0000928475-05-000054.txt : 20120628 0000928475-05-000054.hdr.sgml : 20120628 20050303132523 ACCESSION NUMBER: 0000928475-05-000054 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20050303 DATE AS OF CHANGE: 20050303 GROUP MEMBERS: KERR SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: KERR MCGEE CORP /DE CENTRAL INDEX KEY: 0001141185 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 731612389 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-78007 FILM NUMBER: 05657099 BUSINESS ADDRESS: STREET 1: KERR-MCGEE CENTER STREET 2: 123 ROBERT S. KERR AVENUE CITY: OKLAHOMA CITY STATE: OK ZIP: 73102 BUSINESS PHONE: 4052701313 MAIL ADDRESS: STREET 1: KERR-MCGEE CENTER STREET 2: P.O. BOX 25861 CITY: OKLAHOMA CITY STATE: OK ZIP: 73125 FORMER COMPANY: FORMER CONFORMED NAME: KERR MCGEE HOLDCO INC DATE OF NAME CHANGE: 20010525 FORMER COMPANY: FORMER CONFORMED NAME: KING HOLDCO INC DATE OF NAME CHANGE: 20010523 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ICAHN CARL C ET AL CENTRAL INDEX KEY: 0000921669 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 000000000 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: C/O ICAHN ASSOCIATES CORP STREET 2: 767 FIFTH AVE #4700 CITY: NEW YORK STATE: NY ZIP: 10153 BUSINESS PHONE: 2127024300 MAIL ADDRESS: STREET 1: C/O ICAHN ASSOCIATES CORP STREET 2: 767 FIFTH AVE #4700 CITY: NEW YORK STATE: NY ZIP: 10153 SC 13D 1 kerrmcgee13dfinal.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No.__)* Kerr-McGee Corporation (Name of Issuer) Common Stock (Title of Class of Securities) 492386107 (CUSIP Number) Marc Weitzen, Esq. General Counsel Icahn Associates Corp. & affiliated companies 767 Fifth Avenue, 47th Floor New York, New York 10153 (212) 702-4388 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) February 28, 2005 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of " 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box / /. NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D CUSIP No. 492386107 1 NAME OF REPORTING PERSON High River Limited Partnership S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) / / 3 SEC USE ONLY 4 SOURCE OF FUNDS* OO 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /X/ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH: 7 SOLE VOTING POWER 1,421,200 8 SHARED VOTING POWER 0 9 SOLE DISPOSITIVE POWER 1,421,200 10 SHARED DISPOSITIVE POWER 0 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,421,200 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* // 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.94% 14 TYPE OF REPORTING PERSON* PN SCHEDULE 13D CUSIP No. 492386107 NAME OF REPORTING PERSON Hopper Investments LLC S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) / / 3 SEC USE ONLY 4 SOURCE OF FUNDS* OO 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /X/ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH: 7 SOLE VOTING POWER 0 8 SHARED VOTING POWER 1,421,200 9 SOLE DISPOSITIVE POWER 0 10 SHARED DISPOSITIVE POWER 1,421,200 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,421,200 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* // 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.94% 14 TYPE OF REPORTING PERSON* OO SCHEDULE 13D CUSIP No. 492386107 NAME OF REPORTING PERSON Barberry Corp. S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) / / 3 SEC USE ONLY 4 SOURCE OF FUNDS* OO 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /X/ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH: 7 SOLE VOTING POWER 0 8 SHARED VOTING POWER 1,421,200 9 SOLE DISPOSITIVE POWER 0 10 SHARED DISPOSITIVE POWER 1,421,200 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,421,200 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* // 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.94% 14 TYPE OF REPORTING PERSON* CO SCHEDULE 13D CUSIP No. 492386107 NAME OF REPORTING PERSON Icahn Partners Master Fund L.P. S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) / / 3 SEC USE ONLY 4 SOURCE OF FUNDS* OO 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /X/ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Cayman Islands NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH: 7 SOLE VOTING POWER 2,901,212 8 SHARED VOTING POWER 0 9 SOLE DISPOSITIVE POWER 2,901,212 10 SHARED DISPOSITIVE POWER 0 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,901,212 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* // 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.91% 14 TYPE OF REPORTING PERSON* PN SCHEDULE 13D CUSIP No. 492386107 NAME OF REPORTING PERSON Icahn Offshore L.P. S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) / / 3 SEC USE ONLY 4 SOURCE OF FUNDS* OO 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /X/ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH: 7 SOLE VOTING POWER 0 8 SHARED VOTING POWER 2,901,212 9 SOLE DISPOSITIVE POWER 0 10 SHARED DISPOSITIVE POWER 2,901,212 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,901,212 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* // 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.91% 14 TYPE OF REPORTING PERSON* PN SCHEDULE 13D CUSIP No. 492386107 NAME OF REPORTING PERSON CCI Offshore LLC S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) / / 3 SEC USE ONLY 4 SOURCE OF FUNDS* OO 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /X/ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH: 7 SOLE VOTING POWER 0 8 SHARED VOTING POWER 2,901,212 9 SOLE DISPOSITIVE POWER 0 10 SHARED DISPOSITIVE POWER 2,901,212 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,901,212 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* // 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.91% 14 TYPE OF REPORTING PERSON* OO SCHEDULE 13D CUSIP No. 492386107 NAME OF REPORTING PERSON Icahn Partners L.P. S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) / / 3 SEC USE ONLY 4 SOURCE OF FUNDS* OO 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /X/ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH: 7 SOLE VOTING POWER 2,783,588 8 SHARED VOTING POWER 0 9 SOLE DISPOSITIVE POWER 2,783,588 10 SHARED DISPOSITIVE POWER 0 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,783,588 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* // 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.84% 14 TYPE OF REPORTING PERSON* PN SCHEDULE 13D CUSIP No. 492386107 NAME OF REPORTING PERSON Icahn Onshore L.P. S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) / / 3 SEC USE ONLY 4 SOURCE OF FUNDS* OO 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /X/ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH: 7 SOLE VOTING POWER 0 8 SHARED VOTING POWER 2,783,588 9 SOLE DISPOSITIVE POWER 0 10 SHARED DISPOSITIVE POWER 2,783,588 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,783,588 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* // 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.84% 14 TYPE OF REPORTING PERSON* PN SCHEDULE 13D CUSIP No. 492386107 NAME OF REPORTING PERSON CCI Onshore LLC S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) / / 3 SEC USE ONLY 4 SOURCE OF FUNDS* OO 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /X/ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH: 7 SOLE VOTING POWER 0 8 SHARED VOTING POWER 2,783,588 9 SOLE DISPOSITIVE POWER 0 10 SHARED DISPOSITIVE POWER 2,783,588 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,783,588 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* // 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.84% 14 TYPE OF REPORTING PERSON* OO SCHEDULE 13D CUSIP No. 492386107 1 NAME OF REPORTING PERSON Carl C. Icahn S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) / / 3 SEC USE ONLY 4 SOURCE OF FUNDS* OO 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /X/ 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States of America NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH: 7 SOLE VOTING POWER 0 8 SHARED VOTING POWER 7,106,000 9 SOLE DISPOSITIVE POWER 0 10 SHARED DISPOSITIVE POWER 7,106,000 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 7,106,000 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* // 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.68% 14 TYPE OF REPORTING PERSON* IN SCHEDULE 13D Item 1. Security and Issuer This Schedule 13D relates to the Common Stock, par value $1.00 per share (the "Shares"), of Kerr-McGee Corporation, a Delaware corporation (the "Issuer"). The address of the principal executive offices of the Issuer is Kerr-McGee Center, 123 Robert S. Kerr Avenue, Oklahoma City, OK 73102. Item 2. Identity and Background The persons filing this statement are Barberry Corp., a Delaware corporation ("Barberry"), Hopper Investments, LLC, a Delaware limited liability company, High River Limited Partnership, a Delaware limited partnership ("High River"), Icahn Partners Master Fund L.P., a Cayman Islands limited partnership ("Icahn Master"), Icahn Offshore L.P., a Delaware limited partnership ("Icahn Offshore"), CCI Offshore LLC, a Delaware limited liability company ("CCI Offshore"), Icahn Partners L.P., a Delaware limited partnership ("Icahn Partners"), Icahn Onshore L.P., a Delaware limited partnership ("Icahn Onshore"), CCI Onshore LLC, a Delaware limited liability company (" CCI Onshore") and Carl C. Icahn, a citizen of the United States of America (collectively, the "Reporting Persons"). The principal business address and the address of the principal office of the Reporting Persons is c/o Icahn Associates Corp., 767 Fifth Avenue, 47th Floor, New York, New York 10153, except that (i) the principal business address of each of Barberry, Hopper and High River is 100 South Bedford Road, Mount Kisco, New York 10549 and (ii) the principal business address of Icahn Master is c/o Walkers SPV Limited, P.O. Box 908GT, 87 Mary Street, George Town, Grand Cayman, Cayman Islands. Barberry is the sole member of Hopper, which is the general partner of High River. CCI Offshore is the general partner of Icahn Offshore, which is the general partner of Icahn Master. CCI Onshore is the general partner of Icahn Onshore, which is the general partner of Icahn Partners. Each of Barberry, CCI Offshore and CCI Onshore is 100 percent owned by Carl C. Icahn. As such, Mr. Icahn is in a position directly and indirectly to determine the investment and voting decisions made by the Reporting Persons. Each of Icahn Master, Icahn Partners, Barberry and High River is primarily engaged in the business of investing in securities. Hopper is primarily engaged in the business of serving as the general partner of High River. Icahn Offshore and Icahn Onshore are primarily engaged in the business of serving as the general partner of Icahn Master and Icahn Partners, respectively. CCI Offshore and CCI Onshore are primarily engaged in the business of serving as the general partner of Icahn Offshore and Icahn Onshore, respectively. Carl C. Icahn's present principal occupation or employment is (i) owning all of the interest in CCI Onshore and CCI Offshore, through which Mr. Icahn indirectly directs and manages the investments of Icahn Master and Icahn Partners and (ii) acting as President and a director of Starfire Holding Corporation ("Starfire"), and as the Chairman of the Board and a director of various of Starfire's subsidiaries. Starfire is primarily engaged in the business of investing in and holding securities of various entities. The name, citizenship, present principal occupation or employment and business address of each director and executive officer of High River and Barberry, are set forth in Schedule A attached hereto. Except as set forth on Schedule B, no member of any of the Reporting Persons nor any manager or executive officer of the Reporting Persons, has, during the past five years, (a) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), or (b) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting, or mandating activities subject to, Federal or State securities laws or a finding of any violation with respect to such laws. Any disclosures made herein with respect to persons or entities other than the Reporting Persons are made on information and belief after making inquiry to the appropriate party. By virtue of the transactions described in Item 4, the Reporting Persons may be deemed to be a "group" with the Jana Parties (as hereinafter defined) within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Act"). Although the Reporting Persons do not affirm that such a group has been formed, these disclosures are being made to ensure compliance with the Act. The Reporting Persons expressly disclaim beneficial ownership of securities held by any person or entity other than the Reporting Persons. The securities reported herein as being beneficially owned by the Reporting Persons do not include any securities held by the Jana Parties or any other person or entity other than the Reporting Persons. Item 3. Source and Amount of Funds or Other Consideration The aggregate purchase price of the 7,106,000 Shares purchased by High River, Icahn Master and Icahn Partners, collectively, was $509,002,173.34 (including commissions and, with respect to Shares acquired upon exercise of options, including option purchase prices). The source of funding for the purchase of these Shares was the respective general working capital of the purchasers, and, with respect to High River, pursuant to margin accounts in the regular course of business. Item 4. Purpose of Transaction The Reporting Persons acquired the Shares believing them to be undervalued. The Reporting Persons reserve the right to acquire additional Shares at any time and from time to time in the open market or otherwise. In addition, the Reporting Persons may dispose of all or any portion of the Shares at any time or from time to time in the open market or otherwise. Representatives of the Reporting Persons have had discussions with Barry Rosenstein and other representatives of Jana Partners LLC regarding the Issuer and the Shares. Barry Rosenstein is a managing member of Jana Partners LLC, which serves as the investment manager of Jana Master Fund Ltd. (Barry Rosenstein, Jana Partners LLC and Jana Master Fund Ltd. are sometimes hereinafter referred to collectively as the "Jana Parties"). On February 14, 2005, the Reporting Persons acquired an option (the "Jana Option") to purchase, in the aggregate, 250,000 Shares from Jana Master Fund Ltd. Pursuant to the exercise of the Jana Option on March 1, 2005, Icahn Partners purchased 96,000 Shares, Icahn Master purchased 104,000 Shares and High River purchased 50,000 Shares. The Jana Option had an exercise price of $60.00 per Share and an expiration date of August 14, 2005. A copy of the Jana Option is filed herewith as an exhibit and incorporated herein by reference, and any descriptions herein of the Jana Option are qualified in their entirety by reference to the Jana Option. On March 2, 2005, the Reporting Persons delivered a letter to the Issuer (the "Notification Letter"), notifying the Issuer that the Reporting Persons intend to appear at the 2005 annual meeting of the Issuer's stockholders, in person or by proxy, to nominate and seek to elect Carl Icahn and Barry Rosenstein as members of the board of directors of the Issuer. A copy of the Notification Letter is filed herewith as an exhibit and incorporated herein by reference, and any descriptions herein of the Notification Letter are qualified in their entirety by reference to the Notification Letter. On March 3, 2005, the Reporting Persons and Jana Partners LLC sent a letter to the Issuer (the "Proposed Transaction Letter"), regarding a proposed transaction to increase shareholder value. A copy of the Proposed Transaction Letter is filed herewith as an exhibit and incorporated herein by reference, and any descriptions herein of the Proposed Transaction Letter are qualified in their entirety by reference to the Proposed Transaction Letter. As a result of the foregoing, the Reporting Persons may be deemed to be members of a "group" with the Jana Parties within the meaning of Section 13(d)(3) of the Act. However, the Reporting Persons disclaim membership in any such group for all purposes and disclaim ownership of any Shares held by the Jana Parties, and neither the fact of this filing or anything contained herein shall be deemed to be an admission by any of the Reporting Persons that they are members of such a group. SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT AND OTHER DOCUMENTS RELATED TO SOLICITATION OF PROXIES BY MR. ICAHN AND HIS AFFILIATES FROM THE STOCKHOLDERS OF KERR-MCGEE CORPORATION FOR USE AT ITS ANNUAL MEETING (A) WHEN AND IF THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION, INCLUDING INFORMATION RELATING TO THE PARTICIPANTS IN ANY SUCH PROXY SOLICITATION, AND (B) WHEN AND IF COMPLETED, A DEFINITIVE PROXY STATEMENT AND A FORM OF PROXY WHICH WILL BE MAILED TO STOCKHOLDERS OF KERR-MCGEE CORPORATION AND WILL BE AVAILABLE AT NO CHARGE AT THE SECURITIES AND EXCHANGE COMMISSION'S WEBSITE AT HTTP://WWW.SEC.GOV. Item 5. Interest in Securities of the Issuer (a) The Reporting Persons may be deemed to beneficially own, in the aggregate, 7,106,000 Shares, representing approximately 4.68% of the Issuer's outstanding Shares (based upon the 151,692,157 Shares stated to be outstanding as of October 31, 2004 by the Issuer in the Issuer's Form 10-Q for the period ending September 30, 2004, filed with the Securities and Exchange Commission on November 9, 2004). (b) High River has sole voting power and sole dispositive power with regard to 1,421,200 Shares. Each of Barberry, Hopper and Carl C. Icahn has shared voting power and shared dispositive power with regard to such Shares. Icahn Master has sole voting power and sole dispositive power with regard to 2,901,212 Shares. Each of Icahn Offshore, CCI Offshore and Carl C. Icahn has shared voting power and shared dispositive power with regard to such Shares. Icahn Partners has sole voting power and sole dispositive power with regard to 2,783,588 Shares. Each of Icahn Onshore, CCI Onshore and Carl C. Icahn has shared voting power and shared dispositive power with regard to such Shares. Each of Hopper, Barberry and Mr. Icahn, by virtue of their relationships to High River (as disclosed in Item 2), may be deemed to beneficially own (as that term is defined in Rule 13d-3 under the Act) the Shares which High River directly beneficially owns. Each of Hopper, Barberry and Mr. Icahn disclaims beneficial ownership of such Shares for all other purposes. Each of Icahn Offshore, CCI Offshore and Mr. Icahn, by virtue of their relationships to Icahn Master (as disclosed in Item 2), may be deemed to beneficially own (as that term is defined in Rule 13d-3 under the Act) the Shares which Icahn Master directly beneficially owns. Each of Icahn Offshore, CCI Offshore and Mr. Icahn disclaims beneficial ownership of such Shares for all other purposes. Each of Icahn Onshore, CCI Onshore and Mr. Icahn, by virtue of their relationships to Icahn Partners (as disclosed in Item 2), may be deemed to beneficially own (as that term is defined in Rule 13d-3 under the Act) the Shares which Icahn Partners directly beneficially owns. Each of Icahn Onshore, CCI Onshore and Mr. Icahn disclaims beneficial ownership of such Shares for all other purposes. The Reporting Persons may be deemed to be members of a "group" with the Jana Parties within the meaning of Section 13(d)(3) of the Act. As such, the Reporting Persons may be deemed to beneficially own Shares owned by the Jana Parties. Upon information and belief, the Jana Parties, as of the close of business on March 2, 2005, may be deemed to beneficially own 4,501,300 Shares in the aggregate. Accordingly, the 11,607,300 Shares that may be deemed to be beneficially owned in the aggregate by the Reporting Persons and the Jana Parties, as of the close of business on March 2, 2005, constitutes approximately 7.65% of the Shares outstanding. However, the Reporting Persons disclaim membership in any such group for all purposes and disclaim ownership of any Shares owned by the Jana Parties, and neither the fact of this filing or anything contained herein shall be deemed to be an admission by any of the Reporting Persons that they are members of such a group. (c) The following table sets forth all transactions with respect to Shares effected during the past sixty (60) days by any of the Reporting Persons. Other than the purchase of Shares upon exercise of the Jana Option, all such transactions were effected in the open market, and the table includes commissions paid in per share prices (and, with respect to Shares acquired upon exercise of options, the table includes option purchase prices paid in per share prices). ------------------ -------------- ------------------- ------------------- No. of Shares Price Name Date Purchased Per Share ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- High River 01/24/05 45,000 60.1318 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- High River 01/25/05 45,000 60.3339 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- High River 01/26/05 67,000 59.2852 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- High River 01/26/05 12,000 60.5174 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- High River 01/28/05 60,000 60.5075 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- High River 01/31/05 10,000 60.8514 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- High River 02/03/05 30,000 62.5149 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- High River 02/04/05 27,000 62.9524 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- High River 02/24/05 118,000* 66.1770 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- High River 02/24/05 30,000* 65.8539 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- High River 02/24/05 25,400* 64.0752 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- High River 02/24/05 20,000* 65.9420 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- High River 02/24/05 300,000 76.4535 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- High River 02/28/05 125,000 77.1996 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- High River 03/01/05 50,000* 66.0000 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- High River 03/01/05 238,600 77.1092 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- High River 03/01/05 110,000 76.7300 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- High River 03/02/05 108,200 77.7004 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Master 01/24/05 91,800 60.1318 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Master 01/25/05 91,800 60.3339 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Master 01/26/05 136,680 59.2852 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Master 01/26/05 24,480 60.5174 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Master 01/28/05 122,400 60.5075 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Master 01/31/05 20,400 60.8514 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Master 02/03/05 61,200 62.5149 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Master 02/04/05 55,080 62.9524 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Master 02/24/05 240,700* 66.2058 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Master 02/24/05 61,200* 65.8823 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Master 02/24/05 51,800* 64.1035 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Master 02/24/05 40,800* 65.9700 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Master 02/24/05 612,000 76.4535 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Master 02/28/05 255,000 77.1996 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Master 03/01/05 104,000* 66.0000 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Master 03/01/05 486,744 77.1092 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Master 03/01/05 224,400 76.7300 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Master 03/02/05 220,728 77.7004 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Partners 01/24/05 88,200 60.1318 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Partners 01/25/05 88,200 60.3339 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Partners 01/26/05 131,320 59.2852 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Partners 01/26/05 23,520 60.5174 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Partners 01/28/05 117,600 60.5075 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Partners 01/31/05 19,600 60.8514 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Partners 02/03/05 58,800 62.5149 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Partners 02/04/05 52,920 62.9524 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Partners 02/24/05 231,300* 66.2062 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Partners 02/24/05 58,800* 65.8823 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Partners 02/24/05 49,800* 64.1035 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Partners 02/24/05 39,200* 65.9700 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Partners 02/24/05 588,000 76.4535 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Partners 02/28/05 245,000 77.1996 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Partners 03/01/05 96,000* 66.0000 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Partners 03/01/05 467,656 77.1092 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Partners 03/01/05 215,600 76.7300 ------------------ -------------- ------------------- ------------------- ------------------ -------------- ------------------- ------------------- Icahn Partners 03/02/05 212,072 77.7004 ------------------ -------------- ------------------- ------------------- * Shares acquired upon exercise of options (including, where applicable, the Jana Option) Item 6. Contracts, Arrangements, Understandings or Relationship with Respect to Securities of the Issuer On March 1, 2005, the Reporting Persons exercised the Jana Option more fully described in Item 4. A copy of the Jana Option is filed herewith as an exhibit and incorporated herein by reference, and any descriptions herein of the Jana Option are qualified in their entirety by reference to the Jana Option. On March 2, 2005, the Reporting Persons sent to the Issuer the Notification Letter more fully described in Item 4. A copy of the Notification Letter is filed herewith as an exhibit and incorporated herein by reference, and any descriptions herein of the Notification Letter are qualified in their entirety by reference to the Notification Letter. On March 3, 2005, the Reporting Persons and Jana Partners LLC sent to the Issuer the Proposed Transaction Letter more fully described in Item 4. A copy of the Proposed Transaction Letter is filed herewith as an exhibit and incorporated herein by reference, and any descriptions herein of the Proposed Transaction Letter are qualified in their entirety by reference to the Proposed Transaction Letter. As a result of the foregoing, the Reporting Persons may be deemed to be members of a "group" with the Jana Parties within the meaning of Section 13(d)(3) of the Act. However, the Reporting Persons disclaim membership in any such group for all purposes and disclaim ownership of any Shares held by the Jana Parties, and neither the fact of this filing or anything contained herein shall be deemed to be an admission by any of the Reporting Persons that they are members of such a group. Except as described herein, none of the Reporting Persons has any contracts, arrangements, understandings or relationships (legal or otherwise) with any person with respect to any securities of the Issuer, including but not limited to the transfer or voting of any of the securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or losses, or the giving or withholding of proxies. Item 7. Material to be Filed as Exhibits 1 Joint Filing Agreement of the Reporting Persons. 2 Stock Option Agreement among the Reporting Persons and Jana Master Fund Ltd. 3 Notification Letter from the Reporting Persons to the Issuer. 4 Proposed Transaction Letter from the Reporting Persons and Jana Partners LLC to the Issuer. SIGNATURE After reasonable inquiry and to the best of each of the undersigned knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: March 3, 2005 HOPPER INVESTMENTS LLC By: Barberry Corp. By: /s/ Edward E. Mattner Name: Edward E. Mattner Title: Authorized Signatory BARBERRY CORP. By: /s/ Edward E. Mattner Name: Edward E. Mattner Title: Authorized Signatory HIGH RIVER LIMITED PARTNERSHIP By: Hopper Investments LLC, General Partner By: Barberry Corp., member By: /s/ Edward E. Mattner Name: Edward E. Mattner Title: Authorized Signatory ICAHN PARTNERS MASTER FUND L.P. By: /s/ Edward E. Mattner Name: Edward E. Mattner Title: Authorized Signatory [Signature Page of Schedule 13D - Kerr-McGee, Inc.] ICAHN OFFSHORE L.P. By: /s/ Edward E. Mattner Name: Edward E. Mattner Title: Authorized Signatory CCI OFFSHORE LLC By: /s/ Edward E. Mattner Name: Edward E. Mattner Title: Authorized Signatory ICAHN PARTNERS L.P. By: /s/ Edward E. Mattner Name: Edward E. Mattner Title: Authorized Signatory ICAHN ONSHORE L.P. By: /s/ Edward E. Mattner Name: Edward E. Mattner Title: Authorized Signatory CCI ONSHORE LLC By: /s/ Edward E. Mattner Name: Edward E. Mattner Title: Authorized Signatory /s/ Carl C. Icahn_____________ ----------------- CARL C. ICAHN [Signature Page of Schedule 13D - Kerr-McGee, Inc.] {88883\1060\3/3/2005\00518108v4} JOINT FILING AGREEMENT In accordance with Rule 13d-1(f) under the Securities Exchange Act of 1934, as amended, the persons named below agree to the joint filing on behalf of each of them of a statement on Schedule 13D (including amendments thereto) with respect to the Class A Common Stock and Class B Common Stock of Kerr-McGee, Inc. and further agree that this Joint Filing Agreement be included as an Exhibit to such joint filings. In evidence thereof, the undersigned, being duly authorized, have executed this Joint Filing Agreement this 3rd day of March, 2005. HOPPER INVESTMENTS LLC By: Barberry Corp. By: /s/ Edward E. Mattner Name: Edward E. Mattner Title: Authorized Signatory BARBERRY CORP. By: /s/ Edward E. Mattner Name: Edward E. Mattner Title: Authorized Signatory HIGH RIVER LIMITED PARTNERSHIP By: Hopper Investments LLC, General Partner By: Barberry Corp., member By:/s/ Edward E. Mattner Name: Edward E. Mattner Title: Authorized Signatory ICAHN PARTNERS MASTER FUND L.P. By: /s/ Edward E. Mattner Name: Edward E. Mattner Title: Authorized Signatory ICAHN OFFSHORE L.P. By: /s/ Edward E. Mattner Name: Edward E. Mattner Title: Authorized Signatory [Signature Page of Joint Filing Agreement to Schedule 13D - Kerr-McGee, Inc.] CCI OFFSHORE LLC By: /s/ Edward E. Mattner Name: Edward E. Mattner Title: Authorized Signatory ICAHN PARTNERS L.P. By: /s/ Edward E. Mattner Name: Edward E. Mattner Title: Authorized Signatory ICAHN ONSHORE L.P. By: /s/ Edward E. Mattner Name: Edward E. Mattner Title: Authorized Signatory CCI ONSHORE LLC By: /s/ Edward E. Mattner Name: Edward E. Mattner Title: Authorized Signatory /s/ Carl C. Icahn_____________ ----------------- CARL C. ICAHN [Signature Page of Joint Filing Agreement to Schedule 13D - Kerr-McGee, Inc.] SCHEDULE A DIRECTORS AND EXECUTIVE OFFICERS OF THE REPORTING PERSONS Name, Business Address and Principal Occupation of Each Executive Officer and Director of High River and Barberry. The following sets forth the name, position, and principal occupation of each director and executive officer of each of High River and Barberry. Each such person is a citizen of the United States of America. Except as otherwise indicated, the business address of each director and officer is c/o Icahn Associates Corp., 767 Fifth Avenue, 47th Floor, New York, New York 10153. To the best of the Reporting Persons' knowledge, except as set forth in this statement on Schedule 13D, none of the directors or executive officers of the Reporting Persons own any shares of the Issuer. HIGH RIVER LIMITED PARTNERSHIP Name Position ---- -------- Hopper Investments LLC General Partner BARBERRY CORP. Name Position ---- -------- Carl C. Icahn Chairman, President and Secretary Jordan Bleznick Vice President - Taxes SCHEDULE B ----------- On January 5, 2001, Reliance Group Holdings, Inc. ("Reliance") commenced an action in the United States District Court for the Southern District of New York against "Carl C. Icahn, Icahn Associates Corp. and High River Limited Partnership" alleging that High River's tender offer for Reliance 9% senior notes violated Section 14(e) of the Exchange Act. Reliance sought a temporary restraining order and preliminary and permanent injunctive relief to prevent defendants from purchasing the notes. The Court initially imposed a temporary restraining order. Defendants then supplemented the tender offer disclosures. The Court conducted a hearing on the disclosures and other matters raised by Reliance. It then denied plaintiffs' motion for a preliminary injunction and ordered dissolution of its temporary restraining order following dissemination of the supplement. Reliance took an immediate appeal to the United States Court of Appeals for the Second Circuit and sought a stay to restrain defendants from purchasing notes during the pendency of the appeal. On January 30, 2001, the Court of Appeals denied plaintiff's stay application. On January 30, Reliance also sought a further temporary restraining order from the District Court. The Court considered the matter and reimposed its original restraint until noon the next day, at which time the restraint was dissolved. The appeal was argued on March 9 and denied on March 22, 2001. EX-99 2 kerrstockoption.txt STOCK OPTION AGREEMENT dated as of February 14, 2005 by and between JANA PARTNERS LLC and HIGH RIVER LIMITED PARTNERSHIP, ICAHN PARTNERS LP and ICAHN PARTNERS MASTER FUND LP with respect to 250,000 shares of common stock of KERR-MCGEE CORPORATION This STOCK OPTION AGREEMENT, dated as of February 14, 2005, is made and entered into by and between HIGH RIVER LIMITED PARTNERSHIP, a Delaware limited partnership, ICAHN PARTNERS LP, a Delaware limited partnership, ICAHN PARTNERS MASTER FUND LP, a Cayman Islands exempted limited partnership (collectively, the "Purchasers"), and JANA PARTNERS LLC, on behalf of funds and accounts managed by it and its affiliates (the "Seller"). Capitalized terms not otherwise defined herein have the meanings set forth in Article IV. WHEREAS, the Purchasers desire to acquire from the Seller an option to acquire 250,000 shares (the "Shares") of the common stock, par value $1.00 per share, of Kerr-McGee Corporation, on the terms and subject to the conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I GRANT OF OPTION, SALES OF SHARES AND CLOSING 1.01 Grant of Option. In consideration of a payment by the Purchasers to the Seller of an aggregate of $1,500,000, to be wired to the Seller on the date hereof in accordance with the wire instructions set forth on Schedule A hereto, the Seller hereby grants to the Purchasers the right and option to purchase the Shares at a strike price of $60.00 per Share (the "Option"). The Purchasers may exercise the Option, in whole or in part, from time to time, from the date hereof through August 14, 2005, by delivery of one or more notices (each an "Exercise Notice") to the Seller by email as follows: gary@janapartners.com, with a copy to barry@janapartners.com, at or prior to 3:00 p.m. New York City time on the date of exercise, to be accompanied by a phone call to the Seller as follows: Gary Claar at (212) 692-7696 or Barry Rosenstein at (415) 909-7770, indicating that such notice has been sent. Each Exercise Notice shall contain instructions (i) specifying the number of Shares to be purchased by each individual Purchaser and (ii) identifying the account(s) to which such Shares are to be delivered. 1.02 Purchase and Sale. The Seller agrees to and shall sell to the Purchasers, and the Purchasers agree to purchase from the Seller, those Shares subject to each such Exercise Notice at the closing for such Shares as contemplated in Section 1.04 below, on the terms set forth in this Agreement. 1.03 Purchase Price. The applicable purchase price of $60.00 per Share is payable in immediately available United States funds at the closing for such Shares in the manner provided in Section 1.04. 1.04 Closing. The Shares to be sold in any particular closing will be delivered by the Seller via DTC-book entry transfers from the Seller to the accounts of the Purchasers with Icahn & Co., Inc. and Goldman Sachs as set forth on Schedule A hereto, against delivery of the applicable purchase price, in transactions to be closed not later than the close of trading on the first NYSE trading day following the date of delivery of the applicable Exercise Notice. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER The Seller hereby represents and warrants to the Purchasers, as of the date hereof and as of the date of each closing, as follows: 2.01 Existence of the Seller. The Seller is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization or incorporation. The Seller has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby, including without limitation to sell and transfer (pursuant to this Agreement) the Shares. 2.02 Authority. This Agreement has been duly and validly executed and delivered by the Seller and constitutes a legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms. 2.03 Shares. The Shares are owned beneficially by the Seller free and clear of all Liens, and at each closing the Seller will transfer to the Purchasers good and valid title to the Shares purchased thereby, free and clear of all Liens. 2.04 No Conflicts. The execution and delivery by the Seller of this Agreement does not, and the performance by the Seller of its obligations under this Agreement and the consummation of the transactions contemplated hereby will not: (a) conflict with or result in a violation or breach of any of the terms, conditions or provisions of the organizational documents of the Seller or of the funds and accounts under its management; or (b) conflict with or result in a violation or breach of any term or provision of any Contract, Law or Order applicable to the Seller, the funds and accounts under its management or any of the respective Assets and Properties. 2.05 Brokers. All negotiations relative to this Agreement and the transactions contemplated hereby have been carried out on behalf of the Seller directly with the Purchasers without the intervention of any person on behalf of the Seller in such manner as to give rise to any valid claim by any person against the Purchasers for a finder's fee, brokerage commission or similar payment. 2.06 Holdings. At all times after the execution of this Agreement and prior to August 14, 2005, the Seller shall continue to hold beneficial ownership of the Shares subject to the Option and one or more custodians for the Seller shall hold record ownership thereof and the Seller shall not loan or sell, or permit the loan or sale of, such Shares. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS The Purchasers hereby represent and warrant to the Seller as follows: 3.01 Organization of the Purchasers. The Purchasers are duly organized, validly existing and in good standing under the Laws of their jurisdictions of organization or incorporation. The Purchasers have full authority to execute and deliver this Agreement and to perform the Purchasers' obligations hereunder and to consummate the transactions contemplated hereby, including, without limitation, to buy (pursuant to this Agreement) the Shares. 3.02 Authority. This Agreement has been duly and validly executed and delivered by the Purchasers and constitutes a legal, valid and binding obligation of the Purchasers, enforceable against the Purchasers in accordance with its terms. 3.03 No Conflicts. The execution and delivery by the Purchasers of this Agreement do not, and the performance by the Purchasers of their obligations under this Agreement and the consummation of the transactions contemplated hereby will not: (a) conflict with or result in a violation or breach of any of the terms, conditions or provisions of their organizational documents; or (b) conflict with or result in a violation or breach of any term or provision of any Contract, Law or Order applicable to the Purchasers or any of their Assets and Properties. 3.04 Brokers. All negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by the Purchasers directly with the Seller without the intervention of any Person on behalf of the Purchasers in such manner as to give rise to any valid claim by any Person against the Seller for a finder's fee, brokerage commission or similar payment. ARTICLE IV DEFINITIONS 4.01 Definitions. (a) Defined Terms. As used in this Agreement, the following defined terms have the meanings indicated below: "Agreement" means this Stock Option Agreement, as the same shall be amended from time to time. "Assets and Properties" of any Person means all assets and properties of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible, and wherever situated), including the goodwill related thereto, operated, owned or leased by such Person. "Contract" means any agreement, lease, license, evidence of indebtedness, mortgage, indenture, security agreement or other contract. "Exercise Notice" has the meaning ascribed to it in Section 1.01 of this Agreement. "Seller" has the meaning ascribed to it in the forepart of this Agreement. "Laws" means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of the United States or any state, county, city or other political subdivision or of any governmental or regulatory authority. "Liens" means any mortgage, pledge, assessment, security interest, lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or any conditional sale Contract, title retention Contract or other Contract to give any of the foregoing. "Option" has the meaning ascribed to it in Section 1.01 of this Agreement. "Person" means any natural person, corporation, limited liability company, general partnership, limited partnership, proprietorship, other business organization, trust, union, association or governmental or regulatory authority. "Purchasers" has the meaning ascribed to it in the forepart of this Agreement. "Seller" has the meaning ascribed to it in the forepart of this Agreement. "Shares" has the meaning ascribed to it in the forepart of this Agreement. ARTICLE V MISCELLANEOUS 5.01 Entire Agreement. This Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof. Except as set forth herein, there are no contracts, arrangements, understandings or relationships (legal or otherwise) between the parties with respect to any securities of Kerr-McGee Corporation. 5.02 Expenses. Each party will pay its own costs and expenses incurred in connection with the negotiation, execution and closing of this Agreement and the transactions contemplated hereby. 5.03 Waiver. Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative. 5.04 Amendment. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each party hereto. 5.05 No Third Party Beneficiary. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and it is not the intention of the parties to confer third-party beneficiary rights upon any other Person. 5.06 No Assignment; Binding Effect. Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any party hereto without the prior written consent of the other party hereto and any attempt to do so will be void, except for assignments and transfers by operation of Law. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns. 5.07 Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. 5.08 Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, and (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom. 5.09 Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of New York applicable to a Contract executed and performed in such State, without giving effect to the conflicts of laws principles thereof. 5.10 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. 5.11 Authority of Agent. The Seller hereby represents and warrants to the Purchasers that the Seller has full authority to execute and deliver this Agreement on behalf of the funds and accounts under its management and that the Purchasers may deal with and take instructions from, and rely in dealing with and taking instruction from, the Seller, in all respects with respect to this Agreement and any matter arising in connection therewith. IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officer of each party hereto as of the date first above written. Purchasers: HIGH RIVER LIMITED PARTNERSHIP By: Hopper Investments, LLC, general partner By: Barberry Corp., sole member By:________________________________ Name: Edward E. Mattner Title: Authorized Signatory ICAHN PARTNERS LP By: Icahn Onshore LP, general partner By: CCI Onshore LLC, sole member By:________________________________ Name: Edward E. Mattner Title: Authorized Signatory ICAHN PARTNERS MASTER FUND LP By: Icahn Offshore LP, general partner By: CCI Offshore LLC, sole member By:________________________________ Name: Edward E. Mattner Title: Authorized Signatory Seller: JANA PARTNERS LLC By:_________________________________ Name: Barry Rosenstein Title: Authorized Signatory [Stock Option Agreement with Jana Partners LLC re Kerr-McGee dated February 14, 2005] > EX-99 3 kerrstockholderletter.txt ICAHN PARTNERS LP ICAHN PARTNERS MASTER FUND LP HIGH RIVER LIMITED PARTNERSHIP c/o Icahn Associates Corp. 767 Fifth Avenue, 47th Floor New York, New York 10153 March 2, 2005 VIA HAND DELIVERY AND FACSIMILE Kerr-McGee Corporation 123 Robert S. Kerr Avenue Oklahoma City, Oklahoma 73102 Attention: Office of the Secretary Re: Stockholder Notification of Nominations Ladies and Gentlemen: Icahn Partners LP, a Delaware limited partnership, Icahn Partners Master Fund LP, a Cayman Islands exempted limited partnership, and High River Limited Partnership, a Delaware limited partnership (collectively, the "Nominating Parties"), are hereby submitting this notice on the date hereof in order to comply with the requirements (the "Bylaw Requirements") set forth in Article III, Section 10(A) of the Amended and Restated Bylaws of Kerr-McGee Corporation (the "Corporation"). The address of Icahn Partners LP and Icahn Partners Master Fund LP, as it appears on the Corporation's books, is 767 Fifth Avenue, 47th Floor, New York, New York 10153. The address of High River Limited Partnership, as it appears on the Corporation's books, is One Whitehall Street, New York, NY 10004. The decision to nominate the Slate (as defined below) was made pursuant to discussions among representatives of the Nominating Parties and Jana Partners LLC. Each of the Nominating Parties is the record owner directly of 1,000 shares of common stock, par value $1.00 per share, of the Corporation ("Common Stock"), which, in the aggregate, constitutes less than one percent (1%) of the outstanding Common Stock. The Nominating Parties own beneficially, in the aggregate, approximately 4.3% of the outstanding Common Stock (based on the 151,692,157 shares stated to be outstanding as of October 31, 2004 by the Corporation in its Quarterly Report on Form 10-Q for the period ended September 30, 2004) as of the close of business on March 1, 2005. For further information on the beneficial ownership of the Corporation's securities by the Nominating Parties, reference should be made to Annex A to this notice. The Nominating Parties hereby represent that they intend to appear at the 2005 annual meeting of the Corporation's stockholders (the "Annual Meeting") in person or by proxy to submit the business specified in this notice. The Nominating Parties are seeking at the Annual Meeting to elect Mr. Carl Icahn and Mr. Barry Rosenstein as members of the Board of Directors of the Corporation and, in that regard, propose to nominate Messrs. Icahn and Rosenstein as their nominees (the "Nominees" or the "Slate") for election as directors of the Corporation at the Annual Meeting. The Nominating Parties intend to propose the following resolution at the Annual Meeting (and/or any other form of resolution required by the Corporation to nominate these Nominees): "It is hereby being resolved, that Mr. Carl Icahn and Mr. Barry Rosenstein are nominated to be elected as members of the Board of Directors of the Corporation." As required by the Bylaw Requirements, the Nominating Parties hereby advise you that certain information relating to the Nominees is set forth in Annex B of this notice. Except as set forth herein or in any of the Annexes (or any attachments thereto), to the best knowledge of the Nominating Parties (i) the Nominees do not own any securities of the Corporation or any parent or subsidiary of the Corporation, directly or indirectly, beneficially or of record, nor have they purchased or sold any securities of the Corporation within the past two years, and none of their associates beneficially owns, directly or indirectly, any securities of the Corporation, (ii) neither the Nominees, their associates or any member of their immediate families, nor the Nominating Parties or their associates has any arrangement or understanding with any person (a) with respect to any future employment by the Corporation or its affiliates or (b) with respect to future transactions to which the Corporation or any of its affiliates will or may be a party, nor any material interest, direct or indirect, in any transaction, or series of similar transactions, that has occurred since the beginning of the Corporation's last fiscal year or any currently proposed transaction, or series of similar transactions, to which the Corporation or any of its subsidiaries was or is to be a party and in which the amount involved exceeds $60,000, (iii) neither the Nominees, their associates or any member of their immediate families, nor the Nominating Parties or their associates has been indebted to the Corporation or its subsidiaries at any time since the beginning of the Corporation's last fiscal year in an amount in excess of $60,000, (iv) the Nominees are not, or were not within the past year, party to any contract, arrangement or understanding with any person with respect to any securities of the Corporation, including, but not limited to, joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profits or the giving or withholding of proxies, (v) neither the Nominees nor any of their associates has any arrangement or understanding with any person pursuant to which he was or is to be selected as a director, nominee or officer of the Corporation, (vi) there are no relationships between the Nominees, their associates or any member of their immediate families, nor the Nominating Parties or their associates and the Corporation that are listed in, or substantially similar in nature and scope to those relationships listed, in paragraphs (b)(1) through (5) of Item 404 of Regulation S-K under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (vii) there is no other information with respect to the Nominees, their associates or any member of their immediate families, nor the Nominating Parties or their associates that is required to be disclosed in solicitations of proxies for election of directors or is otherwise required by the rules and regulations of the SEC promulgated under the Exchange Act. Matters disclosed in any part of this notice, including the Annexes and any attachments thereto, should be deemed disclosed for all purposes of this notice. The written consent of the Nominees as required by the Bylaw Requirements is attached as Annex C. As more fully described in Annex A, 250,000 of the shares of Common Stock beneficially owned by the Nominating Parties were purchased from Jana Master Fund Ltd., of which Jana Partners LLC is investment manager, pursuant to the exercise of an option. Barry Rosenstein (one of the Nominees) is a managing member of Jana Partners LLC. The Nominating Parties will promptly provide any other information reasonably requested by the Corporation pursuant to the Bylaw Requirements. Please be advised, however, that, notwithstanding the compliance by the Nominating Parties with the Bylaw Requirements, neither the delivery of this notice in accordance with the terms of the Bylaws Requirements nor the delivery of any additional information, if any, provided by the Nominating Parties or any of their affiliates to the Corporation from and after the date hereof shall be deemed to constitute an admission by the Nominating Parties or any of its affiliates of the legality or enforceability of the Bylaw Requirements or a waiver by any such person or entity of its right to, in any way, contest or challenge the enforceability thereof. The Nominating Parties reserve the right to nominate additional nominees, in the event the Corporation, by the appropriate corporate action, increased or increases the number of directors to be elected at the Annual Meeting to be greater than two (2). [Remainder of page intentionally left blank] Very truly yours, ICAHN PARTNERS LP By: ______________________ Name: Edward E. Mattner Its: Authorized Signatory ICAHN PARTNERS MASTER FUND LP By: ______________________ Name: Edward E. Mattner Its: Authorized Signatory HIGH RIVER LIMITED PARTNERSHIP By: Hopper Investments LLC, general partner By: Barberry Corp., sole member By: ______________________ Name: Edward E. Mattner Its: Authorized Signatory [Signature page to Kerr-McGee stockholder proposal notice] ANNEX A As of the close of business on March 1, 2005, Icahn Partners LP is the direct beneficial owner of 2,571,516 shares of the Corporation's common stock, par value $1.00 per share ("Shares"). Each of (i) Icahn Onshore LP, as the general partner of Icahn Partners LP, and (ii) CCI Onshore LLC, as the general partner of Icahn Onshore LP, may be deemed to be an indirect beneficial owner of the 2,571,516 Shares directly beneficially owned by Icahn Partners LP. As of the close of business on March 1, 2005, Icahn Partners Master Fund LP is the direct beneficial owner of 2,680,484 Shares. Each of (i) Icahn Offshore LP, as the general partner of Icahn Partners Master Fund LP, and (ii) CCI Offshore LLC, as the general partner of Icahn Offshore LP, may be deemed to be an indirect beneficial owner of the 2,680,484 Shares directly beneficially owned by Icahn Partners Master Fund LP. As of the close of business on March 1, 2005, High River Limited Partnership is the direct beneficial owner of 1,313,000 Shares. Each of (i) Hopper Investments LLC, as the general partner of High River Limited Partnership, and (ii) Barberry Corp., as the sole member of Hopper Investments LLC, may be deemed to be an indirect beneficial owner of the 1,313,000 Shares directly beneficially owned by High River Limited Partnership. Each of CCI Onshore LLC, CCI Offshore LLC and Barberry Corp. is wholly owned by Carl C. Icahn. As such, Mr. Icahn may be deemed to be the indirect beneficial owner of 6,565,000 Shares. On February 14, 2005, Icahn Partners LP, Icahn Partners Master Fund LP and High River Limited Partnership acquired an option to purchase, in the aggregate, 250,000 Shares from Jana Master Fund Ltd., of which Jana Partners LLC is investment manager. Barry Rosenstein (one of the Nominees) is a managing member of Jana Partners LLC. Pursuant to the exercise of this option on March 1, 2005, Icahn Partners LP purchased 96,000 Shares, Icahn Partners Master Fund LP purchased 104,000 Shares and High River Limited Partnership purchased 50,000 Shares. The option had an exercise price of $60.00 per Share and an expiration date of August 14, 2005. ANNEX B CARL C. ICAHN Name: Carl C. Icahn (the "Nominee") Age: 69 Business Address: 767 Fifth Avenue New York, NY 10153 Residence Address: 15 West 53rd Street Penthouse B&C New York, NY 10019 Set forth below is a brief description of the Nominee's business experience during the past five years, including the Nominee's principal occupations and employment during the past five years, the name and principal business of any corporation or other organization in which such occupations and employment were carried on and the Nominee's current principal occupation or employment: Mr. Icahn has served as Chairman of the Board and a director of Starfire Holding Corporation ("Starfire") (formerly Icahn Holding Corporation), a privately-held holding company, and Chairman of the Board and a director of various subsidiaries of Starfire, since 1984. Mr. Icahn is and has been since 1994 a majority shareholder, the Chairman of the Board and a Director of American Railcar Industries, Inc. ("ARI"), a Missouri corporation. ARI is primarily engaged in the business of manufacturing, managing, leasing and selling of railroad freight and tank cars. Mr. Icahn has also been Chairman of the Board and President of Icahn & Co., Inc., a registered broker-dealer and a member of the National Association of Securities Dealers, since 1968. Since November 1990, Mr. Icahn has been Chairman of the Board of American Property Investors, Inc., the general partner of American Real Estate Partners, L.P., a public limited partnership that invests in real estate and holds various other interests, including the interests in its subsidiaries that are engaged, among other things, in the oil and gas business and casino entertainment business. Mr. Icahn has been a director of Cadus Pharmaceutical Corporation, a firm that holds various biotechnology patents, since 1993. From August 1998 to August 2002, Mr. Icahn served as Chairman of the Board of Maupintour Holding LLC (f/k/a/ Lowestfare.com, LLC), an internet travel reservations company. From October 1998 through May, 2004, Mr. Icahn was the President and a director of Stratosphere Corporation, which operates the Stratosphere Hotel and Casino. Since September 29, 2000, Mr. Icahn has served as the Chairman of the Board of GB Holdings, Inc., which owns all of the outstanding stock of Atlantic Coast Entertainment Holdings, Inc., which through its wholly-owned subsidiary owns and operates The Sands Hotel and Casino in Atlantic City, New Jersey. Mr. Icahn also serves in the same capacity with Atlantic Coast Entertainment Holdings, Inc. In January 2003, Mr. Icahn became Chairman of the Board and a director of XO Communications, Inc., a telecommunications company. Mr. Icahn received his B.A. from Princeton University in 1957. The entities listed above are not a parent, subsidiary or other affiliate of Kerr-McGee Inc. ("Kerr-McGee"). The Nominee does not hold any positions or offices with Kerr-McGee. BARRY ROSENSTEIN Name: Barry Rosenstein (the "Nominee") Age: 46 Business Address: 201 Post Street San Francisco, CA 94108 Residence Address: 768 El Camino Del Mar San Francisco, CA 94121 Set forth below is a brief description of the Nominee's business experience during the past five years, including the Nominee's principal occupations and employment during the past five years, the name and principal business of any corporation or other organization in which such occupations and employment were carried on and the Nominee's current principal occupation or employment: Barry Rosenstein is the founder and Managing Partner of JANA Partners LLC, an investment management company, a position he has held since 2001. Mr. Rosenstein also founded, and from 1993 to 2001 served as Managing Partner of, Sagaponack Partners L.P., a private equity fund. He received his M.B.A. from the University of Pennsylvania's Wharton School of Business in 1984. In 1981, Mr. Rosenstein graduated Phi Beta Kappa from Lehigh University. Mr. Rosenstein is also a C.P.A. Mr. Rosenstein serves on the board of directors of Cobra Electronics and Marisa Christina, Inc. The entities listed above are not a parent, subsidiary or other affiliate of Kerr-McGee Inc. ("Kerr-McGee"). The Nominee does not hold any positions or offices with Kerr-McGee. As of the close of business on March 1, 2005, Jana Master Fund Ltd. is the direct beneficial owner of 3,693,235 Shares. Jana Partners LLC is the investment manager of Jana Master Fund Ltd. In addition, as of such date, a separate account also managed by Jana Partners LLC was the direct beneficial owner of 289,565 Shares. As the investment manager to both Jana Master Fund Ltd. and such managed account, Jana Partners LLC may be deemed to be an indirect beneficial owner of the 3,982,800 Shares directly beneficially owned by such entities. As a managing member of Jana Partners LLC, Mr. Rosenstein may also be deemed an indirect beneficial owner of such Shares. Pursuant to the exercise of an option on March 1, 2005, Jana Master Fund Ltd. sold to Icahn Partners LP, Icahn Partners Master Fund LP and High River Limited Partnership 250,000 Shares in the aggregate. The option had an exercise price of $60.00 per Share and an expiration date of August 14, 2005. Such Shares are not included in the amounts set forth in the immediately preceding paragraph. ANNEX C CONSENT OF NOMINEES Each of the undersigned hereby consents to being named as a nominee for election as a director of Kerr-McGee Inc. (the "Company"), in the proxy statement and other materials concerning the undersigned's nomination in connection with the solicitation of proxies from stockholders of the Company to be voted at the 2005 annual meeting of stockholders of the Company and any adjournment thereof, and further consents to serve as a director of the Company, if elected. /s/ Carl C. Icahn Carl C. Icahn /s/ Barry Rosenstein Barry Rosenstein EX-99 4 kerrmcgeeschedulea.txt ICAHN PARTNERS LP ICAHN PARTNERS MASTER FUND LP HIGH RIVER LIMITED PARTNERSHIP JANA PARTNERS LLC March 3, 2005 VIA FEDERAL EXPRESS AND FACSIMILE ---------------------------------- Mr. Luke R. Corbett Chairman and Chief Executive Officer Kerr-McGee Corporation 123 Robert S. Kerr Avenue Oklahoma City, Oklahoma 73102 Dear Mr. Corbett: As we have previously discussed with you, each of us is a large shareholder of Kerr-McGee Corporation ("KMG"), beneficially owning, in the aggregate, approximately 11.6 million shares or approximately 7.6% of the outstanding shares of KMG's common stock. Entities affiliated with Carl Icahn recently proposed Carl Icahn and Barry Rosenstein, managing partner of Jana Partners (a $3 billion hedge fund), as nominees for KMG's board of directors at the upcoming annual meeting. This action was taken in order to help ensure that KMG is focused on maximizing shareholder value. While management's recent announcement of its intention to review strategic alternatives for its chemicals business is a positive first step, we feel this action does not go far enough toward maximizing the value of KMG's common stock. A great opportunity exists today for shareholders of KMG. Never before has there been such a disconnect between the stock market valuation of publicly traded E&P companies such as KMG on a per barrel of oil equivalent ("boe") of proved reserves basis and the value at which oil and gas futures are trading in the commodity markets. We believe that this spread can be captured by KMG by selling today a portion of its production for delivery over the next five years and utilizing the proceeds from such a sale, today, to immediately repurchase stock. We believe that if KMG were to follow the plan outlined below (and detailed in the attached schedule), KMG's share price would increase significantly. The plan would require KMG to take the following steps: 1. Sell the chemical business; 2. Enter into a transaction to monetize forward production and capitalize on today's high price of oil and gas, low interest rate environment and increased commodity market liquidity; and 3. Utilize the proceeds from the chemical business sale and the forward sale of a portion of KMG's future oil and gas production to buy back shares. At KMG's current market price of $78.99 per share (as of the close of the market on March 2, 2005), and pro-forma for the sale of its chemicals business for $1.7 billion (the mid-point of the range projected on KMG's January 26, 2005 fourth quarter conference call), KMG is trading at approximately $11.80 per boe of proved in the ground reserves. To monetize the current discount in KMG's stock market valuation versus the commodity market valuation for oil and gas, we recommend that KMG immediately execute a Volumetric Production Payment transaction ("VPP") for 50 million boe's of proved producing reserves per year over each of the next five years (i.e., 250 million boe's of production total, or approximately 32% of KMG's total proved producing reserves), constituting approximately 37% of KMG's projected 2005 production. Based on the current forward curve for oil and gas, the low interest rate environment and increased liquidity in the commodity markets, we believe (as a result of discussions with commodity trading firms) that KMG could realize proceeds of between $35 and $38 per boe sold forward through a VPP transaction. As such, KMG could raise a total of approximately $8.75 BILLION OF CASH (assuming the VPP transaction at $35 per boe), or approximately 60% of its enterprise value (excluding KMG's chemicals business), by selling only approximately 21% of its total proved reserves. After raising the proceeds described above (including proceeds from the sale of the chemicals business), KMG should repurchase up to approximately 116 million shares of its stock at $90 per share. Following such a transaction, KMG would still have approximately 950 million boe of proved reserves, approximately 56% of which would be proved developed reserves and approximately 44% would be proved undeveloped reserves. Assuming that KMG would trade at its current value of $11.80 per boe of proved reserves (excluding the chemical business), the pro forma share price following the proposed transactions would be $111 per share. Historically, we believe investors have penalized KMG's share price due to what we perceive as poor results achieved in exploration, drilling and use of free cash flow. However, after giving effect to the proposed VPP transaction and the sale of the chemicals business, we believe that the public market valuation for KMG's remaining reserves could increase to be more in line with the reserve valuations attributed to its comparable companies (see attached schedule). If this were to occur, KMG could trade at $132 per share. Obviously, there can be no assurance that KMG common stock will trade within the $111 to $132 range, even if all of these transactions are undertaken and completed. We would like to discuss this recommendation with you at your earliest convenience since we feel it is important to move quickly while the opportunity exists. Very truly yours, CARL C. ICAHN BARRY ROSENSTEIN [03.03.05 Letter to Kerr-McGee from Icahn and Rosenstein re VPP transaction] SCHEDULE A This should be read only in conjunction with the attached letter dated March 3, 2005 KMG VALUATION: PROFORMA FOR SALE OF CHEMICALS BUSINESS AND 250 MMBOE VPP TRANSACTION AND STOCK REPURCHASE CHEMICAL BUSINESS SALES PROCEEDS (1) $ 1,700,000,000 Estimated Tax Basis 1,600,000,000 Assumed Tax Rate 35% ---------------------- ESTIMATED AFTER-TAX PROCEEDS FROM THE CHEMICAL SALE $ 1,665,000,000 VPP BOE's Sold 250,000,000 Estimated VPP Sales Proceeds per BOE $ 35.00 ---------------------- ESTIMATED VPP SALES PROCEEDS $ 8,750,000,000 ESTIMATED PROCEEDS AVAILABLE FOR STOCK PUCHASES $ 10,415,000,000 ASSUMED STOCK REPURCHASE PRICE PER SHARE $ 90.00 Diluted Shares Outstanding at 12/31/04 (Per KMG 2004 Earnings Release) 161,706,000 Assumed Shares Repurchased 115,722,222 Pro Forma Shares Outstanding after Assumed Repurchases 45,983,778 Total Proved Reserves at 12/31/04 (Per KMG 2004 Earnings Release) 1,200,000,000 Proved Producing Reserves Sold in VPP Transaction 250,000,000 ---------------------- Total Proved Reserves after VPP Transaction 950,000,000 Calculated Current Value of KMG Per Proved Reserve (2) $ 11.80 IMPLIED ENTERPRISE VALUE OF REMAINING KMG RESERVES @ $11.80 PER BOE $ 11,210,000,000 Value Attributed to KMG Exploratory Acreage and Other Assets Less Current KMG Net Debt (Per KMG 2004 Earnings Release)$ 3,189,100,000 Present Value of Cost Associated with VPP Production 1,581,000,000 (Assumed at $6.0 per boe grown at 15% per annum, discounted at 8% cost of capital) Estimated Present Value of VPP Tax Liability $ 1,330,000,000 REMAINDER EQUALS PRO FORMA KMG EQUITY VALUE $ 5,109,900,000 Divided by Pro Forma KMG Shares Outstanding 45,983,778 REULTS IN PRO FORMA KMG VALUE PER SHARE @ $11.80 PER BOE $ 111.12 EFFECT ON KMG'S SHARE PRICE ASSUMING A $12.80 PER BOE VALUATION OF PROVED RESERVES Current Assumed E&P Comparable Company Value of Public Market Proved Reserves (3) $ 12.80 IMPLIED ENTERPRISE VALUE OF REMAINING KMG RESERVES @ $12.80 PER BOE $ 12,160,000,000 Value Attributed to KMG Exploratory Acreage and Other Assets Less Current KMG Net Debt (Per KMG 2004 Earnings Release) $ 3,189,100,000 Present Value of Cost Associated with VPP Production $ 1,581,000,000 (Assumed at $6.0 per boe grown at 15% per annum, discounted at 8% cost of capital) Estimated Present Value of VPP Tax Liability $ 1,330,000,000 REMAINDER EQUALS PRO FORMA KMG EQUITY VALUE $ 6,059,900,000 Divided by Pro Forma KMG Shares Outstanding $ 45,983,778 RESULTS IN PRO FORMA KMG VALUE PER SHARE AT $12.80 PER BOE $ 131.78 Notes: ----------------------- (1) Assumes Chemical business is sold for the mid-point of KMG management's estimated valuation range as of January 26, 2005. (2) KMG currently is trading at approximatley $11.80 per boe of proved reserve after deducting the value of the Chemical business at the mid-point of KMG management's estimated valuation range as of January 26, 2005. (3) Assumes KMG trades at $12.80 per boe of proved reserves. $12.95 represents the comparable company valuation on a per boe of proved reserves basis (Based on 2004 Earrnings Releases for each company.) Comps. are comprised of Apache, Devon, Chesapeake and XTO Energy. This should be read only in conjunction with the attached letter dated March 3, 2005