert and Robert J. Allison, Jr., Class
II directors, are to be elected for terms of three years, each to hold office
until the expiration of his term in 2000 and until his successor shall have been
elected and shall have qualified. It is the intention of the persons named in
the accompanying form of proxy to vote such proxy, unless otherwise instructed,
for the election of Messrs. Conrad P. Albert and Robert J. Allison, Jr. for
terms of three years. If either of these nominees should be unable to serve, the
proxies will be voted for the election of such other persons as shall be
determined by the persons named in the proxy, in accordance with their judgment.
Messrs. Larry Barcus and James L. Bryan, Class III directors, were elected
by the stockholders in 1995 for terms of three years. Messrs. Ronald Brown and
John R. Gordon, Class I directors, were elected by the stockholders in 1996 to
each serve a three-year term. Mr. John R. Butler, Jr. was elected by the
directors in 1996 as a Class I director to serve a term which expires in 1999.
INFORMATION ABOUT DIRECTORS
Certain information concerning the nominees for election as directors, and
those persons whose terms of office as directors will continue after the
meeting, is set forth below.
NOMINEES FOR ELECTION
CONRAD P. ALBERT -- Mr. Albert resides in New York and is engaged in
personal investments. He was Executive Vice President of Manufacturers Hanover
Trust Company, a banking corporation, New York, New York, from September 1983
through 1991. Mr. Albert is also a director of Deep Tech International.
AGE AT END BECAME A PROPOSED
OF 1997 DIRECTOR TERM EXPIRES
- ---------- -------- ------------
51 1986 2000
ROBERT J. ALLISON, JR. -- Mr. Allison has been Chairman of the Board and
Chief Executive Officer of the Company since October 1, 1986. Mr. Allison was
elected President of the Company in January 1993.
AGE AT END BECAME A PROPOSED
OF 1997 DIRECTOR TERM EXPIRES
- ---------- -------- ------------
58 1985 2000
DIRECTORS CONTINUING IN OFFICE
LARRY BARCUS -- Mr. Barcus is Chairman of L. G. Barcus and Sons, Inc.,
Kansas City, Kansas, a general contractor with operations nationwide.
AGE AT END BECAME A PRESENT
OF 1997 DIRECTOR TERM EXPIRES
- ---------- -------- ------------
60 1986 1998
RONALD BROWN -- Mr. Brown resides in Rancho Santa Fe, California, and is
engaged in personal investments. He retired as Executive Vice President of
Compass Bank, Houston, Texas in 1992.
AGE AT END BECAME A PRESENT
OF 1997 DIRECTOR TERM EXPIRES
- ---------- -------- ------------
64 1986 1999
2
5
JAMES L. BRYAN -- Mr. Bryan has been Senior Vice President of Dresser
Industries, Inc. ("Dresser"), an oilfield services company with executive
offices in Dallas, Texas, since February 1994. In May 1990, Mr. Bryan was
elected Vice President - Operations of Dresser.
AGE AT END BECAME A PRESENT
OF 1997 DIRECTOR TERM EXPIRES
- ---------- -------- ------------
61 1986 1998
JOHN R. BUTLER, JR. -- Mr. Butler has been Chairman of the Board and Chief
Executive Officer of GeoQuest International Holdings, Inc. since 1973. GeoQuest
is a supplier of drilling, production and seismic data, with executive offices
in Houston, Texas.
AGE AT END BECAME A PRESENT
OF 1997 DIRECTOR TERM EXPIRES
- ---------- -------- ------------
58 1996 1999
JOHN R. GORDON -- Mr. Gordon has been President of Deltec Asset Management
Corporation, a New York investment management company, since January 1988.
Deltec Asset Management Corporation's executive office is in New York, New York.
AGE AT END BECAME A PRESENT
OF 1997 DIRECTOR TERM EXPIRES
- ---------- -------- ------------
49 1988 1999
COMMITTEES OF THE BOARD
The Board has a standing Executive Committee, Audit Committee and
Compensation and Benefits Committee (the "Compensation Committee"). The Board
does not currently have a Nominating Committee. Mr. Allison is Chairman and
Messrs. Brown and Bryan are members of the Executive Committee. Mr. Barcus is
Chairman and Messrs. Albert, Bryan and Butler are members of the Audit
Committee. Mr. Brown is Chairman and Messrs. Gordon and Simmons are members of
the Compensation Committee. During 1996, the Audit Committee met three times and
the Compensation Committee met five times.
The Executive Committee reviews and, where appropriate, approves corporate
action with respect to the conduct of the business of the Company between Board
meetings. Actions taken by the Executive Committee are regularly submitted to
the Board at its next meeting for review by the full Board.
The Audit Committee recommends to the Board each year the appointment of
independent auditors for the following year. The Audit Committee considers the
independence of such auditors; reviews the fees for audit and nonaudit services;
reviews the plan, scope and results of the independent audit; reviews the
recommendations resulting from such audit and the responses of management to
such recommendations; reviews the plan, scope and results of the Company's
internal audit group's activities; reviews the recommendations resulting from
internal audits; and reviews the accounting controls of the Company that the
Audit Committee or the Board may deem necessary or desirable. This Committee
also reviews the annual financial statements issued by the Company to its
security holders and makes recommendations as to accounting and auditing
policies which, in its judgment, should receive the attention of the Board.
The Compensation Committee considers and approves certain remuneration
arrangements between the Company and its officers, including executive officers'
salaries; adopts or makes recommendations to the Board regarding the adoption of
compensation and employee benefit plans in which officers and certain key
employees of the Company and certain subsidiaries are eligible to participate;
and grants bonuses, stock options, restricted stock and other benefits pursuant
to Company plans. This Committee also reviews and makes recommendations with
respect to the election of officers of the Company, and when appropriate,
recommends the election to the Board of a Chief Executive Officer.
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MEETINGS
During 1996, the Board met five times. Each incumbent director of the
Company, during his term as a director in 1996, attended at least 75% of the
aggregate number of meetings of the Company's Board and Committees of which he
was a member.
VOTING SECURITIES AND PRINCIPAL HOLDERS
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of Common Stock beneficially
owned, or as to which there is a right to acquire beneficial ownership within 60
days of February 28, 1997, by each continuing director, each nominee for
director, and all directors and executive officers of the Company as a group as
of February 28, 1997. Except for Mr. Allison, no director, nominee for director
or officer of the Company owns and has the right to acquire more than 1% of the
outstanding Common Stock. All directors and officers of the Company as a group
own beneficially, or have the right to acquire, within 60 days of February 28,
1997, approximately 3.0% of the outstanding Common Stock.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
-----------------------------------------
NUMBER OF SHARES
SHARES EXERCISABLE TOTAL
TITLE NAME OF BENEFICIALLY WITHIN BENEFICIAL PERCENT OF
OF CLASS BENEFICIAL OWNER OWNED(1) 60 DAYS OWNERSHIP CLASS
-------- ---------------- ------------ ----------- ---------- ----------
Common Stock............ Robert J. Allison, Jr. 216,959 410,000 626,959 1.1
Common Stock............ Charles G. Manley 38,284 87,000 125,284 *
Common Stock............ Michael E. Rose 23,303 36,667 59,970 *
Common Stock............ John N. Seitz 19,077 111,267 130,344 *
Common Stock............ Charles K. Abernathy 34,639 60,000 94,639 *
Common Stock............ Conrad P. Albert 14,000(2) 22,000 36,000(2) *
Common Stock............ Larry Barcus 1,000 45,000 46,000 *
Common Stock............ Ronald Brown 3,222(3) 42,000 45,222(3) *
Common Stock............ James L. Bryan 1,000 45,000 46,000 *
Common Stock............ John R. Butler, Jr. 0 0 0 *
Common Stock............ John R. Gordon 12,198 45,000 57,198 *
Common Stock............ All directors and executive 483,972 1,272,934 1,756,906 3.0
officers as a group, including
the above-named (21 persons)
- ---------------
* Less than one percent.
(1) The directors and officers have sole voting and dispositive power of all
shares beneficially owned. Included are beneficially owned and undistributed
shares of Common Stock held in the Anadarko Employee Savings Plan. The
number does not include shares of Common Stock which the directors or
officers of the Company have the right to acquire within 60 days of February
28, 1997.
(2) Mr. Albert disclaims beneficial ownership of the 1,000 shares held in his
wife's name and the 1,000 shares held in his children's names.
(3) Mr. Brown disclaims beneficial ownership of the 50 shares held in his wife's
name.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to persons known to be the
beneficial owner of more than 5% of the Company's outstanding Common Stock:
AMOUNT
AND
NATURE OF
BENEFICIAL PERCENT
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
-------------- ------------------------------------ ---------- --------
Common Stock................ FMR Corp. 8,804,335(1) 14.8%
82 Devonshire Street
Boston, Massachusetts 02109
Common Stock................ Sonatrach Petroleum 6,000,000(2) 10.1%
Investment Corporation (Ireland) Limited
10, rue du Sahara
Hydra, Algiers, Algeria
Common Stock................ Oppenheimer Group Inc. 4,104,650(3) 6.9%
Oppenheimer Tower
World Financial Center
New York, New York 10281
Common Stock................ J.P. Morgan & Co. Incorporated 3,058,941(4) 5.1%
60 Wall Street
New York, New York 10260
- ---------------
(1) According to information contained in Schedule 13G filed with the Securities
and Exchange Commission (the "Commission") dated February 14, 1997.
(2) According to information contained in a Schedule 13D filed with the
Commission dated May 11, 1993.
(3) According to information contained in Schedule 13G filed with the Commission
dated January 21, 1997.
(4) According to information contained in Amendment 1 to the Schedule 13G filed
with the Commission, dated January 31, 1997.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company purchases production, drilling and seismic data from
wholly-owned subsidiaries of GeoQuest International Holdings, Inc. In 1996, the
aggregate amount paid to Petroleum Information Corporation and Petroleum
Information (Canada), Ltd., was approximately $878,000. Mr. Butler, a director
of the Company, is Chairman of the Board and Chief Executive Officer of GeoQuest
International Holdings, Inc. and Senior Chairman of the subsidiaries. In
addition, the Company paid approximately $50,000 in 1996 to Houston Advance
Research Center for a seismic imaging project. Mr. Butler is Chairman of the
Houston Advance Research Center.
During 1989, Anadarko Algeria Corporation ("Anadarko Algeria"), a
wholly-owned subsidiary of the Company, entered into an agreement with
Sonatrach, the national oil and gas enterprise of Algeria ("Sonatrach"), which
gives Anadarko Algeria the right to explore for and produce liquid hydrocarbons
in Algeria. Sonatrach is wholly-owned by the People's Democratic Republic of
Algeria and owns 99.9% of the capital stock of Sonatrach Petroleum Investment
Corporation (Ireland) Limited. In 1996, approximately $60,000 was paid to
Sonatrach for charges related to reservoir studies, laboratory services and well
testing services. As of December 31, 1996, a total of approximately $232 million
in exploration and development costs had been incurred by Anadarko Algeria of
which approximately $85 million was incurred in 1996.
During 1996, Anadarko Algeria and Sonatrach entered into a contract with
Brown & Root Condor, SPA ("BRC") for the construction of an oil production
facility. Sonatrach owns 51 percent of BRC either directly or indirectly. In
1996, approximately $22 million was paid to BRC pursuant to the agreement.
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COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive an annual retainer
of $35,000 for serving on the Board of Directors, plus $1,250 for attendance at
each meeting of the Board. In addition, non-employee directors receive an annual
retainer of $3,000 for serving on the Audit or the Compensation Committee, plus
$1,250 for each committee meeting attended. Non-employee directors who serve as
a Chairman of a committee receive an additional annual retainer of $3,000. All
directors are reimbursed for expenses incurred in attending Board and committee
meetings. Employees of the Company who are also directors do not receive a
retainer or fees for Board and committee meetings attended.
The 1988 Stock Option Plan for Non-Employee Directors (the "1988 Plan") was
amended in 1994 to permit nonemployee directors to receive a portion of their
retainer and/or meeting fees in Common Stock. Under the 1988 Plan, each
non-employee director receives an initial grant of 10,000 options which vest
equally over a two-year period. In addition, on October 27 of each year, each
non-employee director is granted an option to purchase 5,000 shares of Common
Stock at the fair market value on such date. All outstanding options granted
under the 1988 Plan are options which do not constitute incentive stock options
("ISOs") within the meaning of the Internal Revenue Code of 1986, as amended
(the "Code") ("NQOs"). All outstanding options under the 1988 Plan are
exercisable no earlier than one year from the date of grant and expire 10 years
from the date of grant. Options may not be awarded or granted after October 26,
1998, or the earlier termination of the 1988 Plan.
The Company has a Director Retirement Income Plan for its non-employee
directors. Directors having 10 or more years of service on the Board and having
attained age 65 will be eligible to receive retirement income equal to 60% of
the Director's annual retainer fee in effect as of the director's retirement
date from the Board. Directors having less than 10 years of service will accrue
a benefit of 6% per year of service of the Director's annual retainer fee in
effect as of such Director's retirement. Such retirement income will become
payable on the later of the Director's retirement date or age 65 and will be
payable in equal installments on a monthly basis during the life of the Director
with 120 months of payments guaranteed.
The Company's Director Deferred Compensation Plan (the "Director Deferred
Plan") allowed non-employee directors to defer all or part of their Director
annual retainer fee and provided unfunded benefit payments in amounts related to
the amount of compensation deferred, age of the Director at the time the
compensation was deferred and accrued interest at 20% per annum. The Director
Deferred Plan provides in-service payments during the time the director is a
member of the Board and payments upon retirement, death, disability or the
attainment of age 65. There have been no deferrals under the Director Deferred
Plan since 1990.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 furnished to the Company during
its most recent fiscal year and Forms 5 furnished to the Company with respect to
its most recent fiscal year, the Company believes that all transactions by
reporting persons during the most recent fiscal year were reported on a timely
basis. Forms 5 reporting the automatic grant of stock options in 1995 under the
1988 Plan for Messrs. Albert, Barcus, Brown, Bryan and Gordon were not filed in
1995.
COMPENSATION AND BENEFITS COMMITTEE REPORT
ON 1996 EXECUTIVE COMPENSATION
The Compensation Committee is comprised entirely of independent outside
directors and is responsible for establishing and administering the executive
compensation programs of the Company. These programs are designed to promote the
Company's strategic objectives, thereby enhancing stockholder value. This report
describes the compensation decisions made by the Compensation Committee during
1996 with respect to Anadarko's executive officers.
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COMPENSATION PHILOSOPHY OF THE COMPANY
The key elements of Anadarko's executive compensation programs include base
salary, performance-based annual bonus and long-term stock incentive plans.
These plans have been developed to attract, reward and retain key personnel
critical to the long-term success of the Company. Anadarko's compensation
programs are designed to provide executive officers total compensation levels
above the average of the Company's competitive market with the opportunity to be
within the top quartile of a select peer group of comparable public oil and gas
companies, to the extent that Company and executive performance on an individual
and collective basis so warrants. In 1996, Mr. Allison's total compensation was
within the top quartile of the select peer group.
Section 162(m) of the Code limits the deductibility by a company of
compensation in excess of $1 million paid to the Chief Executive Officer and the
next four highest paid officers during any fiscal year, unless such compensation
meets certain performance-based requirements. The Compensation Committee's
primary consideration in structuring the Company's compensation programs and in
determining the appropriateness of awards, is the achievement of the Company's
strategic business goals, taking into consideration competitive practice, market
economics and other factors. To the extent fulfilling these goals is consistent
with favorable tax treatment under section 162(m) of the Code, the Compensation
Committee is committed to making awards that qualify for the performance-based
deduction. The Company believes that the compensation paid for 1996 pursuant to
the Annual Incentive Bonus Plan (the "Incentive Plan") and the compensation in
1996 resulting from the exercise of stock options awarded under the 1993 Stock
Incentive Plan (the "1993 Plan") is deductible. Additionally, the Company
believes that with approval by stockholders of the proposed amendment to the
1993 Plan (see APPROVAL OF AN AMENDMENT TO THE 1993 STOCK INCENTIVE PLAN on page
15), compensation which may be paid in the future pursuant to the performance
shares awarded to Mr. Allison in 1996 will also qualify as deductible
compensation under section 162(m).
The Performance Graph, contained in this proxy statement, compares
Anadarko's stock price performance over a five-year period against the S&P 500
Index and the Dow Jones Oil-Secondary index (a published index for the oil and
gas industry). The Dow Jones Oil-Secondary index provides a meaningful
comparison of Anadarko's total stockholder return against a consistent
representation of oil and gas companies with whom Anadarko competes for
investment dollars. The majority of these companies are also included in the
select peer group against which the Compensation Committee annually reviews the
total compensation and stock ownership of its executive officers. The analysis
of this select peer group focuses more specifically on those companies which are
similar in business segments and are considered potential competitors for the
Company's executive talent.
BASE SALARY
Anadarko strives to be the best managed company within the oil and gas
industry, and structures its compensation programs to match pay with
performance. The Company's base salaries are targeted to be above the industry
average, taking into account scope of responsibilities and internal
relationships. Individual base salaries are determined by the Compensation
Committee based on their subjective evaluation of the executive's performance
and the length of time the executive has been in the position. Base compensation
is reviewed annually by the Compensation Committee and adjusted accordingly to
reflect each executive officer's contribution to the performance of the Company.
Mr. Allison's annual base salary for 1996 was increased by the Compensation
Committee, effective January 1, as a result of his contribution to the Company's
outstanding financial and operational performance for 1995, which served to
enhance the value of the Company. In determining Mr. Allison's base compensation
against his comparable peers, the Compensation Committee considered Mr.
Allison's leadership and specific individual contributions to the Company's
continued growth during his 18 years as Anadarko's Chief Executive Officer.
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ANNUAL INCENTIVE BONUS
For 1996, executive officers were eligible to receive annual bonus
incentives under the Company's Incentive Plan. The Incentive Plan puts a
significant portion of compensation at risk by linking potential annual
compensation to the Company's achievement of specific performance goals. These
goals are established by the Compensation Committee at the beginning of each
calendar year.
Under the Incentive Plan, a total bonus target is established for each
individual executive officer and other key employees, which ranges up to 80% of
base salary. This target is based upon the individual's position, level of
responsibility and ability to impact the Company's success. The individual
target is adjusted based on the Company's achievement of pre-established
performance goals. Individuals may receive up to 150% of their bonus target if
the Company exceeds the specified goals and, conversely, individuals may receive
a reduced bonus or no bonus payment if the Company does not attain the specified
goals.
For 1996, the performance goals established by the Compensation Committee
included financial, operational and relative stock price performance criteria.
The financial criteria included (1) net income, and (2) cash flow, both of which
were measured against internal objectives. The operational criteria included the
comparison of (1) Anadarko's average five-year worldwide reserve replacement
measured against an internal objective, and (2) Anadarko's average five-year
worldwide cost of finding measured against the most recent available industry
average five-year worldwide cost of finding. The stock price performance
criteria included the comparison of Anadarko's relative stock price performance
for 1996 against the relative average stock price performance of a select group
of peer companies for the same period. Each performance goal, including the
specific criteria for such goal, was assigned a weight by the Compensation
Committee based upon the relative importance of each goal in increasing
stockholder value.
Anadarko's operating performance for 1996 was one of the best in the
Company's history. The Company added over 113 million energy equivalent barrels
(EEBs) of reserves, increasing total reserves to 601 million EEBs. Reserve
replacement for 1996 was 299%, which resulted in the Company replacing annual
production volumes for the 15th consecutive year. In addition, Anadarko's
worldwide five-year cost of finding continues to be better than the most
recently published industry worldwide five-year average. The Company's financial
performance for the year yielded record results. Anadarko's overall performance
for 1996, as measured against the performance goals established by the
Compensation Committee, produced the maximum Corporate Performance Rating under
the Incentive Plan. As a result, the Compensation Committee approved a bonus for
Mr. Allison which represents 150% of his 80% bonus target.
STOCK PLANS
The Company believes equity-based programs encourage long-term strategic
management and enhancement of stockholder value. To align the interests of
executive officers with those of stockholders, the Company may grant certain
stock-based awards under the 1993 Plan. The Compensation Committee believes
stock ownership is important to place executive officers in the same position as
stockholders with a commitment to the long-term success of Anadarko. Anadarko
has established stock ownership guidelines for executive officers of two and
one-half times base salary for Vice Presidents, three times base salary for
Senior Vice Presidents and five times base salary for the Chief Executive
Officer.
The Compensation Committee periodically reviews competitive market data to
determine appropriate stock awards based on the executive's position and the
market value of the stock. In addition, the Compensation Committee considers
previous stock grants when determining grant size for executive officers. The
Compensation Committee awards stock options to ensure that the interests of
executives and stockholders are aligned. Stock options only produce value for
the executive if there is an increase in stock price which results in a
corresponding increase in value to the stockholder. Stock options are granted on
an annual basis at the fair market value of the Common Stock on the date of
grant.
In early 1996, the Compensation Committee determined that the success of
the Company's long-term strategic objectives would best be supported by a stock
compensation program for Mr. Allison designed to increase stockholder value both
in absolute dollars and relative to the Company's peers, as well as encourage
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11
his retention with the Company until normal retirement age. To accomplish these
objectives, the Committee granted Mr. Allison performance shares and 480,000
non-qualified stock options. The stock option grant vests over the next seven
years and encourages continued focus on increasing the stock price for the
stockholder. The performance share grant will only produce a payout if the
Company's total stockholder return relative to the Company's peers at the end of
a four-year or eight-year performance period meets the performance criteria
established by the Compensation Committee. The maximum potential payout under
this grant is 150,000 shares.
SUMMARY
Anadarko's compensation strategy is to provide total compensation
commensurate with the Company's achievement of specific operational, financial
and strategic objectives and the long-term appreciation of Anadarko's stock
price. The Company believes a significant portion of executive compensation
should be directly and materially linked to the creation of value for
stockholders. The Compensation Committee believes the design of the Company's
total executive compensation program provides executives the incentive to
maximize long-term operational performance consistent with sound financial
controls and high standards of integrity. It is the Compensation Committee's
belief that this focus will ultimately be reflected in Anadarko's stock price
and stockholder return.
The Compensation and Benefits Committee of the Board of Directors consists
of the following:
Mr. Ronald Brown
Mr. John R. Gordon
Mr. Charles M. Simmons
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The following table sets forth information with respect to the Chief
Executive Officer and the four most highly compensated executive officers of the
Company as to whom the total annual salary and bonus for the fiscal year ended
December 31, 1996, exceeded $100,000:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- -------------------------------------
AWARDS
------------------------
OTHER SECURITIES
ANNUAL UNDERLYING
COMPENSA- RESTRICTED OPTIONS/ LTIP
NAME PRINCIPAL POSITION YEAR SALARY($) BONUS($) TION(1)($) STOCK(2)($) SARS(3)(#) PAYOUTS($)
---- ------------------ ---- --------- --------- ---------- ----------- ---------- ----------
Robert J. Allison, Chairman, President and 1996 925,000 1,110,000 53,172(1) 0 480,000 0
Jr. Chief Executive Officer
Chairman, President and 1995 825,000 1,000,000(5) 0 0 60,000 0
Chief Executive Officer
Chairman, President and 1994 825,000 743,000 0 0 60,000 0
Chief Executive Officer
John N. Seitz Senior Vice President, 1996 300,000 190,000 0 0 24,000 0
Exploration
Senior Vice President, 1995 258,333 165,000 0 0 24,000 0
Exploration
Vice President, 1994 250,000 130,000 0 113,000 18,000 0
Exploration
Michael E. Rose Senior Vice President, 1996 315,000 167,000 0 0 24,000 0
Finance
Senior Vice President, 1995 280,000 148,000 0 81,250 24,000 0
Finance
Senior Vice President, 1994 280,000 148,000 0 0 24,000 0
Finance
Charles G. Manley Senior Vice President, 1996 310,000 164,000 0 0 24,000 0
Administration
Senior Vice President, 1995 280,000 148,000 0 0 24,000 0
Administration
Senior Vice President, 1994 280,000 148,000 0 0 24,000 0
Administration
Charles K. Abernathy Vice President, Offshore 1996 238,000 90,000 0 0 18,000 0
Vice President, Offshore 1995 228,000 80,000 0 0 18,000 0
Vice Pres. Operations- 1994 228,000 90,000 0 0 18,000 0
International/Offshore
ALL
OTHER
COMPENSA-
NAME TION(4)($)
---- ----------
Robert J. Allison, 331,687
Jr.
316,741
192,180
John N. Seitz 74,312
70,721
43,485
Michael E. Rose 97,214
101,312
74,078
Charles G. Manley 105,144
108,817
77,626
Charles K. Abernathy 86,925
93,325
67,485
- ---------------
(1) Represents certain perquisites, including $31,705 attributable to personal
use of the Company airplane. No other executive officer had perquisites in
excess of $50,000 or 10% of salary plus bonus.
(2) As of December 31, 1996, the number of restricted shares held by each
executive officer and corresponding value on December 31, 1996 was for Mr.
Seitz, 2,667 shares valued at $172,688; Mr. Rose, 4,334 shares valued at
$280,627; Mr. Manley, 3,000 shares valued at $194,250; and Mr. Abernathy,
2,000 shares valued at $129,500. Dividends will be paid on unvested shares.
The restricted stock awarded to Mr. Seitz in 1994 will vest 33% per year
each April 28 beginning in 1995. The restricted stock awarded to Mr. Rose in
1995 will vest 33% per year each April 27 beginning in 1996.
(3) No Stock Appreciation Rights ("SARs") are outstanding.
(4) This column includes (a) Company contributions to the Anadarko Employee
Savings Plan and Savings Restoration Plan; (b) interest earned above 120% of
the applicable federal rate on deferred compensation under the Executive
Deferred Compensation Plan; (c) payments under the Annual Override Bonus
Plan ("ORRI"); and (d) the value of Company paid split-dollar insurance. The
1996 amounts for items (a), (b), (c) and (d) for each of the individuals
named in the table are for Mr. Allison, $100,080, $74,071, $45,247 and
$112,289; Mr. Seitz, $27,900, $15,109, $11,461 and $19,842; Mr. Rose,
$27,780, $34,778, $9,518 and $25,138; Mr. Manley, $27,480, $39,166, $9,692
and $28,806; and Mr. Abernathy, $19,080, $31,129, $14,852 and $21,864,
respectively. No deferrals have been made under the Executive Deferred
Compensation Plan since 1990. Grants under the ORRI were discontinued after
1986; however, awards that were previously made will continue to produce
payments to the recipients in accordance with the provisions of the plan.
(5) Includes $743,000 paid under the Company's Incentive Plan and a special
bonus of $257,000, the payment of which is deferred until Mr. Allison's
retirement from the Company.
10
13
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE AT ASSUMED
SECURITIES OPTIONS/SARS EXERCISE ANNUAL RATES OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM(3)
OPTIONS/SARS EMPLOYEES IN PRICE(2) EXPIRATION -----------------------------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE 0%($) 5%($) 10%($)
---- ------------- ------------ -------- ---------- ----- -------------- --------------
Robert J. Allison,
Jr.................. 480,000(4) 53.2% $54.375 02/26/07 $0 $ 18,539,857 $ 48,366,346
Charles G. Manley..... 24,000(5) 2.7% $63.625 10/30/06 $0 $ 960,322 $ 2,433,645
Michael E. Rose....... 24,000(5) 2.7% $63.625 10/30/06 $0 $ 960,322 $ 2,433,645
John N. Seitz......... 24,000(5) 2.7% $63.625 10/30/06 $0 $ 960,322 $ 2,433,645
Charles K.
Abernathy........... 18,000(5) 2.0% $63.625 10/30/06 $0 $ 720,242 $ 1,825,234
Above Optionees Gain
as % of all
Stockholders Gain... N/A N/A N/A N/A N/A 0.2% 0.2%
All Stockholders(6)... 59,525,699 $0 $2,381,847,102 $6,035,856,025
- ---------------
(1) No SARs were granted in 1996.
(2) The exercise price equals the fair market value of the Common Stock on the
date of grant.
(3) The dollar amounts under these columns are the results of calculation at 0%
and at the 5% and 10% rates set by the Commission and are not intended to
forecast possible future appreciation, if any, of the Company's stock price.
The Company did not use an alternative formula for a grant date valuation,
as the Company is not aware of any formula which will determine with
reasonable accuracy a present value based on future unknown or volatility
factors.
(4) The stock option granted on February 26, 1996, was granted under the
Company's 1993 Plan. On August 16, 1996 and on February 26, 1997, 60,000
options became exercisable. On each February 26 beginning in 1998 through
2003, 60,000 will become exercisable. In the event of a "Change of Control"
(as defined by the Plan) the Compensation Committee can take any one or more
of the following actions: (i) provide for the acceleration of vesting; (ii)
provide for the purchase of the option by the Company; (iii) make such
adjustment as deemed appropriate; or (iv) cause such option to be assumed,
or new rights substituted therefor, by the acquiring or surviving
corporation.
(5) Stock options granted on October 30, 1996 were granted under the Company's
1993 Plan. Fifty percent of the options become fully exercisable on October
30, 1997 and 50 percent become fully exercisable on October 30, 1998. In the
event of a "Change of Control" (as defined by the Plan) the Compensation
Committee can take any one or more of the following actions: (i) provide for
the acceleration of vesting; (ii) provide for the purchase of the option by
the Company; (iii) make such adjustment as deemed appropriate; or (iv) cause
such option to be assumed, or new rights substituted therefor, by the
acquiring or surviving corporation.
(6) Shares owned by all stockholders on December 31, 1996. No gain to optionee
is possible without an increase in stock appreciation which will benefit all
stockholders commensurately. A 0% gain in stock price appreciation will
result in no appreciation for the optionee.
11
14
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL AT FISCAL
YEAR-END YEAR-END
SHARES (#) ($)
ACQUIRED VALUE --------------- ---------------------
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE*
---- ----------- ---------- --------------- ---------------------
Robert J. Allison, Jr....... 160,000 $5,939,638 350,000/450,000 $7,586,250/$4,635,000
Charles G. Manley........... 24,000 $ 697,106 87,000/36,000 $ 1,883,250/$273,000
Michael E. Rose............. 36,000 $ 712,716 36,000/36,000 $ 648,000/$273,000
John N. Seitz............... 0 $ 0 110,600/36,000 $ 2,868,362/$273,000
Charles K. Abernathy........ 12,000 $ 444,337 105,000/27,000 $ 2,675,813/$204,750
- ---------------
* Computed based upon the difference between aggregate fair market value on
December 31, 1996 ($63.8125) and aggregate exercise price.
LONG-TERM INCENTIVE PLANS -- AWARDS
IN LAST FISCAL YEAR
NUMBER OF PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
SHARES OR OTHER PRICE-BASED PLANS
UNITS OR PERIOD UNTIL -------------------------------------------
OTHER RIGHTS MATURATION THRESHOLD TARGET MAXIMUM
NAME (#) OR PAYOUT ($ OR #) ($ OR #) ($ OR #)
---- ------------ ---------------- --------- -------------- --------------
Robert J. Allison, Jr..... 150,000 4 and/or 8 years 0 100,000 Shares 150,000 Shares
Subject to stockholder approval of the amendment to the 1993 Plan, Mr. Allison
was granted 100,000 performance shares with a maximum potential payout of
150,000 shares for the four-year performance period January 1, 1996 through
December 31, 1999. Payout of the performance shares will be determined by
comparing the Company's average quarterly total shareholder return ("TSR") over
the performance period to a select group of peer companies, designated at the
time of the grant, average quarterly TSR for the same period. Any company that
ceases to be traded during the performance period will be removed from the peer
company list and payout will be determined based on the remaining companies. No
companies may be added to the peer company list during the performance period.
At the end of the performance period, the Company and the peer companies shall
be ranked based on their TSR ranking. If the Company is in the top 25% of the
ranking, payout will be 150% of the shares granted. If the Company is average or
above, payout will be 100% of the shares granted. If the Company is below
average, no shares will be paid out. If all shares are not earned in the initial
four-year performance period they may be earned based on an eight-year
performance period, using the same performance criteria, beginning on January 1,
1996 through December 31, 2003. In the event of an eight-year performance
period, any shares paid out based on the four-year performance period will be
subtracted from any payout earned at the end of the eight-year performance
period. Upon cessation of employment resulting from death or disability during a
performance cycle, TSR will be calculated for the Company and the peer companies
using the closing stock price on the date employment ceases. Upon cessation of
employment resulting from a Change of Control, TSR will be calculated using the
closing stock price on the date of the Change of Control. The amount of payout
will be pro-rated based on the actual number of quarters completed (including
the quarter in which the event occurred). Upon cessation of employment as a
result of retirement, any payout will be made at the discretion of the
Compensation Committee. Payout under the 1993 Plan will be made in shares of
Common Stock of the Company.
12
15
PENSION PLAN TABLE
The Company has a defined benefit Retirement Plan (the "Retirement Plan")
covering all United States employees of the Company. The following table shows
the estimated single life annuity payable annually upon retirement at various
levels of compensation based on the Retirement Plan benefit formula in effect on
December 31, 1996.
YEARS OF SERVICE
--------------------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ -------- -------- ---------- ---------- ----------
$ 250,000....................... $ 66,000 $ 88,000 $ 110,000 $ 132,000 $ 154,000
300,000...................... 79,000 106,000 132,000 159,000 185,000
400,000...................... 106,000 142,000 177,000 213,000 248,000
500,000...................... 133,000 178,000 222,000 267,000 311,000
600,000...................... 160,000 214,000 267,000 321,000 374,000
700,000...................... 187,000 250,000 312,000 375,000 437,000
800,000...................... 214,000 286,000 357,000 429,000 500,000
900,000...................... 241,000 322,000 402,000 483,000 563,000
1,000,000...................... 268,000 358,000 447,000 537,000 626,000
1,100,000...................... 295,000 394,000 492,000 591,000 689,000
1,200,000...................... 322,000 430,000 537,000 645,000 752,000
1,300,000...................... 349,000 466,000 582,000 699,000 815,000
1,400,000...................... 376,000 502,000 627,000 753,000 878,000
1,500,000...................... 403,000 538,000 672,000 807,000 941,000
1,600,000...................... 430,000 574,000 717,000 861,000 1,004,000
1,700,000...................... 457,000 610,000 762,000 915,000 1,067,000
1,800,000...................... 484,000 646,000 807,000 969,000 1,130,000
1,900,000...................... 511,000 682,000 852,000 1,023,000 1,193,000
2,000,000...................... 538,000 718,000 897,000 1,077,000 1,256,000
2,100,000...................... 565,000 754,000 942,000 1,131,000 1,319,000
2,200,000...................... 592,000 790,000 987,000 1,185,000 1,382,000
2,300,000...................... 619,000 826,000 1,032,000 1,239,000 1,445,000
2,400,000...................... 646,000 862,000 1,077,000 1,293,000 1,508,000
2,500,000...................... 673,000 898,000 1,122,000 1,347,000 1,571,000
The Retirement Plan provides benefits based on a length of service and a
final average pay formula including the Salary and Bonus columns of the Summary
Compensation Table. Messrs. Allison, Manley, Rose, Seitz and Abernathy,
respectively, have 23, 23, 19, 19 and 22 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.
The benefits payable under the Retirement Plan are subject to certain
limitations under the Code. For certain employees who may be affected by such
limits, the Company has a Retirement Restoration Plan (the "Restoration Plan")
to maintain total benefits upon retirement at approximately the levels shown in
the table above. The supplemental benefits provided under the Restoration Plan
will not be accorded certain of the favorable tax treatments that apply to
benefits paid under the existing Retirement Plan. Benefits under the Restoration
Plan are payable solely from the general assets of the Company.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
The Company has Key Employee Change of Control Contracts (the "Severance
Contracts") with all current executive officers. The Severance Contracts provide
that in the event of a change in control, as defined in the Severance Contracts,
such individuals will receive certain benefits in the event of the termination
of their employment within five years of the effective date of such change in
control. Such benefits are provided unless such termination of employment is (i)
because of the death or retirement, except in certain circumstances, of the
executive, (ii) by the Company for cause or disability, or (iii) by the
executive other than for good reason (as defined in the Severance Contracts).
Generally, benefits payable under the terms of the Severance Contracts include a
lump-sum cash payment equal to (i) 2.9 times the highest total annualized
compensation paid during the three years ending with the year of such
participant's termination from the
13
16
Company (including base salary and the amount or value of any bonuses); (ii) the
amount of Company matching contributions which would have been made on the
participant's behalf had he continued to participate in the Anadarko Employee
Savings Plan and the Savings Restoration Plan for up to an additional three
years; (iii) the present value of the additional normal retirement benefit which
would have been received by the employee based on continued service through
normal retirement date and assuming an annual 6% increase in base salary; (iv)
the present value of the amounts of deferred compensation which would have been
received by the employee based on continued service through age 65 under each
deferred compensation agreement to which the participant was a party; and (v)
the value of any investments credited to the employee under the Savings
Restoration Plan. In addition, the Severance Contracts provide for a
continuation of various health care, disability and life insurance plans and
certain other benefits for a period of up to three years; and the payment of all
legal fees and expenses incurred by the employee in obtaining or enforcing any
right or benefit provided by the Severance Contracts. The Severance Contracts
also obligate the Company to pay an employee such cash amount as may be
necessary to restore any benefit diminution resulting directly or indirectly
from the assessment of any special excise taxes under section 280G of the Code
in respect to benefits provided under the Severance Contracts. In consideration
of these benefits the employee agrees, in the event a person seeks to effect a
change in control, not to leave the employ of the Company and to render services
commensurate with his position until such person has abandoned or terminated his
efforts or the change in control has occurred. The employee also agrees to
retain, in confidence, any and all confidential information known to him
concerning the Company and its business so long as such information is not
otherwise publicly disclosed. No amounts have been paid under the Severance
Contracts.
The Employee Severance Pay Plan (the "Severance Plan") covers all of the
Company employees who are not covered by the Employment Contracts. The Severance
Plan provides that, in the event of a change in control, as defined in the
Severance Plan, employees will have certain benefits provided to them in the
event of the termination of their employment within three years after the
effective date of such change in control. Benefits are provided unless
termination of employment is (i) because of the death or retirement, except in
certain circumstances, of the employee; (ii) by the Company for cause or
disability; or (iii) by the employee other than for good reason, as defined in
the Severance Plan. The Severance Plan provides benefits that include a lump sum
cash payment based on salary and service ranging from a minimum of three months
to a maximum of two years salary; and a continuation of employee's medical and
dental insurance for six months. No amounts have been paid under the Severance
Plan.
In the event of a "Change of Control", under the terms of the Company's
existing stock option plans, except for the 1993 Plan, all outstanding options
which were granted at least six months prior to the date of the "Change of
Control" shall be surrendered to the Company and the optionee shall receive a
cash payment in an amount equal to the number of shares of Common Stock subject
to the options multiplied by the difference between the fair market value of a
share of Common Stock on the date determined to be the date of cancellation and
surrender of such options and the option price. Under the 1993 Plan in the event
of a "Change of Control" the Compensation Committee can take one or more of the
following actions: (i) provide for the acceleration of vesting; (ii) provide for
the purchase of the option by the Company; (iii) make such adjustment as deemed
appropriate; or (iv) cause such option to be assumed, or new rights substituted
therefor, by the acquiring or surviving corporation.
14
17
PERFORMANCE GRAPH
The following performance graph compares the performance of the Company's
Common Stock to the S&P 500 Index and to the Dow Jones Oil -- Secondary Index
for the last five years. The graph assumes that the value of the investment in
the Company's Common Stock and each index was $100 at December 31, 1991 and that
all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
ANADARKO PETROLEUM CORP, S&P 500 AND DOW JONES OIL -- SECONDARY
ANADARKO DOW JONES
MEASUREMENT PERIOD PETROLEUM OIL - SECON- S&P 500 IN-
(FISCAL YEAR COVERED) CORPORATION DARY DEX
1991 100 100 100
1992 124 101 108
1993 193 112 118
1994 165 108 120
1995 233 125 165
1996 280 154 203
Assumes $100 Invested on December 31, 1991.
* Total Return Assumes Reinvestment of Dividends
Total Return Data Provided by S&P's Compustat Services Inc. and Dow Jones &
Company Inc.
APPROVAL OF AN AMENDMENT TO THE 1993 STOCK INCENTIVE PLAN
(ITEM NO. 2 ON PROXY CARD)
THE BOARD OF DIRECTORS RECOMMENDS THE APPROVAL OF THE AMENDMENT TO THE 1993
STOCK INCENTIVE PLAN (THE "AMENDMENT") WHICH AUTHORIZES THE GRANT OF PERFORMANCE
STOCK AWARDS BASED ON THE PERFORMANCE GOAL SPECIFIED IN THE AMENDMENT.
The 1993 Plan was adopted by the Board on October 28, 1993 and approved by
stockholders on April 28, 1994. In December 1995, the Internal Revenue Service
("IRS") issued final regulations under section 162(m) of the Code. Section
162(m) of the Code limits to $1 million per year the tax deduction available to
public companies for certain compensation paid to certain employees subject to
an exemption for compensation which is "performance-based". The Company's intent
is to ensure that payouts of performance shares granted under the 1993 Plan
qualify for the exemption under section 162(m) of the Code.
The 1993 Plan is intended to attract and retain executive personnel and
other key employees of the Company and its subsidiaries. In addition, the 1993
Plan is intended to allow the Compensation Committee the ability to use stock
and stock-related awards in the Company's overall compensation program. The
essential features of the Amendment and the 1993 Plan, as amended, are
summarized below. Approval by
15
18
affirmative votes of holders of a majority of shares of Common Stock present, or
represented, and entitled to vote is required for any payouts of performance
shares granted under the 1993 Plan and for the payouts to qualify for the
"performance-based" compensation exemption under section 162(m) of the Code.
AMENDMENT
The Amendment to the 1993 Plan establishes performance criteria for the
granting of performance shares under the Plan. The Committee has the authority
to grant Performance Awards based upon the achievement of the specific
performance goals. The Committee shall establish at the time a Performance Award
is granted the performance period, which shall be equal in length to at least
four years, and the performance goals pursuant to which an Employee may earn and
be entitled to a payment under such Performance Award. The Committee shall also
establish a 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 the Company's TSR compared to
certain peer companies' TSR for the same period. During any performance period,
the Committee shall have the authority to adjust the performance goals in such
manner as the Committee, in its sole discretion, deems appropriate with respect
to such performance period; provided, however, that Performance Awards which are
designed to qualify for the performance-based exception of section 162(m) of the
Code, and which are held by "covered employees" (as such term is defined in the
regulations promulgated under section 162(m) of the Code), may not have any term
or condition of such Award changed in a manner that would produce a greater
benefit.
Stockholders must approve the material terms of the performance goals
before any compensation is paid to certain employees' granted Performance
Awards. One Performance Award was granted in 1996. For the terms of that grant
see LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR on page 12.
The maximum aggregate number of Performance Award shares that may be issued
to an employee for payment of compensation based on a Performance Award grant
shall not exceed 150,000 shares for any performance period. 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.
SUMMARY OF THE 1993 STOCK INCENTIVE PLAN AS AMENDED
TYPES OF AWARDS
The 1993 Plan permits the granting of any or all of the following types of
awards: (1) stock options, including ISOs; (2) SARs in tandem with stock options
or freestanding; (3) restricted stock; (4) performance awards; (5) stock
compensation awards; and (6) other stock-based awards.
ELIGIBILITY FOR PARTICIPATION
All key employees, including employee directors and officers of the Company
or any affiliate of the Company, are eligible for participation under the 1993
Plan. While the concept of "key employee" eligible to participate in the 1993
Plan is necessarily flexible, approximately 150 employees (including a total of
15 executive officers) are considered to fall within this category.
ADMINISTRATION
The 1993 Plan is administered by the Compensation Committee composed of
disinterested, outside directors appointed by the Board. The Compensation
Committee selects key employees who will receive awards, determines the type and
terms of awards to be granted, and interprets and administers the Plan. Unless
otherwise expressly provided in the 1993 Plan, all decisions under or with
respect to the 1993 Plan shall be within the sole discretion of the Compensation
Committee and are final.
16
19
AMENDMENT AND TERMINATION
The Board may terminate or amend the 1993 Plan without stockholder
approval, except that stockholder approval is required for any amendment which
would increase the number of shares available for grant, decrease the minimum
exercise price or otherwise cause the 1993 Plan to cease to qualify for any tax
or regulatory exemption, status or requirement.
TERM OF THE PROGRAM
The 1993 Plan will terminate on October 28, 2003, after which time no
additional awards may be made under the 1993 Plan.
SHARES SUBJECT TO PROGRAM
Subject to adjustment as described more fully below, 4,000,000 shares of
Common Stock may be awarded under the 1993 Plan, provided, however, that no more
than 800,000 shares of the shares specified shall be issued as restricted stock.
The maximum aggregate number of shares available for options and SARs to any
executive officer during the term of the 1993 Plan is 20 percent of the number
of shares with respect to which awards may be granted under the 1993 Plan.
STOCK OPTIONS
Stock options granted under the 1993 Plan are subject to the terms and
conditions determined by the Compensation Committee, except that (i) no options
may be granted after the termination of the 1993 Plan; (ii) the option exercise
price cannot be less than 100 percent of fair market value of a share of Common
Stock at the time the option is granted; and (iii) no option may be exercised
more than 10 years after it is granted. ISOs may be granted provided they meet
the requirements of the Code.
The Compensation Committee shall determine the form in which payment of the
exercise price may be made, including cash, shares of Common Stock, other
securities or other property, or any combination thereof, having a fair market
value on the exercise date equal to the relevant exercise price.
STOCK APPRECIATION RIGHTS
An SAR may be granted in tandem with another award, in addition to another
award, or freestanding and unrelated to another award. The grant price of an SAR
shall not be less than 100 percent of fair market value of a share of Common
Stock at the time the SAR is granted. The Compensation Committee may impose such
conditions or restrictions on the exercise of any SAR as it shall deem
appropriate.
RESTRICTED STOCK
The Compensation Committee shall determine the employees to whom Restricted
Stock shall be granted, the number of shares of Restricted Stock to be granted
to each participant, the duration of the restriction period, the conditions
under which the Restricted Stock may be forfeited to the Company and other terms
and conditions of awards of Restricted Stock. Restricted Stock may not be
disposed of by the participant until the restrictions specified in the award
expire. The participant will have, with respect to Restricted Stock, the right
to vote the shares and receive any cash dividends. Except as otherwise
determined by the Compensation Committee, upon termination of a participant's
employment for any reason during the restriction period, all Restricted Stock
shall be forfeited by the participant.
PERFORMANCE AWARDS
See APPROVAL OF AN AMENDMENT TO THE 1993 STOCK INCENTIVE PLAN -- AMENDMENT
on page 15.
17
20
STOCK COMPENSATION
The Compensation Committee shall have the authority to pay all or a portion
of any amounts payable under any compensation program of the Company in shares
of Common Stock. The number and type of shares to be distributed in lieu of the
cash compensation, as well as the terms and conditions of any such stock
compensation, shall be determined by the Compensation Committee.
OTHER STOCK-BASED AWARDS
The Compensation Committee may grant other forms of awards based on,
payable in, or otherwise related in whole or in part to Common Stock under the
1993 Plan. Subject to the terms of the 1993 Plan, the Compensation Committee
shall determine the terms and conditions of any such other stock-based awards.
CHANGE OF CONTROL
In the event of a "Change of Control" as defined in the 1993 Plan, the
Compensation Committee may take any one or more of the following actions in
connection with any awards made under the 1993 Plan: (i) accelerate the exercise
or vesting date; (ii) provide for the purchase, in cash, of such award; (iii)
make adjustments to such award; or (iv) cause any outstanding award to be
assumed, or a new right substituted therefor, by the acquiring or surviving
corporation.
ADJUSTMENTS
In the event the Compensation Committee determines that any dividend or
other distribution, recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of shares of Common Stock or other similar corporate
transaction or event affects the Common Stock such that an adjustment is
determined by the Compensation Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended under the
1993 Plan, then the Compensation Committee shall adjust any or all of the
awards.
NEW PLAN BENEFITS
1993 STOCK INCENTIVE PLAN
DOLLAR NUMBER
NAME AND POSITION VALUE($) OF UNITS
----------------- -------- ------------
Robert J. Allison, Jr., Chairman, President and Chief
Executive Officer......................................... (1) 0 to 150,000
- ---------------
(1) The dollar value is not determinable at this time since any payout is
contingent on the Company's TSR performance at the end of 2000 and 2004. See
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR on page 12.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP served as the Company's independent auditors during
1996 and was appointed by the Board to serve in that capacity for 1997.
Representatives of KPMG Peat Marwick LLP will be present at the meeting to
respond to appropriate questions from stockholders and to make a statement if
they desire to do so.
OTHER MATTERS
It is not expected that any other matters will come before the meeting.
However, if any other matters properly come before the meeting, it is the
intention of the persons named in the accompanying form of proxy to vote such
proxy in accordance with their judgment on such matters.
18
21
STOCKHOLDER PROPOSALS
Any proposal which a stockholder may desire to present to the 1998 Annual
Meeting of Stockholders must be received by the Company on, or prior to,
November 18, 1997.
PROXY SOLICITATION
The cost of preparing, assembling and mailing the material in connection
with the solicitation of proxies will be borne by the Company. It is expected
that the solicitation of proxies will be primarily by mail but solicitations may
also be made personally or by telephone or telegraph by officers and other
employees of the Company. In addition, the Company has engaged ChaseMellon
Shareholder Services, L.L.C., 450 West 33rd Street, New York, New York 10001 to
assist in such solicitation at an estimated fee of $5,000 plus disbursements.
It is important that the proxies be returned promptly. All stockholders,
whether or not they expect to attend in person, are urged to sign, date and
return the accompanying form of proxy in the enclosed addressed envelope, which
requires no postage if mailed in the United States.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ SUZANNE SUTER
SUZANNE SUTER
Corporate Secretary
Dated: March 21, 1997
Houston, Texas
19
22
AMENDMENT
TO
ANADARKO PETROLEUM CORPORATION
1993 STOCK INCENTIVE PLAN
WHEREAS, ANADARKO PETROLEUM CORPORATION (the "Company"), has heretofore
adopted the 1993 Stock Incentive Plan (the "Plan"); and
WHEREAS, the Company desires to amend the Plan;
NOW, THEREFORE, the Plan shall be amended as follows, effective as of
January 1, 1996:
1. Section 2 shall be amended by replacing the definition of "Employee" in
its entirety with the following definition:
"'Employee' shall mean any executive officer or other key employee of
the Company or any Affiliate."
2. Section 6 (d) shall be replaced in its entirety by the following:
"(d) Performance Awards. The Committee shall have authority to grant
Performance Awards which shall consist of a right, denominated in Shares,
and shall confer on the holder thereof compensation rights based upon the
achievement of the performance goals. The maximum aggregate number of
Performance Award Shares that may be issued to an Employee for payment of
compensation based on a Performance Award grant shall not exceed 150,000
Shares for any performance period.
(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 be equal in length to at least four (4)
years, and the performance goals pursuant to which an Employee may earn
and be entitled to a payment under such Performance Award. The Committee
shall also establish a 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 the Company's total shareholder return compared to peer
companies' total shareholder return for the same period. During any
performance period, the Committee shall have the authority to adjust the
performance goals in such manner as the Committee, in its sole
discretion, deems appropriate with respect to such performance period;
provided, however, that Performance Awards which are designed to qualify
for the performance-based exception of Section 162(m) of the Code, and
which are held by "covered employees" (as such term is defined in the
regulations promulgated under Section 162(m) of the Code), may not have
any term or condition of such Award changed in a manner that would
produce a greater benefit.
(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."
3. Section 9 shall be amended by adding the following new subsection:
"(l) Shareholder Approval. Shareholders must approve the material
terms of the performance goals described in Section 6(d) before any
compensation is paid to a "covered employee" (as such term is defined in
the regulations promulgated under Section 162(m) of the Code) based upon a
Performance Award granted under such section."
4. As amended hereby, the Plan is specifically ratified and reaffirmed.
A-1
23
P
R
O
X
Y
ANADARKO PETROLEUM CORPORATION
SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 24, 1997
The undersigned stockholder hereby appoints ROBERT J. ALLISON, JR. AND SUZANNE
SUTER, and any one of them, with power of substitution and revocation, the
attorneys of the undersigned to vote all shares registered in the name of the
undersigned for the election of directors, unless such authority is withheld,
and on all other matters which may come before the 1997 Annual Meeting of
Stockholders of Anadarko Petroleum Corporation to be held on Thursday, April
24, 1997 at 9:30 A.M. or any adjournment thereof.
PLEASE MARK THIS PROXY AS INDICATED ON THE REVERSE SIDE TO VOTE. 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.
THIS PROXY MUST BE SIGNED AND RETURNED TO BE COUNTED.
(Continued and to be signed on other side)
24
PLEASE MARK
YOUR VOTES AS [X]
INDICATED IN
THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
Item 1 -- ELECTION OF CLASS II DIRECTORS
Conrad P. Albert and Robert J. Allison, Jr.
FOR WITHHELD
FOR ALL
[ ] [ ]
Withheld For: (Write that nominee's name in the space provided below.)
- -----------------------------------------------------------------------
Item 2 -- APPROVAL OF THE AMENDMENT TO THE 1993 STOCK INCENTIVE PLAN
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Signature(s) Date , 1997
--------------------------------------- -------------------
Please mark, date and sign as your name appears above. If shares are held
jointly, each stockholder named should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
Return signed proxy in the enclosed envelope.