-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SUoZtfgnYAuK0wGarlb+pxS7uGKDk1HC4k4NqBtDrXqIUaP9/Ra16+03Em4WlSSO Ef/VsaG4WWIkRM/divQy9A== 0000055458-01-500014.txt : 20010329 0000055458-01-500014.hdr.sgml : 20010329 ACCESSION NUMBER: 0000055458-01-500014 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KERR MCGEE CORP CENTRAL INDEX KEY: 0000055458 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 730311467 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-03939 FILM NUMBER: 1581902 BUSINESS ADDRESS: STREET 1: KERR MCGEE CTR STREET 2: 123 ROBERT S KERR CITY: OKLAHOMA CITY STATE: OK ZIP: 73125 BUSINESS PHONE: 4052701313 MAIL ADDRESS: STREET 1: P O BOX 25861 CITY: OKLAHOMA CITY STATE: OK ZIP: 73125 FORMER COMPANY: FORMER CONFORMED NAME: KERR MCGEE OIL INDUSTRIES INC DATE OF NAME CHANGE: 19671227 10-K405 1 form10k2000.txt FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal year ended December 31, 2000 Commission file number 1-3939 KERR-MCGEE CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 73-0311467 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) KERR-MCGEE CENTER, OKLAHOMA CITY, OKLAHOMA 73102 (Address of principal executive offices) Registrant's telephone number, including area code: (405)270-1313 Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------------------------ ------------------------- Common Stock $1 Par Value New York Stock Exchange Preferred Share Purchase Right 7-1/2% Convertible Subordinated Debentures Due May 15, 2014 New York Stock Exchange 5-1/4% Convertible Subordinated Debentures Due February 15, 2010 New York Stock Exchange 5-1/2% Exchangeable Notes Due August 2, 2004 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] --- The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $6.1 billion as of February 28, 2001. The number of shares of common stock outstanding as of February 28, 2001, was 94,671,473. DOCUMENTS INCORPORATED BY REFERENCE Specified sections of the Kerr-McGee Corporation 2000 Annual Report to Stockholders, as described herein, are incorporated by reference in Parts I and II of this Form 10-K. The definitive Proxy Statement for the 2000 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2000, is incorporated by reference in Part III of this Form 10-K. KERR-McGEE CORPORATION PART I Items 1. and 2. Business and Properties GENERAL DEVELOPMENT OF BUSINESS Kerr-McGee Corporation, an energy and chemical company, had its beginning in 1929 with the formation of Anderson & Kerr Drilling Company. The company was incorporated in Delaware in 1932. With oil and gas exploration and production as its base, the company has expanded into titanium dioxide pigment manufacturing and marketing and minerals mining and marketing. Kerr-McGee owns a large inventory of natural resources that includes oil and gas reserves and chemical and mineral deposits. For a discussion of recent business developments, reference is made to the Management's Discussion and Analysis section in the 2000 Annual Report to Stockholders, which discussion is incorporated by reference in Item 7, and the Exploration and Production and Chemicals discussions included in this Form 10-K. INDUSTRY SEGMENTS For information as to business segments of the company, reference is made to Note 26 to the Consolidated Financial Statements in the 2000 Annual Report to Stockholders, which note is incorporated by reference in Item 8. EXPLORATION AND PRODUCTION Kerr-McGee Corporation owns oil and gas operations worldwide. The company acquires leases and concessions and explores for, develops, produces and markets crude oil and natural gas through its subsidiaries, Kerr-McGee Oil & Gas Corporation, Kerr-McGee Oil and Gas Onshore LP, Kerr-McGee Oil (U.K.) PLC, Kerr-McGee North Sea (U.K.) Limited, Kerr-McGee Resources (U.K.) Limited, Kerr-McGee Gryphon Limited, Kerr-McGee China Petroleum Limited and various other subsidiaries. The areas of Kerr-McGee's offshore oil and gas exploration and/or production activities are the Gulf of Mexico, North Sea, Australia, Brazil, China, Thailand, Canada, Benin, Morocco and Gabon. Onshore exploration and/or production operations are in the United States, Indonesia, the United Kingdom, Kazakhstan, Ecuador and Yemen. - ------------------ Except as indicated under Items 1 through 3, 5 through 8 and 10 through 14, no other information appearing in either the company's 2000 Annual Report to Stockholders or its 2001 Proxy Statement is deemed to be filed as part of this annual report on Form 10-K. Kerr-McGee's average daily oil production during 2000 was 206,700 barrels, an increase of 5% from 1999. Kerr-McGee's average oil price was $27.64 per barrel in 2000, compared with $17.26 per barrel for 1999. During 2000, natural gas sales averaged 531 million cubic feet per day, down 8% from 1999 sales. The 2000 average natural gas price was $3.87 per thousand cubic feet, compared with $2.38 per thousand cubic feet for 1999. Kerr-McGee continued to add to its worldwide acreage inventory in 2000. Gross undeveloped and developed acreage at year-end 2000 was approximately 58 million acres, an increase of 32% compared with year-end 1999. Costs Incurred, Results of Operations, Sales Prices, Production Costs and - -------------------------------------------------------------------------------- Capitalized Costs - ----------------- Reference is made to Notes 28, 29 and 30 to the Consolidated Financial Statements in the 2000 Annual Report to Stockholders, which notes are incorporated by reference in Item 8. These notes contain information on the costs incurred in crude oil and natural gas activities for each of the past three years; results of operations from crude oil and natural gas activities, average sales prices per unit of crude oil and natural gas, and production costs per barrel of oil equivalent (BOE) for each of the past three years; and capitalized costs of crude oil and natural gas activities at December 31, 2000 and 1999. Reserves - -------- Kerr-McGee's estimated proved crude oil, condensate, natural gas liquids and natural gas reserves at December 31, 2000, and the changes in net quantities of such reserves for the three years then ended are shown in Note 31 to the Consolidated Financial Statements in the 2000 Annual Report to Stockholders, which note is incorporated by reference in Item 8. From time to time, reports are filed with the United States Department of Energy relating to the company's reserves. The reserves reported in the Notes to Financial Statements are consistent with other filings pertaining to proved reserves. Minor differences in gas volumes occur due to different pressure bases required in the reports. However, the differences in estimates do not exceed 5% of the total estimated reserves. Undeveloped Acreage - ------------------- As of December 31, 2000, the company had interests in undeveloped oil and gas leases in the Gulf of Mexico, onshore United States, the United Kingdom and Danish sectors of the North Sea and onshore and offshore in other international areas as follows: Gross Net Location Acreage Acreage - -------- ---------- --------- United States - Offshore 2,072,660 1,427,909 Onshore 1,098,117 592,490 ---------- --------- 3,170,777 2,020,399 ---------- --------- North Sea 1,864,508 922,590 ---------- --------- Other international - Australia 14,590,086 6,239,237 Yemen 9,879,761 4,724,346 Thailand 4,861,797 4,132,526 Brazil 3,877,510 1,388,137 Canada 3,230,344 2,501,353 Gabon 3,115,997 436,240 Morocco 2,965,262 741,316 Benin 2,459,439 2,459,439 Kazakhstan 2,248,000 2,248,000 China 1,399,108 960,518 Ecuador 494,210 247,105 ---------- ---------- 49,121,514 26,078,217 ---------- ---------- Total 54,156,799 29,021,206 ========== ========== Developed Acreage - ----------------- At December 31, 2000, the company had interests in developed oil and gas acreage in the Gulf of Mexico, onshore United States, the United Kingdom sector of the North Sea, and onshore and offshore in other international areas as follows: Gross Net Location Acreage Acreage - -------- --------- --------- United States - Offshore 573,193 266,929 Onshore 913,396 462,151 --------- --------- 1,486,589 729,080 --------- --------- North Sea 480,758 114,803 --------- --------- Other international - Indonesia 1,319,042 395,713 Ecuador 484,326 242,163 China 70,028 17,156 Kazakhstan 1,000 1,000 --------- --------- 1,874,396 656,032 --------- --------- Total 3,841,743 1,499,915 ========= ========= Net Exploratory and Development Wells - ------------------------------------- Domestic and international exploratory and development wells drilled during the three years ended December 31, 2000, are as follows: 2000 1999 1998 ----- ---- ----- Exploratory Wells - Net(1) United States Productive 1.25 1.70 3.40 Dry holes 2.75 2.15 6.73 ----- ---- ----- 4.00 3.85 10.13 ----- ---- ----- North Sea Dry holes 4.66 .80 2.05 ----- ---- ----- Other international Productive - - 1.00 Dry holes 3.13 .80 5.64 ----- ---- ----- 3.13 .80 6.64 ----- ---- ----- Total 11.79 5.45 18.82 ===== ==== ===== The above 2000 net well count does not include 15.35 successful net wells (2.50 United States, 8.02 North Sea and 4.83 Other international) that were drilled in 2000 but are currently suspended. 2000 1999 1998 ----- ----- ----- Development Wells - Net(1) United States Productive 34.85 34.87 46.99 Dry holes 3.09 5.38 8.00 ----- ----- ----- 37.94 40.25 54.99 ----- ----- ----- North Sea Productive 8.44 9.31 10.77 Dry holes 1.85 .51 - ----- ----- ----- 10.29 9.82 10.77 Other international Productive 4.50 2.05 4.54 Dry holes .50 - 1.00 ----- ----- ----- 5.00 2.05 5.54 ----- ----- ----- Total 53.23 52.12 71.30 ===== ===== ===== (1)Net Wells - The total of the company's fractional working interests in "gross wells" expressed as the equivalent number of full-interest wells. Gross and Net Wells - ------------------- The number of productive oil and gas wells, in which the company had an interest at December 31, 2000, is shown in the following table. These wells include 2,148 gross or 919.18 net wells associated with improved recovery projects and 315 gross or 211.35 net wells that have multiple completions but are included as single wells. Gross Net Location Wells Wells - -------- ----- -------- Crude Oil United States 2,514 1,205.64 North Sea 358 86.30 Ecuador 59 29.50 China 25 6.13 Kazakhstan 14 7.00 Indonesia 35 10.50 ----- -------- 3,005 1,345.07 ----- -------- Natural Gas United States 1,114 644.67 North Sea 4 .32 ----- -------- 1,118 644.99 ----- -------- Total 4,123 1,990.06 ===== ======== Wells in Process of Drilling - ---------------------------- At year-end 2000, the company had wells classified as temporarily suspended or in the process of drilling as follows: Gross Net Wells Wells ----- ----- United States 40 19.28 North Sea 39 24.09 Indonesia 21 6.30 China 10 7.54 Ecuador 4 2.00 Australia 7 2.03 Kazakhstan 3 1.50 --- ----- Total 124 62.74 === ===== Crude Oil and Natural Gas Sales - ------------------------------- The following table summarizes the sales of the company's crude oil and natural gas production for the past three years: (Millions) 2000 1999 1998 -------- -------- ------ Crude oil and condensate - barrels United States 27.0 29.0 24.2 North Sea 43.1 38.4 31.8 Other international 5.5 5.4 6.8 -------- -------- ------ 75.6 72.8 62.8 ======== ======== ====== Crude oil and condensate United States $ 742.6 $ 489.0 $308.8 North Sea 1,205.0 687.2 411.0 Other international 143.0 80.0 69.7 -------- -------- ------ $2,090.6 $1,256.2 $789.5 ======== ======== ====== Natural gas - MCF United States 168.9 191.0 197.3 North Sea 25.4 20.7 15.7 -------- -------- ------ 194.3 211.7 213.0 ======== ======== ====== Natural gas United States $ 693.7 $ 459.7 $415.1 North Sea 58.8 43.8 38.7 -------- -------- ------ $ 752.5 $ 503.5 $453.8 ======== ======== ====== Sales of Production - ------------------- All of the company's crude oil and natural gas is sold at market prices. Kerr-McGee has contracted with several energy marketing companies to sell substantially all of its domestic crude oil and natural gas production, including one company that purchases approximately 85% of the company's U.S. gas production. International crude oil and natural gas is sold both under contract and through spot market sales in the geographic area of production. Improved Recovery - ----------------- The company continues to initiate and/or participate in improved-recovery projects where geological, engineering and economic conditions are favorable. As of December 31, 2000, the company was participating in 40 active improved-recovery projects located principally in Texas, Oklahoma, New Mexico and the United Kingdom sector of the North Sea. Most of the company's improved- recovery operations incorporate water injection. Exploration and Development Activities - -------------------------------------- Gulf of Mexico Since 1947, the Gulf of Mexico has been a focal area for Kerr-McGee and represented 35% of Kerr-McGee's oil and gas production in 2000. Kerr-McGee is one of the largest independent producers in the Gulf of Mexico and has significantly expanded its deepwater exploration, exploitation and production activities in that area. In 2000, Kerr-McGee continued to build and enhance its deepwater exploration portfolio. An additional 40 blocks, or 230,400 acres, were acquired through the lease sale effort. Kerr-McGee was one of the most active participants in the Gulf of Mexico federal lease sale program in 2000. Outside of lease sale activity, an additional 33 blocks, or 190,080 acres, were added through an acquisition of Statoil's Gulf of Mexico exploration acreage. This acquisition also allowed Kerr-McGee to consolidate interests in 60 blocks already in the inventory. During the year, 10 deepwater exploration wells were drilled with a success rate of 50%. The most noteworthy success was the Gunnison discovery (50%) in western Garden Banks. To date, Gunnison is the first sizable discovery in this area of the gulf. The 17,000-foot discovery well was drilled in 3,150 feet of water, in Garden Banks block 668. The wellbore encountered 275 feet of net pay in three main zones. A downdip confirmation sidetrack was immediately drilled and penetrated 350 feet of net pay approximately one-quarter mile north of the discovery. Appraisal drilling continues on the Gunnison discovery, and development options are under evaluation. Several satellite opportunities, including the Durango prospect, are currently on the 2001 drilling schedule and will be included in the development planning for the area. Kerr-McGee has interest in 43 blocks in the greater Gunnison area. During 2000, three new fields began production in the Gulf of Mexico. A summary of these and other major producing fields is as follows: Conger field, Garden Banks 215 (25%): First gas production from the Conger field began in December 2000. One well came on line at 9,500 gross barrels of oil per day and 30 million gross cubic feet of gas per day. Two additional wells are expected to be completed and placed on line in 2001. The three-well subsea development uses the highest-pressure multiwell subsea production trees installed to date in the Gulf of Mexico. It is located in approximately 1,460 feet of water. Northwestern field, Garden Banks 200 (25%): First production from the Northwestern field began in November 2000. The field was developed with two subsea wells tied back to the Kerr-McGee operated Garden Banks 65 field. The wells were producing 900 gross barrels of oil per day and 41 million gross cubic feet of gas per day at year-end. Garden Banks 184 (50%): This Kerr-McGee-operated block came on line during August 2000 with a single subsea well tied back to the High Island 371 field. Initial production from this well was 25 million gross cubic feet of gas per day. Baldpate Field, Garden Banks 260 area (50%): Average 2000 gross production from the Baldpate field, inclusive of the Penn State Field subsea satellite well (50%), was 50,700 barrels of oil per day and 173 million cubic feet of gas per day. Plans for 2001 include completing the Garden Banks Block 216 #4 well as a subsea producer and recompleting the Garden Banks Block 216 well #2 sidetrack #1 into a high-rate gas pay interval. The field is located in 1,690 feet of water and is producing from an articulated compliant tower. Neptune field, Viosca Knoll 826 area (50%): Average 2000 gross production from the Neptune field was 18,200 barrels of oil per day and 20 million cubic feet of gas per day from the world's first production spar. Production was from 10 platform wells and three subsea wells. The third subsea well was added in October 2000 and was producing approximately 25 million gross cubic feet of gas per day. Pompano field, Viosca Knoll 989 area (25%): Average 2000 gross production for the field was 34,900 barrels of oil per day and 61 million cubic feet of gas per day. At year-end, 31 platform and subsea wells were contributing to the production. Plans for a multiwell drilling program in 2001 have been approved. Breton Sound 20 (100%): A successful exploratory well on block 27 had gross initial production of 10 million cubic feet of gas per day. Additional development drilling activity is planned for 2001. The Breton Sound 20 field's gross production for 2000 averaged 4,200 barrels of oil per day and 12 million cubic feet of gas per day. Main Pass 108 (75%): A successful development well was drilled in late 2000. Two additional development wells are planned for 2001. Average gross production in 2000 for the Main Pass 108 field was 12 million cubic feet of gas per day. Ship Shoal 28/32 (63%/71%): A development well was successfully drilled and completed in Ship Shoal 32 that added gross production of 1,600 barrels of oil per day. The acquisition of additional seismic data around the Ship Shoal 32 salt dome has generated other prospects that are expected to be drilled in 2001. The Ship Shoal 28/32 field's gross production for 2000 averaged 900 barrels of oil per day and 18 million cubic feet of gas per day. Other significant development activities in the Gulf of Mexico included: * Nansen field (50%), located in East Breaks blocks 602 and 646, was sanctioned in March 2000. This Kerr-McGee-operated field will be developed utilizing the world's first production truss spar along with a subsea cluster. The spar development concept is based on the successful application of this technology at the Kerr-McGee-operated Neptune field. The capacity of the spar will be 40,000 barrels of oil per day and 200 million cubic feet of gas per day. Approximately 10 wells will be utilized to produce this field, which is expected to come on line by late 2001. The oil and gas will be delivered to markets along the Texas gulf coast utilizing the new BANGO and Sea Hawk gathering systems. * Boomvang field (30%), located in East Breaks blocks 642, 643 and 668, was also sanctioned in March 2000. The development plan calls for the installation of a separate truss spar to be located in block 643 and two subsea clusters to produce the reserves located in blocks 642 and 668. The Boomvang spar will have a capacity of 40,000 barrels of oil per day and 200 million cubic feet of gas per day and will deliver products into the BANGO and Sea Hawk gathering systems. Production from Boomvang is expected to begin in early 2002. North Sea Kerr-McGee has been active in the North Sea area since 1976. As of December 31, 2000, Kerr-McGee had interests in 30 producing fields in the United Kingdom sector. The company's average daily sales in the North Sea increased by 13% from 1999 levels to 129,500 barrels of oil equivalent per day. In 2000, the North Sea operations represented 57% of the company's worldwide liquids production and 13% of its gas sales. In January 2000, the company completed the purchase of Repsol S.A.'s upstream oil and gas operations in the United Kingdom sector of the North Sea. The former Repsol properties added average daily production of 33,000 barrels of oil equivalent and proved reserves of 96 million barrels of oil equivalent. A key event for the United Kingdom operations in 2000 was the discovery and subsequent project sanction of the Leadon field and surrounding satellites in Quad 9 of the United Kingdom sector of the North Sea. Leadon is being developed using a floating production, storage and offloading (FPSO) vessel, with first oil expected by late 2001. The Skene field also received project sanction in 2000. Skene is a subsea satellite to the Beryl field. Kerr-McGee purchased a 33.3% nonoperating working interest in Skene as part of the Repsol acquisition. The field has gross reserves of 90 million barrels of oil equivalent, which are split roughly one-third oil and two-thirds gas. Oil will be exported via shuttle tanker from the Beryl platform, and gas will be piped to shore via the SAGE Pipeline. First production is anticipated by early 2002. The company's North Sea exploration program included seven successful wildcat wells in the Leadon area in 2000. Discoveries made at the Birse and Glassel prospects will be tied back to Leadon. A discovery was also made at the Jessie prospect, which was directionally drilled from the Janice cluster. The oil accumulation at the Jessie prospect requires further appraisal. Following is a summary of the company's five key developments in the North Sea, which contribute approximately 60% of the region's total net production (Kerr-McGee operated unless stated otherwise): Harding field, block 9/23b (25%): Equity in this nonoperated field was acquired from Repsol at the start of 2000. Gross production rates in 2000 averaged 80,500 barrels of oil per day. The Harding field is produced with a converted jack-up rig, and the oil is exported by shuttle tanker. The Harding field provides Kerr-McGee with additional infrastructure in the strategically important Quad 9 area of the North Sea. Within the same quadrant, Kerr-McGee also has equity in the Gryphon, Leadon, Buckland, Skene, MacLure, Birse and Glassel fields. Ninian field, blocks 3/3 and 3/8 (44.9%): The Ninian field consists of two steel and one concrete jacket platforms producing from a combination of 81 producing and injection wells. Oil is exported by pipeline to the Sullom Voe Terminal. During 2000, the field produced an average of 35,900 barrels of oil per day. The Ninian field receives significant tariff income from the Columba, Lyell and Strathspey fields. Janice field, block 30/17a (50.9%): First production from Janice was achieved in February 1999 with initial production rates exceeding expectations. In 2000, the Janice field produced 27,900 barrels of oil per day and more than 4 million cubic feet of gas per day. Buckland field, block 9/18a (33.3%): Equity in this nonoperated field was acquired from Repsol at the start of 2000. Gross production rates in 2000 averaged 33,100 barrels of oil per day and 40 million cubic feet of gas per day. The Buckland field is produced via a subsea template to the Beryl platform. Oil is exported by shuttle tanker, with gas production sold offshore at the Beryl platform. Gryphon field, block 9/18b (61.5%): Gryphon was the first field in the North Sea to use a permanently moored FPSO vessel. In 2000, field production averaged 16,900 barrels of oil per day. U.S. Onshore Kerr-McGee is active in the U.S. onshore environment with production operations in Texas, Oklahoma, New Mexico and Louisiana. In 2000, the company's onshore average production rate was 17,900 barrels of oil per day and 172 million cubic feet of gas per day. At the end of 2000, onshore proved reserves represented approximately 19% of Kerr-McGee's total worldwide reserves. Following is a summary of key U.S. onshore developments: Indian Basin field, Eddy County, New Mexico (55%): Six producing wells were drilled and completed during 2000. Additional development is planned for 2001. Kerr-McGee's net production from the field was 22 million cubic feet of gas per day in 2000. Double A Wells field, Polk County, Texas (40%): A 3-D seismic program acquired in 1999 was instrumental in generating 1999 and 2000 drilling opportunities. Eight wells were completed during 2000, and field development is expected to continue during 2001. Kerr-McGee's net production from this field for 2000 averaged 1,300 barrels of oil per day and 23 million cubic feet of gas per day. South Texas fields (80%): Eighteen wells were completed during 2000. Acquisition of 3-D seismic data covering 14,000 acres of leasehold in Starr County began in January 2000 and was completed by the end of the year. Kerr-McGee's 2000 net production from the area averaged 800 barrels of oil per day and 30 million cubic feet of gas per day. Mocane-Laverne field, Harper and Beaver Counties, Oklahoma (60%): The 2000 development program consisted of 11 wells. In December 2000, Kerr-McGee completed an exchange of noncore assets for assets in Mocane-Laverne field, which resulted in approximately 50,000 additional net acres in this field. Development of the new acreage is planned to begin in 2001. Kerr-McGee's net production for 2000 from the field was 14 million cubic feet of gas per day. Other International In 2000, Kerr-McGee continued its exploration and production efforts by strategically expanding into selected international areas. A summary by country follows: China: Liuhua 11-1 field (24.5%), South China Sea: Gross production for 2000 averaged 19,300 barrels of oil per day. Two sidetracks were completed in 2000, with three more planned for 2001. Bohai Bay block 04/36 (81.8%): The company drilled two successful appraisal wells in 2000 to evaluate the CFD 11-1 discovery made in late 1999. The development design of this discovery is under way. In the second half of 2000, a 3-D seismic survey of more than 1,100 square kilometers was conducted extending over the CFD 11-1 and CFD 12-1 structures on blocks 04/36 and 05/36, respectively. The company is currently processing the survey to delineate the CFD 11-1 discovery and to aid in the selection of additional appraisal wells to be drilled in 2001. Several attractive exploration targets both inside and outside the 3-D survey area are also being evaluated for 2001 drilling. Bohai Bay block 05/36 (50%): During 2000, Kerr-McGee drilled the successful 12-1-1 exploratory well. A subsequent successful appraisal well tested 2,700 barrels of oil per day. Several additional appraisal wells are planned for 2001. The development plan for this block is scheduled to be created in tandem with the plan for the CFD 11-1 discovery on block 04/36. Bohai Bay block 09/18 (100%): This block includes more than 550,000 acres and is located south of the Kerr-McGee operated blocks 04/36 and 05/36. Block 09/18 has similar play concepts as our recent discoveries on blocks 04/36 and 05/36. Getuo block (57%): Kerr-McGee plans to drill the Tuohai #1 exploratory well in this shallow water block north of Block 04/36 in early 2001, completing all work commitments on this block. Indonesia: Jabung block (30%), Sumatra: This 1.7 million-acre block consists of seven proven oil and gas fields. Two new fields, North Gemah and Ripah, were discovered in 2000. Four fields are currently on production, while the remaining fields are expected to commence production from 2001 to 2003. Production from the Jabung block averaged 15,200 gross barrels of oil per day in 2000. On January 7, 2000, the Indonesian government approved development plans incorporating oil, gas, condensate and LPG for five fields. Appraisal work on the North Gemah (30%) and Ripah fields (30%) will continue in 2001. Several exploratory prospects are planned for 2001 in addition to an active development drilling program. Ecuador: Block 7: Coca-Payamino, Gacela, Lobo, Jaguar and Mono (all 50%) comprise Kerr-McGee's producing fields in this block. Production averaged approximately 13,100 gross barrels of oil per day in 2000. Kerr-McGee completed negotiations with the Ecuadorean government to convert the previous service contract to a participation contract. As a result of the contract conversion, Kerr-McGee's Coca-Payamino working interest increased from 23% to 50%. This new contract contains more favorable terms for investment and will allow Kerr-McGee to fully develop the asset. In addition, a development well was drilled in 2000 with initial production of 1,500 barrels of oil per day that further extended the Lobo field. Studies are ongoing to determine additional field development. Evaluation efforts are also ongoing to determine further potential around the Oso #1 well. Block 21 (50%): Appraisal drilling of the Yuralpa structure was completed in 1999, and a plan of development was submitted to the Ecuadorean government in 2000. Government approval of the plan is anticipated when the new Oleoducto de Crudos Pesados (OCP) pipeline project is signed. OCP Pipeline (2.01%): Kerr-McGee is a member of a consortium that is evaluating the installation of a new pipeline system planned in Ecuador. This pipeline should increase the total Ecuador production capacity by approximately 450,000 barrels of oil per day, allowing for the continued expansion of the already active Oriente Basin. Kazakhstan: Arman Joint Venture (50%): The Arman field lies along the eastern coastline of the Caspian Sea approximately 300 kilometers north of Aktau. In 2000, gross production averaged 4,300 barrels of oil per day. Caspian Pipeline Consortium (1.75%): The Caspian Pipeline Consortium is constructing a pipeline from the Caspian Sea to the Black Sea to increase the export capacity from western Kazakhstan. Pipeline installation and marine terminal construction continued in 2000, and completion is anticipated in 2001. Mertvyi Kultuk (100%): The company-operated Mertvyi Kultuk block contains approximately 2.25 million acres and is located in the Ust-Yurt Basin along the northeastern shore of the Caspian Sea in Kazakhstan. The 2000 activities included further 2-D seismic interpretation in preparation for 2001 exploration drilling. Australia: Bayu-Undan field (11.2%): The Bayu-Undan gas-condensate field is located in the Zone of Cooperation Area of the Timor Sea between Australia and East Timor. Project sanction was received from regulatory agencies in February 2000. Procurement and fabrication of the major components began in 2000. First production is expected in 2004. WA 276-P, WA 277-P and WA 278-P (39%): Kerr-McGee operates these three contiguous blocks totaling 1.8 million acres. Four commitment wells were drilled in 2000. This drilling activity resulted in two gas discoveries on the Prometheus and Rubicon Prospects in Block WA 278-P. Additional exploratory drilling and studies are being considered for 2001. WA 295 (50%): Kerr-McGee operates this 3.5 million-acre block in the Carnarvon Basin. Acquisition and interpretation of 2,100 kilometers of 2-D seismic data have been completed. Exploration drilling is anticipated to begin in the first half of 2001, with the initial well to be located in 4,500 feet of water. Brazil: BS-1 (40%): Activities in 2000 were dedicated to the selection of a drill site and the plans for a drilling program to commence in 2001. A 3-D seismic program was acquired and interpreted in 2000. The initial test well will be drilled in 5,400 feet of water and will evaluate the Simao Prospect in the Santos basin. Kerr-McGee is operator of this 2.2 million-acre block. BM-S-3 (30%): This deepwater Santos Basin block covers 1.6 million acres. A 3-D seismic program was initiated in late 2000. Data interpretation and mapping are expected to delineate a prospect that may be drilled in 2002. Gabon: Anton and Astrid Marin blocks (14%): Located offshore along the southern coast of Gabon, the Anton and Astrid Marin blocks total 3.1 million acres in water depths ranging from 6,000 feet to more than 10,000 feet. Activities in 2000 focused on the selection of the initial drill sites and the designs for the initial drilling campaign. Exploration drilling will commence early in the second quarter of 2001, with the initial well located in a water depth of 8,100 feet. Two to three wells are planned for 2001. Morocco: Cap Draa block (33.3%): In late 2000, Kerr-McGee and partners entered into an exploration contract covering approximately 3 million acres along the deepwater shelf edge, offshore Morocco in water depths from 650 to 6,500 feet. A 3-D seismic program is planned for 2001. Benin: Block 4 (100%): In December 2000, Kerr-McGee acquired a 100% working interest in 2.5 million acres offshore Benin and opened a regional office in Benin. Water depths on this block range from 300 feet to 10,000 feet. Geological and geophysical studies to be conducted in 2001 will be key to the selection of a drill site for a well anticipated to be drilled in late 2002 or early 2003. Nova Scotia, Canada: EL2383, EL2386, EL2393 and EL2396 (50%): Kerr-McGee is operator of four deepwater blocks located offshore Nova Scotia, Canada, in water depths ranging from 500 to 9,200 feet. The blocks cover approximately 1.5 million acres and were acquired in April 2000. A 3-D seismic acquisition will be interpreted in 2001. EL2398, EL2399 and EL2404 (100%): In late 2000, Kerr-McGee was the winning bidder on three offshore Nova Scotia deepwater blocks covering more than 1.8 million acres. These blocks are in water depths ranging from 350 feet to 10,000 feet. A 2-D seismic program is planned for 2001. Thailand: Block W7/38 (85%), Andaman Sea: Kerr-McGee is the operator of this 4.9 million-acre block. An exploratory test well was drilled in 2000. Additional seismic studies are planned for 2001. Yemen: Blocks 50 (47.5%) and 51 (43.8%): These exploration blocks cover nearly 10 million acres. In 2000, Kerr-McGee acquired approximately 1,045 kilometers of new 2-D seismic data to further evaluate prospective areas. An exploration well is scheduled in 2001 on block 51. CHEMICALS Kerr-McGee Corporation's chemical operations consist of two segments (pigment and other) that produce and market inorganic industrial chemicals, heavy minerals and forest products through its subsidiaries, Kerr-McGee Chemical LLC, KMCC Western Australia Pty. Ltd., Kerr-McGee Pigments GmbH & Co. KG, Kerr-McGee Pigments N.V., Kerr-McGee Pigments Limited, Kerr-McGee (Holland) B.V. and Kerr-McGee Pigments (Savannah) Inc. Many of these products are manufactured using proprietary technology developed by the company. Industrial chemicals include titanium dioxide, synthetic rutile, manganese products and sodium chlorate. Heavy minerals produced are ilmenite, natural rutile, leucoxene and zircon. Forest products operations treat railroad crossties and other hardwood products and provide other wood-treating services. On February 14, 2000, the company reached agreement with Kemira Oyj of Finland to purchase its titanium dioxide pigment operations in Savannah, Georgia, and Botlek, Netherlands, for $403 million. The company completed the transaction for the Savannah business in April 2000 and subsequently completed the transaction for the Botlek business in May 2000. Both plants use an early generation of Kerr-McGee's proprietary chloride technology, and the Savannah plant also produces titanium dioxide by the sulfate process. In October 2000, the company sold its 25% equity interest in The National Titanium Dioxide Company of Saudi Arabia (also known as Cristal) to its partners in the project for $43 million. In January 2001, the company acquired the 20% minority interest that Bayer A.G. held in Kerr-McGee's titanium pigment facilities in Uerdingen, Germany, and Antwerp, Belgium, for $24 million. Kerr-McGee acquired its original 80% interest in the Uerdingen and Antwerp facilities from Bayer A.G. in March 1998 with an option to purchase the remaining 20%. Titanium Dioxide Pigment The company's primary chemical product is titanium dioxide pigment (TiO2). TiO2 is a white pigment used in a wide range of products, including paint, coatings, plastics and paper. TiO2 is used in these products for its unique ability to impart whiteness, brightness and opacity. Titanium dioxide pigment is produced in two crystalline forms - rutile and anatase. The rutile form has a higher refractive index than anatase titanium dioxide, generating better opacity and tinting strength. Rutile titanium dioxide products also provide a higher level of durability (resistance to weathering). In general, the rutile form of titanium dioxide is preferred for use in paint, coatings, plastics and inks. Anatase titanium dioxide is less abrasive than rutile and is preferred for use in fibers, rubber, ceramics and some paper applications. Titanium dioxide is produced using one of two different technologies, the chloride process and the sulfate process, both of which are used by Kerr-McGee. Because of market considerations, chloride process capacity has increased at a substantially higher level than sulfate process capacity over the past 20 years. The chloride process currently makes up about 60% of total industry capacity. The company produces TiO2 pigment at six production facilities located in the United States (two facilities), Australia, Germany, Belgium and the Netherlands. Approximately 70% of the company's production capacity utilizes the chloride process. The following table outlines the company's production capacity by location and process. TiO2 Capacity As of March 1, 2001 (Tonnes per Year) Facility Capacity Process - ----------------------------- -------- ------- Hamilton, Mississippi 188,000 Chloride Savannah, Georgia 91,000 Chloride Kwinana, Western Australia(1) 86,000 Chloride Botlek, Netherlands 56,000 Chloride Uerdingen, Germany 100,000 Sulfate Savannah, Georgia 54,000 Sulfate Antwerp, Belgium 30,000 Sulfate ------- Total 605,000 ======= (1)The Kwinana Facility is part of the Tiwest Joint Venture in which the company owns a 50% interest. The company owns a 50% interest in a joint venture that operates an integrated TiO2 project in Western Australia (the Tiwest Joint Venture). The venture consists of a heavy-minerals mine, a mineral separation facility, a synthetic rutile facility and a titanium dioxide plant. Heavy minerals are mined from 20,793 acres that are leased by the Tiwest Joint Venture. The company's 50% interest in the properties' remaining in-place proven and probable reserves is 6.7 million tonnes of heavy minerals contained in 183 million tonnes of sand averaging 3.7% heavy minerals. The valuable heavy minerals are composed of 62.5% ilmenite, 10.5% zircon, 4.2% rutile, 2.9% leucoxene, with the remaining 19.9% of heavy minerals presently having no value. Heavy-mineral concentrate from the mine is processed at a 750,000 tonne-per-year dry separation plant. Some of the recovered ilmenite is upgraded at an adjoining synthetic rutile facility, which has a capacity of 200,000 tonnes per year. Synthetic rutile is a high-grade titanium dioxide feedstock. Synthetic rutile from the Tiwest Joint Venture provides feedstock to an 86,000 tonne-per-year titanium dioxide plant located at Kwinana, Western Australia. Production of ilmenite, synthetic rutile, natural rutile and leucoxene in excess of the Tiwest Joint Venture's requirements is purchased by Kerr-McGee as part of the feedstock requirement for its TiO2 business under a long-term agreement executed in September 2000. Information regarding heavy-mineral reserves, production and average prices for the three years ended December 31, 2000, is presented in the following table. Mineral reserves in this table represent the estimated quantities of proven and probable ore that, under presently anticipated conditions, may be profitably recovered and processed for the extraction of their mineral content. Future production of these resources depends on many factors, including market conditions and government regulations. Heavy-Mineral Reserves, Production and Prices (Thousands of tonnes) 2000 1999 1998 - --------------------- ----- ----- ----- Proven and probable reserves 6,700 5,800 5,600 Production 293 199 209 Average market price (per tonne) $145 $131 $124 The company also operates a synthetic rutile production facility located in Mobile, Alabama. This facility, with an annual production capacity of 200,000 tonnes per year, provides a portion of the feedstock for the company's titanium dioxide business. Titanium-bearing ores used for the production of TiO2 include ilmenite, natural rutile, synthetic rutile, titanium-bearing slag and leucoxene. These products are mined and processed in many parts of the world. In addition to ores purchased from the Tiwest Joint Venture, the company obtains ores for its TiO2 business from a variety of suppliers in the United States, Australia, Canada, South Africa, Norway and Ukraine. Ores are generally purchased under multi-year agreements. The global market in which the company's titanium dioxide business operates is highly competitive. The company actively markets its TiO2 utilizing primarily direct sales but also through a network of agents and distributors. In general, products produced in a given market region will be sold there to minimize logistical costs. However, the company actively exports products, as required, from its facilities in the United States, Europe and Australia to other market regions. Titanium dioxide applications are technically demanding, and the company utilizes a strong technical sales and services organization to carry out its marketing efforts. Technical sales and services laboratories are strategically located in major market areas, including the United States, Europe and the Asia- Pacific region. The company's products compete on the basis of price and product quality, as well as technical and customer service. World demand for titanium dioxide is expected to increase at an average rate of 3% per year over the next five years. In 2000, the company's sales of TiO2 represented about 12% of global consumption.(1)(2) Other Products Electrolytic Products - Facilities at the company's Hamilton, Mississippi, complex include a 130,000 tonne-per-year sodium chlorate facility and a manganese metal facility. In February 2001, the company decided to cease production of manganese metal at the Hamilton complex. Sodium chlorate is used in the environmentally preferred chlorine dioxide process for bleaching pulp. Sodium chlorate demand in the United States is expected to increase approximately 5% per year in the near term as the pulp and paper industry continues conversion to the chlorine dioxide process. The company's share of the U.S. market is about 7%. The company operates facilities at Henderson, Nevada, producing electrolytic manganese dioxide and boron trichloride. Annual production capacity is 26,500 tonnes for manganese dioxide and 340,000 kilograms for boron trichloride. Boron trichloride is used in the production of pharmaceuticals and in the manufacture of semiconductors. Manganese dioxide is a major component of alkaline batteries. The company's share of the North American manganese dioxide market is approximately one-third. North American demand for manganese dioxide is expected to grow by 5% to 8% per year for the next five years. Increased demand is being driven by the need for alkaline batteries for portable electronic devices. The company has a strong technical position in the industry and introduced a new, improved manganese dioxide product in 2000. The new product commands a premium price and provides improved performance in high drain rate applications. (1)Includes only a partial year of sales contribution from the Savannah and Botlek facilities acquired in second quarter 2000. (2)Includes 100% of pigment sales volume from the Tiwest Joint Venture. Forest Products - The principal product of the forest products business is treated railroad crossties. Other products include railroad crossing materials, bridge timbers and utility poles. The company's six wood-treating plants are located along major railways in Madison, Illinois; Indianapolis, Indiana; Columbus, Mississippi; Springfield, Missouri; The Dalles, Oregon; and Texarkana, Texas. The company's share of the U.S. railroad crosstie market is 34%. U.S. crosstie demand is expected to remain relatively flat at about 12 to 14 million ties per year. OTHER Research and Development The company's Technical Center in Oklahoma City performs research and development in support of its existing businesses and for the development of new and improved products and processes. The primary focus of the company's research and development efforts is on the titanium dioxide business. A separate dedicated group at the Technical Center performs research and development in support of the company's electrolytic businesses. Employees On December 31, 2000, the company had 4,426 employees. Approximately 900, or 20% of these employees, were represented by chemical industry collective bargaining agreements in the United States and Europe. Competitive Conditions In the petroleum industry, competition exists from the initial process of bidding for leases to the sale of crude oil and natural gas. Competitive factors include finding and developing petroleum, producing crude oil and natural gas efficiently, transporting the produced crude oil and natural gas, and developing successful marketing strategies. The titanium dioxide pigment business is highly competitive. The number of competitors in the industry has declined due to recent consolidations, and this trend is expected to continue. Significant consolidation among the consumers of titanium dioxide has also taken place over the past five years and is expected to continue. Worldwide, Kerr-McGee is one of only five producers that own proprietary chloride process technology to produce titanium dioxide pigment. Cost efficiency and product quality as well as technical and customer service are key competitive factors in the titanium dioxide business. It is not possible to predict the effect of future competition on Kerr-McGee's operating and financial results. GOVERNMENT REGULATIONS AND ENVIRONMENTAL RESERVES General The company is subject to extensive regulation by federal, state, local and foreign governments. The production and sale of crude oil and natural gas in the United States are subject to regulation by federal and state authorities, particularly with respect to allowable rates of production, offshore exploration and production, and environmental matters. Stringent environmental-protection laws and regulations apply to almost all of the company's operations. In addition, special taxes apply to the oil and gas industry. Environmental Matters Federal, state and local laws and regulations relating to environmental protection affect almost all company operations. During 2000, direct capital and operating expenditures related to environmental protection and cleanup of existing sites totaled $51 million. Additional expenditures totaling $116 million were charged to environmental reserves. While it is extremely difficult to estimate the total direct and indirect costs to the company of government environmental regulations, it is presently estimated that the direct capital and operating expenditures and expenditures charged to reserves will be approximately $145 million in 2001 and $130 million in 2002. Some expenditures to reduce the occurrence of releases to the environment may result in increased efficiency; however, most of these expenditures produce no significant increase in production capacity, efficiency or revenue. Operation of pollution-control equipment installed for these purposes usually entails additional expense. Environmental laws and regulations obligate the company to clean up various sites at which petroleum, chemicals, low-level radioactive substances or other regulated materials have been disposed of or released. Some of these sites have been designated Superfund sites on the National Priority List by the EPA pursuant to the Comprehensive Environmental Response, Compensation, and Authority Act of 1980. The company provides for costs related to contingencies when a loss is probable and the amount is reasonably estimable. It is not possible for the company to reliably estimate the amount and timing of all future expenditures related to environmental matters because: * some sites are in the early stages of investigation, and other sites may be identified in the future; * cleanup requirements are difficult to predict at sites where remedial investigations have not been completed or final decisions have not been made regarding cleanup requirements, technologies or other factors that bear on cleanup costs; * environmental laws frequently impose joint and several liability on all potentially responsible parties, and it can be difficult to determine the number and financial condition of other potentially responsible parties and their share of responsibility for cleanup costs; and * environmental laws and regulations are continually changing, and court proceedings are inherently uncertain. The company believes that currently it has reserved adequately for contingencies. However, additions to the reserves may be required as additional information is obtained that enables the company to better estimate its liability, including any liability at sites now being studied, though management cannot now reliably estimate the amount of any future additions to the reserves. Also see "Item 3. Legal Proceedings," which follows. Item 3. Legal Proceedings For a discussion of contingencies, reference is made to the Environmental Matters section of Management's Discussion and Analysis and Note 16 to the Consolidated Financial Statements in the 2000 Annual Report to Stockholders, which are incorporated by reference in Items 7 and 8, respectively. Item 4. Submission of Matters to a Vote of Security Holders None submitted during the fourth quarter of 2000. Executive Officers of the Registrant The following is a list of executive officers, their ages, and their positions and offices as of March 1, 2001:
Name Age Office - ---------------------- --- ------------------------------------------------------------------------------------- Luke R. Corbett 54 Chief Executive Officer since 1997. Chairman of the Board since May 1999 and from 1997 to February 1999. President and Chief Operating Officer from 1995 until 1997. Robert M. Wohleber 50 Senior Vice President and Chief Financial Officer since December 1999. Prior to joining the company in 1999, served as Executive Vice President and Chief Financial Officer of Freeport-McMoRan Exploration Company, President and Chief Executive Officer of Freeport-McMoRan Sulfur and Senior Vice President of Freeport-McMoRan Gold and Copper Corporation. Kenneth W. Crouch 57 Senior Vice President since 1996. Senior Vice President, Worldwide Exploration and Production operations since 1998. Senior Vice President, Exploration, Kerr-McGee Oil & Gas Corporation from 1996 to 1998. Senior Vice President, North American and International Exploration, Exploration and Production Division during 1996. W. Peter Woodward 52 Senior Vice President since 1997. Senior Vice President for Kerr-McGee Chemical since 1997. Senior Vice President, Chemical Marketing for Kerr-McGee Chemical Corporation from 1996 until 1997. Gregory F. Pilcher 40 Senior Vice President, General Counsel and Corporate Secretary since July 2000. Vice President, General Counsel and Corporate Secretary from 1999 to 2000. Deputy General Counsel for Business Transactions from 1998 to 1999. Associate/Assistant General Counsel for Litigation and Civil Proceedings from 1996 to 1998. Michael G. Webb 53 Senior Vice President for Strategic Planning since 1996. George D. Christiansen 56 Vice President, Safety and Environ-mental Affairs since 1998. Vice President, Environmental Assessment and Remediation from 1996 to 1998. Julius C. Hilburn 50 Vice President, Human Resources since 1996. Deborah A. Kitchens 44 Vice President and Controller since 1996. J. Michael Rauh 51 Treasurer since 1996. Vice President since 1987. Jean B. Wallace 47 Vice President, General Administration since 1996.
There is no family relationship between any of the executive officers. FORWARD-LOOKING INFORMATION This Form 10-K contains forward-looking statements regarding the company's or management's intentions, beliefs or expectations within the meaning of the Securities Litigation Reform Act. Future results and developments discussed in these statements may be affected by numerous factors and risks, such as the accuracy of the assumptions that underlie the statements, the success of the oil and gas exploration and production program, drilling risks, the market value of Kerr-McGee's products, uncertainties in interpreting engineering data, demand for consumer products for which Kerr-McGee's businesses supply raw materials, general economic conditions, and other factors and risks discussed in the company's SEC filings. Actual results and developments may differ materially from those expressed or implied in this Form 10-K. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters Information relative to the market in which the company's common stock is traded, the high and low sales prices of the common stock by quarters for the past two years, and the approximate number of holders of common stock is furnished in Note 33 to the Consolidated Financial Statements in the 2000 Annual Report to Stockholders, which note is incorporated by reference in Item 8. Quarterly dividends declared totaled $1.80 per share for the years 2000, 1999 and 1998. Cash dividends have been paid continuously since 1941 and totaled $166 million in 2000, $138 million in 1999 and $86 million in 1998. Item 6. Selected Financial Data Information regarding selected financial data required in this item is presented in the schedule captioned "Seven-Year Financial Summary" in the 2000 Annual Report to Stockholders and is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations "Management's Discussion and Analysis" in the 2000 Annual Report to Stockholders is incorporated herein by reference. Item 7a. Quantitative and Qualitative Disclosure about Market Risk For information required under this section, reference is made to the "Market Risks" section of Management's Discussion and Analysis in the 2000 Annual Report to Stockholders, which discussion is incorporated by reference above. Item 8. Financial Statements and Supplementary Data The following financial statements and supplementary data included in the 2000 Annual Report to Stockholders are incorporated herein by reference: Reports of Independent Public Accountants Consolidated Statement of Income Consolidated Statement of Comprehensive Income and Stockholders' Equity Consolidated Balance Sheet Consolidated Statement of Cash Flows Notes to Financial Statements Item 9. Change in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant (a) Identification of directors - For information required under this section, reference is made to the "Director Information" section of the company's proxy statement for 2001 made in connection with its Annual Stockholders' Meeting to be held on May 8, 2001. (b) Identification of executive officers - The information required under this section is set forth in the caption "Executive Officers of the Registrant" on pages 22 and 23 of this Form 10-K pursuant to Instruction 3 to Item 401(b) of Regulation S-K and General Instruction G(3) to Form 10-K. (c) Compliance with Section 16(a) of the 1934 Act - For information required under this section, reference is made to the "Section 16(a) Beneficial Ownership Reporting Compliance" section of the company's proxy statement for 2001 made in connection with its Annual Stockholders' Meeting to be held on May 8, 2001. Item 11. Executive Compensation For information required under this section, reference is made to the "Executive Compensation and Other Information" section of the company's proxy statement for 2001 made in connection with its Annual Stockholders' Meeting to be held on May 8, 2001. Item 12. Security Ownership of Certain Beneficial Owners and Management For information required under this section, reference is made to the "Security Ownership" portion of the "Director Information" section of the company's proxy statement for 2001 made in connection with its Annual Stockholders' Meeting to be held on May 8, 2001. Item 13. Certain Relationships and Related Transactions For information required under this section, reference is made to the "Director Information" section of the company's proxy statement for 2001 made in connection with its Annual Stockholders' Meeting to be held on May 8, 2001. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) 1. Financial Statements - The following consolidated financial statements of Kerr-McGee Corporation and its subsidiary companies, included in the company's 2000 Annual Report to Stockholders, are incorporated by reference in Item 8: Reports of Independent Public Accountants Consolidated Statement of Income for the Years Ended December 31, 2000, 1999 and 1998 Consolidated Statement of Comprehensive Income and Stockholders' Equity for the Years Ended December 31, 2000, 1999 and 1998 Consolidated Balance Sheet at December 31, 2000 and 1999 Consolidated Statement of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998 Notes to Financial Statements (a) 2. Financial Statement Schedules - Report of Independent Public Accountants on Financial Statement Schedule Schedule II - Valuation Accounts and Reserves for the Years Ended December 31, 2000, 1999 and 1998 Schedules I, III, IV and V are omitted as the subject matter thereof is either not present or is not present in amounts sufficient to require submission of the schedules in accordance with instructions contained in Regulation S-X. (a) 3. Exhibits - The following documents are filed under Commission file number 1-3939 as a part of this report. Exhibit No. 3.1 Restated Certificate of Incorpora- tion of Kerr-McGee Corporation, filed as Exhibit 3.1 to the report filed on Form 10-K for the year ended December 31, 1998, and incorporated herein by reference. 3.2 Bylaws of Kerr-McGee Corporation as approved January 9, 2001. 4.1 Amended and Restated Rights Agreement dated as of October 14, 1998. 4.2 Indenture dated as of November 1, 1981, between the company and United States Trust Company of New York, as trustee, relating to the company's 7% Debentures due November 1, 2011, filed as Exhibit 4 to Form S-16, effective November 16, 1981, Registration No. 2-772987, and incorporated herein by reference. 4.3 Indenture dated as of August 1, 1982, filed as Exhibit 4 to Form S-3, effective August 27, 1982, Registration Statement No. 2-78952, and incorporated herein by reference, and the first supplement thereto dated May 7, 1996, between the company and Citibank, N.A., as trustee, relating to the company's 6.625% notes due October 15, 2007, and 7.125% debentures due October 15, 2027, filed as Exhibit 4.1 to the Current Report on Form 8-K filed July 27, 1999, and incorporated herein by reference. 4.4 The company agrees to furnish to the Securities and Exchange Commission, upon request, copies of each of the following instruments defining the rights of the holders of certain long-term debt of the company: the Note Agreement dated as of November 29, 1989, among the Kerr-McGee Corporation Employee Stock Ownership Plan Trust (the Trust) and several lenders, providing for a loan guaranteed by the company of $125 million to the Trust; the Revolving Credit Agreement dated as of March 6, 2000, between Kerr-McGee China Petroleum Ltd., as borrower, and Kerr-McGee Corporation, as guarantor, and several banks providing for revolving credit of up to $100 million through March 3, 2003; the 364-day $20 million Credit Agreement dated as of September 19, 2000, between Kerr-McGee Canada Ltd., as borrower, and Kerr-McGee Corporation, as guarantor, and the Royal Bank of Canada; the $100 million, 8% Note Agreement entered into by Oryx Energy Company (Oryx) dated as of October 20, 1995, and due October 15, 2003; the $150 million, 8.375% Note Agreement entered into by Oryx dated as of July 17, 1996, and due July 15, 2004; the $150 million, 8-1/8% Note Agreement entered into by Oryx dated as of October 20, 1995, and due October 15, 2005; the $11 million, 9-1/4% Series A Note Agreement entered into by Oryx and due January 2, 2002; the $2.2 million, 9-1/2% Series A Note Agreement entered into by Oryx and due February 1, 2002; the $150 million, 10% Note Agreement entered into by Oryx dated as of April 10, 1991, and due April 1, 2001; the Revolving Credit Agreement dated as of January 12, 2001, between the company or certain subsidiary borrowers and various banks providing for revolving credit up to $650 million through January 12, 2006; and the $650 million Credit Agreement dated as of January 12, 2001, between the company or certain subsidiary borrowers and various banks providing for a 364-day revolving credit facility. The total amount of securities authorized under each of such instruments does not exceed 10% of the total assets of the company and its subsidiaries on a consolidated basis. 4.5 Kerr-McGee Corporation Direct Purchase and Dividend Reinvestment Plan filed on Form S-3 effective August 19, 1993, Registration No. 33-66112, and incorporated herein by reference. 4.6 Indenture dated as of May 15, 1989, by and between Oryx Energy Company and Texas Commerce Bank N.A., as trustee, relating to Oryx's 7-1/2% Convertible Subordinated Debentures due May 15, 2014, filed as Exhibit 4.1 to Oryx's Form S-1, effective May 5, 1989, Registration No. 33-28494, and incorporated herein by reference and the First Supplemental Indenture among Oryx Energy Company, Kerr-McGee Corporation and Chase Bank of Texas, N.A., as trustee, dated as of February 26, 1999, and filed as Exhibit 4.1 to Form 8-K filed March 11, 1999, and incorporated herein by reference. 4.7 Second Supplement to the August 1, 1982, Indenture dated as of August 2, 1999, between the company and Citibank, N.A., as trustee, relating to the company's 5-1/2% exchangeable notes due August 2, 2004, filed as Exhibit 4.11 to the report on Form 10-K for the year ended December 31, 1999, and incorporated herein by reference. 4.8 Fifth Supplement to the August 1, 1982, Indenture dated as of February 11, 2000, between the company and Citibank, N.A., as trustee, relating to the company's 5-1/4% Convertible Subordinated Debentures due February 15, 2010, filed as Exhibit 4.1 to Form 8-K filed February 4, 2000, and incorporated herein by reference. 10.1* Deferred Compensation Plan for Non- Employee Directors as amended and restated effective October 1, 1990, filed as Exhibit 10(1) to the report filed on Form 10-K for the year ended December 31, 1990, and incorporated herein by reference. 10.2* Kerr-McGee Corporation Stock Deferred Compensation Plan for Non-Employee Directors as amended and restated effective August 1, 1995, filed as Exhibit 10.2 to the report filed on Form 10-K for the year ended December 31, 1995, and incorporated herein by reference. 10.3* Description of the company's Annual Incentive Compensation Plan, filed as Exhibit 10.3 to the report filed on Form 10-K for the year ended December 31, 1995, and incorporated herein by reference. 10.4* The Long Term Incentive Plan as amended and restated effective May 9, 1995, filed as Exhibit 10.5 on Form 10-Q for the quarter ended March 31, 1995, and incorporated herein by reference. 10.5* Benefits Restoration Plan as amended and restated effective September 13, 1989, filed as Exhibit 10(6) to the report on Form 10-K for the year ended December 31, 1992, and incorporated herein by reference. 10.6* Kerr-McGee Corporation Executive Deferred Compensation Plan as amended and restated effective January 1, 1996, filed as Exhibit 10.6 to the report on Form 10-K for the year ended December 31, 1995, and incorporated herein by reference. 10.7* Kerr-McGee Corporation Supplemental Executive Retirement Plan as amended and restated effective May 3, 1994, filed as Exhibit 10.8 on Form 10-K for the year ended December 31, 1994, and incorporated herein by reference. 10.8* The Kerr-McGee Corporation Annual Incentive Compensation Plan effective January 1, 1998, filed as Exhibit 10.3 on Form 10-Q for the quarter ended March 31, 1998, and incorporated herein by reference. 10.9* The Kerr-McGee Corporation 1998 Long Term Incentive Program effective January 1, 1998, filed as Exhibit 10.4 on Form 10-Q for the quarter ended March 31, 1998, and incorpo- rated herein by reference. 10.10* Amended and restated Agreement, restated as of January 11, 2000, between the company and Luke R. Corbett. 10.11* Amended and restated Agreement, restated as of January 11, 2000, between the company and Kenneth W. Crouch. 10.12* Amended and restated Agreement, restated as of January 11, 2000, between the company and Robert M. Wohleber. 10.13* Amended and restated Agreement, restated as of January 11, 2000, between the company and William P. Woodward. 10.14* Amended and restated Agreement, restated as of January 11, 2000, between the company and Gregory F. Pilcher. 10.15* Form of agreement, amended and restated as of January 11, 2000, between the company and certain executive officers not named in the Summary Compensation Table contained in the company's definitive Proxy Statement for the 2001 Annual Meeting of Stockholders. 10.16* Oryx Energy Company Executive Retirement Plan as amended and restated as of January 1, 1995, filed as Exhibit 10.6 on Form 10-K for the year ended December 31, 1995, and incorporated herein by reference; Amendment No. 1 to the Executive Retirement Plan as amended and restated effective January 1, 1995, filed as Exhibit 10.6a on Form 10-K for the year ended December 31, 1995, and incorporated herein by reference; Amendment No. 2 to the Executive Retirement Plan as amended and restated effective January 1, 1995, filed as Exhibit 10.6b on Form 10-K for the year ended December 31, 1996, and incorporated herein by reference; Amendments No. 3 and 4 to the Executive Retirement Plan as amended and restated effective January 1, 1995, filed as Exhibit 10.6c on Form 10-K for the year ended December 31, 1997, and incorporated herein by reference. 12 Computation of ratio of earnings to fixed charges. 13 2000 Annual Report to Stockholders. 21 Subsidiaries of the Registrant. 23.1 Consent of Arthur Andersen LLP. 23.2 Consent of PricewaterhouseCoopers LLP. 24 Powers of Attorney. *These exhibits relate to the compensation plans and arrangements of the company. (b) Reports on Form 8-K - The following Current Reports on Form 8-K were filed by the company during the quarter ended December 31, 2000. * Current Report dated October 17, 2000, for purposes of reporting under Items 5 and 7. * Current Report dated October 25, 2000, for purposes of reporting under Items 5 and 7. * Current Report dated November 9, 2000, for purposes of reporting under Item 5. * Current Report dated November 27, 2000, for purposes of reporting under Items 5 and 7. * Current Report dated December 4, 2000, for purposes of reporting under Items 5 and 7. Report of Independent Public Accountants on Financial Statement Schedule - ------------------------------------------------------------------------ To Kerr-McGee Corporation: We have audited in accordance with auditing standards generally accepted in the United States, the consolidated financial statements included in Kerr-McGee Corporation's 2000 Annual Report to Stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 23, 2001. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The Schedule of Valuation Accounts and Reserves is the responsibility of the company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. ARTHUR ANDERSEN LLP Oklahoma City, Oklahoma, February 23, 2001 SCHEDULE II KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES VALUATION ACCOUNTS AND RESERVES
Additions ------------------------- Balance at Charged to Charged to Deductions Balance at Beginning Profit and Other from End of (Millions of dollars) of Year Loss Accounts Reserves Year ----------- ----------- ----------- ----------- ----------- Year Ended December 31, 2000 Deducted from asset accounts Allowance for doubtful notes and accounts receivable $ 17 $ 2 $ 2 $ 1 $ 20 Warehouse inventory obsolescence 4 2 - 1 5 ----- ---- ----- ---- ----- Total $ 21 $ 4 $ 2 $ 2 $ 25 ----- ==== ===== ==== ===== Year Ended December 31, 1999 Deducted from asset accounts Allowance for doubtful notes and accounts receivable $ 14 $ 2 $ 1 $ - $ 17 Warehouse inventory obsolescence 4 1 - 1 4 ----- ---- ----- ---- ----- Total $ 18 $ 3 $ 1 $ 1 $ 21 ===== ==== ===== ==== ===== Year Ended December 31, 1998 Deducted from asset accounts Allowance for doubtful notes and accounts receivable $ 14 $ 1 $ - $ 1 $ 14 Warehouse inventory obsolescence 3 2 - 1 4 ----- ---- ----- ---- ----- Total $ 17 $ 3 $ - $ 2 $ 18 ===== ==== ===== ==== =====
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KERR-McGEE CORPORATION By: Luke R. Corbett* ------------------------ Luke R. Corbett, Chief Executive Officer March 28, 2001 By: (Robert M. Wohleber) - -------------- -------------------------- Date Robert M. Wohleber Senior Vice President and Chief Financial Officer By: (Deborah A. Kitchens) ------------------------------ Deborah A. Kitchens, Vice President and Controller and Chief Accounting Officer * By her signature set forth below, Deborah A. Kitchens has signed this Annual Report on Form 10-K as attorney-in-fact for the officer noted above, pursuant to power of attorney filed with the Securities and Exchange Commission. By: (Deborah A. Kitchens) --------------------- Deborah A. Kitchens Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the date indicated. By: Luke R. Corbett* ----------------------------- Luke R. Corbett, Director By: William E. Bradford* ----------------------------- William E. Bradford, Director By: Sylvia A. Earle* ----------------------------- Sylvia A. Earle, Director By: David C. Genever-Watling* ----------------------------- David C. Genever-Watling, Director March 28, 2001 By: Martin C. Jischke* - -------------- ----------------------------- Date Martin C. Jischke, Director By: William C. Morris* ----------------------------- William C. Morris, Director By: John J. Murphy* ----------------------------- John J. Murphy, Director By: Leroy C. Richie* ----------------------------- Leroy C. Richie, Director By: Matthew R. Simmons* ----------------------------- Matthew R. Simmons, Director By: Farah M. Walters* ----------------------------- Farah M. Walters, Director By: Ian L. White-Thomson* ----------------------------- Ian L. White-Thomson, Director *By her signature set forth below, Deborah A. Kitchens has signed this Annual Report on Form 10-K as attorney-in-fact for the directors noted above, pursuant to the powers of attorney filed with the Securities and Exchange Commission. By: (Deborah A. Kitchens) --------------------- Deborah A. Kitchens EX-3 2 bylaws2001.txt BYLAWS Exhibit 3.2 AMENDED AND RESTATED BYLAWS OF KERR-McGEE CORPORATION ARTICLE I OFFICES Section 1. The principal place of business of Kerr-McGee Corporation ("Corporation") shall be in Oklahoma City, Oklahoma. Section 2. The Corporation may also have offices at such other places as the Board of Directors may from time to time appoint or the business of the Corporation may require. ARTICLE II SEAL Section 1. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization, and the words "Corporate Seal, Delaware". The Corporate Seal may be used by causing it or a facsimile thereof to be impressed, affixed or reproduced. Section 2. The corporate seal shall be retained under the custody and control of the Secretary or Assistant Secretary except as and to the extent the use of same by others may be expressly authorized by the Board of Directors. ARTICLE III STOCKHOLDERS' MEETINGS Section 1. All meetings of the stockholders for any purpose may be held at such place as shall be stated in the notice of the meeting. Section 2. An annual meeting of the stockholders shall be held within one hundred fifty (150) days after the end of each fiscal year as the Board of Directors may set for a particular year's annual meeting, at which meeting they shall elect by a plurality vote by ballot a board of directors and transact such other business as may properly be brought before the meeting. Section 3. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by law, by the Certificate of Incorporation or by these ByLaws. If, however, such majority shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of voting stock shall be present. At such adjourned meeting at which the requisite amount of voting stock shall be represented, any business may be transacted which might have been transacted at the meeting as originally notified. Section 4. At any meeting of the stockholders, every stockholder having the right to vote shall be entitled to vote in person or by proxy appointed in a manner prescribed by the Company and permitted by applicable law. Section 5. Except as may otherwise be provided by law or in the Certificate of Incorporation of the Corporation, or any amendment thereto, each stockholder shall have one vote for each share of the stock having voting power, registered in his name on the books of the Corporation, and except where the transfer books of the Corporation shall have been closed or a date shall have been fixed as a record date for the determination of its stockholders entitled to vote, no share of stock shall be voted on at any election for directors which shall have been transferred on the books of the Corporation within twenty days preceding such election of directors, or on any other matter respecting which stockholders are entitled to vote if such stock has been so transferred within twenty days prior to action on such matter. Section 6. Except as otherwise provided by law, notice of the annual meeting of stockholders shall be given at least ten days prior to the meeting, and in accordance with Article XXI hereof, to each stockholder so entitled to vote thereat. Section 7. A complete list of the stockholders so entitled to vote at the ensuing election of directors arranged in alphabetical order, with the address of each, and the number of voting shares registered in the name of each, shall be filed in the office where the election is to be held, at least ten days before every election, and shall at all times during the ordinary business hours and during the whole time of said election be open to the examination of any stockholder. Section 8. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute, shall be called only by the Chief Executive Officer of the Corporation or by the Secretary at the direction of the Board of Directors pursuant to a resolution approved by the Board of Directors. Section 9. Business transacted at all special meetings shall be confined to the objects stated in the notice of the meeting. Section 10. Written or electronic notice of a special meeting of stockholders, stating the time and place and object thereof, shall be given at least ten days before such meeting, and in accordance with Article XXI hereof, to each stockholder entitled to vote thereat. Section 11. (A) Annual Meeting of Stockholders. (1) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (a) pursuant to the Corporation's notice of meeting delivered pursuant to Article III, Section 6 of these ByLaws, (b) by or at the direction of the Chief Executive Officer or the Board of Directors or (c) by any stockholder of the Corporation who is entitled to vote at the meeting, who complied with the notice procedures set forth in subparagraphs (2) and (3) of this paragraph (A) of this ByLaw and who was a stockholder of record at the time such notice is delivered to the Secretary of the Corporation. (2) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of this ByLaw, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation, and, in the case of business other than nominations, such other business must be a proper matter for stockholder action. To be timely, a stockholder's notice shall be delivered in writing to the Secretary at the principal executive offices of the Corporation not less than seventy days nor more than ninety days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than twenty days, or delayed by more than seventy days, from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the ninetieth day prior to such annual meeting and not later than the close of business on the later of the seventieth day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner and (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner. (3) Notwithstanding anything in the second sentence of paragraph (A)(2) of this ByLaw to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least eighty days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this ByLaw shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation. (B) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting pursuant to Article III, Section 10 of these ByLaws. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of meeting (a) by or at the direction of the Chief Executive Officer or the Board of Directors or (b) by any stockholder of the Corporation who is entitled to vote at the meeting, who complies with the notice procedures set forth in this ByLaw and who is a stockholder of record at the time such notice is delivered to the Secretary of the Corporation. Nominations of stockholders of persons for election to the Board of Directors may be made at such a special meeting of stockholders if the stockholder's notice as required by paragraph (A)(2) of this ByLaw shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the ninetieth day prior to such special meeting and not later than the close of business on the later of the seventieth day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. (C) General. (1) Only persons who are nominated in accordance with the procedures set the forth in this ByLaw shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this ByLaw. Except as otherwise provided by law, the Certificate of Incorporation or these ByLaws, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this ByLaw and, if any proposed nomination or business is not in compliance with this ByLaw, to declare that such defective nomination shall be disregard or that such proposed business shall not be transacted. (2) For purposes of this ByLaw, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (3) For purposes of this ByLaw, no adjournment nor notice of adjournment of any meeting shall be deemed to constitute a new notice of such meeting for purposes of this Section 11, and in order for any notification required to be delivered by a stockholder pursuant to this Section 11 to be timely, such notification must be delivered within the periods set forth above with respect to the originally scheduled meeting. (4) Notwithstanding the foregoing provisions of this ByLaw, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this ByLaw. Nothing in this ByLaw shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. ARTICLE IV DIRECTORS Section 1. The property and business of the Corporation shall be managed by its Board of Directors, the members of which need not be stockholders. Section 2. The Board of Directors of the Corporation shall consist of such number of directors, not less than three, as shall from time to time be fixed exclusively by resolution of the Board of Directors. The directors shall be divided into three classes in the manner set forth in the Certificate of Incorporation of the Corporation, each class to be elected for the term set forth therein. Directors shall (except as hereinafter provided for the filling of vacancies and newly created directorships) be elected by the holders of a plurality of the voting power present in person or represented by proxy and entitled to vote. Section 3. Each director shall be elected to serve until his successor shall be elected and shall qualify by evidence of acceptance of such office and such acceptance shall be presumed in the absence of express rejection thereof by the person elected within ten days after his knowledge of election. A person who has passed his 64th birthday and who has not theretofore served as a director of the Corporation shall not be eligible to be elected a director, whether pursuant to this Section 3 or to Section 6, of this Article. A person who has passed his 70th birthday shall not in any event be eligible for reelection for continued service as a director of the Corporation, irrespective of prior service as a director of the Corporation. A person who has retired as an employee shall not in any event be eligible for election or reelection to the Board or be qualified for continued service as a Director of the Corporation irrespective of prior service as a Director of the Corporation. For purposes of this Section, any service as a director of Oryx Energy Company prior to the Corporation's merger with Oryx Energy Company shall be deemed to be prior service as a director of the Corporation. Any failure of any director to meet the qualifications for service as a director set forth in these ByLaws, or otherwise under law, shall result in the termination of the term of such director. Section 4. The directors may hold their meetings, have one or more offices and keep the books of the Corporation in the City of Oklahoma City, Oklahoma, or at such other places as they may from time to time determine and designate. Section 5. The members of the Board of Directors or any committee thereof may participate in a meeting of such Board or committee, as the case may be, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this subsection shall constitute presence in person at such a meeting. Section 6. Vacancies in the Board of Directors, however occasioned, and newly created directorships resulting from any increase in the authorized number of directors, may be filled only by a majority of the remaining directors then in office though less than a quorum and the accepting directors so chosen shall hold office for a term as set forth in the Certificate of Incorporation of the Corporation and until a successor or successors have been duly elected and qualified unless sooner displaced. Section 7. Notwithstanding the foregoing, whenever the holders of any one or more series of Preferred Stock issued by the Corporation shall have the right, voting separately by series, to elect directors at an annual or special meeting of stockholders, the election, term of office, removal, filling of vacancies and other features of such directorships shall be governed by the terms of the Amended and Restated Certificate of Incorporation applicable thereto, and such directors so elected shall not be divided into classes pursuant to Article SEVENTH of the Amended and Restated Certificate of Incorporation unless expressly provided by such terms. The number of directors that may be elected by the holders of any such series of Preferred Stock shall be in addition to the number fixed by or pursuant to the ByLaws. Except as otherwise expressly provided in the terms of such series, the number of directors that may be so elected by the holders of any such series of stock shall be elected for terms expiring at the next annual meeting of stockholders and without regard to the classification of the members of the Board of Directors as set forth in Section 2 hereof, and vacancies among directors so elected by the separate vote of the holders of any such series of Preferred Stock shall be filled by the affirmative vote of a majority of the remaining directors elected by such series, or, if there are no such remaining directors, by the holders of such series in the same manner in which such series initially elected a director. Section 8. Subject to provisions of pertinent law and the Certificate of Incorporation, dividends, if any, declared respecting any class of shares of the Corporation's capital stock may be declared by the Board of Directors at any regular meeting thereof and despite any provision of the ByLaws to the contrary at any special meeting thereof, whether or not consideration or action respecting dividends be stated in the notice thereof; and dividends may be paid in cash or, if the declaration thereof so provides, in property, including shares of the Corporation. There may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repair or maintaining any property of the Corporation, or for such other purpose as the Board of Directors shall deem conducive to the interest of the Corporation, and the Board of Directors may abolish any reserve in the manner in which it was created. Section 9. The Board of Directors shall have power to close the stock transfer books of the Corporation for a period not exceeding sixty days preceding the date of any meeting of stockholders or the date for payment of any dividend or the date for the allotment of rights or the date when any change or conversion or exchange of capital stock shall go into effect or for any other purpose; provided, however, that in lieu of closing the stock transfer books, as aforesaid, the Board of Directors may fix in advance a date not exceeding sixty days preceding the date of any meeting of stockholders or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date for such other purpose, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, or for such other purpose, and in such case only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting and any adjournment, thereof, or to receive such allotment of rights, or to exercise such rights or to be considered as stockholders for such other purpose, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. Section 10. In addition to the powers and authorities by these ByLaws expressly conferred upon it, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these ByLaws directed or required to be exercised or done by the stockholders. Section 11. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if prior to such action a written consent thereto is signed by all members of the Board and such written consent is filed with the minutes of proceedings of the Board. ARTICLE V COMMITTEES Section 1. The Board of Directors may appoint an Executive Committee of two or more directors, which shall consist of the Chief Executive Officer and such other director or directors as shall be designated by resolution adopted by the Board of Directors. Such Committee shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation while the Board of Directors is not in session except that it shall not have power or authority in reference to (1) amending the Certificate of Incorporation, (2) adopting an agreement of merger or consolidation under Section 251 or 252 of the Delaware General Corporation Law, (3) recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, (4) recommending to the stockholders dissolution of the Corporation or revocation of a dissolution, or (5) amending the ByLaws; nor shall it have any power or authority which the Board of Directors has by resolution withheld from it. Vacancies in the membership of the Committee shall be filled by the Board of Directors at a regular meeting or a special meeting called for that purpose. Section 2. The Committees of the Board shall be governed by Subsection (2) of Section 141(c) of the Delaware General Corporation Law which provides for the designation of committees of the Corporation's Board of Directors and the permissible functions of such committees. Section 3. The Board of Directors by resolution or resolutions adopted by a majority of the Board of Directors may designate other committees, each committee to consist of two or more directors of the Corporation and to exercise such powers and duties and to have such name as may be designated by resolution adopted by the Board of Directors. Section 4. Each committee of the Board of Directors may meet at such stated times and/or upon call with such notice as said committee may by resolution provide from time to time. At all meetings of each committee, a majority of members thereof shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the members present at any meeting at which there is a quorum shall be the act of the committee. Section 5. Committees of the Board of Directors shall keep regular minutes of their proceedings. Any action required or permitted to be taken at any meeting of the Committee may be taken without a meeting if prior to such action a written consent thereto is signed by all members of the Committee and such written consent is filed with the minutes of proceedings of the Committee. ARTICLE VI COMPENSATION OF DIRECTORS Section 1. Directors may, pursuant to resolution of the Board of Directors, be paid a stated sum with respect to each regular and special meeting of the Board of Directors and be allowed their expenses of attendance, if any, for attending each meeting of the Board of Directors. Directors who are not full-time employees of the Corporation may be paid such additional compensation for their services as directors as may from time to time be fixed by resolution of the Board of Directors. Nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Section 2. Members of the Executive Committee and members of other committees of the Board of Directors who are not full-time employees of the Corporation may, pursuant to resolution of the Board of Directors, be paid a stated sum for attending meetings of such committees. All members of committees of the Board of Directors may, pursuant to resolution of the Board of Directors, be allowed their expenses of attendance, if any, for attending meetings of such committees. ARTICLE VII MEETINGS OF THE BOARD OF DIRECTORS Section 1. Annual meetings of the Board of Directors shall be held at such place within or without the State of Delaware as soon as practicable following the election of new directors at the annual meeting of the stockholders. Section 2. Regular meetings of the Board of Directors may be held at such time and place, within or without the State of Delaware as shall from time to time be determined by the Board of Directors. After there has been such determination and notice thereof has been once given to each member of the Board of Directors, regular meetings may be held without any further notice being given. Section 3. Special meetings of the Board of Directors may be called by the Chief Executive Officer on twenty-four hour's notice to each director, either personally or by mail, by telegram, or by other means permitted by applicable law; special meetings shall be called by the Chief Executive Officer or Secretary in like manner and on like notice on the written request of a majority of the directors. Section 4. At all meetings of the Board of Directors, a majority of the directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation or by these ByLaws. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. ARTICLE VII-A WAR AND NATIONAL EMERGENCY Section 1. The emergency bylaws provided in this Article VII-A shall be operative during any emergency resulting from an attack on the United States, or during any nuclear or atomic disaster, or during the existence of any catastrophe, or other similar emergency condition, as a result of which a quorum of the Board of Directors cannot readily be convened for action. To the extent not inconsistent with these emergency bylaws, the ByLaws of the Corporation shall remain in effect during any emergency and upon its termination these emergency bylaws shall cease to be operative. Section 2. During any such emergency a meeting of the Board of Directors may be called by any officer or director by giving two days' notice thereof to such of the directors as it may be feasible to reach at the time and by such means as may be feasible at the time. The notice shall specify the time and the place of the meeting, which shall be the head office of the Corporation or any other place specified in the notice. At any such meeting three members of the then existing Board of Directors shall constitute a quorum, which may act by majority vote. Section 3. If the number of directors who are available to act shall drop below three, additional directors, in whatever number is necessary to constitute a Board of three Directors, shall be selected automatically from the first available officers or employees in the order provided in the emergency succession list established by the Board of Directors and in effect at the time an emergency arises. Additional directors, beyond the minimum number of three directors, but not more than three additional directors, may be elected from any officers or employees on the emergency succession list. Section 4. The Board of Directors is empowered with the maximum authority possible under the Delaware Corporation Law, and all other applicable law, to conduct the interim management of the affairs of the Corporation in an emergency in what it considers to be in the best interests of the Corporation (including the right to amend this Article) irrespective of the provisions of the Certificate of Incorporation or of the ByLaws. ARTICLE VIII OFFICERS Section 1. The officers of the Corporation shall be chosen by the Board of Directors, shall include a Chief Executive Officer, and may include a President, a Chairman of the Board (who shall be selected from the directors then serving), one or more Vice Chairmen of the Board (who shall be selected from the directors then serving), one or more Executive Vice Presidents, Senior Vice Presidents, and Vice Presidents, respectively, a General Counsel, a Secretary, one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, and a Controller. Any number of offices may be held by the same person, but if an instrument is required by law to be executed, acknowledged or verified by two or more officers, no officer shall execute, acknowledge or verify such instrument in more than one capacity for such purpose. Section 2. Without limiting the right of the Board of Directors to choose officers of the Corporation at any time when vacancies occur or when the number of officers is increased, the Board of Directors at the first meeting after each annual meeting of stockholders shall choose a Chief Executive Officer, a President and such other officers as shall be designated at such time, including, if so designated, a Chairman of the Board, one or more Vice Chairmen of the Board, Executive Vice Presidents, Senior Vice Presidents and Vice Presidents, respectively, a General Counsel, a Secretary, one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, and a Controller. None of said officers, except the Chairman of the Board, and Vice Chairmen of the Board, need be members of the Board. Section 3. The Board of Directors may choose such other officers and agents as it shall deem necessary or advisable, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors, or, in the absence of exact specification or limitation thereof by the Board of Directors, as the Chief Executive Officer may determine from time to time. Subject to the below provisions, each of the officers of the Corporation elected by the Board of Directors or appointed by an officer in accordance with these ByLaws shall have the powers and duties prescribed by law, by the ByLaws or by the Board of Directors and, in the case of appointed officers, the powers and duties prescribed by the appointing officer, and, unless otherwise prescribed by the ByLaws or by the Board of Directors or such appointing officer, shall have such further powers and duties as ordinarily pertain to that office. Section 4. The salaries of all officers of the Corporation and of its wholly owned subsidiaries, other than his own salary, shall be determined by the Chief Executive Officer but shall be reviewed from time to time by an Executive Compensation Committee appointed by the Board of Directors from among its members. The Executive Compensation Committee shall recommend to the Board of Directors such changes in the officers' salaries as fixed by the Chief Executive Officer as it may deem appropriate and the Board of Directors shall instruct the Chief Executive Officer to implement those of the recommended changes which it approves. The salary of the Chief Executive Officer shall be determined by the Board of Directors. Section 5. The officers of the Corporation shall hold office until their successors are chosen and qualify in their stead. Any officer elected or appointed by the Board of Directors may be removed at any time with or without cause by the affirmative vote of a majority of the whole Board of Directors. ARTICLE IX CHAIRMAN OF THE BOARD Section 1. The Chairman of the Board shall do and perform such duties as may from time to time be assigned to him by the Board of Directors or the Chief Executive Officer. ARTICLE X CHIEF EXECUTIVE OFFICER Section 1. The Chief Executive Officer shall preside at all meetings of the stockholders and of the Board of Directors, and shall be a member, ex officio, of all committees, except the Audit, Stock Option, Nominating and Executive Compensation committees. The Chief Executive Officer shall have general and active management of the business of the Corporation, and shall see that all orders and resolutions of the Board of Directors and of the committees thereof are carried into effect. Section 2. The Chief Executive Officer shall have authority, which he may delegate, to execute certificates of stock, bonds, deeds, powers of attorney, mortgages and other contracts, under the seal of the Corporation, unless required by law to be otherwise signed and executed and unless the signing and execution thereof shall be expressly and exclusively delegated by the Board of Directors to some other officer or agent of the Corporation. ARTICLE XI VICE CHAIRMAN OF THE BOARD Section 1. In the absence of the Chief Executive Officer, the Vice Chairman (or, if there exists more than one Vice Chairman, the Vice Chairman designated by the Board of Directors) shall serve as the Chief Executive Officer of the Corporation. The Vice Chairmen of the Board shall advise and counsel with the Chief Executive Officer and with other officers of the Corporation, and each shall do and perform such other duties as may from time to time be assigned to him by the Board of Directors or the Chief Executive Officer. Section 2. Any Vice Chairman of the Board, to the extent delegated by the Chief Executive Officer or the Board of Directors, may execute certificates of stock, bonds, deeds, powers of attorney, mortgages and other contracts under the seal of the Corporation, unless required by law to be otherwise signed and executed and unless the signing and execution thereof be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. ARTICLE XII PRESIDENT Section 1. The President, if one is elected, may be the chief operating officer of the Corporation. Section 2. The President shall have the authority, which he may delegate, to execute certificates of stock, bonds, deeds, powers of attorney, mortgages and other contracts, under the seal of the Corporation, unless required by law to be otherwise signed and executed and unless the signing and execution thereof shall be expressly and exclusively delegated by the Board of Directors or the Chief Executive Officer to some other officer or agent of the Corporation. ARTICLE XIII VICE PRESIDENTS Section 1. There may be one or more Executive Vice Presidents, one or more Senior Vice Presidents, and such other Vice Presidents, with or without other such special designations, as may be elected by the Board of Directors from time to time. Section 2. The Executive Vice Presidents and each of the Vice Presidents shall have the authority to sign certificates of stock, bonds, deeds, mortgages and other contracts, unless required by law to be otherwise signed and executed and unless the signing and execution thereof shall be expressly and exclusively delegated by the Board of Directors or the Chief Executive Officer to some other officer or agent of the Corporation, and perform such duties and exercise such powers as the Board of Directors or the Chief Executive Officer shall prescribe. ARTICLE XIV SECRETARY Section 1. The Secretary shall attend all sessions of the Board of Directors and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose; and shall perform like duties for all committees of the Board of Directors when required. He shall give, or cause to be given, all required notices of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the Chief Executive Officer, under whose supervision he shall be. He shall be responsible for keeping in safe custody the seal of the Corporation, and when such is proper, he shall affix the same to any instrument requiring it, and when so affixed, it shall be attested by his signature or by the signature of an Assistant Secretary. Section 2. The Assistant Secretaries in the absence or disability of the Secretary shall perform and exercise the powers of the Secretary and shall perform such further duties as may be prescribed by the Secretary, the Board of Directors or the Chief Executive Officer. ARTICLE XV TREASURER Section 1. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation, in such depositories as may be designated by the Board of Directors or the Chief Executive Officer. Section 2. The Treasurer shall: (a) endorse or cause to be endorsed in the name of the Corporation for collection the bills, notes, checks or other negotiable instruments received by the Corporation, (b) sign or cause to be signed all bills, notes, checks or other negotiable instruments issued by the Corporation and (c) pay out or cause to be paid out money, as the Corporation may require, taking proper vouchers therefor; provided, however, that the Board of Directors and the Chief Executive Officer may by resolution delegate, with or without power to re-delegate, any and all of the foregoing duties of the Treasurer to other officers, employees or agents of the Corporation, and to provide that other officers, employees and agents shall have power to sign bills, notes, checks, vouchers, orders, or other instruments on behalf of the Corporation. The Treasurer shall render to the Chief Executive Officer and to the Board of Directors, whenever they may require it, an account of his transactions as Treasurer. Section 3. The Treasurer shall give the Corporation a bond if required by the Board of Directors in a sum, and with one or more sureties satisfactory to the Board, for the faithful performance of the duties of his office and for the restoration of the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 4. The Assistant Treasurers in the absence or disability of the Treasurer shall perform and exercise the powers of the Treasurer and shall perform such further duties as may be prescribed by the Treasurer, the Board of Directors or the Chief Executive Officer. ARTICLE XVI CONTROLLER Section 1. The Controller shall have charge of the Corporation's books of account, records and auditing, and shall be subject in all matters to the control of the Board of Directors and the Chief Executive Officer. ARTICLE XVII VACANCIES AND DELEGATION OF DUTIES OF OFFICERS Section 1. If the office of any officer or agent, one or more, becomes vacant by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, the Board of Directors may choose a successor or successors, who shall, unless the Board of Directors otherwise specifies, hold office for the unexpired term in respect of which such vacancy occurred, or until his successor shall be elected. Section 2. In case of the absence of any officer of the Corporation, or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may delegate, for the time being, the powers or duties, or any of them, of such officer to any other officers and/or directors; provided a majority of the entire Board of Directors concurs therein. ARTICLE XVIII STOCK AND STOCKHOLDERS Section 1. The shares of stock of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation's stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate as provided in Article XVIII, Section 2 of these ByLaws, or as otherwise permitted by law, representing the number of shares registered in certificate form. Section 2. The certificates of stock of the Corporation shall be numbered and shall be entered in the books of the Corporation as they are issued. They shall exhibit the holder's name and number of shares and shall be signed by the Chairman of the Board, Chief Executive Officer, Vice Chairman of the Board, President or a Vice President, and the Secretary or an Assistant Secretary. Any and all signatures on a stock certificate may be a facsimile. Section 3. Upon surrender to the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Corporation will issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Transfers of uncertificated shares will be made on the records of the Corporation as may be provided by law. Section 4. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by the laws of Delaware. Section 5. A new certificate of stock of the Corporation may be issued in place of any certificate theretofore issued by the Corporation and alleged to have been lost, stolen or destroyed. The Board of Directors may from time to time prescribe the terms and conditions under which such new certificates may be issued. Among other things, the Board of Directors may require that the owner of the allegedly lost, stolen or destroyed certificate, or his legal representatives, submit proper evidence in writing and under oath that the alleged loss, theft, or destruction actually occurred, and may require that such owner or representatives give the Corporation a bond, satisfactory to the Corporation as to form and security, sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate. A new certificate may be issued without requiring any bond when, in the judgment of the Board of Directors or of any officer of the Corporation to whom the Board of Directors may delegate appropriate authority, it is proper to waive the bond requirement. ARTICLE XIX INSPECTION OF BOOKS, CHECKS AND FISCAL YEAR Section 1. The Board of Directors shall determine from time to time whether, and, if allowed, when and under what conditions and regulations the accounts and books of the Corporation (except such as may by statute be specifically open to inspection), or any of them, shall be open to the inspection of the stockholders, and the stockholders' rights in this respect are and shall be restricted and limited accordingly. Section 2. Checks or demands for money and notes of the Corporation may be signed by such officer or officers or such person or persons other than those herein authorized and in such manner as the Board of Directors or the Chief Executive Officer may from time to time provide. Section 3. The fiscal year shall begin the first day in January of each year and end the following December 31. ARTICLE XX DIRECTORS' ANNUAL STATEMENT Section 1. The Board of Directors shall present at each annual meeting a full and clear statement of the business and condition of the Corporation. ARTICLE XXI NOTICES Section 1. Whenever under the provisions of the Certificate of Incorporation or of these ByLaws notice (which as herein used shall include also annual reports, proxy statements and solicitations and other communications to holders of the Corporation's securities) is required to be, or may be, given to any director, officer, stockholder or other person, it may, unless legally controlling provisions prohibit the same, be given in writing, by mail, by depositing the same in any U.S. post office or letter-box, in a postpaid sealed wrapper addressed to such person to whom the notice may be, or is required to be given, at such address as appears on the books of the Corporation, and all notices given in accordance with the provisions of this Article shall be deemed to be given at the time when the same is deposited in the mail. In addition, the Corporation may give notice by electronic transmission pursuant to Title 8, Section 232 of the Delaware Code, or its successor. Section 2. Should a person who is a stockholder own shares evidenced by more than one stock certificate, nevertheless only one notice (when any is required to be, or may be, given to holders of shares of any or all classes) shall be, in the sole discretion of the Corporation, required to be mailed and if different addresses as to such person are recorded on the Corporation's stock ledger the notice may be mailed to the address that appears to have been given latest in time unless the stockholders shall have expressly directed otherwise in writing to the Secretary of the Corporation, nor shall variations in the designation of the name or identity of any one stockholder require the mailing of more than one notice to any one stockholder, which may be mailed to any one of the names or designations that may so appear in the Corporation's stock ledger with respect to such stockholder; and, at the sole discretion of the Corporation, the distribution of dividend payments may be, unless a stockholder shall expressly request multiple distributions strictly in accordance with the stock ledger record of his multiple ownerships, handled in accordance with or so as not to be repugnant to the purpose of the above provisions, which is to avoid the expenditure by the Corporation of effort, time and expense in such matters that might have been avoided had the recording of a stockholder's name and/or address incident to his multiple record ownership of shares been effected accurately, uniformly and consistently. Section 3. Any stockholder, director or officer may waive in writing or otherwise any notice required to be given under the provisions of pertinent statutes or of the Certificate of Incorporation or of these ByLaws. A waiver of notice in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to such notice. ARTICLE XXII INDEMNIFICATION Section 1. The Corporation shall, to the full extent permitted by the Laws of the State of Delaware as then in effect or, if less stringent, in effect on December 31, 1985 ("Delaware Law"), indemnify any person (the "Indemnitee") made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether or not by or in the right of the Corporation, by reason of the fact that the Indemnitee is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, trustee, partner, or other agent of any other enterprise or legal person (any such action, suit or proceeding being herein referred to as a "Legal Action") against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the Indemnitee in connection with such Legal Action or its investigation, defense or appeal (herein called "Indemnified Expenses"), if the Indemnitee has met the standard of conduct necessary under Delaware Law to permit such indemnification. Rights to indemnification shall extend to the heirs, beneficiaries, administrators and executors of any deceased Indemnitee. For purposes of this Section, reference to "any other enterprise or legal person" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries. The Indemnified Expenses shall be paid by the Corporation in advance as shall be appropriate to permit Indemnitee to defray such expenses currently as incurred, provided the Indemnitee agrees in writing that in the event it shall ultimately be determined as provided hereunder that Indemnitee was not entitled to be indemnified, then Indemnitee shall promptly repay to the Corporation such amounts so paid. The prepayment of expenses as provided for in this Section 1 shall be authorized by the Board of Directors in the specific case unless the Board of Directors receives within thirty (30) days of the Indemnitee's request for indemnification an opinion of counsel selected in the manner provided for in Section 2 of this Article XXII that there is no reasonable basis for a belief that the Indemnitee's conduct met the requisite standard of conduct. The fees of such counsel and all related expenses shall, in all cases, be paid by the Corporation. Section 2. The determination of whether Indemnitee has met the standard of conduct required to permit indemnification under this ByLaw shall in the first instance be submitted to the Board of Directors of the Corporation. If the Board by a majority vote of a quorum consisting of directors who were not parties to such Legal Action determines Indemnitee has met the required standard of conduct such determination shall be conclusive; but if such affirmative majority vote is not given, then the matter shall be referred to independent legal counsel for determination. Such outside counsel shall be selected by agreement of the Board of Directors and Indemnitee or, if they are unable to agree, then by lot from among those New York City law firms which (i) have more than 100 attorneys, (ii) have a substantial practice in the corporate and securities areas of law, (iii) have not performed any services for the Corporation or any of its subsidiaries or affiliates for at least five (5) years and (iv) have a rating of "av" in the then current Martindale-Hubbell Law Directory. The fees and expenses of counsel in connection with making this determination shall be paid by the Corporation. Notwithstanding the foregoing, if dissatisfied with the determination so made by counsel, Indemnitee may within two (2) years thereafter, petition any court of competent jurisdiction to determine whether Indemnitee is entitled to indemnification under the provisions hereof and such court shall thereupon have the exclusive authority to make such determination. The Corporation shall pay all expenses (including attorneys' fees) actually incurred by Indemnitee in connection with such judicial determination. The termination of any Legal Action by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Indemnitee did not meet the requisite standard of conduct; however, a successful defense of a Legal Action by Indemnitee on the merits or otherwise shall conclusively establish Indemnitee did meet such standard of conduct notwithstanding any previous determination to the contrary under thin Section 2. Section 3. The indemnification and advance payment of expenses as provided in this Article XXII shall not be deemed exclusive of any other rights to which Indemnitee may be entitled under any provision of law, the Certificate of Incorporation, any ByLaw or otherwise. Section 4. If any provision of this Article XXII shall be held to be invalid, illegal or unenforceable for any reason whatsoever, the validity, legality and enforceability of the remaining provisions of this Article XXII shall not in any way be affected or impaired thereby. Section 5. Any amendment, repeal or modification of these ByLaws, the Corporation's Certificate of Incorporation or any applicable provision of Delaware Law, or any other instrument, which eliminates or diminishes the indemnification rights provided for in this Article XXII shall be ineffective as against an Indemnitee with respect to any Legal Action based upon actions taken or not taken by the Indemnitee prior to such repeal or the adoption of such modification or amendment. The provisions of this ByLaw shall be applicable to all Legal Actions made or commenced after the adoption hereof, whether arising from acts or omissions to act occurring before or after its adoption. The provisions of this ByLaw shall be deemed to be a contract between the Corporation and each director or officer who serves in such capacity at any time while this ByLaw and the relevant provisions of Delaware Law and other applicable law, if any, are in effect. If any provision of this ByLaw shall be found to be invalid or limited in application by reason of any law or regulation, it shall not affect the validity of the remaining provisions hereof. The rights of indemnification provided in this ByLaw shall neither be exclusive of, nor be deemed in limitation of, any rights to which an officer, director, employee or agent may otherwise be entitled or permitted by contract, this ByLaw, vote of stockholders or directors or otherwise, or as a matter of law, both as to actions in such person's official capacity and actions in any other capacity while holding such office, it being the policy of the Corporation that indemnification of any person whom the Corporation is obligated to indemnify pursuant to this ByLaw shall be made to the fullest extent permitted by law. ARTICLE XXIII AMENDMENTS Section 1. These ByLaws may be altered or amended or repealed, in whole or in part: By the affirmative vote of the holders of a majority of the stock issued and outstanding and entitled to a vote thereat, at any regular or special meeting of the stockholders, or by the affirmative vote of a majority of the Board of Directors in attendance at any regular or special meeting of the Board of Directors; provided, however, that, notwithstanding any other provisions of these ByLaws or any provision of law which might otherwise permit a lesser vote of the stockholders, the affirmative vote of the holders of at least 75 percent in voting power of all shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required in order for the stockholders to alter, amend or repeal Section 8 and Section 11 of Article III, Sections 2 and 6 of Article IV or this proviso to this Article XXIII of these ByLaws or to adopt any provision inconsistent with any of such Sections or with this proviso. CERTIFICATE I, the undersigned, _________________________________, (Assistant) Secretary of KERR-McGEE CORPORATION, a Delaware corporation, do hereby certify that the foregoing is a full, true, and correct copy of the ByLaws of said Corporation in effect on the date of this certificate. Given under my hand and seal of the Corporation this ______ day of _________________, _____. ------------------------------- (Assistant) Secretary (SEAL) EX-4 3 firstamend.txt AMENDED RIGHTS AGREEMENT Exhibit 4.1 FIRST AMENDMENT TO RIGHTS AGREEMENT THIS AMENDMENT (this "Amendment"), dated as of October 14, 1998, to the Rights Agreement, dated as of July 9, 1996 (the "Rights Agreement"), by and between Kerr-McGee Corporation, a Delaware corporation (the "Company"), and Bank One Trust Company, N.A.*, as Rights Agent (the "Rights Agent"). R E C I T A L S WHEREAS, the Company and the Rights Agent have heretofore executed and entered into the Rights Agreement; WHEREAS, pursuant to Section 27 of the Rights Agreement, the Company may from time to time supplement or amend the Rights Agreement in accordance with the provisions thereof; WHEREAS, the Company intends to enter into (i) an Agreement and Plan of Merger, dated as of October 14, 1998 (as it may be further amended, supplemented or otherwise modified from time to time, the "Merger Agreement") between Oryx Energy Company ("Oryx") and the Company, pursuant to which Oryx will be merged with and into the Company on the terms and conditions stated therein (the "Merger"), and (ii) a Stock Option Agreement, dated as of October 14, 1998 (as it may be further amended, supplemented or otherwise modified from time to time, the "Option Agreement") pursuant to which the Company will grant to Oryx an option to purchase shares of Common Stock of the Company on the terms and conditions stated therein; WHEREAS, the Merger Agreement requires that the Company amend the Rights Agreement to the extent necessary to provide that the approval, execution and delivery of the Merger Agreement and the Option Agreement, and the consummation of the transactions contemplated thereby, will not (i) cause Oryx or any of its affiliates to become an Acquiring Person or (ii) cause the occurrence of a Stock Acquisition Date or Distribution Date; and WHEREAS, the Board of Directors has determined that it is in the best interest of the Company and its stockholders to amend the Rights Agreement to exempt the Merger, the Merger Agreement and the Option Agreement, and all of the transactions contemplated thereby, from the application of the Rights Agreement. - -------- * The Liberty National Bank & Trust Co. of Oklahoma City was merged into Bank One Trust Company, N.A., effective December 5, 1997. A G R E E M E N T NOW THEREFORE, the Company hereby amends the Rights Agreement as follows: 1. Section 1(a) of the Rights Agreement is hereby modified and amended by adding the following proviso at the end of the first sentence thereof: "; provided, further, that neither Oryx Energy Company, a Delaware corporation ("Oryx"), nor any of its Affiliates or Associates shall be deemed to be an Acquiring Person by virtue of (i) the approval, execution or delivery of the Agreement and Plan of Merger dated as of October 14, 1998, as may be amended, supplemented or otherwise modified from time to time, between the Company and Oryx (the "Merger Agreement"), (ii) the approval, execution or delivery of the Stock Option Agreement dated as of October 14, 1998, as may be amended, supplemented or otherwise modified from time to time, between the Company and Oryx pursuant to which the Company has granted to Oryx an option to purchase shares of Common Stock (the "Option Agreement") or (iii) the consummation of any of the transactions contemplated by the Merger Agreement or the Option Agreement." 2. The Rights Agreement is hereby further modified and amended by adding a new Section 35 to the end thereof to read in its entirety as follows: "Section 35. Merger Agreement and Option Agreement with Oryx. Notwithstanding any other provision of this Rights Agreement, as amended by this Amendment, neither (i) the approval, execution or delivery of the Merger Agreement nor the consummation of any of the transactions contemplated thereby, nor (ii) the approval, execution or delivery of the Option Agreement nor the consummation of any of the transactions contemplated thereby, is or shall be deemed to be an event described in Section 11(a)(ii) or Section 13 hereof, nor will such performance or consummation result in the occurrence of a Stock Acquisition Date, a Distribution Date or any other separation of the Rights from the underlying Common Stock, nor entitle or permit the holders of the Rights to exercise the Rights or otherwise affect the rights of the holders of the Rights or otherwise affect the rights of the holders of the Rights, including giving the holders of the Rights the right to acquire securities of any party to the Merger Agreement or the Option Agreement." 3. This Amendment shall become effective as of the date of, and immediately prior to the execution of, the Merger Agreement and the Option Agreement. 4. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State. 5. This Amendment may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute one and the same instrument. 6. Terms not defined herein shall, unless the context otherwise requires, have the meanings assigned to such terms in the Rights Agreement. 7. In all respects not inconsistent with the terms and provisions of this Amendment, the Rights Agreement is hereby ratified, adopted, approved and confirmed. In executing and delivering this Amendment, the Rights Agent shall be entitled to all the privileges and immunities afforded to the Rights Agreement under the terms and conditions of the Rights Agreement. [The remainder of this page has been intentionally left blank] IN WITNESS WHEREOF, this Amendment has been duly executed by the Company and the Rights Agent as of the day and year first written above. KERR-McGEE CORPORATION By: /s/ Luke R. Corbett ------------------- Name: Luke R. Corbett Title: Chairman and CEO BANK ONE TRUST COMPANY, N.A. By: /s/ M. E. Allan --------------- Name: M. E. Allan Title: Vice President EX-10 4 corbettagrmt.txt CONTINUITY AGREEMENT Exhibit 10.10 CONTINUITY AGREEMENT This Agreement (the "Agreement") is dated as of January 11, 2000 by and between Kerr-McGee Corporation, a Delaware corporation (the "Company"), and Luke R. Corbett (the "Executive"). WHEREAS, the Company's Board of Directors considers the continued services of key executives of the Company to be in the best interests of the Company and its stockholders; and WHEREAS, the Company's Board of Directors desires to assure, and has determined that it is appropriate and in the best interests of the Company and its stockholders to reinforce and encourage the continued attention and dedication of key executives of the Company to their duties of employment without personal distraction or conflict of interest in circumstances which could arise from the occurrence of a change in control of the Company; and WHEREAS, the Company's Board of Directors has authorized the Company to enter into continuity agreements with those key executives of the Company and any of its respective subsidiaries (all of such entities, together with the Company, are hereinafter referred to as an "Employer"), such agreements to set forth the severance compensation which the Company agrees under certain circumstances to pay such executives; and WHEREAS, the Executive is a key executive of an Employer and has been designated as an executive to be offered such a continuity compensation agreement with the Company. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Executive agree as follows: 1. Term. This Agreement shall become effective on the date hereof (the "Effective Date") and remain in effect until the third anniversary thereof; provided, however, that this Agreement shall automatically renew for an additional year on each successive anniversary of the Effective Date, unless an Employer informs the Executive, in writing, at least 180 days prior to the renewal date, that this Agreement shall not be renewed. The foregoing shall constitute the "Term" of this Agreement for purposes hereof. 2. Change in Control. No compensation or other benefit pursuant to Section 4 hereof shall be payable under this Agreement unless and until either (i) a Change in Control of the Company (as hereinafter defined) shall have occurred while the Executive is employed by an Employer and the Executive's employment by an Employer thereafter shall have terminated in accordance with Section 3 hereof or (ii) the Executive's employment by an Employer shall have terminated in accordance with Section 3(a)(ii) hereof prior to the occurrence of the Change in Control. For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred when, during the Term of this Agreement: (a) any person ("Person") as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as used in Section 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) of the Exchange Act but excluding the Company and any subsidiary and any employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as trustee), directly or indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities (other than indirectly as a result of the Company's redemption of its securities); or (b) the consummation of any merger or other business combination of the Company, sale of 50% or more of the Company's assets, liquidation or dissolution of the Company or combination of the foregoing transactions (the "Transactions") other than a Transaction immediately following which the shareholders of the Company and any trustee or fiduciary of any Company employee benefit plan immediately prior to the Transaction own at least 60% of the voting power, directly or indirectly, of (A) the surviving corporation in any such merger or other business combination; (B) the purchaser of or successor to the Company's assets; (C) both the surviving corporation and the purchaser in the event of any combination of Transactions; or (D) the parent company owning 100% of such surviving corporation, purchaser or both the surviving corporation and the purchaser, as the case may be; or (c) within any twenty-four month period, the persons who were directors immediately before the beginning of such period (the "Incumbent Directors") shall cease (for any reason other than death) to constitute at least a majority of the Board or the board of directors of a successor to the Company. For this purpose, any director who was not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who commenced or threatened to commence an election contest or proxy solicitation by or on behalf of a Person (other than the Board) or who has entered into an agreement to effect a Change in Control or expressed an intention to cause such a Change in Control); or (d) a majority of the members of the Board of Directors in office immediately prior to a proposed transaction determine by a written resolution that such proposed transaction, if taken, will be deemed a Change in Control and such proposed transaction is consummated. 3. Termination of Employment; Definitions. (a) Termination without Cause by the Company or for Good Reason by the Executive. (i) The Executive shall be entitled to the compensa- tion provided for in Section 4 hereof, if within two years after a Change in Control, the Executive's employment by an Employer shall be terminated (A) by an Employer for any reason other than (I) the Executive's Disability or Retirement, (II) the Executive's death or (III) for Cause, or (B) by the Executive with Good Reason (all terms are as hereinafter defined), unless such termination occurs with the Executive's prior written consent expressly waiving the rights provided hereunder. (ii) In addition, the Executive shall be entitled to the compensation provided for in Section 4 hereof if, (A) in the event that an agreement is signed which, if consummated, would result in a Change of Control and, within 12 months thereafter, the Executive is terminated without Cause by the Company (other than on account of Executive's Death or Disability) or terminates employment with Good Reason prior to the Change in Control, (B) such termination is at the request or instigation of the acquiror or merger partner or otherwise in connection with the anticipated Change in Control, and (C) within said 12 month period, such Change in Control actually occurs. (b) Disability. For purposes of this Agreement, "Disability" shall mean the Executive's absence from the full-time performance of the Executive's duties (as such duties existed immediately prior to such absence) for 180 consecutive business days, when the Executive is disabled as a result of incapacity due to physical or mental illness. (c) Retirement. For purposes of this Agreement, "Retirement" shall mean the Executive's voluntary termination of employment pursuant to late, normal or early retirement under a pension plan sponsored by an Employer, as defined in such plan, but only if such retirement occurs prior to a termination by an Employer without Cause or by the Executive for Good Reason. (d) Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially all of his or her duties with an Employer (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to such Executive by the Board of Directors (the "Board") of the Company which specifically identifies the manner in which the Board believes that the Executive has not substantially performed his or her duties; (ii) the willful engaging by the Executive in gross misconduct which is materially and demonstrably injurious to the Company or any Employer; or (iii) the conviction of, or plea of guilty or nolo contendere to, a felony. Termination of the Executive for Cause shall be made by delivery to the Executive of a copy of a resolution duly adopted by the affirmative vote of not less than a three-fourths majority of the non-employee Directors of the Company or of the ultimate parent of the entity which caused the Change in Control (if the Company has become a subsidiary) at a meeting of such Directors called and held for such purpose, after 30 days prior written notice to the Executive specifying the basis for such termination and the particulars thereof and a reasonable opportunity for the Executive to cure or otherwise resolve the behavior in question prior to such meeting, finding that in the reasonable judgment of such Directors, the conduct or event set forth in any of clauses (i) through (iii) above has occurred and that such occurrence warrants the Executive's termination. (e) Good Reason. For purposes of this Agreement, "Good Reason" shall mean the occurrence, within the Term of this Agreement, of any of the following without the Executive's written consent expressly waiving the rights provided hereunder: (i) any material and adverse diminution in the Executive's duties or responsibilities with the Company (or any affiliate thereof) from those in effect immediately prior to the Change in Control; provided, however, that no such diminution shall be deemed to exist solely because of changes in Executive's duties, responsibilities or titles as a consequence of the Company ceasing to be a company with publicly-traded securities or becoming a wholly-owned subsidiary of another company; (ii) any reduction in the Executive's annual base salary or any adverse change in bonus opportunity or participation in cash bonus programs in effect immediately prior to the Change in Control; (iii) any requirement that Executive be based at a location more than 35 miles from the location at which the Executive was based immediately prior to the Change in Control (or a substantial increase in the amount of travel Executive is required to do because of a relocation of the executive offices); (iv) any failure by the Company to obtain from any successor to the Company an agreement reasonably satisfactory to the Executive to assume and perform this Agreement, as contemplated by Section 10(a) hereof; or (v) during the thirty-day period immediately following the first anniversary of the Change in Control, the voluntary termination of employment by the Executive for any reason or no reason at all; (vi) any amendment, reduction or termination of any benefit plan, program or arrangement, which has the effect of causing the Executive to have benefits which are not substantially similar, in the aggregate, to those benefits provided to the Executive immediately prior to the Change in Control. Notwithstanding the foregoing, in the event Executive provides the Company with a Notice of Termination (as defined below) referencing this Section 3(e) (with the exception of Section 3(e)(v)), the Company shall have 30 days thereafter in which to cure or resolve the behavior otherwise constituting Good Reason. Any good faith determination by Executive that Good Reason exists shall be presumed correct and shall be binding upon the Company. (f) Notice of Termination. Any purported termination of the Executive's employment (other than on account of Executive's death) with an Employer, if such termination occurs after the occurrence of a Change in Control or under circumstances specified under Section 3(a)(ii) above, shall be communicated by a Notice of Termination to the Executive, if such termination is by an Employer, or to an Employer, if such termination is by the Executive. For purposes of this Agreement, "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provisions so indicated; provided, however, that in connection with a termination for Good Reason under Section 3(e)(v), no details shall be necessary other than reference to such Section. For purposes of this Agreement, no purported termination of Executive's employment with an Employer shall be effective without such a Notice of Termination having been given. 4. Compensation Upon Termination After a Change in Control. Subject to Section 9 hereof, if within two years of a Change in Control, the Executive's employment by an Employer shall be terminated in accordance with Section 3(a) (the "Termination"), the Executive shall be entitled to the following payments and benefits: (a) Severance. The Company shall pay or cause to be paid to the Executive a cash severance amount equal to (i) three (3) times the sum of (A) the Executive's annual base salary on the date of the Change in Control (or, if higher, the annual base salary in effect immediately prior to the giving of the Notice of Termination) and (B) the higher of: (x) the average of the actual bonuses earned by the Executive in respect of the three years prior to the year in which the Change in Control occurs under the Company's incentive award program, or (y) the Executive's target bonus for the year of Termination, plus (ii) in lieu of continuation of any of the Executive's perquisites as provided to the Executive prior to the Change in Control (or, if greater, at the time of Termination), a cash payment equal to 7 percent of the Executive's annual base salary as in effect on the date of the Change in Control for each of the three (3) years following the date of Termination. This cash severance amount shall be payable in a lump sum. (b) Additional Payments and Benefits. The Executive shall also be entitled to: (i) a lump sum cash payment equal to the sum of (A) the Executive's accrued but unpaid annual base salary through the date of Termination, (B) the unpaid portion, if any, of bonuses previously earned by the Executive pursuant to the Company's Executive incentive award program, plus the pro rata portion of the bonus to be paid for the year in which the date of Termination occurs (calculated through the date of Termination), and (C) an amount, if any, equal to compensation previously deferred (excluding any qualified plan deferral) and any accrued vacation pay, in each case, in full satisfaction of Executive's rights thereto. (ii) a lump sum cash payment equal to the aggregate sum of (A) additional pension contributions in an amount equal to the Company's contributions under the Company's 401(k) plan, profit sharing or other savings pension plans (or such other qualified and nonqualified defined contribution pension plans as then in effect) for the three (3) year period following the date of Termination (the "Separation Period") (based on assumed rates of Executive's contributions at the level of participation in effect as of the last date Executive was permitted to participate); and (B) the difference between the discounted present value (i.e., lump sum value) of the annuity benefit the Executive is entitled to receive under the Company's qualified and nonqualified defined benefit retirement programs in which the Executive is a participant calculated through the date of Termination and the discounted present value (i.e., lump sum value) of the annuity benefit the Executive would be entitled to receive under such retirement programs calculated after adding an additional five years of credit to age and service up to a maximum of age 65 as if the executive had been paid at the rate used to calculate the payments under Section 4(a), provided that the additional credits added with respect to each retirement program shall not exceed five years when added to any additional credits already provided by the terms of the such programs in respect of the Termination covered hereby. (iii) continued medical, dental, vision, and life insurance coverage (excluding accident, death, and disability insurance) for the Executive and the Executive's eligible dependents or, to the extent such coverage is not commercially available, such other arrangements reasonably acceptable to the Executive, on the same basis as in effect prior to the Change in Control or the Executive's Termination, whichever is deemed to provide for more substantial benefits, for a period ending on the earlier of (A) the end of the Separation Period or (B) the commencement of comparable coverage by the Executive with a subsequent employer; (iv) unless it would adversely affect the Company's ability to use pooling of interest accounting in a Change in Control transaction in which such accounting is intended to be used, immediate 100% vesting of all outstanding stock options, stock appreciation rights and restricted stock granted or issued by any Employer to the extent not previously vested on or following the Change of Control; and (v) all other accrued or vested benefits in accordance with the terms of the applicable plan (with an offset for any amounts paid under Section 4(b)(i)(C), above). All lump sum payments under this Section 4 shall be paid within 15 business days after Executive's date of Termination, provided, however, that such payment shall be made 30 days after Termination in the event that the Company requires the Executive to sign a release at the time of Termination. Discounted present value (i.e., lump sum value) for purposes of subsection (ii) above shall be calculated using a discount factor equal to one percentage point below the rate of interest, per annum, publicly announced by The Chase Manhattan Bank, N.A. as its prime rate in effect at its principal office in New York City, and using the actuarial factors set forth in the defined benefit retirement program. (c) Outplacement. If so requested by the Executive, outplacement services shall be provided by a professional outplacement provider selected by Executive; provided, however, that such outplacement services shall be provided the Executive at an aggregate total cost to the Company of not more than ten (10) percent of such Executive's annual base salary. (d) Withholding. Payments and benefits provided pursuant to this Section 4 shall be subject to any applicable payroll and other taxes required to be withheld. 5. Compensation Upon Termination for Death, Disability or Retirement. If an Executive's employment is terminated by reason of Death, Disability or Retirement prior to any other termination, Executive will receive: (a) the sum of (i) Executive's accrued but unpaid salary through the date of Termination, (ii) the pro rata portion of the Executive's target bonus for the year of Executive's Death or Disability (calculated through the date of Termination), and (iii) an amount equal to any compensation previously deferred and any accrued vacation pay; and (b) other accrued or vested benefits in accordance with the terms of the applicable plan (with an offset for any amounts paid under item (a)(iii), above). 6. Excess Parachute Payments. (a) (i) If it is determined (as hereafter provided) that any payment or distribution by the Company or any Employer to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a "Severance Payment"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) by reason of being "contingent on a change in ownership or control" of the Company, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such excise tax (such tax or taxes, together with any such interest and penalties, are hereafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment or payments (a "Gross-Up Payment") in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Severance Payments. (ii) Subject to the provisions of Section 6(a)(i) hereof, all determinations required to be made under this Section 6, including whether an Excise Tax is payable by the Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by the nationally recognized firm of certified public accountants (the "Accounting Firm") used by the Company prior to the Change in Control (or, if such Accounting Firm declines to serve, the Accounting Firm shall be a nationally recognized firm of certified public accountants selected by the Executive). The Accounting Firm shall be directed by the Company or the Executive to submit its preliminary determination and detailed supporting calculations to both the Company and the Executive within 15 calendar days after the Termination Date, if applicable, and any other such time or times as may be requested by the Company or the Executive. If the Accounting Firm determines that any Excise Tax is payable by the Executive, the Company shall pay the required Gross-Up Payment to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall, at the same time as it makes such determination, furnish the Executive with an opinion that he has substantial authority not to report any Excise Tax on his/her federal, state, local income or other tax return. Any determination by the Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon the Company and the Executive absent a contrary determination by the Internal Revenue Services or a court of competent jurisdiction; provided, however, that no such determination shall eliminate or reduce the Company's obligation to provide any Gross-Up Payment that shall be due as a result of such contrary determination. As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (an "Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to Section 6(a) hereof and the Executive thereafter is required to make a payment of any Excise Tax, the Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and the Executive as promptly as possible. Any such Underpayment shall be promptly paid by the Company to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations. (iii) The federal, state and local income or other tax returns filed by the Executive (or any filing made by a consolidated tax group which includes the Company) shall be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by the Executive. The Executive shall make proper payment of the amount of any Excise Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his/her federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior to the filing of the Executive's federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, the Executive shall within five business days pay to the Company the amount of such reduction. (iv) The Company and the Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determination contemplated by Section 6(a) hereof. (v) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Sections 6(a)(ii) and (iv) hereof shall be borne by the Company. If such fees and expenses are initially advanced by the Executive, the Company shall reimburse the Executive the full amount of such fees and expenses within five business days after receipt from the Executive of a statement therefor and reasonable evidence of his/her payment thereof. (b) In the event that the Internal Revenue Service claims that any payment or benefit received under this Agreement constitutes an "excess parachute payment," within the meaning of Section 280G(b)(1) of the Code, the Executive shall notify the Company in writing of such claim. Such notification shall be given as soon as practicable but no later than 10 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30 day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and reasonably satisfactory to the Executive; (iii) cooperate with the Company in good faith in order to effectively contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including, but not limited to, additional interest and penalties and related legal, consulting or other similar fees) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for and against any Excise Tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. (c) The Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or other tax (including interest and penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that if the Executive is required to extend the statute of limitations to enable the Company to contest such claim, the Executive may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a corporate deduction would be disallowed pursuant to Section 280G of the Code and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. In addition, no position may be taken nor any final resolution be agreed to by the Company without the Executive's consent if such position or resolution could reasonably be expected to adversely affect the Executive (including any other tax position of the Executive unrelated to matters covered hereby). (d) If, after the receipt by the Executive of an amount advanced by the Company in connection with the contest of the Excise Tax claim, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto); provided, however, if the amount of that refund exceeds the amount advanced by the Company or it is otherwise determined for any reason that additional amounts could be paid to the Named Executive without incurring any Excise Tax, any such amount will be promptly paid by the Company to the named Executive (or shall be applied to reduce any amount that Executive would otherwise be required to pay the Company). If, after the receipt by the Executive of an amount advanced by the Company in connection with an Excise Tax claim, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest the denial of such refund prior to the expiration of 30 days after such determination, such advance shall be forgiven and shall not be required to be repaid and shall be deemed to be in consideration for services rendered after the date of the Termination. 7. Expenses. In addition to all other amounts payable to the Executive under this Agreement, the Company shall pay or reimburse the Executive for reasonable legal fees (including without limitation, any and all court costs and reasonable attorneys' fees and expenses) incurred by the Executive in connection with or as a result of any claim, action or proceeding brought by the Company or the Executive with respect to or arising out of this Agreement or any provision hereof; provided, however, that the Company shall have no obligation to pay any such legal fees, if (i) in the case of an action brought by the Executive, the Company is successful in establishing with the court that the Executive's action was frivolous or otherwise without any reasonable legal or factual basis; or (ii) in connection with any such claim, action or proceeding arising out of Section 12 of this Agreement. 8. Obligations Absolute; Non-Exclusivity of Rights; Joint Several Liability. (a) The obligations of the Company to make the payments to the Executive, and to make the arrangements, provided for herein shall be absolute and unconditional and shall not be reduced by any circumstances, including without limitation any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or any third party at any time. (b) Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any other Employer and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any agreements with the Company or any other Employer. (c) Each entity included in the definition of "Employer" and any successors or assigns shall be joint and severally liable with the Company under this Agreement. 9. Not an Employment Agreement; Effect On Other Rights. (a) This Agreement is not, and nothing herein shall be deemed to create, a contract of employment between the Executive and the Company. The Company may terminate the employment of the Executive by the Company at any time, subject to the terms of this Agreement and/or any employment agreement or arrangement between the Company and the Executive that may then be in effect. (b) This Agreement supersedes all prior agreements covering change in control or any other subject matter covered by this Agreement and Executive hereby represents that the Executive has no other oral or written representations, understandings or agreements with the Company or any of its officers, directors or representatives covering any such subject matter and agrees that any and all prior written agreements relating to such subject matter shall be terminated effective as of the date of execution of this Agreement and shall be of no further force or effect. Notwithstanding the foregoing, and except as provided in the last sentence of this paragraph, this Agreement shall not have any effect on the Executive's rights under that certain Agreement by and between the Executive and the Company dated as of December 31, 1992 (the "Other Agreement"); provided, however, that in the event of the Executive's termination of employment under circumstances that invoke Section 3 hereof, this Agreement shall govern solely for the purpose of providing the terms of all payments and additional benefits to which the Executive is entitled upon such termination if such payments and benefits are greater in the aggregate than those provided by the Other Agreement and any payments or benefits provided pursuant to the Other Agreement shall reduce the corresponding type of payments or benefits hereunder. The Other Agreement shall terminate and be of no further force or effect as of February 27, 2002. Notwithstanding the foregoing, and except as provided in the event that the Executive's employment is terminated prior to the occurrence of a Change in Control under the circumstances provided for in Section 3(a)(ii) and such circumstances also entitle Executive to payments and benefits under the Other Agreement, then, until the Change in Control occurs, the Executive will receive the payments and benefits to which he/she is entitled under such Other Agreement. Upon the occurrence of the Change in Control, the Company will pay to the Executive in cash the amount to which he/she is entitled to under this Agreement (reduced by the amounts already paid under the Other Agreement) in respect of cash payments and shall provide or increase any other noncash benefits to those provided for hereunder (after taking into Account noncash benefits, if any, provided under such Other Agreement). Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any Company plan or program of the Company or any other Employer shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement. 10. Successors; Binding Agreement, Assignment. (a) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business of the Company, by agreement to expressly, absolutely and unconditionally assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a material breach of this Agreement and shall entitle the Executive to terminate the Executive's employment with the Company or such successor for Good Reason immediately prior to or at any time after such succession. As used in this Agreement, "Company" shall mean (i) the Company as hereinbefore defined, and (ii) any successor to all the stock of the Company or to all or substantially all of the Company's business or assets which executes and delivers an agreement provided for in this Section 10(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, including any parent or subsidiary of such a successor. (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's estate or designated beneficiary. Neither this Agreement nor any right arising hereunder may be assigned or pledged by the Executive. 11. Notice. For purpose of this Agreement, notices and all other communications provided for in this Agreement or contemplated hereby shall be in writing and shall be deemed to have been duly given when personally delivered, delivered by a nationally recognized overnight delivery service or when mailed United States certified or registered mail, return receipt requested, postage prepaid, and addressed, in the case of the Company, to the Company at: Kerr-McGee Corporation 123 Robert S. Kerr Avenue P.O. Box 25861 Oklahoma City, Oklahoma 73125 Attention: Chief Executive Officer (with a copy to General Counsel) and in the case of the Executive, to the Executive at the address set forth on the execution page at the end hereof. Either party may designate a different address by giving notice of change of address in the manner provided above, except that notices of change of address shall be effective only upon receipt. 12. Confidentiality. (a) The Executive shall retain in confidence any and all confidential information concerning the Company and its respective business which is now known or hereafter becomes known to the Executive, except as otherwise required by law and except information (i) ascertainable or obtained from public information, (ii) received by the Executive at any time after the Executive's employment by the Company shall have terminated, from a third party not employed by or otherwise affiliated with the Company or (iii) which is or becomes known to the public by any means other than a breach of this Section 12. Upon the Termination of employment, the Executive will not take or keep any proprietary or confidential information or documentation belonging to the Company. (b) The Executive acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of this Section 12 would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement during the pendency of any dispute involving such Section and to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available. Upon the resolution of such dispute, any payments or benefits required by this Agreement which were suspended during the pendency of the dispute shall be paid or provided to the Executive if it is determined that no breach of this Section 12 occurred. This paragraph 12 shall survive the termination of this Agreement. 13. Release. In the event that the Company requests a release from the Executive, in the form attached hereto as Exhibit A, then as a condition to providing any payments or benefits under this Agreement, the Executive shall deliver such release. 14. Miscellaneous. No provision of this Agreement may be amended, altered, modified, waived or discharged unless such amendment, alteration, modification, waiver or discharge is agreed to in writing signed by the Executive and such officer of the Company as shall be specifically designated by the Committee or by the Board of Directors of the Company. No waiver by either party, at any time, of any breach by the other party of, or of compliance by the other party with, any condition or provision of this Agreement to be performed or complied with by such other party shall be deemed a waiver of any similar or dissimilar provision or condition of this Agreement or any other breach of or failure to comply with the same condition or provision at the same time or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 15. Severability. If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby. To the extent permitted by applicable law, each party hereto waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect. 16. Governing Law; Venue. The validity, interpretation, construction and performance of this Agreement shall be governed exclusively by the laws of the State of Delaware without giving effect to its conflict of laws rules. For purposes of jurisdiction and venue, the Company and each Employer hereby consents to jurisdiction and venue in any suit, action or proceeding with respect to this Agreement in any court of competent jurisdiction in the state in which Executive resides at the commencement of such suit, action or proceeding and waives any objection, challenge or dispute as to such jurisdiction or venue being proper. 17. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. KERR-MCGEE CORPORATION By: Gregory F. Pilcher Vice President, General Counsel and Corporate Secretary Luke R. Corbett 3801 Ridgewood Drive Edmond, OK 73013 Exhibit A RELEASE [___________] ("Executive"), for and in consideration of the payments and benefits that Executive shall receive under this Agreement, hereby executes the following General Release ("Release") and agrees as follows: 1. Executive, on behalf of Executive, Executive's agents, assignees, attorneys, successors, assigns, heirs and executors, to, and Executive does hereby fully and completely forever release the Company and its affiliates, predecessors and successors and all of their respective past and/or present officers, directors, partners, members, managing members, managers, Executives, agents, representatives, administrators, attorneys, insurers and fiduciaries in their individual and/or representative capacities (hereinafter collectively referred to as the "Releasees"), from any and all causes of action, suits, agreements, promises, damages, disputes, controversies, contentions, differences, judgments, claims, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, variances, trespasses, extents, executions and demands of any kind whatsoever, which Executive or Executive's heirs, executors, administrators, successors and assigns ever had, now have or may have against the Releasees or any of them, in law, admiralty or equity, whether known or unknown to Executive, for, upon, or by reason of, any matter, action, omission, course or thing whatsoever occurring up to the date this Release is signed by Executive, including, without limitation, in connection with or in relationship to Executive's employment or other service relationship with the Company or its affiliates, the termination of any such employment or service relationship and any applicable employment, compensatory or equity arrangement with the Company or its respective affiliates; provided that such released claims shall not include any claims to enforce Executive's rights under, or with respect to, this Release (such released claims are collectively referred to herein as the "Released Claims"). 2. Notwithstanding the generality of clause (1) above, the Released Claims include, without limitation, (a) any and all claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Civil Rights Act of 1971, the Civil Rights Act of 1991, the Fair Labor Standards Act, the Executive Retirement Income Security Act of 1974, the Americans with Disabilities Act, the Family and Medical Leave Act of 1993, and any and all other federal, state or local laws, statutes, rules and regulations pertaining to employment or otherwise, and (b) any claims for wrongful discharge, breach of contract, fraud, misrepresentation or any compensation claims, or any other claims under any statute, rule, regulation or under the common law, including compensatory damages, punitive damages, attorney's fees, costs, expenses and all claims for any other type of damage or relief. 3. This means that, by signing this Release, the Executive shall have waived any right to which the Executive may have had to bring a lawsuit or make any claim against the releasees based on any acts or omissions of the releasees up to the date of the signing of this Release. 4. Executive represents that he has read carefully and fully understands the terms of this Release, and that Executive has been advised to consult with an attorney and have had the opportunity to consult with an attorney prior to signing this Release. Executive acknowledges that he is executing this Release voluntarily and knowingly and that he has not relied on any representations, promises or agreements of any kind made to Executive in connection with Executive's decision to accept the terms of this Release, other than those set forth in this Release. Executive acknowledges that Executive has been given at least twenty-one (21) days to consider whether Executive wants to sign this Release and that the Age Discrimination in Employment Act gives Executive the right to revoke this Release within seven (7) days after it is signed, and Executive understands that he will not receive any payments due him under this Release until such seven (7) day revocation period (the "Revocation Period") has passed and then, only if Executive has not revoked this Release. To the extent Executive has executed this Release within less than twenty-one (21) days after its delivery to Executive, Executive hereby acknowledges that his decision to execute this Release prior to the expiration of such twenty-one (21) day period was entirely voluntary. KERR-MCGEE CORPORATION - ------------------------- ------------------------------ Executive Title: Name: EX-10 5 crouchagrmt.txt CONTINUITY AGREEMENT Exhibit 10.11 CONTINUITY AGREEMENT This Agreement (the "Agreement") is dated as of January 11, 2000 by and between Kerr-McGee Corporation, a Delaware corporation (the "Company"), and Kenneth W. Crouch (the "Executive"). WHEREAS, the Company's Board of Directors considers the continued services of key executives of the Company to be in the best interests of the Company and its stockholders; and WHEREAS, the Company's Board of Directors desires to assure, and has determined that it is appropriate and in the best interests of the Company and its stockholders to reinforce and encourage the continued attention and dedication of key executives of the Company to their duties of employment without personal distraction or conflict of interest in circumstances which could arise from the occurrence of a change in control of the Company; and WHEREAS, the Company's Board of Directors has authorized the Company to enter into continuity agreements with those key executives of the Company and any of its respective subsidiaries (all of such entities, together with the Company, are hereinafter referred to as an "Employer"), such agreements to set forth the severance compensation which the Company agrees under certain circumstances to pay such executives; and WHEREAS, the Executive is a key executive of an Employer and has been designated as an executive to be offered such a continuity compensation agreement with the Company. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Executive agree as follows: 1. Term. This Agreement shall become effective on the date hereof (the "Effective Date") and remain in effect until the third anniversary thereof; provided, however, that this Agreement shall automatically renew for an additional year on each successive anniversary of the Effective Date, unless an Employer informs the Executive, in writing, at least 180 days prior to the renewal date, that this Agreement shall not be renewed. The foregoing shall constitute the "Term" of this Agreement for purposes hereof. 2. Change in Control. No compensation or other benefit pursuant to Section 4 hereof shall be payable under this Agreement unless and until either (i) a Change in Control of the Company (as hereinafter defined) shall have occurred while the Executive is employed by an Employer and the Executive's employment by an Employer thereafter shall have terminated in accordance with Section 3 hereof or (ii) the Executive's employment by an Employer shall have terminated in accordance with Section 3(a)(ii) hereof prior to the occurrence of the Change in Control. For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred when, during the Term of this Agreement: (a) any person ("Person") as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as used in Section 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) of the Exchange Act but excluding the Company and any subsidiary and any employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as trustee), directly or indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities (other than indirectly as a result of the Company's redemption of its securities); or (b) the consummation of any merger or other business combination of the Company, sale of 50% or more of the Company's assets, liquidation or dissolution of the Company or combination of the foregoing transactions (the "Transactions") other than a Transaction immediately following which the shareholders of the Company and any trustee or fiduciary of any Company employee benefit plan immediately prior to the Transaction own at least 60% of the voting power, directly or indirectly, of (A) the surviving corporation in any such merger or other business combination; (B) the purchaser of or successor to the Company's assets; (C) both the surviving corporation and the purchaser in the event of any combination of Transactions; or (D) the parent company owning 100% of such surviving corporation, purchaser or both the surviving corporation and the purchaser, as the case may be; or (c) within any twenty-four month period, the persons who were directors immediately before the beginning of such period (the "Incumbent Directors") shall cease (for any reason other than death) to constitute at least a majority of the Board or the board of directors of a successor to the Company. For this purpose, any director who was not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who commenced or threatened to commence an election contest or proxy solicitation by or on behalf of a Person (other than the Board) or who has entered into an agreement to effect a Change in Control or expressed an intention to cause such a Change in Control); or (d) a majority of the members of the Board of Directors in office immediately prior to a proposed transaction determine by a written resolution that such proposed transaction, if taken, will be deemed a Change in Control and such proposed transaction is consummated. 3. Termination of Employment; Definitions. (a) Termination without Cause by the Company or for Good Reason by the Executive. (i) The Executive shall be entitled to the compensation provided for in Section 4 hereof, if within two years after a Change in Control, the Executive's employment by an Employer shall be terminated (A) by an Employer for any reason other than (I) the Executive's Disability or Retirement, (II) the Executive's death or (III) for Cause, or (B) by the Executive with Good Reason (all terms are as hereinafter defined), unless such termination occurs with the Executive's prior written consent expressly waiving the rights provided hereunder. (ii) In addition, the Executive shall be entitled to the compensation provided for in Section 4 hereof if, (A) in the event that an agreement is signed which, if consummated, would result in a Change of Control and, within 12 months thereafter, the Executive is terminated without Cause by the Company (other than on account of Executive's Death or Disability) or terminates employment with Good Reason prior to the Change in Control, (B) such termination is at the request or instigation of the acquiror or merger partner or otherwise in connection with the anticipated Change in Control, and (C) within said 12 month period, such Change in Control actually occurs. (b) Disability. For purposes of this Agreement, "Disability" shall mean the Executive's absence from the full-time performance of the Executive's duties (as such duties existed immediately prior to such absence) for 180 consecutive business days, when the Executive is disabled as a result of incapacity due to physical or mental illness. (c) Retirement. For purposes of this Agreement, "Retirement" shall mean the Executive's voluntary termination of employment pursuant to late, normal or early retirement under a pension plan sponsored by an Employer, as defined in such plan, but only if such retirement occurs prior to a termination by an Employer without Cause or by the Executive for Good Reason. (d) Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially all of his or her duties with an Employer (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to such Executive by the Board of Directors (the "Board") of the Company which specifically identifies the manner in which the Board believes that the Executive has not substantially performed his or her duties; (ii) the willful engaging by the Executive in gross misconduct which is materially and demonstrably injurious to the Company or any Employer; or (iii) the conviction of, or plea of guilty or nolo contendere to, a felony. Termination of the Executive for Cause shall be made by delivery to the Executive of a copy of a resolution duly adopted by the affirmative vote of not less than a three-fourths majority of the non-employee Directors of the Company or of the ultimate parent of the entity which caused the Change in Control (if the Company has become a subsidiary) at a meeting of such Directors called and held for such purpose, after 30 days prior written notice to the Executive specifying the basis for such termination and the particulars thereof and a reasonable opportunity for the Executive to cure or otherwise resolve the behavior in question prior to such meeting, finding that in the reasonable judgment of such Directors, the conduct or event set forth in any of clauses (i) through (iii) above has occurred and that such occurrence warrants the Executive's termination. (e) Good Reason. For purposes of this Agreement, "Good Reason" shall mean the occurrence, within the Term of this Agreement, of any of the following without the Executive's written consent expressly waiving the rights provided hereunder: (i) any material and adverse diminution in the Executive's duties or responsibilities with the Company (or any affiliate thereof) from those in effect immediately prior to the Change in Control; provided, however, that no such diminution shall be deemed to exist solely because of changes in Executive's duties, responsibilities or titles as a consequence of the Company ceasing to be a company with publicly-traded securities or becoming a wholly-owned subsidiary of another company; (ii) any reduction in the Executive's annual base salary or any adverse change in bonus opportunity or participation in cash bonus programs in effect immediately prior to the Change in Control; (iii) any requirement that Executive be based at a location more than 35 miles from the location at which the Executive was based immediately prior to the Change in Control (or a substantial increase in the amount of travel Executive is required to do because of a relocation of the executive offices); (iv) any failure by the Company to obtain from any successor to the Company an agreement reasonably satisfactory to the Executive to assume and perform this Agreement, as contemplated by Section 10(a) hereof; or (v) during the thirty-day period immediately following the first anniversary of the Change in Control, the voluntary termination of employment by the Executive for any reason or no reason at all; (vi) any amendment, reduction or termination of any benefit plan, program or arrangement, which has the effect of causing the Executive to have benefits which are not substantially similar, in the aggregate, to those benefits provided to the Executive immediately prior to the Change in Control. Notwithstanding the foregoing, in the event Executive provides the Company with a Notice of Termination (as defined below) referencing this Section 3(e) (with the exception of Section 3(e)(v)), the Company shall have 30 days thereafter in which to cure or resolve the behavior otherwise constituting Good Reason. Any good faith determination by Executive that Good Reason exists shall be presumed correct and shall be binding upon the Company. (f) Notice of Termination. Any purported termination of the Executive's employment (other than on account of Executive's death) with an Employer, if such termination occurs after the occurrence of a Change in Control or under circumstances specified under Section 3(a)(ii) above, shall be communicated by a Notice of Termination to the Executive, if such termination is by an Employer, or to an Employer, if such termination is by the Executive. For purposes of this Agreement, "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provisions so indicated; provided, however, that in connection with a termination for Good Reason under Section 3(e)(v), no details shall be necessary other than reference to such Section. For purposes of this Agreement, no purported termination of Executive's employment with an Employer shall be effective without such a Notice of Termination having been given. 4. Compensation Upon Termination After a Change in Control. Subject to Section 9 hereof, if within two years of a Change in Control, the Executive's employment by an Employer shall be terminated in accordance with Section 3(a) (the "Termination"), the Executive shall be entitled to the following payments and benefits: (a) Severance. The Company shall pay or cause to be paid to the Executive a cash severance amount equal to (i) three (3) times the sum of (A) the Executive's annual base salary on the date of the Change in Control (or, if higher, the annual base salary in effect immediately prior to the giving of the Notice of Termination) and (B) the higher of: (x) the average of the actual bonuses earned by the Executive in respect of the three years prior to the year in which the Change in Control occurs under the Company's incentive award program, or (y) the Executive's target bonus for the year of Termination, plus (ii) in lieu of continuation of any of the Executive's perquisites as provided to the Executive prior to the Change in Control (or, if greater, at the time of Termination), a cash payment equal to 7 percent of the Executive's annual base salary as in effect on the date of the Change in Control for each of the three (3) years following the date of Termination. This cash severance amount shall be payable in a lump sum. (b) Additional Payments and Benefits. The Executive shall also be entitled to: (i) a lump sum cash payment equal to the sum of (A) the Executive's accrued but unpaid annual base salary through the date of Termination, (B) the unpaid portion, if any, of bonuses previously earned by the Executive pursuant to the Company's Executive incentive award program, plus the pro rata portion of the bonus to be paid for the year in which the date of Termination occurs (calculated through the date of Termination), and (C) an amount, if any, equal to compensation previously deferred (excluding any qualified plan deferral) and any accrued vacation pay, in each case, in full satisfaction of Executive's rights thereto. (ii) a lump sum cash payment equal to the aggregate sum of (A) additional pension contributions in an amount equal to the Company's contributions under the Company's 401(k) plan, profit sharing or other savings pension plans (or such other qualified and nonqualified defined contribution pension plans as then in effect) for the three (3) year period following the date of Termination (the "Separation Period") (based on assumed rates of Executive's contributions at the level of participation in effect as of the last date Executive was permitted to participate); and (B) the difference between the discounted present value (i.e., lump sum value) of the annuity benefit the Executive is entitled to receive under the Company's qualified and nonqualified defined benefit retirement programs in which the Executive is a participant calculated through the date of Termination and the discounted present value (i.e., lump sum value) of the annuity benefit the Executive would be entitled to receive under such retirement programs calculated after adding an additional five years of credit to age and service up to a maximum of age 65 as if the executive had been paid at the rate used to calculate the payments under Section 4(a), provided that the additional credits added with respect to each retirement program shall not exceed five years when added to any additional credits already provided by the terms of the such programs in respect of the Termination covered hereby. (iii) continued medical, dental, vision, and life insurance coverage (excluding accident, death, and disability insurance) for the Executive and the Executive's eligible dependents or, to the extent such coverage is not commercially available, such other arrangements reasonably acceptable to the Executive, on the same basis as in effect prior to the Change in Control or the Executive's Termination, whichever is deemed to provide for more substantial benefits, for a period ending on the earlier of (A) the end of the Separation Period or (B) the commencement of comparable coverage by the Executive with a subsequent employer; (iv) unless it would adversely affect the Company's ability to use pooling of interest accounting in a Change in Control transaction in which such accounting is intended to be used, immediate 100% vesting of all outstanding stock options, stock appreciation rights and restricted stock granted or issued by any Employer to the extent not previously vested on or following the Change of Control; and (v) all other accrued or vested benefits in accordance with the terms of the applicable plan (with an offset for any amounts paid under Section 4(b)(i)(C), above). All lump sum payments under this Section 4 shall be paid within 15 business days after Executive's date of Termination, provided, however, that such payment shall be made 30 days after Termination in the event that the Company requires the Executive to sign a release at the time of Termination. Discounted present value (i.e., lump sum value) for purposes of subsection (ii) above shall be calculated using a discount factor equal to one percentage point below the rate of interest, per annum, publicly announced by The Chase Manhattan Bank, N.A. as its prime rate in effect at its principal office in New York City, and using the actuarial factors set forth in the defined benefit retirement program. (c) Outplacement. If so requested by the Executive, outplacement services shall be provided by a professional outplacement provider selected by Executive; provided, however, that such outplacement services shall be provided the Executive at an aggregate total cost to the Company of not more than ten (10) percent of such Executive's annual base salary. (d) Withholding. Payments and benefits provided pursuant to this Section 4 shall be subject to any applicable payroll and other taxes required to be withheld. 5. Compensation Upon Termination for Death, Disability or Retirement. If an Executive's employment is terminated by reason of Death, Disability or Retirement prior to any other termination, Executive will receive: (a) the sum of (i) Executive's accrued but unpaid salary through the date of Termination, (ii) the pro rata portion of the Executive's target bonus for the year of Executive's Death or Disability (calculated through the date of Termination), and (iii) an amount equal to any compensation previously deferred and any accrued vacation pay; and (b) other accrued or vested benefits in accordance with the terms of the applicable plan (with an offset for any amounts paid under item (a)(iii), above). 6. Excess Parachute Payments. (a) (i) If it is determined (as hereafter provided) that any payment or distribution by the Company or any Employer to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a "Severance Payment"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) by reason of being "contingent on a change in ownership or control" of the Company, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such excise tax (such tax or taxes, together with any such interest and penalties, are hereafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment or payments (a "Gross-Up Payment") in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Severance Payments. (ii) Subject to the provisions of Section 6(a)(i) hereof, all determinations required to be made under this Section 6, including whether an Excise Tax is payable by the Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by the nationally recognized firm of certified public accountants (the "Accounting Firm") used by the Company prior to the Change in Control (or, if such Accounting Firm declines to serve, the Accounting Firm shall be a nationally recognized firm of certified public accountants selected by the Executive). The Accounting Firm shall be directed by the Company or the Executive to submit its preliminary determination and detailed supporting calculations to both the Company and the Executive within 15 calendar days after the Termination Date, if applicable, and any other such time or times as may be requested by the Company or the Executive. If the Accounting Firm determines that any Excise Tax is payable by the Executive, the Company shall pay the required Gross-Up Payment to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall, at the same time as it makes such determination, furnish the Executive with an opinion that he has substantial authority not to report any Excise Tax on his/her federal, state, local income or other tax return. Any determination by the Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon the Company and the Executive absent a contrary determination by the Internal Revenue Services or a court of competent jurisdiction; provided, however, that no such determination shall eliminate or reduce the Company's obligation to provide any Gross-Up Payment that shall be due as a result of such contrary determination. As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (an "Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to Section 6(a) hereof and the Executive thereafter is required to make a payment of any Excise Tax, the Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and the Executive as promptly as possible. Any such Underpayment shall be promptly paid by the Company to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations. (iii) The federal, state and local income or other tax returns filed by theExecutive (or any filing made by a consolidated tax group which includes the Company) shall be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by the Executive. The Executive shall make proper payment of the amount of any Excise Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his/her federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior to the filing of the Executive's federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, the Executive shall within five business days pay to the Company the amount of such reduction. (iv) The Company and the Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determination contemplated by Section 6(a) hereof. (v) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Sections 6(a)(ii) and (iv) hereof shall be borne by the Company. If such fees and expenses are initially advanced by the Executive, the Company shall reimburse the Executive the full amount of such fees and expenses within five business days after receipt from the Executive of a statement therefor and reasonable evidence of his/her payment thereof. (b) In the event that the Internal Revenue Service claims that any payment or benefit received under this Agreement constitutes an "excess parachute payment," within the meaning of Section 280G(b)(1) of the Code, the Executive shall notify the Company in writing of such claim. Such notification shall be given as soon as practicable but no later than 10 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30 day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and reasonably satisfactory to the Executive; (iii) cooperate with the Company in good faith in order to effectively contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including, but not limited to, additional interest and penalties and related legal, consulting or other similar fees) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for and against any Excise Tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. (c) The Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or other tax (including interest and penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that if the Executive is required to extend the statute of limitations to enable the Company to contest such claim, the Executive may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a corporate deduction would be disallowed pursuant to Section 280G of the Code and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. In addition, no position may be taken nor any final resolution be agreed to by the Company without the Executive's consent if such position or resolution could reasonably be expected to adversely affect the Executive (including any other tax position of the Executive unrelated to matters covered hereby). (d) If, after the receipt by the Executive of an amount advanced by the Company in connection with the contest of the Excise Tax claim, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto); provided, however, if the amount of that refund exceeds the amount advanced by the Company or it is otherwise determined for any reason that additional amounts could be paid to the Named Executive without incurring any Excise Tax, any such amount will be promptly paid by the Company to the named Executive (or shall be applied to reduce any amount that Executive would otherwise be required to pay the Company). If, after the receipt by the Executive of an amount advanced by the Company in connection with an Excise Tax claim, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest the denial of such refund prior to the expiration of 30 days after such determination, such advance shall be forgiven and shall not be required to be repaid and shall be deemed to be in consideration for services rendered after the date of the Termination. 7. Expenses. In addition to all other amounts payable to the Executive under this Agreement, the Company shall pay or reimburse the Executive for reasonable legal fees (including without limitation, any and all court costs and reasonable attorneys' fees and expenses) incurred by the Executive in connection with or as a result of any claim, action or proceeding brought by the Company or the Executive with respect to or arising out of this Agreement or any provision hereof; provided, however, that the Company shall have no obligation to pay any such legal fees, if (i) in the case of an action brought by the Executive, the Company is successful in establishing with the court that the Executive's action was frivolous or otherwise without any reasonable legal or factual basis; or (ii) in connection with any such claim, action or proceeding arising out of Section 12 of this Agreement. 8. Obligations Absolute; Non-Exclusivity of Rights; Joint Several Liability. (a) The obligations of the Company to make the payments to the Executive, and to make the arrangements, provided for herein shall be absolute and unconditional and shall not be reduced by any circumstances, including without limitation any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or any third party at any time. (b) Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any other Employer and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any agreements with the Company or any other Employer. (c) Each entity included in the definition of "Employer" and any successors or assigns shall be joint and severally liable with the Company under this Agreement. 9. Not an Employment Agreement; Effect On Other Rights. (a) This Agreement is not, and nothing herein shall be deemed to create, a contract of employment between the Executive and the Company. The Company may terminate the employment of the Executive by the Company at any time, subject to the terms of this Agreement and/or any employment agreement or arrangement between the Company and the Executive that may then be in effect. (b) This Agreement supersedes all prior agreements covering change in control or any other subject matter covered by this Agreement and Executive hereby represents that the Executive has no other oral or written representations, understandings or agreements with the Company or any of its officers, directors or representatives covering any such subject matter and agrees that any and all prior written agreements relating to such subject matter shall be terminated effective as of the date of execution of this Agreement and shall be of no further force or effect. Notwithstanding the foregoing, and except as provided in the last sentence of this paragraph, this Agreement shall not have any effect on the Executive's rights under that certain Agreement by and between the Executive and the Company dated as of January 6, 2000 (the "Other Agreement"); provided, however, that in the event of the Executive's termination of employment under circumstances that invoke Section 3 hereof, this Agreement shall govern solely for the purpose of providing the terms of all payments and additional benefits to which the Executive is entitled upon such termination if such payments and benefits are greater in the aggregate than those provided by the Other Agreement and any payments or benefits provided pursuant to the Other Agreement shall reduce the corresponding type of payments or benefits hereunder. The Other Agreement shall terminate and be of no further force or effect as of February 27, 2002. Notwithstanding the foregoing, and except as provided in the event that the Executive's employment is terminated prior to the occurrence of a Change in Control under the circumstances provided for in Section 3(a)(ii) and such circumstances also entitle Executive to payments and benefits under the Other Agreement, then, until the Change in Control occurs, the Executive will receive the payments and benefits to which he/she is entitled under such Other Agreement. Upon the occurrence of the Change in Control, the Company will pay to the Executive in cash the amount to which he/she is entitled to under this Agreement (reduced by the amounts already paid under the Other Agreement) in respect of cash payments and shall provide or increase any other noncash benefits to those provided for hereunder (after taking into Account noncash benefits, if any, provided under such Other Agreement). Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any Company plan or program of the Company or any other Employer shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement. 10. Successors; Binding Agreement, Assignment. (a) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business of the Company, by agreement to expressly, absolutely and unconditionally assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a material breach of this Agreement and shall entitle the Executive to terminate the Executive's employment with the Company or such successor for Good Reason immediately prior to or at any time after such succession. As used in this Agreement, "Company" shall mean (i) the Company as hereinbefore defined, and (ii) any successor to all the stock of the Company or to all or substantially all of the Company's business or assets which executes and delivers an agreement provided for in this Section 10(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, including any parent or subsidiary of such a successor. (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's estate or designated beneficiary. Neither this Agreement nor any right arising hereunder may be assigned or pledged by the Executive. 11. Notice. For purpose of this Agreement, notices and all other communications provided for in this Agreement or contemplated hereby shall be in writing and shall be deemed to have been duly given when personally delivered, delivered by a nationally recognized overnight delivery service or when mailed United States certified or registered mail, return receipt requested, postage prepaid, and addressed, in the case of the Company, to the Company at: Kerr-McGee Corporation 123 Robert S. Kerr Avenue P.O. Box 25861 Oklahoma City, Oklahoma 73125 Attention: Chief Executive Officer (with a copy to General Counsel) and in the case of the Executive, to the Executive at the address set forth on the execution page at the end hereof. Either party may designate a different address by giving notice of change of address in the manner provided above, except that notices of change of address shall be effective only upon receipt. 12. Confidentiality. (a) The Executive shall retain in confidence any and all confidential information concerning the Company and its respective business which is now known or hereafter becomes known to the Executive, except as otherwise required by law and except information (i) ascertainable or obtained from public information, (ii) received by the Executive at any time after the Executive's employment by the Company shall have terminated, from a third party not employed by or otherwise affiliated with the Company or (iii) which is or becomes known to the public by any means other than a breach of this Section 12. Upon the Termination of employment, the Executive will not take or keep any proprietary or confidential information or documentation belonging to the Company. (b) The Executive acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of this Section 12 would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement during the pendency of any dispute involving such Section and to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available. Upon the resolution of such dispute, any payments or benefits required by this Agreement which were suspended during the pendency of the dispute shall be paid or provided to the Executive if it is determined that no breach of this Section 12 occurred. This paragraph 12 shall survive the termination of this Agreement. 13. Release. In the event that the Company requests a release from the Executive, in the form attached hereto as Exhibit A, then as a condition to providing any payments or benefits under this Agreement, the Executive shall deliver such release. 14. Miscellaneous. No provision of this Agreement may be amended, altered, modified, waived or discharged unless such amendment, alteration, modification, waiver or discharge is agreed to in writing signed by the Executive and such officer of the Company as shall be specifically designated by the Committee or by the Board of Directors of the Company. No waiver by either party, at any time, of any breach by the other party of, or of compliance by the other party with, any condition or provision of this Agreement to be performed or complied with by such other party shall be deemed a waiver of any similar or dissimilar provision or condition of this Agreement or any other breach of or failure to comply with the same condition or provision at the same time or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 15. Severability. If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby. To the extent permitted by applicable law, each party hereto waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect. 16. Governing Law; Venue. The validity, interpretation, construction and performance of this Agreement shall be governed exclusively by the laws of the State of Delaware without giving effect to its conflict of laws rules. For purposes of jurisdiction and venue, the Company and each Employer hereby consents to jurisdiction and venue in any suit, action or proceeding with respect to this Agreement in any court of competent jurisdiction in the state in which Executive resides at the commencement of such suit, action or proceeding and waives any objection, challenge or dispute as to such jurisdiction or venue being proper. 17. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. KERR-MCGEE CORPORATION By: Luke R. Corbett Chairman and Chief Executive Officer Kenneth W. Crouch 9523 Champions Cove Drive Springs, TX 77379 Exhibit A RELEASE [_________] ("Executive"), for and in consideration of the payments and benefits that Executive shall receive under this Agreement, hereby executes the following General Release ("Release") and agrees as follows: 1. Executive, on behalf of Executive, Executive's agents, assignees, attorneys, successors, assigns, heirs and executors, to, and Executive does hereby fully and completely forever release the Company and its affiliates, predecessors and successors and all of their respective past and/or present officers, directors, partners, members, managing members, managers, Executives, agents, representatives, administrators, attorneys, insurers and fiduciaries in their individual and/or representative capacities (hereinafter collectively referred to as the "Releasees"), from any and all causes of action, suits, agreements, promises, damages, disputes, controversies, contentions, differences, judgments, claims, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, variances, trespasses, extents, executions and demands of any kind whatsoever, which Executive or Executive's heirs, executors, administrators, successors and assigns ever had, now have or may have against the Releasees or any of them, in law, admiralty or equity, whether known or unknown to Executive, for, upon, or by reason of, any matter, action, omission, course or thing whatsoever occurring up to the date this Release is signed by Executive, including, without limitation, in connection with or in relationship to Executive's employment or other service relationship with the Company or its affiliates, the termination of any such employment or service relationship and any applicable employment, compensatory or equity arrangement with the Company or its respective affiliates; provided that such released claims shall not include any claims to enforce Executive's rights under, or with respect to, this Release (such released claims are collectively referred to herein as the "Released Claims"). 2. Notwithstanding the generality of clause (1) above, the Released Claims include, without limitation, (a) any and all claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Civil Rights Act of 1971, the Civil Rights Act of 1991, the Fair Labor Standards Act, the Executive Retirement Income Security Act of 1974, the Americans with Disabilities Act, the Family and Medical Leave Act of 1993, and any and all other federal, state or local laws, statutes, rules and regulations pertaining to employment or otherwise, and (b) any claims for wrongful discharge, breach of contract, fraud, misrepresentation or any compensation claims, or any other claims under any statute, rule, regulation or under the common law, including compensatory damages, punitive damages, attorney's fees, costs, expenses and all claims for any other type of damage or relief. 3. This means that, by signing this Release, the Executive shall have waived any right to which the Executive may have had to bring a lawsuit or make any claim against the releasees based on any acts or omissions of the releasees up to the date of the signing of this Release. 4. Executive represents that he has read carefully and fully understands the terms of this Release, and that Executive has been advised to consult with an attorney and have had the opportunity to consult with an attorney prior to signing this Release. Executive acknowledges that he is executing this Release voluntarily and knowingly and that he has not relied on any representations, promises or agreements of any kind made to Executive in connection with Executive's decision to accept the terms of this Release, other than those set forth in this Release. Executive acknowledges that Executive has been given at least twenty-one (21) days to consider whether Executive wants to sign this Release and that the Age Discrimination in Employment Act gives Executive the right to revoke this Release within seven (7) days after it is signed, and Executive understands that he will not receive any payments due him under this Release until such seven (7) day revocation period (the "Revocation Period") has passed and then, only if Executive has not revoked this Release. To the extent Executive has executed this Release within less than twenty-one (21) days after its delivery to Executive, Executive hereby acknowledges that his decision to execute this Release prior to the expiration of such twenty-one (21) day period was entirely voluntary. KERR-MCGEE CORPORATION - ------------------------- ------------------------------ Executive Title: Name: EX-10 6 wohleberagrmt.txt CONTINUITY AGREEMENT Exhibit 10.12 CONTINUITY AGREEMENT This Agreement (the "Agreement") is dated as of January 11, 2000 by and between Kerr-McGee Corporation, a Delaware corporation (the "Company"), and Robert M. Wohleber (the "Executive"). WHEREAS, the Company's Board of Directors considers the continued services of key executives of the Company to be in the best interests of the Company and its stockholders; and WHEREAS, the Company's Board of Directors desires to assure, and has determined that it is appropriate and in the best interests of the Company and its stockholders to reinforce and encourage the continued attention and dedication of key executives of the Company to their duties of employment without personal distraction or conflict of interest in circumstances which could arise from the occurrence of a change in control of the Company; and WHEREAS, the Company's Board of Directors has authorized the Company to enter into continuity agreements with those key executives of the Company and any of its respective subsidiaries (all of such entities, together with the Company, are hereinafter referred to as an "Employer"), such agreements to set forth the severance compensation which the Company agrees under certain circumstances to pay such executives; and WHEREAS, the Executive is a key executive of an Employer and has been designated as an executive to be offered such a continuity compensation agreement with the Company. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Executive agree as follows: 1. Term. This Agreement shall become effective on the date hereof (the "Effective Date") and remain in effect until the third anniversary thereof; provided, however, that this Agreement shall automatically renew for an additional year on each successive anniversary of the Effective Date, unless an Employer informs the Executive, in writing, at least 180 days prior to the renewal date, that this Agreement shall not be renewed. The foregoing shall constitute the "Term" of this Agreement for purposes hereof. 2. Change in Control. No compensation or other benefit pursuant to Section 4 hereof shall be payable under this Agreement unless and until either (i) a Change in Control of the Company (as hereinafter defined) shall have occurred while the Executive is employed by an Employer and the Executive's employment by an Employer thereafter shall have terminated in accordance with Section 3 hereof or (ii) the Executive's employment by an Employer shall have terminated in accordance with Section 3(a)(ii) hereof prior to the occurrence of the Change in Control. For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred when, during the Term of this Agreement: (a) any person ("Person") as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as used in Section 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) of the Exchange Act but excluding the Company and any subsidiary and any employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as trustee), directly or indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities (other than indirectly as a result of the Company's redemption of its securities); or (b) the consummation of any merger or other business combination of the Company, sale of 50% or more of the Company's assets, liquidation or dissolution of the Company or combination of the foregoing transactions (the "Transactions") other than a Transaction immediately following which the shareholders of the Company and any trustee or fiduciary of any Company employee benefit plan immediately prior to the Transaction own at least 60% of the voting power, directly or indirectly, of (A) the surviving corporation in any such merger or other business combination; (B) the purchaser of or successor to the Company's assets; (C) both the surviving corporation and the purchaser in the event of any combination of Transactions; or (D) the parent company owning 100% of such surviving corporation, purchaser or both the surviving corporation and the purchaser, as the case may be; or (c) within any twenty-four month period, the persons who were directors immediately before the beginning of such period (the "Incumbent Directors") shall cease (for any reason other than death) to constitute at least a majority of the Board or the board of directors of a successor to the Company. For this purpose, any director who was not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who commenced or threatened to commence an election contest or proxy solicitation by or on behalf of a Person (other than the Board) or who has entered into an agreement to effect a Change in Control or expressed an intention to cause such a Change in Control); or (d) a majority of the members of the Board of Directors in office immediately prior to a proposed transaction determine by a written resolution that such proposed transaction, if taken, will be deemed a Change in Control and such proposed transaction is consummated. 3. Termination of Employment; Definitions. (a) Termination without Cause by the Company or for Good Reason by the Executive. (i) The Executive shall be entitled to the compensation provided for in Section 4 hereof, if within two years after a Change in Control, the Executive's employment by an Employer shall be terminated (A) by an Employer for any reason other than (I) the Executive's Disability or Retirement, (II) the Executive's death or (III) for Cause, or (B) by the Executive with Good Reason (all terms are as hereinafter defined), unless such termination occurs with the Executive's prior written consent expressly waiving the rights provided hereunder. (ii) In addition, the Executive shall be entitled to the compensation provided for in Section 4 hereof if, (A) in the event that an agreement is signed which, if consummated, would result in a Change of Control and, within 12 months thereafter, the Executive is terminated without Cause by the Company (other than on account of Executive's Death or Disability) or terminates employment with Good Reason prior to the Change in Control, (B) such termination is at the request or instigation of the acquiror or merger partner or otherwise in connection with the anticipated Change in Control, and (C) within said 12 month period, such Change in Control actually occurs. (b) Disability. For purposes of this Agreement, "Disability" shall mean the Executive's absence from the full-time performance of the Executive's duties (as such duties existed immediately prior to such absence) for 180 consecutive business days, when the Executive is disabled as a result of incapacity due to physical or mental illness. (c) Retirement. For purposes of this Agreement, "Retirement" shall mean the Executive's voluntary termination of employment pursuant to late, normal or early retirement under a pension plan sponsored by an Employer, as defined in such plan, but only if such retirement occurs prior to a termination by an Employer without Cause or by the Executive for Good Reason. (d) Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially all of his or her duties with an Employer (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to such Executive by the Board of Directors (the "Board") of the Company which specifically identifies the manner in which the Board believes that the Executive has not substantially performed his or her duties; (ii) the willful engaging by the Executive in gross misconduct which is materially and demonstrably injurious to the Company or any Employer; or (iii) the conviction of, or plea of guilty or nolo contendere to, a felony. Termination of the Executive for Cause shall be made by delivery to the Executive of a copy of a resolution duly adopted by the affirmative vote of not less than a three-fourths majority of the non-employee Directors of the Company or of the ultimate parent of the entity which caused the Change in Control (if the Company has become a subsidiary) at a meeting of such Directors called and held for such purpose, after 30 days prior written notice to the Executive specifying the basis for such termination and the particulars thereof and a reasonable opportunity for the Executive to cure or otherwise resolve the behavior in question prior to such meeting, finding that in the reasonable judgment of such Directors, the conduct or event set forth in any of clauses (i) through (iii) above has occurred and that such occurrence warrants the Executive's termination. (e) Good Reason. For purposes of this Agreement, "Good Reason" shall mean the occurrence, within the Term of this Agreement, of any of the following without the Executive's written consent expressly waiving the rights provided hereunder: (i) any material and adverse diminution in the Executive's duties or responsibilities with the Company (or any affiliate thereof) from those in effect immediately prior to the Change in Control; provided, however, that no such diminution shall be deemed to exist solely because of changes in Executive's duties, responsibilities or titles as a consequence of the Company ceasing to be a company with publicly-traded securities or becoming a wholly-owned subsidiary of another company; (ii) any reduction in the Executive's annual base salary or any adverse change in bonus opportunity or participation in cash bonus programs in effect immediately prior to the Change in Control; (iii) any requirement that Executive be based at a location more than 35 miles from the location at which the Executive was based immediately prior to the Change in Control (or a substantial increase in the amount of travel Executive is required to do because of a relocation of the executive offices); (iv) any failure by the Company to obtain from any successor to the Company an agreement reasonably satisfactory to the Executive to assume and perform this Agreement, as contemplated by Section 10(a) hereof; or (v) during the thirty-day period immediately following the first anniversary of the Change in Control, the voluntary termination of employment by the Executive for any reason or no reason at all; (vi) any amendment, reduction or termination of any benefit plan, program or arrangement, which has the effect of causing the Executive to have benefits which are not substantially similar, in the aggregate, to those benefits provided to the Executive immediately prior to the Change in Control. Notwithstanding the foregoing, in the event Executive provides the Company with a Notice of Termination (as defined below) referencing this Section 3(e) (with the exception of Section 3(e)(v)), the Company shall have 30 days thereafter in which to cure or resolve the behavior otherwise constituting Good Reason. Any good faith determination by Executive that Good Reason exists shall be presumed correct and shall be binding upon the Company. (f) Notice of Termination. Any purported termination of the Executive's employment (other than on account of Executive's death) with an Employer, if such termination occurs after the occurrence of a Change in Control or under circumstances specified under Section 3(a)(ii) above, shall be communicated by a Notice of Termination to the Executive, if such termination is by an Employer, or to an Employer, if such termination is by the Executive. For purposes of this Agreement, "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provisions so indicated; provided, however, that in connection with a termination for Good Reason under Section 3(e)(v), no details shall be necessary other than reference to such Section. For purposes of this Agreement, no purported termination of Executive's employment with an Employer shall be effective without such a Notice of Termination having been given. 4. Compensation Upon Termination After a Change in Control. Subject to Section 9 hereof, if within two years of a Change in Control, the Executive's employment by an Employer shall be terminated in accordance with Section 3(a) (the "Termination"), the Executive shall be entitled to the following payments and benefits: (a) Severance. The Company shall pay or cause to be paid to the Executive a cash severance amount equal to (i) three (3) times the sum of (A) the Executive's annual base salary on the date of the Change in Control (or, if higher, the annual base salary in effect immediately prior to the giving of the Notice of Termination) and (B) the higher of: (x) the average of the actual bonuses earned by the Executive in respect of the three years prior to the year in which the Change in Control occurs under the Company's incentive award program, or (y) the Executive's target bonus for the year of Termination, plus (ii) in lieu of continuation of any of the Executive's perquisites as provided to the Executive prior to the Change in Control (or, if greater, at the time of Termination), a cash payment equal to 7 percent of the Executive's annual base salary as in effect on the date of the Change in Control for each of the three (3) years following the date of Termination. This cash severance amount shall be payable in a lump sum. (b) Additional Payments and Benefits. The Executive shall also be entitled to: (i) a lump sum cash payment equal to the sum of (A) the Executive's accrued but unpaid annual base salary through the date of Termination, (B) the unpaid portion, if any, of bonuses previously earned by the Executive pursuant to the Company's Executive incentive award program, plus the pro rata portion of the bonus to be paid for the year in which the date of Termination occurs (calculated through the date of Termination), and (C) an amount, if any, equal to compensation previously deferred (excluding any qualified plan deferral) and any accrued vacation pay, in each case, in full satisfaction of Executive's rights thereto. (ii) a lump sum cash payment equal to the aggregate sum of (A) additional pension contributions in an amount equal to the Company's contributions under the Company's 401(k) plan, profit sharing or other savings pension plans (or such other qualified and nonqualified defined contribution pension plans as then in effect) for the three (3) year period following the date of Termination (the "Separation Period") (based on assumed rates of Executive's contributions at the level of participation in effect as of the last date Executive was permitted to participate); and (B) the difference between the discounted present value (i.e., lump sum value) of the annuity benefit the Executive is entitled to receive under the Company's qualified and nonqualified defined benefit retirement programs in which the Executive is a participant calculated through the date of Termination and the discounted present value (i.e., lump sum value) of the annuity benefit the Executive would be entitled to receive under such retirement programs calculated after adding an additional five years of credit to age and service up to a maximum of age 65 as if the executive had been paid at the rate used to calculate the payments under Section 4(a), provided that the additional credits added with respect to each retirement program shall not exceed five years when added to any additional credits already provided by the terms of the such programs in respect of the Termination covered hereby. (iii) continued medical, dental, vision, and life insurance coverage (excluding accident, death, and disability insurance) for the Executive and the Executive's eligible dependents or, to the extent such coverage is not commercially available, such other arrangements reasonably acceptable to the Executive, on the same basis as in effect prior to the Change in Control or the Executive's Termination, whichever is deemed to provide for more substantial benefits, for a period ending on the earlier of (A) the end of the Separation Period or (B) the commencement of comparable coverage by the Executive with a subsequent employer; (iv) unless it would adversely affect the Company's ability to use pooling of interest accounting in a Change in Control transaction in which such accounting is intended to be used, immediate 100% vesting of all outstanding stock options, stock appreciation rights and restricted stock granted or issued by any Employer to the extent not previously vested on or following the Change of Control; and (v) all other accrued or vested benefits in accordance with the terms of the applicable plan (with an offset for any amounts paid under Section 4(b)(i)(C), above). All lump sum payments under this Section 4 shall be paid within 15 business days after Executive's date of Termination, provided, however, that such payment shall be made 30 days after Termination in the event that the Company requires the Executive to sign a release at the time of Termination. Discounted present value (i.e., lump sum value) for purposes of subsection (ii) above shall be calculated using a discount factor equal to one percentage point below the rate of interest, per annum, publicly announced by The Chase Manhattan Bank, N.A. as its prime rate in effect at its principal office in New York City, and using the actuarial factors set forth in the defined benefit retirement program. (c) Outplacement. If so requested by the Executive, outplacement services shall be provided by a professional outplacement provider selected by Executive; provided, however, that such outplacement services shall be provided the Executive at an aggregate total cost to the Company of not more than ten (10) percent of such Executive's annual base salary. (d) Withholding. Payments and benefits provided pursuant to this Section 4 shall be subject to any applicable payroll and other taxes required to be withheld. 5. Compensation Upon Termination for Death, Disability or Retirement. If an Executive's employment is terminated by reason of Death, Disability or Retirement prior to any other termination, Executive will receive: (a) the sum of (i) Executive's accrued but unpaid salary through the date of Termination, (ii) the pro rata portion of the Executive's target bonus for the year of Executive's Death or Disability (calculated through the date of Termination), and (iii) an amount equal to any compensation previously deferred and any accrued vacation pay; and (b) other accrued or vested benefits in accordance with the terms of the applicable plan (with an offset for any amounts paid under item (a)(iii), above). 6. Excess Parachute Payments. (a) (i) If it is determined (as hereafter provided) that any payment or distribution by the Company or any Employer to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a "Severance Payment"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) by reason of being "contingent on a change in ownership or control" of the Company, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such excise tax (such tax or taxes, together with any such interest and penalties, are hereafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment or payments (a "Gross-Up Payment") in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Severance Payments. (ii) Subject to the provisions of Section 6(a)(i) hereof, all determinations required to be made under this Section 6, including whether an Excise Tax is payable by the Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by the nationally recognized firm of certified public accountants (the "Accounting Firm") used by the Company prior to the Change in Control (or, if such Accounting Firm declines to serve, the Accounting Firm shall be a nationally recognized firm of certified public accountants selected by the Executive). The Accounting Firm shall be directed by the Company or the Executive to submit its preliminary determination and detailed supporting calculations to both the Company and the Executive within 15 calendar days after the Termination Date, if applicable, and any other such time or times as may be requested by the Company or the Executive. If the Accounting Firm determines that any Excise Tax is payable by the Executive, the Company shall pay the required Gross-Up Payment to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall, at the same time as it makes such determination, furnish the Executive with an opinion that he has substantial authority not to report any Excise Tax on his/her federal, state, local income or other tax return. Any determination by the Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon the Company and the Executive absent a contrary determination by the Internal Revenue Services or a court of competent jurisdiction; provided, however, that no such determination shall eliminate or reduce the Company's obligation to provide any Gross-Up Payment that shall be due as a result of such contrary determination. As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (an "Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to Section 6(a) hereof and the Executive thereafter is required to make a payment of any Excise Tax, the Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and the Executive as promptly as possible. Any such Underpayment shall be promptly paid by the Company to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations. (iii) The federal, state and local income or other tax returns filed by the Executive (or any filing made by a consolidated tax group which includes the Company) shall be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by the Executive. The Executive shall make proper payment of the amount of any Excise Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his/her federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior to the filing of the Executive's federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, the Executive shall within five business days pay to the Company the amount of such reduction. (iv) The Company and the Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determination contemplated by Section 6(a) hereof. (v) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Sections 6(a)(ii) and (iv) hereof shall be borne by the Company. If such fees and expenses are initially advanced by the Executive, the Company shall reimburse the Executive the full amount of such fees and expenses within five business days after receipt from the Executive of a statement therefor and reasonable evidence of his/her payment thereof. (b) In the event that the Internal Revenue Service claims that any payment or benefit received under this Agreement constitutes an "excess parachute payment," within the meaning of Section 280G(b)(1) of the Code, the Executive shall notify the Company in writing of such claim. Such notification shall be given as soon as practicable but no later than 10 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30 day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and reasonably satisfactory to the Executive; (iii) cooperate with the Company in good faith in order to effectively contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including, but not limited to, additional interest and penalties and related legal, consulting or other similar fees) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for and against any Excise Tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. (c) The Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or other tax (including interest and penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that if the Executive is required to extend the statute of limitations to enable the Company to contest such claim, the Executive may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a corporate deduction would be disallowed pursuant to Section 280G of the Code and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. In addition, no position may be taken nor any final resolution be agreed to by the Company without the Executive's consent if such position or resolution could reasonably be expected to adversely affect the Executive (including any other tax position of the Executive unrelated to matters covered hereby). (d) If, after the receipt by the Executive of an amount advanced by the Company in connection with the contest of the Excise Tax claim, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto); provided, however, if the amount of that refund exceeds the amount advanced by the Company or it is otherwise determined for any reason that additional amounts could be paid to the Named Executive without incurring any Excise Tax, any such amount will be promptly paid by the Company to the named Executive (or shall be applied to reduce any amount that Executive would otherwise be required to pay the Company). If, after the receipt by the Executive of an amount advanced by the Company in connection with an Excise Tax claim, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest the denial of such refund prior to the expiration of 30 days after such determination, such advance shall be forgiven and shall not be required to be repaid and shall be deemed to be in consideration for services rendered after the date of the Termination. 7. Expenses. In addition to all other amounts payable to the Executive under this Agreement, the Company shall pay or reimburse the Executive for reasonable legal fees (including without limitation, any and all court costs and reasonable attorneys' fees and expenses) incurred by the Executive in connection with or as a result of any claim, action or proceeding brought by the Company or the Executive with respect to or arising out of this Agreement or any provision hereof; provided, however, that the Company shall have no obligation to pay any such legal fees, if (i) in the case of an action brought by the Executive, the Company is successful in establishing with the court that the Executive's action was frivolous or otherwise without any reasonable legal or factual basis; or (ii) in connection with any such claim, action or proceeding arising out of Section 12 of this Agreement. 8. Obligations Absolute; Non-Exclusivity of Rights; Joint Several Liability. (a) The obligations of the Company to make the payments to the Executive, and to make the arrangements, provided for herein shall be absolute and unconditional and shall not be reduced by any circumstances, including without limitation any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or any third party at any time. (b) Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any other Employer and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any agreements with the Company or any other Employer. (c) Each entity included in the definition of "Employer" and any successors or assigns shall be joint and severally liable with the Company under this Agreement. 9. Not an Employment Agreement; Effect On Other Rights. (a) This Agreement is not, and nothing herein shall be deemed to create, a contract of employment between the Executive and the Company. The Company may terminate the employment of the Executive by the Company at any time, subject to the terms of this Agreement and/or any employment agreement or arrangement between the Company and the Executive that may then be in effect. (b) This Agreement supersedes all prior agreements covering change in control or any other subject matter covered by this Agreement and Executive hereby represents that the Executive has no other oral or written representations, understandings or agreements with the Company or any of its officers, directors or representatives covering any such subject matter and agrees that any and all prior written agreements relating to such subject matter shall be terminated effective as of the date of execution of this Agreement and shall be of no further force or effect. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any Company plan or program of the Company or any other Employer shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement. 10. Successors; Binding Agreement, Assignment. (a) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business of the Company, by agreement to expressly, absolutely and unconditionally assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a material breach of this Agreement and shall entitle the Executive to terminate the Executive's employment with the Company or such successor for Good Reason immediately prior to or at any time after such succession. As used in this Agreement, "Company" shall mean (i) the Company as hereinbefore defined, and (ii) any successor to all the stock of the Company or to all or substantially all of the Company's business or assets which executes and delivers an agreement provided for in this Section 10(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, including any parent or subsidiary of such a successor. (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's estate or designated beneficiary. Neither this Agreement nor any right arising hereunder may be assigned or pledged by the Executive. 11. Notice. For purpose of this Agreement, notices and all other communications provided for in this Agreement or contemplated hereby shall be in writing and shall be deemed to have been duly given when personally delivered, delivered by a nationally recognized overnight delivery service or when mailed United States certified or registered mail, return receipt requested, postage prepaid, and addressed, in the case of the Company, to the Company at: Kerr-McGee Corporation 123 Robert S. Kerr Avenue P.O. Box 25861 Oklahoma City, Oklahoma 73125 Attention: Chief Executive Officer (with a copy to General Counsel) and in the case of the Executive, to the Executive at the address set forth on the execution page at the end hereof. Either party may designate a different address by giving notice of change of address in the manner provided above, except that notices of change of address shall be effective only upon receipt. 12. Confidentiality. (a) The Executive shall retain in confidence any and all confidential information concerning the Company and its respective business which is now known or hereafter becomes known to the Executive, except as otherwise required by law and except information (i) ascertainable or obtained from public information, (ii) received by the Executive at any time after the Executive's employment by the Company shall have terminated, from a third party not employed by or otherwise affiliated with the Company or (iii) which is or becomes known to the public by any means other than a breach of this Section 12. Upon the Termination of employment, the Executive will not take or keep any proprietary or confidential information or documentation belonging to the Company. (b) The Executive acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of this Section 12 would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement during the pendency of any dispute involving such Section and to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available. Upon the resolution of such dispute, any payments or benefits required by this Agreement which were suspended during the pendency of the dispute shall be paid or provided to the Executive if it is determined that no breach of this Section 12 occurred. This paragraph 12 shall survive the termination of this Agreement. 13. Release. In the event that the Company requests a release from the Executive, in the form attached hereto as Exhibit A, then as a condition to providing any payments or benefits under this Agreement, the Executive shall deliver such release. 14. Miscellaneous. No provision of this Agreement may be amended, altered, modified, waived or discharged unless such amendment, alteration, modification, waiver or discharge is agreed to in writing signed by the Executive and such officer of the Company as shall be specifically designated by the Committee or by the Board of Directors of the Company. No waiver by either party, at any time, of any breach by the other party of, or of compliance by the other party with, any condition or provision of this Agreement to be performed or complied with by such other party shall be deemed a waiver of any similar or dissimilar provision or condition of this Agreement or any other breach of or failure to comply with the same condition or provision at the same time or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 15. Severability. If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby. To the extent permitted by applicable law, each party hereto waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect. 16. Governing Law; Venue. The validity, interpretation, construction and performance of this Agreement shall be governed exclusively by the laws of the State of Delaware without giving effect to its conflict of laws rules. For purposes of jurisdiction and venue, the Company and each Employer hereby consents to jurisdiction and venue in any suit, action or proceeding with respect to this Agreement in any court of competent jurisdiction in the state in which Executive resides at the commencement of such suit, action or proceeding and waives any objection, challenge or dispute as to such jurisdiction or venue being proper. 17. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. KERR-MCGEE CORPORATION By: Luke R. Corbett Chairman and Chief Executive Officer Robert M. Wohleber 4201 W. Memorial Road, Apt. 4208 Oklahoma City, OK 73134 Exhibit A RELEASE [___________] ("Executive"), for and in consideration of the payments and benefits that Executive shall receive under this Agreement, hereby executes the following General Release ("Release") and agrees as follows: 1. Executive, on behalf of Executive, Executive's agents, assignees, attorneys, successors, assigns, heirs and executors, to, and Executive does hereby fully and completely forever release the Company and its affiliates, predecessors and successors and all of their respective past and/or present officers, directors, partners, members, managing members, managers, Executives, agents, representatives, administrators, attorneys, insurers and fiduciaries in their individual and/or representative capacities (hereinafter collectively referred to as the "Releasees"), from any and all causes of action, suits, agreements, promises, damages, disputes, controversies, contentions, differences, judgments, claims, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, variances, trespasses, extents, executions and demands of any kind whatsoever, which Executive or Executive's heirs, executors, administrators, successors and assigns ever had, now have or may have against the Releasees or any of them, in law, admiralty or equity, whether known or unknown to Executive, for, upon, or by reason of, any matter, action, omission, course or thing whatsoever occurring up to the date this Release is signed by Executive, including, without limitation, in connection with or in relationship to Executive's employment or other service relationship with the Company or its affiliates, the termination of any such employment or service relationship and any applicable employment, compensatory or equity arrangement with the Company or its respective affiliates; provided that such released claims shall not include any claims to enforce Executive's rights under, or with respect to, this Release (such released claims are collectively referred to herein as the "Released Claims"). 2. Notwithstanding the generality of clause (1) above, the Released Claims include, without limitation, (a) any and all claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Civil Rights Act of 1971, the Civil Rights Act of 1991, the Fair Labor Standards Act, the Executive Retirement Income Security Act of 1974, the Americans with Disabilities Act, the Family and Medical Leave Act of 1993, and any and all other federal, state or local laws, statutes, rules and regulations pertaining to employment or otherwise, and (b) any claims for wrongful discharge, breach of contract, fraud, misrepresentation or any compensation claims, or any other claims under any statute, rule, regulation or under the common law, including compensatory damages, punitive damages, attorney's fees, costs, expenses and all claims for any other type of damage or relief. 3. This means that, by signing this Release, the Executive shall have waived any right to which the Executive may have had to bring a lawsuit or make any claim against the releasees based on any acts or omissions of the releasees up to the date of the signing of this Release. 4. Executive represents that he has read carefully and fully understands the terms of this Release, and that Executive has been advised to consult with an attorney and have had the opportunity to consult with an attorney prior to signing this Release. Executive acknowledges that he is executing this Release voluntarily and knowingly and that he has not relied on any representations, promises or agreements of any kind made to Executive in connection with Executive's decision to accept the terms of this Release, other than those set forth in this Release. Executive acknowledges that Executive has been given at least twenty-one (21) days to consider whether Executive wants to sign this Release and that the Age Discrimination in Employment Act gives Executive the right to revoke this Release within seven (7) days after it is signed, and Executive understands that he will not receive any payments due him under this Release until such seven (7) day revocation period (the "Revocation Period") has passed and then, only if Executive has not revoked this Release. To the extent Executive has executed this Release within less than twenty-one (21) days after its delivery to Executive, Executive hereby acknowledges that his decision to execute this Release prior to the expiration of such twenty-one (21) day period was entirely voluntary. KERR-MCGEE CORPORATION - ------------------------- ------------------------------ Executive Title: Name: EX-10 7 woodwardagrmt.txt CONTINUITY AGREEMENT Exhibit 10.13 CONTINUITY AGREEMENT This Agreement (the "Agreement") is dated as of January 11, 2000 by and between Kerr-McGee Corporation, a Delaware corporation (the "Company"), and W. Pete Woodward (the "Executive"). WHEREAS, the Company's Board of Directors considers the continued services of key executives of the Company to be in the best interests of the Company and its stockholders; and WHEREAS, the Company's Board of Directors desires to assure, and has determined that it is appropriate and in the best interests of the Company and its stockholders to reinforce and encourage the continued attention and dedication of key executives of the Company to their duties of employment without personal distraction or conflict of interest in circumstances which could arise from the occurrence of a change in control of the Company; and WHEREAS, the Company's Board of Directors has authorized the Company to enter into continuity agreements with those key executives of the Company and any of its respective subsidiaries (all of such entities, together with the Company, are hereinafter referred to as an "Employer"), such agreements to set forth the severance compensation which the Company agrees under certain circumstances to pay such executives; and WHEREAS, the Executive is a key executive of an Employer and has been designated as an executive to be offered such a continuity compensation agreement with the Company. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Executive agree as follows: 1. Term. This Agreement shall become effective on the date hereof (the "Effective Date") and remain in effect until the third anniversary thereof; provided, however, that this Agreement shall automatically renew for an additional year on each successive anniversary of the Effective Date, unless an Employer informs the Executive, in writing, at least 180 days prior to the renewal date, that this Agreement shall not be renewed. The foregoing shall constitute the "Term" of this Agreement for purposes hereof. 2. Change in Control. No compensation or other benefit pursuant to Section 4 hereof shall be payable under this Agreement unless and until either (i) a Change in Control of the Company (as hereinafter defined) shall have occurred while the Executive is employed by an Employer and the Executive's employment by an Employer thereafter shall have terminated in accordance with Section 3 hereof or (ii) the Executive's employment by an Employer shall have terminated in accordance with Section 3(a)(ii) hereof prior to the occurrence of the Change in Control. For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred when, during the Term of this Agreement: (a) any person ("Person") as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as used in Section 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) of the Exchange Act but excluding the Company and any subsidiary and any employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as trustee), directly or indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities (other than indirectly as a result of the Company's redemption of its securities); or (b) the consummation of any merger or other business combination of the Company, sale of 50% or more of the Company's assets, liquidation or dissolution of the Company or combination of the foregoing transactions (the "Transactions") other than a Transaction immediately following which the shareholders of the Company and any trustee or fiduciary of any Company employee benefit plan immediately prior to the Transaction own at least 60% of the voting power, directly or indirectly, of (A) the surviving corporation in any such merger or other business combination; (B) the purchaser of or successor to the Company's assets; (C) both the surviving corporation and the purchaser in the event of any combination of Transactions; or (D) the parent company owning 100% of such surviving corporation, purchaser or both the surviving corporation and the purchaser, as the case may be; or (c) within any twenty-four month period, the persons who were directors immediately before the beginning of such period (the "Incumbent Directors") shall cease (for any reason other than death) to constitute at least a majority of the Board or the board of directors of a successor to the Company. For this purpose, any director who was not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who commenced or threatened to commence an election contest or proxy solicitation by or on behalf of a Person (other than the Board) or who has entered into an agreement to effect a Change in Control or expressed an intention to cause such a Change in Control); or (d) a majority of the members of the Board of Directors in office immediately prior to a proposed transaction determine by a written resolution that such proposed transaction, if taken, will be deemed a Change in Control and such proposed transaction is consummated. 3. Termination of Employment; Definitions. (a) Termination without Cause by the Company or for Good Reason by the Executive. (i) The Executive shall be entitled to the compensation provided for in Section 4 hereof, if within two years after a Change in Control, the Executive's employment by an Employer shall be terminated (A) by an Employer for any reason other than (I) the Executive's Disability or Retirement, (II) the Executive's death or (III) for Cause, or (B) by the Executive with Good Reason (all terms are as hereinafter defined), unless such termination occurs with the Executive's prior written consent expressly waiving the rights provided hereunder. (ii) In addition, the Executive shall be entitled to the compensation provided for in Section 4 hereof if, (A) in the event that an agreement is signed which, if consummated, would result in a Change of Control and, within 12 months thereafter, the Executive is terminated without Cause by the Company (other than on account of Executive's Death or Disability) or terminates employment with Good Reason prior to the Change in Control, (B) such termination is at the request or instigation of the acquiror or merger partner or otherwise inconnection with the anticipated Change in Control, and (C) within said 12 month period, such Change in Control actually occurs. (b) Disability. For purposes of this Agreement, "Disability" shall mean the Executive's absence from the full-time performance of the Executive's duties (as such duties existed immediately prior to such absence) for 180 consecutive business days, when the Executive is disabled as a result of incapacity due to physical or mental illness. (c) Retirement. For purposes of this Agreement, "Retirement" shall mean the Executive's voluntary termination of employment pursuant to late, normal or early retirement under a pension plan sponsored by an Employer, as defined in such plan, but only if such retirement occurs prior to a termination by an Employer without Cause or by the Executive for Good Reason. (d) Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially all of his or her duties with an Employer (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to such Executive by the Board of Directors (the "Board") of the Company which specifically identifies the manner in which the Board believes that the Executive has not substantially performed his or her duties; (ii) the willful engaging by the Executive in gross misconduct which is materially and demonstrably injurious to the Company or any Employer; or (iii) the conviction of, or plea of guilty or nolo contendere to, a felony. Termination of the Executive for Cause shall be made by delivery to the Executive of a copy of a resolution duly adopted by the affirmative vote of not less than a three-fourths majority of the non-employee Directors of the Company or of the ultimate parent of the entity which caused the Change in Control (if the Company has become a subsidiary) at a meeting of such Directors called and held for such purpose, after 30 days prior written notice to the Executive specifying the basis for such termination and the particulars thereof and a reasonable opportunity for the Executive to cure or otherwise resolve the behavior in question prior to such meeting, finding that in the reasonable judgment of such Directors, the conduct or event set forth in any of clauses (i) through (iii) above has occurred and that such occurrence warrants the Executive's termination. (e) Good Reason. For purposes of this Agreement, "Good Reason" shall mean the occurrence, within the Term of this Agreement, of any of the following without the Executive's written consent expressly waiving the rights provided hereunder: (i) any material and adverse diminution in the Executive's duties or responsibilities with the Company (or any affiliate thereof) from those in effect immediately prior to the Change in Control; provided, however, that no such diminution shall be deemed to exist solely because of changes in Executive's duties, responsibilities or titles as a consequence of the Company ceasing to be a company with publicly-traded securities or becoming a wholly-owned subsidiary of another company; (ii) any reduction in the Executive's annual base salary or any adverse change in bonus opportunity or participation in cash bonus programs in effect immediately prior to the Change in Control; (iii) any requirement that Executive be based at a location more than 35 miles from the location at which the Executive was based immediately prior to the Change in Control (or a substantial increase in the amount of travel Executive is required to do because of a relocation of the executive offices); (iv) any failure by the Company to obtain from any successor to the Company an agreement reasonably satisfactory to the Executive to assume and perform this Agreement, as contemplated by Section 10(a) hereof; or (v) during the thirty-day period immediately following the first anniversary of the Change in Control, the voluntary termination of employment by the Executive for any reason or no reason at all; (vi) any amendment, reduction or termination of any benefit plan, program or arrangement, which has the effect of causing the Executive to have benefits which are not substantially similar, in the aggregate, to those benefits provided to the Executive immediately prior to the Change in Control. Notwithstanding the foregoing, in the event Executive provides the Company with a Notice of Termination (as defined below) referencing this Section 3(e) (with the exception of Section 3(e)(v)), the Company shall have 30 days thereafter in which to cure or resolve the behavior otherwise constituting Good Reason. Any good faith determination by Executive that Good Reason exists shall be presumed correct and shall be binding upon the Company. (f) Notice of Termination. Any purported termination of the Executive's employment (other than on account of Executive's death) with an Employer, if such termination occurs after the occurrence of a Change in Control or under circumstances specified under Section 3(a)(ii) above, shall be communicated by a Notice of Termination to the Executive, if such termination is by an Employer, or to an Employer, if such termination is by the Executive. For purposes of this Agreement, "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provisions so indicated; provided, however, that in connection with a termination for Good Reason under Section 3(e)(v), no details shall be necessary other than reference to such Section. For purposes of this Agreement, no purported termination of Executive's employment with an Employer shall be effective without such a Notice of Termination having been given. 4. Compensation Upon Termination After a Change in Control. Subject to Section 9 hereof, if within two years of a Change in Control, the Executive's employment by an Employer shall be terminated in accordance with Section 3(a) (the "Termination"), the Executive shall be entitled to the following payments and benefits: (a) Severance. The Company shall pay or cause to be paid to the Executive a cash severance amount equal to (i) three (3) times the sum of (A) the Executive's annual base salary on the date of the Change in Control (or, if higher, the annual base salary in effect immediately prior to the giving of the Notice of Termination) and (B) the higher of: (x) the average of the actual bonuses earned by the Executive in respect of the three years prior to the year in which the Change in Control occurs under the Company's incentive award program, or (y) the Executive's target bonus for the year of Termination, plus (ii) in lieu of continuation of any of the Executive's perquisites as provided to the Executive prior to the Change in Control (or, if greater, at the time of Termination), a cash payment equal to 7 percent of the Executive's annual base salary as in effect on the date of the Change in Control for each of the three (3) years following the date of Termination. This cash severance amount shall be payable in a lump sum. (b) Additional Payments and Benefits. The Executive shall also be entitled to: (i) a lump sum cash payment equal to the sum of (A) the Executive's accrued but unpaid annual base salary through the date of Termination, (B) the unpaid portion, if any, of bonuses previously earned by the Executive pursuant to the Company's Executive incentive award program, plus the pro rata portion of the bonus to be paid for the year in which the date of Termination occurs (calculated through the date of Termination), and (C) an amount, if any, equal to compensation previously deferred (excluding any qualified plan deferral) and any accrued vacation pay, in each case, in full satisfaction of Executive's rights thereto. (ii) a lump sum cash payment equal to the aggregate sum of (A) additional pension contributions in an amount equal to the Company's contributions under the Company's 401(k) plan, profit sharing or other savings pension plans (or such other qualified and nonqualified defined contribution pension plans as then in effect) for the three (3) year period following the date of Termination (the "Separation Period") (based on assumed rates of Executive's contributions at the level of participation in effect as of the last date Executive was permitted to participate); and (B) the difference between the discounted present value (i.e., lump sum value) of the annuity benefit the Executive is entitled to receive under the Company's qualified and nonqualified defined benefit retirement programs in which the Executive is a participant calculated through the date of Termination and the discounted present value (i.e., lump sum value) of the annuity benefit the Executive would be entitled to receive under such retirement programs calculated after adding an additional five years of credit to age and service up to a maximum of age 65 as if the executive had been paid at the rate used to calculate the payments under Section 4(a), provided that the additional credits added with respect to each retirement program shall not exceed five years when added to any additional credits already provided by the terms of the such programs in respect of the Termination covered hereby. (iii) continued medical, dental, vision, and life insurance coverage (excluding accident, death, and disability insurance) for the Executive and the Executive's eligible dependents or, to the extent such coverage is not commercially available, such other arrangements reasonably acceptable to the Executive, on the same basis as in effect prior to the Change in Control or the Executive's Termination, whichever is deemed to provide for more substantial benefits, for a period ending on the earlier of (A) the end of the Separation Period or (B) the commencement of comparable coverage by the Executive with a subsequent employer; (iv) unless it would adversely affect the Company's ability to use pooling of interest accounting in a Change in Control transaction in which such accounting is intended to be used, immediate 100% vesting of all outstanding stock options, stock appreciation rights and restricted stock granted or issued by any Employer to the extent not previously vested on or following the Change of Control; and (v) all other accrued or vested benefits in accordance with the terms of the applicable plan (with an offset for any amounts paid under Section 4(b)(i)(C), above). All lump sum payments under this Section 4 shall be paid within 15 business days after Executive's date of Termination, provided, however, that such payment shall be made 30 days after Termination in the event that the Company requires the Executive to sign a release at the time of Termination. Discounted present value (i.e., lump sum value) for purposes of subsection (ii) above shall be calculated using a discount factor equal to one percentage point below the rate of interest, per annum, publicly announced by The Chase Manhattan Bank, N.A. as its prime rate in effect at its principal office in New York City, and using the actuarial factors set forth in the defined benefit retirement program. (c) Outplacement. If so requested by the Executive, outplacement services shall be provided by a professional outplacement provider selected by Executive; provided, however, that such outplacement services shall be provided the Executive at an aggregate total cost to the Company of not more than ten (10) percent of such Executive's annual base salary. (d) Withholding. Payments and benefits provided pursuant to this Section 4 shall be subject to any applicable payroll and other taxes required to be withheld. 5. Compensation Upon Termination for Death, Disability or Retirement. If an Executive's employment is terminated by reason of Death, Disability or Retirement prior to any other termination, Executive will receive: (a) the sum of (i) Executive's accrued but unpaid salary through the date of Termination, (ii) the pro rata portion of the Executive's target bonus for the year of Executive's Death or Disability (calculated through the date of Termination), and (iii) an amount equal to any compensation previously deferred and any accrued vacation pay; and (b) other accrued or vested benefits in accordance with the terms of the applicable plan (with an offset for any amounts paid under item (a)(iii), above). 6. Excess Parachute Payments. (a) (i) If it is determined (as hereafter provided) that any payment or distribution by the Company or any Employer to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuan to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a "Severance Payment"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) by reason of being "contingent on a change in ownership or control" of the Company, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such excise tax (such tax or taxes, together with any such interest and penalties, are hereafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment or payments (a "Gross-Up Payment") in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Severance Payments. (ii) Subject to the provisions of Section 6(a)(i) hereof, all determinations required to be made under this Section 6, including whether an Excise Tax is payable by the Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by the nationally recognized firm of certified public accountants (the "Accounting Firm") used by the Company prior to the Change in Control (or, if such Accounting Firm declines to serve, the Accounting Firm shall be a nationally recognized firm of certified public accountants selected by the Executive). The Accounting Firm shall be directed by the Company or the Executive to submit its preliminary determination and detailed supporting calculations to both the Company and the Executive within 15 calendar days after the Termination Date, if applicable, and any other such time or times as may be requested by the Company or the Executive. If the Accounting Firm determines that any Excise Tax is payable by the Executive, the Company shall pay the required Gross-Up Payment to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall, at the same time as it makes such determination, furnish the Executive with an opinion that he has substantial authority not to report any Excise Tax on his/her federal, state, local income or other tax return. Any determination by the Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon the Company and the Executive absent a contrary determination by the Internal Revenue Services or a court of competent jurisdiction; provided, however, that no such determination shall eliminate or reduce the Company's obligation to provide any Gross-Up Payment that shall be due as a result of such contrary determination. As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (an "Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to Section 6(a) hereof and the Executive thereafter is required to make a payment of any Excise Tax, the Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and the Executive as promptly as possible. Any such Underpayment shall be promptly paid by the Company to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations. (iii) The federal, state and local income or other tax returns filed by the Executive (or any filing made by a consolidated tax group which includes the Company) shall be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by the Executive. The Executive shall make proper payment of the amount of any Excise Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his/her federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior to the filing of the Executive's federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, the Executive shall within five business days pay to the Company the amount of such reduction. (iv) The Company and the Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determination contemplated by Section 6(a) hereof. (v) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Sections 6(a)(ii) and (iv) hereof shall be borne by the Company. If such fees and expenses are initially advanced by the Executive, the Company shall reimburse the Executive the full amount of such fees and expenses within five business days after receipt from the Executive of a statement therefor and reasonable evidence of his/her payment thereof. (b) In the event that the Internal Revenue Service claims that any payment or benefit received under this Agreement constitutes an "excess parachute payment," within the meaning of Section 280G(b)(1) of the Code, the Executive shall notify the Company in writing of such claim. Such notification shall be given as soon as practicable but no later than 10 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30 day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and reasonably satisfactory to the Executive; (iii) cooperate with the Company in good faith in order to effectively contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including, but not limited to, additional interest and penalties and related legal, consulting or other similar fees) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for and against any Excise Tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. (c) The Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or other tax (including interest and penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that if the Executive is required to extend the statute of limitations to enable the Company to contest such claim, the Executive may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a corporate deduction would be disallowed pursuant to Section 280G of the Code and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. In addition, no position may be taken nor any final resolution be agreed to by the Company without the Executive's consent if such position or resolution could reasonably be expected to adversely affect the Executive (including any other tax position of the Executive unrelated to matters covered hereby). (d) If, after the receipt by the Executive of an amount advanced by the Company in connection with the contest of the Excise Tax claim, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto); provided, however, if the amount of that refund exceeds the amount advanced by the Company or it is otherwise determined for any reason that additional amounts could be paid to the Named Executive without incurring any Excise Tax, any such amount will be promptly paid by the Company to the named Executive (or shall be applied to reduce any amount that Executive would otherwise be required to pay the Company). If, after the receipt by the Executive of an amount advanced by the Company in connection with an Excise Tax claim, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest the denial of such refund prior to the expiration of 30 days after such determination, such advance shall be forgiven and shall not be required to be repaid and shall be deemed to be in consideration for services rendered after the date of the Termination. 7. Expenses. In addition to all other amounts payable to the Executive under this Agreement, the Company shall pay or reimburse the Executive for reasonable legal fees (including without limitation, any and all court costs and reasonable attorneys' fees and expenses) incurred by the Executive in connection with or as a result of any claim, action or proceeding brought by the Company or the Executive with respect to or arising out of this Agreement or any provision hereof; provided, however, that the Company shall have no obligation to pay any such legal fees, if (i) in the case of an action brought by the Executive, the Company is successful in establishing with the court that the Executive's action was frivolous or otherwise without any reasonable legal or factual basis; or (ii) in connection with any such claim, action or proceeding arising out of Section 12 of this Agreement. 8. Obligations Absolute; Non-Exclusivity of Rights; Joint Several Liability. (a) The obligations of the Company to make the payments to the Executive, and to make the arrangements, provided for herein shall be absolute and unconditional and shall not be reduced by any circumstances, including without limitation any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or any third party at any time. (b) Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any other Employer and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any agreements with the Company or any other Employer. (c) Each entity included in the definition of "Employer" and any successors or assigns shall be joint and severally liable with the Company under this Agreement. 9. Not an Employment Agreement; Effect On Other Rights. (a) This Agreement is not, and nothing herein shall be deemed to create, a contract of employment between the Executive and the Company. The Company may terminate the employment of the Executive by the Company at any time, subject to the terms of this Agreement and/or any employment agreement or arrangement between the Company and the Executive that may then be in effect. (b) This Agreement supersedes all prior agreements covering change in control or any other subject matter covered by this Agreement and Executive hereby represents that the Executive has no other oral or written representations, understandings or agreements with the Company or any of its officers, directors or representatives covering any such subject matter and agrees that any and all prior written agreements relating to such subject matter shall be terminated effective as of the date of execution of this Agreement and shall be of no further force or effect. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any Company plan or program of the Company or any other Employer shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement. 10. Successors; Binding Agreement, Assignment. (a) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business of the Company, by agreement to expressly, absolutely and unconditionally assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a material breach of this Agreement and shall entitle the Executive to terminate the Executive's employment with the Company or such successor for Good Reason immediately prior to or at any time after such succession. As used in this Agreement, "Company" shall mean (i) the Company as hereinbefore defined, and (ii) any successor to all the stock of the Company or to all or substantially all of the Company's business or assets which executes and delivers an agreement provided for in this Section 10(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, including any parent or subsidiary of such a successor. (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's estate or designated beneficiary. Neither this Agreement nor any right arising hereunder may be assigned or pledged by the Executive. 11. Notice. For purpose of this Agreement, notices and all other communications provided for in this Agreement or contemplated hereby shall be in writing and shall be deemed to have been duly given when personally delivered, delivered by a nationally recognized overnight delivery service or when mailed United States certified or registered mail, return receipt requested, postage prepaid, and addressed, in the case of the Company, to the Company at: Kerr-McGee Corporation 123 Robert S. Kerr Avenue P.O. Box 25861 Oklahoma City, Oklahoma 73125 Attention: Chief Executive Officer (with a copy to General Counsel) and in the case of the Executive, to the Executive at the address set forth on the execution page at the end hereof. Either party may designate a different address by giving notice of change of address in the manner provided above, except that notices of change of address shall be effective only upon receipt. 12. Confidentiality. (a) The Executive shall retain in confidence any and all confidential information concerning the Company and its respective business which is now known or hereafter becomes known to the Executive, except as otherwise required by law and except information (i) ascertainable or obtained from public information, (ii) received by the Executive at any time after the Executive's employment by the Company shall have terminated, from a third party not employed by or otherwise affiliated with the Company or (iii) which is or becomes known to the public by any means other than a breach of this Section 12. Upon the Termination of employment, the Executive will not take or keep any proprietary or confidential information or documentation belonging to the Company. (b) The Executive acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of this Section 12 would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement during the pendency of any dispute involving such Section and to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available. Upon the resolution of such dispute, any payments or benefits required by this Agreement which were suspended during the pendency of the dispute shall be paid or provided to the Executive if it is determined that no breach of this Section 12 occurred. This paragraph 12 shall survive the termination of this Agreement. 13. Release. In the event that the Company requests a release from the Executive, in the form attached hereto as Exhibit A, then as a condition to providing any payments or benefits under this Agreement, the Executive shall deliver such release. 14. Miscellaneous. No provision of this Agreement may be amended, altered, modified, waived or discharged unless such amendment, alteration, modification, waiver or discharge is agreed to in writing signed by the Executive and such officer of the Company as shall be specifically designated by the Committee or by the Board of Directors of the Company. No waiver by either party, at any time, of any breach by the other party of, or of compliance by the other party with, any condition or provision of this Agreement to be performed or complied with by such other party shall be deemed a waiver of any similar or dissimilar provision or condition of this Agreement or any other breach of or failure to comply with the same condition or provision at the same time or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 15. Severability. If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby. To the extent permitted by applicable law, each party hereto waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect. 16. Governing Law; Venue. The validity, interpretation, construction and performance of this Agreement shall be governed exclusively by the laws of the State of Delaware without giving effect to its conflict of laws rules. For purposes of jurisdiction and venue, the Company and each Employer hereby consents to jurisdiction and venue in any suit, action or proceeding with respect to this Agreement in any court of competent jurisdiction in the state in which Executive resides at the commencement of such suit, action or proceeding and waives any objection, challenge or dispute as to such jurisdiction or venue being proper. 17. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. KERR-MCGEE CORPORATION By: Luke R. Corbett Chairman and Chief Executive Officer W. Pete Woodward 7501 Cobalt Cove Edmond, OK 73013 Exhibit A RELEASE [__________] ("Executive"), for and in consideration of the payments and benefits that Executive shall receive under this Agreement, hereby executes the following General Release ("Release") and agrees as follows: 1. Executive, on behalf of Executive, Executive's agents, assignees, attorneys, successors, assigns, heirs and executors, to, and Executive does hereby fully and completely forever release the Company and its affiliates, predecessors and successors and all of their respective past and/or present officers, directors, partners, members, managing members, managers, Executives, agents, representatives, administrators, attorneys, insurers and fiduciaries in their individual and/or representative capacities (hereinafter collectively referred to as the "Releasees"), from any and all causes of action, suits, agreements, promises, damages, disputes, controversies, contentions, differences, judgments, claims, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, variances, trespasses, extents, executions and demands of any kind whatsoever, which Executive or Executive's heirs, executors, administrators, successors and assigns ever had, now have or may have against the Releasees or any of them, in law, admiralty or equity, whether known or unknown to Executive, for, upon, or by reason of, any matter, action, omission, course or thing whatsoever occurring up to the date this Release is signed by Executive, including, without limitation, in connection with or in relationship to Executive's employment or other service relationship with the Company or its affiliates, the termination of any such employment or service relationship and any applicable employment, compensatory or equity arrangement with the Company or its respective affiliates; provided that such released claims shall not include any claims to enforce Executive's rights under, or with respect to, this Release (such released claims are collectively referred to herein as the "Released Claims"). 2. Notwithstanding the generality of clause (1) above, the Released Claims include, without limitation, (a) any and all claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Civil Rights Act of 1971, the Civil Rights Act of 1991, the Fair Labor Standards Act, the Executive Retirement Income Security Act of 1974, the Americans with Disabilities Act, the Family and Medical Leave Act of 1993, and any and all other federal, state or local laws, statutes, rules and regulations pertaining to employment or otherwise, and (b) any claims for wrongful discharge, breach of contract, fraud, misrepresentation or any compensation claims, or any other claims under any statute, rule, regulation or under the common law, including compensatory damages, punitive damages, attorney's fees, costs, expenses and all claims for any other type of damage or relief. 3. This means that, by signing this Release, the Executive shall have waived any right to which the Executive may have had to bring a lawsuit or make any claim against the releasees based on any acts or omissions of the releasees up to the date of the signing of this Release. 4. Executive represents that he has read carefully and fully understands the terms of this Release, and that Executive has been advised to consult with an attorney and have had the opportunity to consult with an attorney prior to signing this Release. Executive acknowledges that he is executing this Release voluntarily and knowingly and that he has not relied on any representations, promises or agreements of any kind made to Executive in connection with Executive's decision to accept the terms of this Release, other than those set forth in this Release. Executive acknowledges that Executive has been given at least twenty-one (21) days to consider whether Executive wants to sign this Release and that the Age Discrimination in Employment Act gives Executive the right to revoke this Release within seven (7) days after it is signed, and Executive understands that he will not receive any payments due him under this Release until such seven (7) day revocation period (the "Revocation Period") has passed and then, only if Executive has not revoked this Release. To the extent Executive has executed this Release within less than twenty-one (21) days after its delivery to Executive, Executive hereby acknowledges that his decision to execute this Release prior to the expiration of such twenty-one (21) day period was entirely voluntary. KERR-MCGEE CORPORATION - ------------------------- ------------------------------ Executive Title: Name: EX-10 8 pilcheragrmt.txt CONTINUITY AGREEMENT Exhibit 10.14 CONTINUITY AGREEMENT This Agreement (the "Agreement") is dated as of January 11, 2000 by and between Kerr-McGee Corporation, a Delaware corporation (the "Company"), and Gregory F. Pilcher (the "Executive"). WHEREAS, the Company's Board of Directors considers the continued services of key executives of the Company to be in the best interests of the Company and its stockholders; and WHEREAS, the Company's Board of Directors desires to assure, and has determined that it is appropriate and in the best interests of the Company and its stockholders to reinforce and encourage the continued attention and dedication of key executives of the Company to their duties of employment without personal distraction or conflict of interest in circumstances which could arise from the occurrence of a change in control of the Company; and WHEREAS, the Company's Board of Directors has authorized the Company to enter into continuity agreements with those key executives of the Company and any of its respective subsidiaries (all of such entities, together with the Company, are hereinafter referred to as an "Employer"), such agreements to set forth the severance compensation which the Company agrees under certain circumstances to pay such executives; and WHEREAS, the Executive is a key executive of an Employer and has been designated as an executive to be offered such a continuity compensation agreement with the Company. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Executive agree as follows: 1. Term. This Agreement shall become effective on the date hereof (the "Effective Date") and remain in effect until the third anniversary thereof; provided, however, that this Agreement shall automatically renew for an additional year on each successive anniversary of the Effective Date, unless an Employer informs the Executive, in writing, at least 180 days prior to the renewal date, that this Agreement shall not be renewed. The foregoing shall constitute the "Term" of this Agreement for purposes hereof. 2. Change in Control. No compensation or other benefit pursuant to Section 4 hereof shall be payable under this Agreement unless and until either (i) a Change in Control of the Company (as hereinafter defined) shall have occurred while the Executive is employed by an Employer and the Executive's employment by an Employer thereafter shall have terminated in accordance with Section 3 hereof or (ii) the Executive's employment by an Employer shall have terminated in accordance with Section 3(a)(ii) hereof prior to the occurrence of the Change in Control. For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred when, during the Term of this Agreement: (a) any person ("Person") as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as used in Section 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) of the Exchange Act but excluding the Company and any subsidiary and any employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as trustee), directly or indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities (other than indirectly as a result of the Company's redemption of its securities); or (b) the consummation of any merger or other business combination of the Company, sale of 50% or more of the Company's assets, liquidation or dissolution of the Company or combination of the foregoing transactions (the "Transactions") other than a Transaction immediately following which the shareholders of the Company and any trustee or fiduciary of any Company employee benefit plan immediately prior to the Transaction own at least 60% of the voting power, directly or indirectly, of (A) the surviving corporation in any such merger or other business combination; (B) the purchaser of or successor to the Company's assets; (C) both the surviving corporation and the purchaser in the event of any combination of Transactions; or (D) the parent company owning 100% of such surviving corporation, purchaser or both the surviving corporation and the purchaser, as the case may be; or (c) within any twenty-four month period, the persons who were directors immediately before the beginning of such period (the "Incumbent Directors") shall cease (for any reason other than death) to constitute at least a majority of the Board or the board of directors of a successor to the Company. For this purpose, any director who was not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who commenced or threatened to commence an election contest or proxy solicitation by or on behalf of a Person (other than the Board) or who has entered into an agreement to effect a Change in Control or expressed an intention to cause such a Change in Control); or (d) a majority of the members of the Board of Directors in office immediately prior to a proposed transaction determine by a written resolution that such proposed transaction, if taken, will be deemed a Change in Control and such proposed transaction is consummated. 3. Termination of Employment; Definitions. (a) Termination without Cause by the Company or for Good Reason by the Executive. (i) The Executive shall be entitled to the compensation provided for in Section 4 hereof, if within two years after a Change in Control, the Executive's employment by an Employer shall be terminated (A) by an Employer for any reason other than (I) the Executive's Disability or Retirement, (II) the Executive's death or (III) for Cause, or (B) by the Executive with Good Reason (all terms are as hereinafter defined), unless such termination occurs with the Executive's prior written consent expressly waiving the rights provided hereunder. (ii) In addition, the Executive shall be entitled to the compensation provided for in Section 4 hereof if, (A) in the event that an agreement is signed which, if consummated, would result in a Change of Control and, within 12 months thereafter, the Executive is terminated without Cause by the Company (other than on account of Executive's Death or Disability) or terminates employment with Good Reason prior to the Change in Control, (B) such termination is at the request or instigation of the acquiror or merger partner or otherwise in connection with the anticipated Change in Control, and (C) within said 12 month period, such Change in Control actually occurs. (b) Disability. For purposes of this Agreement, "Disability" shall mean the Executive's absence from the full-time performance of the Executive's duties (as such duties existed immediately prior to such absence) for 180 consecutive business days, when the Executive is disabled as a result of incapacity due to physical or mental illness. (c) Retirement. For purposes of this Agreement, "Retirement" shall mean the Executive's voluntary termination of employment pursuant to late, normal or early retirement under a pension plan sponsored by an Employer, as defined in such plan, but only if such retirement occurs prior to a termination by an Employer without Cause or by the Executive for Good Reason. (d) Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially all of his or her duties with an Employer (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to such Executive by the Board of Directors (the "Board") of the Company which specifically identifies the manner in which the Board believes that the Executive has not substantially performed his or her duties; (ii) the willful engaging by the Executive in gross misconduct which is materially and demonstrably injurious to the Company or any Employer; or (iii) the conviction of, or plea of guilty or nolo contendere to, a felony. Termination of the Executive for Cause shall be made by delivery to the Executive of a copy of a resolution duly adopted by the affirmative vote of not less than a three-fourths majority of the non-employee Directors of the Company or of the ultimate parent of the entity which caused the Change in Control (if the Company has become a subsidiary) at a meeting of such Directors called and held for such purpose, after 30 days prior written notice to the Executive specifying the basis for such termination and the particulars thereof and a reasonable opportunity for the Executive to cure or otherwise resolve the behavior in question prior to such meeting, finding that in the reasonable judgment of such Directors, the conduct or event set forth in any of clauses (i) through (iii) above has occurred and that such occurrence warrants the Executive's termination. (e) Good Reason. For purposes of this Agreement, "Good Reason" shall mean the occurrence, within the Term of this Agreement, of any of the following without the Executive's written consent expressly waiving the rights provided hereunder: (i) any material and adverse diminution in the Executive's duties or responsibilities with the Company (or any affiliate thereof) from those in effect immediately prior to the Change in Control; provided, however, that no such diminution shall be deemed to exist solely because of changes in Executive's duties, responsibilities or titles as a consequence of the Company ceasing to be a company with publicly-traded securities or becoming a wholly-owned subsidiary of another company; (ii) any reduction in the Executive's annual base salary or any adverse change in bonus opportunity or participation in cash bonus programs in effect immediately prior to the Change in Control; (iii) any requirement that Executive be based at a location more than 35 miles from the location at which the Executive was based immediately prior to the Change in Control (or a substantial increase in the amount of travel Executive is required to do because of a relocation of the executive offices); (iv) any failure by the Company to obtain from any successor to the Company an agreement reasonably satisfactory to the Executive to assume and perform this Agreement, as contemplated by Section 10(a) hereof; or (v) during the thirty-day period immediately following the first anniversary of the Change in Control, the voluntary termination of employment by the Executive for any reason or no reason at all; (vi) any amendment, reduction or termination of any benefit plan, program or arrangement, which has the effect of causing the Executive to have benefits which are not substantially similar, in the aggregate, to those benefits provided to the Executive immediately prior to the Change in Control. Notwithstanding the foregoing, in the event Executive provides the Company with a Notice of Termination (as defined below) referencing this Section 3(e) (with the exception of Section 3(e)(v)), the Company shall have 30 days thereafter in which to cure or resolve the behavior otherwise constituting Good Reason. Any good faith determination by Executive that Good Reason exists shall be presumed correct and shall be binding upon the Company. (f) Notice of Termination. Any purported termination of the Executive's employment (other than on account of Executive's death) with an Employer, if such termination occurs after the occurrence of a Change in Control or under circumstances specified under Section 3(a)(ii) above, shall be communicated by a Notice of Termination to the Executive, if such termination is by an Employer, or to an Employer, if such termination is by the Executive. For purposes of this Agreement, "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provisions so indicated; provided, however, that in connection with a termination for Good Reason under Section 3(e)(v), no details shall be necessary other than reference to such Section. For purposes of this Agreement, no purported termination of Executive's employment with an Employer shall be effective without such a Notice of Termination having been given. 4. Compensation Upon Termination After a Change in Control. Subject to Section 9 hereof, if within two years of a Change in Control, the Executive's employment by an Employer shall be terminated in accordance with Section 3(a) (the "Termination"), the Executive shall be entitled to the following payments and benefits: (a) Severance. The Company shall pay or cause to be paid to the Executive a cash severance amount equal to (i) three (3) times the sum of (A) the Executive's annual base salary on the date of the Change in Control (or, if higher, the annual base salary in effect immediately prior to the giving of the Notice of Termination) and (B) the higher of: (x) the average of the actual bonuses earned by the Executive in respect of the three years prior to the year in which the Change in Control occurs under the Company's incentive award program, or (y) the Executive's target bonus for the year of Termination, plus (ii) in lieu of continuation of any of the Executive's perquisites as provided to the Executive prior to the Change in Control (or, if greater, at the time of Termination), a cash payment equal to 7 percent of the Executive's annual base salary as in effect on the date of the Change in Control for each of the three (3) years following the date of Termination. This cash severance amount shall be payable in a lump sum. (b) Additional Payments and Benefits. The Executive shall also be entitled to: (i) a lump sum cash payment equal to the sum of (A) the Executive's accrued but unpaid annual base salary through the date of Termination, (B) the unpaid portion, if any, of bonuses previously earned by the Executive pursuant to the Company's Executive incentive award program, plus the pro rata portion of the bonus to be paid for the year in which the date of Termination occurs (calculated through the date of Termination), and (C) an amount, if any, equal to compensation previously deferred (excluding any qualified plan deferral) and any accrued vacation pay, in each case, in full satisfaction of Executive's rights thereto. (ii) a lump sum cash payment equal to the aggregate sum of (A) additional pension contributions in an amount equal to the Company's contributions under the Company's 401(k) plan, profit sharing or other savings pension plans (or such other qualified and nonqualified defined contribution pension plans as then in effect) for the three (3) year period following the date of Termination (the "Separation Period") (based on assumed rates of Executive's contributions at the level of participation in effect as of the last date Executive was permitted to participate); and (B) the difference between the discounted present value (i.e., lump sum value) of the annuity benefit the Executive is entitled to receive under the Company's qualified and nonqualified defined benefit retirement programs in which the Executive is a participant calculated through the date of Termination and the discounted present value (i.e., lump sum value) of the annuity benefit the Executive would be entitled to receive under such retirement programs calculated after adding an additional five years of credit to age and service up to a maximum of age 65 as if the executive had been paid at the rate used to calculate the payments under Section 4(a), provided that the additional credits added with respect to each retirement program shall not exceed five years when added to any additional credits already provided by the terms of the such programs in respect of the Termination covered hereby. (iii) continued medical, dental, vision, and life insurance coverage (excluding accident, death, and disability insurance) for the Executive and the Executive's eligible dependents or, to the extent such coverage is not commercially available, such other arrangements reasonably acceptable to the Executive, on the same basis as in effect prior to the Change in Control or the Executive's Termination, whichever is deemed to provide for more substantial benefits, for a period ending on the earlier of (A) the end of the Separation Period or (B) the commencement of comparable coverage by the Executive with a subsequent employer; (iv) unless it would adversely affect the Company's ability to use pooling of interest accounting in a Change in Control transaction in which such accounting is intended to be used, immediate 100% vesting of all outstanding stock options, stock appreciation rights and restricted stock granted or issued by any Employer to the extent not previously vested on or following the Change of Control; and (v) all other accrued or vested benefits in accordance with the terms of the applicable plan (with an offset for any amounts paid under Section 4(b)(i)(C), above). All lump sum payments under this Section 4 shall be paid within 15 business days after Executive's date of Termination, provided, however, that such payment shall be made 30 days after Termination in the event that the Company requires the Executive to sign a release at the time of Termination. Discounted present value (i.e., lump sum value) for purposes of subsection (ii) above shall be calculated using a discount factor equal to one percentage point below the rate of interest, per annum, publicly announced by The Chase Manhattan Bank, N.A. as its prime rate in effect at its principal office in New York City, and using the actuarial factors set forth in the defined benefit retirement program. (c) Outplacement. If so requested by the Executive, outplacement services shall be provided by a professional outplacement provider selected by Executive; provided, however, that such outplacement services shall be provided the Executive at an aggregate total cost to the Company of not more than ten (10) percent of such Executive's annual base salary. (d) Withholding. Payments and benefits provided pursuant to this Section 4 shall be subject to any applicable payroll and other taxes required to be withheld. 5. Compensation Upon Termination for Death, Disability or Retirement. If an Executive's employment is terminated by reason of Death, Disability or Retirement prior to any other termination, Executive will receive: (a) the sum of (i) Executive's accrued but unpaid salary through the date of Termination, (ii) the pro rata portion of the Executive's target bonus for the year of Executive's Death or Disability (calculated through the date of Termination), and (iii) an amount equal to any compensation previously deferred and any accrued vacation pay; and (b) other accrued or vested benefits in accordance with the terms of the applicable plan (with an offset for any amounts paid under item (a)(iii), above). 6. Excess Parachute Payments. (a) (i) If it is determined (as hereafter provided) that any payment or distribution by the Company or anyEmployer to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a "Severance Payment"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) by reason of being "contingent on a change in ownership or control" of the Company, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such excise tax (such tax or taxes, together with any such interest and penalties, are hereafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment or payments (a "Gross-Up Payment") in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Severance Payments. (ii) Subject to the provisions of Section 6(a)(i) hereof, all determinations required to be made under this Section 6, including whether an Excise Tax is payable by the Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by the nationally recognized firm of certified public accountants (the "Accounting Firm") used by the Company prior to the Change in Control (or, if such Accounting Firm declines to serve, the Accounting Firm shall be a nationally recognized firm of certified public accountants selected by the Executive). The Accounting Firm shall be directed by the Company or the Executive to submit its preliminary determination and detailed supporting calculations to both the Company and the Executive within 15 calendar days after the Termination Date, if applicable, and any other such time or times as may be requested by the Company or the Executive. If the Accounting Firm determines that any Excise Tax is payable by the Executive, the Company shall pay the required Gross-Up Payment to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall, at the same time as it makes such determination, furnish the Executive with an opinion that he has substantial authority not to report any Excise Tax on his/her federal, state, local income or other tax return. Any determination by the Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon the Company and the Executive absent a contrary determination by the Internal Revenue Services or a court of competent jurisdiction; provided, however, that no such determination shall eliminate or reduce the Company's obligation to provide any Gross-Up Payment that shall be due as a result of such contrary determination. As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (an "Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to Section 6(a) hereof and the Executive thereafter is required to make a payment of any Excise Tax, the Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and the Executive as promptly as possible. Any such Underpayment shall be promptly paid by the Company to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations. (iii) The federal, state and local income or other tax returns filed by the Executive (or any filing made by a consolidated tax group which includes the Company) shall be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by the Executive. The Executive shall make proper payment of the amount of any Excise Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his/her federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior to the filing of the Executive's federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, the Executive shall within five business days pay to the Company the amount of such reduction. (iv) The Company and the Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determination contemplated by Section 6(a) hereof. (v) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Sections (a)(ii) and (iv) hereof shall be borne by the Company. If such fees and expenses are initially advanced by the Executive, the Company shall reimburse the Executive the full amount of such fees and expenses within five business days after receipt from the Executive of a statement therefor and reasonable evidence of his/her payment thereof. (b) In the event that the Internal Revenue Service claims that any payment or benefit received under this Agreement constitutes an "excess parachute payment," within the meaning of Section 280G(b)(1) of the Code, the Executive shall notify the Company in writing of such claim. Such notification shall be given as soon as practicable but no later than 10 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30 day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and reasonably satisfactory to the Executive; (iii) cooperate with the Company in good faith in order to effectively contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including, but not limited to, additional interest and penalties and related legal, consulting or other similar fees) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for and against any Excise Tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. (c) The Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or other tax (including interest and penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that if the Executive is required to extend the statute of limitations to enable the Company to contest such claim, the Executive may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a corporate deduction would be disallowed pursuant to Section 280G of the Code and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. In addition, no position may be taken nor any final resolution be agreed to by the Company without the Executive's consent if such position or resolution could reasonably be expected to adversely affect the Executive (including any other tax position of the Executive unrelated to matters covered hereby). (d) If, after the receipt by the Executive of an amount advanced by the Company in connection with the contest of the Excise Tax claim, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto); provided, however, if the amount of that refund exceeds the amount advanced by the Company or it is otherwise determined for any reason that additional amounts could be paid to the Named Executive without incurring any Excise Tax, any such amount will be promptly paid by the Company to the named Executive (or shall be applied to reduce any amount that Executive would otherwise be required to pay the Company). If, after the receipt by the Executive of an amount advanced by the Company in connection with an Excise Tax claim, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest the denial of such refund prior to the expiration of 30 days after such determination, such advance shall be forgiven and shall not be required to be repaid and shall be deemed to be in consideration for services rendered after the date of the Termination. 7. Expenses. In addition to all other amounts payable to the Executive under this Agreement, the Company shall pay or reimburse the Executive for reasonable legal fees (including without limitation, any and all court costs and reasonable attorneys' fees and expenses) incurred by the Executive in connection with or as a result of any claim, action or proceeding brought by the Company or the Executive with respect to or arising out of this Agreement or any provision hereof; provided, however, that the Company shall have no obligation to pay any such legal fees, if (i) in the case of an action brought by the Executive, the Company is successful in establishing with the court that the Executive's action was frivolous or otherwise without any reasonable legal or factual basis; or (ii) in connection with any such claim, action or proceeding arising out of Section 12 of this Agreement. 8. Obligations Absolute; Non-Exclusivity of Rights; Joint Several Liability. (a) The obligations of the Company to make the payments to the Executive, and to make the arrangements, provided for herein shall be absolute and unconditional and shall not be reduced by any circumstances, including without limitation any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or any third party at any time. (b) Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any other Employer and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any agreements with the Company or any other Employer. (c) Each entity included in the definition of "Employer" and any successors or assigns shall be joint and severally liable with the Company under this Agreement. 9. Not an Employment Agreement; Effect On Other Rights. (a) This Agreement is not, and nothing herein shall be deemed to create, a contract of employment between the Executive and the Company. The Company may terminate the employment of the Executive by the Company at any time, subject to the terms of this Agreement and/or any employment agreement or arrangement between the Company and the Executive that may then be in effect. (b) This Agreement supersedes all prior agreements covering change in control or any other subject matter covered by this Agreement and Executive hereby represents that the Executive has no other oral or written representations, understandings or agreements with the Company or any of its officers, directors or representatives covering any such subject matter and agrees that any and all prior written agreements relating to such subject matter shall be terminated effective as of the date of execution of this Agreement and shall be of no further force or effect. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any Company plan or program of the Company or any other Employer shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement. 10. Successors; Binding Agreement, Assignment. (a) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business of the Company, by agreement to expressly, absolutely and unconditionally assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a material breach of this Agreement and shall entitle the Executive to terminate the Executive's employment with the Company or such successor for Good Reason immediately prior to or at any time after such succession. As used in this Agreement, "Company" shall mean (i) the Company as hereinbefore defined, and (ii) any successor to all the stock of the Company or to all or substantially all of the Company's business or assets which executes and delivers an agreement provided for in this Section 10(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, including any parent or subsidiary of such a successor. (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's estate or designated beneficiary. Neither this Agreement nor any right arising hereunder may be assigned or pledged by the Executive. 11. Notice. For purpose of this Agreement, notices and all other communications provided for in this Agreement or contemplated hereby shall be in writing and shall be deemed to have been duly given when personally delivered, delivered by a nationally recognized overnight delivery service or when mailed United States certified or registered mail, return receipt requested, postage prepaid, and addressed, in the case of the Company, to the Company at: Kerr-McGee Corporation 123 Robert S. Kerr Avenue P.O. Box 25861 Oklahoma City, Oklahoma 73125 Attention: Chief Executive Officer (with a copy to General Counsel) and in the case of the Executive, to the Executive at the address set forth on the execution page at the end hereof. Either party may designate a different address by giving notice of change of address in the manner provided above, except that notices of change of address shall be effective only upon receipt. 12. Confidentiality. (a) The Executive shall retain in confidence any and all confidential information concerning the Company and its respective business which is now known or hereafter becomes known to the Executive, except as otherwise required by law and except information (i) ascertainable or obtained from public information, (ii) received by the Executive at any time after the Executive's employment by the Company shall have terminated, from a third party not employed by or otherwise affiliated with the Company or (iii) which is or becomes known to the public by any means other than a breach of this Section 12. Upon the Termination of employment, the Executive will not take or keep any proprietary or confidential information or documentation belonging to the Company. (b) The Executive acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of this Section 12 would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement during the pendency of any dispute involving such Section and to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available. Upon the resolution of such dispute, any payments or benefits required by this Agreement which were suspended during the pendency of the dispute shall be paid or provided to the Executive if it is determined that no breach of this Section 12 occurred. This paragraph 12 shall survive the termination of this Agreement. 13. Release. In the event that the Company requests a release from the Executive, in the form attached hereto as Exhibit A, then as a condition to providing any payments or benefits under this Agreement, the Executive shall deliver such release. 14. Miscellaneous. No provision of this Agreement may be amended, altered, modified, waived or discharged unless such amendment, alteration, modification, waiver or discharge is agreed to in writing signed by the Executive and such officer of the Company as shall be specifically designated by the Committee or by the Board of Directors of the Company. No waiver by either party, at any time, of any breach by the other party of, or of compliance by the other party with, any condition or provision of this Agreement to be performed or complied with by such other party shall be deemed a waiver of any similar or dissimilar provision or condition of this Agreement or any other breach of or failure to comply with the same condition or provision at the same time or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 15. Severability. If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby. To the extent permitted by applicable law, each party hereto waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect. 16. Governing Law; Venue. The validity, interpretation, construction and performance of this Agreement shall be governed exclusively by the laws of the State of Delaware without giving effect to its conflict of laws rules. For purposes of jurisdiction and venue, the Company and each Employer hereby consents to jurisdiction and venue in any suit, action or proceeding with respect to this Agreement in any court of competent jurisdiction in the state in which Executive resides at the commencement of such suit, action or proceeding and waives any objection, challenge or dispute as to such jurisdiction or venue being proper. 17. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. KERR-MCGEE CORPORATION By: Luke R. Corbett Chairman and Chief Executive Officer Gregory F. Pilcher 8005 N. W. 128th Circle Oklahoma City, OK 73142 Exhibit A RELEASE [___________] ("Executive"), for and in consideration of the payments and benefits that Executive shall receive under this Agreement, hereby executes the following General Release ("Release") and agrees as follows: 1. Executive, on behalf of Executive, Executive's agents, assignees, attorneys, successors, assigns, heirs and executors, to, and Executive does hereby fully and completely forever release the Company and its affiliates, predecessors and successors and all of their respective past and/or present officers, directors, partners, members, managing members, managers, Executives, agents, representatives, administrators, attorneys, insurers and fiduciaries in their individual and/or representative capacities (hereinafter collectively referred to as the "Releasees"), from any and all causes of action, suits, agreements, promises, damages, disputes, controversies, contentions, differences, judgments, claims, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, variances, trespasses, extents, executions and demands of any kind whatsoever, which Executive or Executive's heirs, executors, administrators, successors and assigns ever had, now have or may have against the Releasees or any of them, in law, admiralty or equity, whether known or unknown to Executive, for, upon, or by reason of, any matter, action, omission, course or thing whatsoever occurring up to the date this Release is signed by Executive, including, without limitation, in connection with or in relationship to Executive's employment or other service relationship with the Company or its affiliates, the termination of any such employment or service relationship and any applicable employment, compensatory or equity arrangement with the Company or its respective affiliates; provided that such released claims shall not include any claims to enforce Executive's rights under, or with respect to, this Release (such released claims are collectively referred to herein as the "Released Claims"). 2. Notwithstanding the generality of clause (1) above, the Released Claims include, without limitation, (a) any and all claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Civil Rights Act of 1971, the Civil Rights Act of 1991, the Fair Labor Standards Act, the Executive Retirement Income Security Act of 1974, the Americans with Disabilities Act, the Family and Medical Leave Act of 1993, and any and all other federal, state or local laws, statutes, rules and regulations pertaining to employment or otherwise, and (b) any claims for wrongful discharge, breach of contract, fraud, misrepresentation or any compensation claims, or any other claims under any statute, rule, regulation or under the common law, including compensatory damages, punitive damages, attorney's fees, costs, expenses and all claims for any other type of damage or relief. 3. This means that, by signing this Release, the Executive shall have waived any right to which the Executive may have had to bring a lawsuit or make any claim against the releasees based on any acts or omissions of the releasees up to the date of the signing of this Release. 4. Executive represents that he has read carefully and fully understands the terms of this Release, and that Executive has been advised to consult with an attorney and have had the opportunity to consult with an attorney prior to signing this Release. Executive acknowledges that he is executing this Release voluntarily and knowingly and that he has not relied on any representations, promises or agreements of any kind made to Executive in connection with Executive's decision to accept the terms of this Release, other than those set forth in this Release. Executive acknowledges that Executive has been given at least twenty-one (21) days to consider whether Executive wants to sign this Release and that the Age Discrimination in Employment Act gives Executive the right to revoke this Release within seven (7) days after it is signed, and Executive understands that he will not receive any payments due him under this Release until such seven (7) day revocation period (the "Revocation Period") has passed and then, only if Executive has not revoked this Release. To the extent Executive has executed this Release within less than twenty-one (21) days after its delivery to Executive, Executive hereby acknowledges that his decision to execute this Release prior to the expiration of such twenty-one (21) day period was entirely voluntary. KERR-MCGEE CORPORATION - ------------------------- ------------------------------ Executive Title: Name: EX-10 9 genagrmt.txt CONTINUITY AGREEMENT Exhibit 10.15 CONTINUITY AGREEMENT This Agreement (the "Agreement") is dated as of January 11, 2000 by and between Kerr-McGee Corporation, a Delaware corporation (the "Company"), and ______________ (the "Executive"). WHEREAS, the Company's Board of Directors considers the continued services of key executives of the Company to be in the best interests of the Company and its stockholders; and WHEREAS, the Company's Board of Directors desires to assure, and has determined that it is appropriate and in the best interests of the Company and its stockholders to reinforce and encourage the continued attention and dedication of key executives of the Company to their duties of employment without personal distraction or conflict of interest in circumstances which could arise from the occurrence of a change in control of the Company; and WHEREAS, the Company's Board of Directors has authorized the Company to enter into continuity agreements with those key executives of the Company and any of its respective subsidiaries (all of such entities, together with the Company, are hereinafter referred to as an "Employer"), such agreements to set forth the severance compensation which the Company agrees under certain circumstances to pay such executives; and WHEREAS, the Executive is a key executive of an Employer and has been designated as an executive to be offered such a continuity compensation agreement with the Company. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Executive agree as follows: 1. Term. This Agreement shall become effective on the date hereof (the "Effective Date") and remain in effect until the third anniversary thereof; provided, however, that this Agreement shall automatically renew for an additional year on each successive anniversary of the Effective Date, unless an Employer informs the Executive, in writing, at least 180 days prior to the renewal date, that this Agreement shall not be renewed. The foregoing shall constitute the "Term" of this Agreement for purposes hereof. 2. Change in Control. No compensation or other benefit pursuant to Section 4 hereof shall be payable under this Agreement unless and until either (i) a Change in Control of the Company (as hereinafter defined) shall have occurred while the Executive is employed by an Employer and the Executive's employment by an Employer thereafter shall have terminated in accordance with Section 3 hereof or (ii) the Executive's employment by an Employer shall have terminated in accordance with Section 3(a)(ii) hereof prior to the occurrence of the Change in Control. For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred when, during the Term of this Agreement: (a) any person ("Person") as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as used in Section 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) of the Exchange Act but excluding the Company and any subsidiary and any employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as trustee), directly or indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities (other than indirectly as a result of the Company's redemption of its securities); or (b) the consummation of any merger or other business combination of the Company, sale of 50% or more of the Company's assets, liquidation or dissolution of the Company or combination of the foregoing transactions (the "Transactions") other than a Transaction immediately following which the shareholders of the Company and any trustee or fiduciary of any Company employee benefit plan immediately prior to the Transaction own at least 60% of the voting power, directly or indirectly, of (A) the surviving corporation in any such merger or other business combination; (B) the purchaser of or successor to the Company's assets; (C) both the surviving corporation and the purchaser in the event of any combination of Transactions; or (D) the parent company owning 100% of such surviving corporation, purchaser or both the surviving corporation and the purchaser, as the case may be; or (c) within any twenty-four month period, the persons who were directors immediately before the beginning of such period (the "Incumbent Directors") shall cease (for any reason other than death) to constitute at least a majority of the Board or the board of directors of a successor to the Company. For this purpose, any director who was not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who commenced or threatened to commence an election contest or proxy solicitation by or on behalf of a Person (other than the Board) or who has entered into an agreement to effect a Change in Control or expressed an intention to cause such a Change in Control); or (d) a majority of the members of the Board of Directors in office immediately prior to a proposed transaction determine by a written resolution that such proposed transaction, if taken, will be deemed a Change in Control and such proposed transaction is consummated. 3. Termination of Employment; Definitions. (a) Termination without Cause by the Company or for Good Reason by the Executive. (i) The Executive shall be entitled to the compensation provided for in Section 4 hereof, if within two years after a Change in Control, the Executive's employment by an Employer shall be terminated (A) by an Employer for any reason other than (I) the Executive's Disability or Retirement, (II) the Executive's death or (III) for Cause, or (B) by the Executive with Good Reason (all terms are as hereinafter defined), unless such termination occurs with the Executive's prior written consent expressly waiving the rights provided hereunder. (ii) In addition, the Executive shall be entitled to the compensation provided for in Section 4 hereof if, (A) in the event that an agreement is signed which, if consummated, would result in a Change of Control and, within 12 months thereafter, the Executive is terminated without Cause by the Company (other than on account of Executive's Death or Disability) or terminates employment with Good Reason prior to the Change in Control, (B) such termination is at the request or instigation of the acquiror or merger partner or otherwise in connection with the anticipated Change in Control, and (C) within said 12 month period, such Change in Control actually occurs. (b) Disability. For purposes of this Agreement, "Disability" shall mean the Executive's absence from the full-time performance of the Executive's duties (as such duties existed immediately prior to such absence) for 180 consecutive business days, when the Executive is disabled as a result of incapacity due to physical or mental illness. (c) Retirement. For purposes of this Agreement, "Retirement" shall mean the Executive's voluntary termination of employment pursuant to late, normal or early retirement under a pension plan sponsored by an Employer, as defined in such plan, but only if such retirement occurs prior to a termination by an Employer without Cause or by the Executive for Good Reason. (d) Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially all of his or her duties with an Employer (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to such Executive by the Board of Directors (the "Board") of the Company which specifically identifies the manner in which the Board believes that the Executive has not substantially performed his or her duties; (ii) the willful engaging by the Executive in gross misconduct which is materially and demonstrably injurious to the Company or any Employer; or (iii) the conviction of, or plea of guilty or nolo contendere to, a felony. Termination of the Executive for Cause shall be made by delivery to the Executive of a copy of a resolution duly adopted by the affirmative vote of not less than a three-fourths majority of the non-employee Directors of the Company or of the ultimate parent of the entity which caused the Change in Control (if the Company has become a subsidiary) at a meeting of such Directors called and held for such purpose, after 30 days prior written notice to the Executive specifying the basis for such termination and the particulars thereof and a reasonable opportunity for the Executive to cure or otherwise resolve the behavior in question prior to such meeting, finding that in the reasonable judgment of such Directors, the conduct or event set forth in any of clauses (i) through (iii) above has occurred and that such occurrence warrants the Executive's termination. (e) Good Reason. For purposes of this Agreement, "Good Reason" shall mean the occurrence, within the Term of this Agreement, of any of the following without the Executive's written consent expressly waiving the rights provided hereunder: (i) any material and adverse diminution in the Executive's duties or responsibilities with the Company (or any affiliate thereof) from those in effect immediately prior to the Change in Control; (ii) any reduction in the Executive's annual base salary or any adverse change in bonus opportunity or participation in cash bonus programs in effect immediately prior to the Change in Control; (iii) any requirement that Executive be based at a location more than 35 miles from the location at which the Executive was based immediately prior to the Change in Control (or a substantial increase in the amount of travel Executive is required to do because of a relocation of the executive offices); (iv) any failure by the Company to obtain from any successor to the Company an agreement reasonably satisfactory to the Executive to assume and perform this Agreement, as contemplated by Section 10(a) hereof; or (v) any amendment, reduction or termination of any benefit plan, program or arrangement, which has the effect of causing the Executive to have benefits which are not substantially similar, in the aggregate, to those benefits provided to the Executive immediately prior to the Change in Control. Notwithstanding the foregoing, in the event Executive provides the Company with a Notice of Termination (as defined below) referencing this Section 3(e), the Company shall have 30 days thereafter in which to cure or resolve the behavior otherwise constituting Good Reason. Any good faith determination by Executive that Good Reason exists shall be presumed correct and shall be binding upon the Company. (f) Notice of Termination. Any purported termination of the Executive's employment (other than on account of Executive's death) with an Employer, if such termination occurs after the occurrence of a Change in Control or under circumstances specified under Section 3(a)(ii) above, shall be communicated by a Notice of Termination to the Executive, if such termination is by an Employer, or to an Employer, if such termination is by the Executive. For purposes of this Agreement, "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provisions so indicated. For purposes of this Agreement, no purported termination of Executive's employment with an Employer shall be effective without such a Notice of Termination having been given. 4. Compensation Upon Termination After a Change in Control. Subject to Section 9 hereof, if within two years of a Change in Control, the Executive's employment by an Employer shall be terminated in accordance with Section 3(a) (the "Termination"), the Executive shall be entitled to the following payments and benefits: (a) Severance. The Company shall pay or cause to be paid to the Executive a cash severance amount equal to (i) three (3) times the sum of (A) the Executive's annual base salary on the date of the Change in Control (or, if higher, the annual base salary in effect immediately prior to the giving of the Notice of Termination) and (B) the higher of: (x) the average of the actual bonuses earned by the Executive in respect of the three years prior to the year in which the Change in Control occurs under the Company's incentive award program, or (y) the Executive's target bonus for the year of Termination, plus (ii) in lieu of continuation of any of the Executive's perquisites as provided to the Executive prior to the Change in Control (or, if greater, at the time of Termination), a cash payment equal to 7 percent of the Executive's annual base salary as in effect on the date of the Change in Control for each of the three (3) years following the date of Termination. This cash severance amount shall be payable in a lump sum. (b) Additional Payments and Benefits. The Executive shall also be entitled to: (i) a lump sum cash payment equal to the sum of (A) the Executive's accrued but unpaid annual base salary through the date of Termination, (B) the unpaid portion, if any, of bonuses previously earned by the Executive pursuant to the Company's Executive incentive award program, plus the pro rata portion of the bonus to be paid for the year in which the date of Termination occurs (calculated through the date of Termination), and (C) an amount, if any, equal to compensation previously deferred (excluding any qualified plan deferral) and any accrued vacation pay, in each case, in full satisfaction of Executive's rights thereto. (ii) a lump sum cash payment equal to the aggregate sum of (A) additional pension contributions in an amount equal to the Company's contributions under the Company's 401(k) plan, profit sharing or other savings pension plans (or such other qualified and nonqualified defined contribution pension plans as then in effect) for the three (3) year period following the date of Termination (the "Separation Period") (based on assumed rates of Executive's contributions at the level of participation in effect as of the last date Executive was permitted to participate); and (B) the difference between the discounted present value (i.e., lump sum value) of the annuity benefit the Executive is entitled to receive under the Company's qualified and nonqualified defined benefit retirement programs in which the Executive is a participant calculated through the date of Termination and the discounted present value (i.e., lump sum value) of the annuity benefit the Executive would be entitled to receive under such retirement programs calculated after adding an additional five years of credit to age and service up to a maximum of age 65 as if the executive had been paid at the rate used to calculate the payments under Section 4(a), provided that the additional credits added with respect to each retirement program shall not exceed five years when added to any additional credits already provided by the terms of the such programs in respect of the Termination covered hereby. (iii) continued medical, dental, vision, and life insurance coverage (excluding accident, death, and disability insurance) for the Executive and the Executive's eligible dependents or, to the extent such coverage is not commercially available, such other arrangements reasonably acceptable to the Executive, on the same basis as in effect prior to the Change in Control or the Executive's Termination, whichever is deemed to provide for more substantial benefits, for a period ending on the earlier of (A) the end of the Separation Period or (B) the commencement of comparable coverage by the Executive with a subsequent employer; (iv) unless it would adversely affect the Company's ability to use pooling of interest accounting in a Change in Control transaction in which such accounting is intended to be used, immediate 100% vesting of all outstanding stock options, stock appreciation rights and restricted stock granted or issued by any Employer to the extent not previously vested on or following the Change of Control; and (v) all other accrued or vested benefits in accordance with the terms of the applicable plan (with an offset for any amounts paid under Section 4(b)(i)(C), above). All lump sum payments under this Section 4 shall be paid within 15 business days after Executive's date of Termination, provided, however, that such payment shall be made 30 days after Termination in the event that the Company requires the Executive to sign a release at the time of Termination. Discounted present value (i.e., lump sum value) for purposes of subsection (ii) above shall be calculated using a discount factor equal to one percentage point below the rate of interest, per annum, publicly announced by The Chase Manhattan Bank, N.A. as its prime rate in effect at its principal office in New York City, and using the actuarial factors set forth in the defined benefit retirement program. (c) Outplacement. If so requested by the Executive, outplacement services shall be provided by a professional outplacement provider selected by Executive; provided, however, that such outplacement services shall be provided the Executive at an aggregate total cost to the Company of not more than ten (10) percent of such Executive's annual base salary. (d) Withholding. Payments and benefits provided pursuant to this Section 4 shall be subject to any applicable payroll and other taxes required to be withheld. 5. Compensation Upon Termination for Death, Disability or Retirement. If an Executive's employment is terminated by reason of Death, Disability or Retirement prior to any other termination, Executive will receive: (a) the sum of (i) Executive's accrued but unpaid salary through the date of Termination, (ii) the pro rata portion of the Executive's target bonus for the year of Executive's Death or Disability (calculated through the date of Termination), and (iii) an amount equal to any compensation previously deferred and any accrued vacation pay; and (b) other accrued or vested benefits in accordance with the terms of the applicable plan (with an offset for any amounts paid under item (a)(iii), above). 6. Excess Parachute Payments. (a) (i) If it is determined (as hereafter provided) that any payment or distribution by the Company or any Employer to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a "Severance Payment"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) by reason of being "contingent on a change in ownership or control" of the Company, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such excise tax (such tax or taxes, together with any such interest and penalties, are hereafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment or payments (a "Gross-Up Payment") in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Severance Payments. (ii) Subject to the provisions of Section 6(a)(i) hereof, all determinations required to be made under this Section 6, including whether an Excise Tax is payable by the Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by the nationally recognized firm of certified public accountants (the "Accounting Firm") used by the Company prior to the Change in Control (or, if such Accounting Firm declines to serve, the Accounting Firm shall be a nationally recognized firm of certified public accountants selected by the Executive). The Accounting Firm shall be directed by the Company or the Executive to submit its preliminary determination and detailed supporting calculations to both the Company and the Executive within 15 calendar days after the Termination Date, if applicable, and any other such time or times as may be requested by the Company or the Executive. If the Accounting Firm determines that any Excise Tax is payable by the Executive, the Company shall pay the required Gross-Up Payment to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall, at the same time as it makes such determination, furnish the Executive with an opinion that he has substantial authority not to report any Excise Tax on his/her federal, state, local income or other tax return. Any determination by the Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon the Company and the Executive absent a contrary determination by the Internal Revenue Services or a court of competent jurisdiction; provided, however, that no such determination shall eliminate or reduce the Company's obligation to provide any Gross-Up Payment that shall be due as a result of such contrary determination. As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (an "Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to Section 6(a) hereof and the Executive thereafter is required to make a payment of any Excise Tax, the Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and the Executive as promptly as possible. Any such Underpayment shall be promptly paid by the Company to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations. (iii) The federal, state and local income or other tax returns filed by the Executive (or any filing made by a consolidated tax group which includes the Company) shall be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by the Executive. The Executive shall make proper payment of the amount of any Excise Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his/her federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior to the filing of the Executive's federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, the Executive shall within five business days pay to the Company the amount of such reduction. (iv) The Company and the Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determination contemplated by Section 6(a) hereof. (v) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Sections 6(a)(ii) and (iv) hereof shall be borne by the Company. If such fees and expenses are initially advanced by the Executive, the Company shall reimburse the Executive the full amount of such fees and expenses within five business days after receipt from the Executive of a statement therefor and reasonable evidence of his/her payment thereof. (b) In the event that the Internal Revenue Service claims that any payment or benefit received under this Agreement constitutes an "excess parachute payment," within the meaning of Section 280G(b)(1) of the Code, the Executive shall notify the Company in writing of such claim. Such notification shall be given as soon as practicable but no later than 10 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30 day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and reasonably satisfactory to the Executive; (iii) cooperate with the Company in good faith in order to effectively contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including, but not limited to, additional interest and penalties and related legal, consulting or other similar fees) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for and against any Excise Tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. (c) The Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or other tax (including interest and penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that if the Executive is required to extend the statute of limitations to enable the Company to contest such claim, the Executive may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a corporate deduction would be disallowed pursuant to Section 280G of the Code and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. In addition, no position may be taken nor any final resolution be agreed to by the Company without the Executive's consent if such position or resolution could reasonably be expected to adversely affect the Executive (including any other tax position of the Executive unrelated to matters covered hereby). (d) If, after the receipt by the Executive of an amount advanced by the Company in connection with the contest of the Excise Tax claim, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto); provided, however, if the amount of that refund exceeds the amount advanced by the Company or it is otherwise determined for any reason that additional amounts could be paid to the Named Executive without incurring any Excise Tax, any such amount will be promptly paid by the Company to the named Executive (or shall be applied to reduce any amount that Executive would otherwise be required to pay the Company). If, after the receipt by the Executive of an amount advanced by the Company in connection with an Excise Tax claim, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest the denial of such refund prior to the expiration of 30 days after such determination, such advance shall be forgiven and shall not be required to be repaid and shall be deemed to be in consideration for services rendered after the date of the Termination. 7. Expenses. In addition to all other amounts payable to the Executive under this Agreement, the Company shall pay or reimburse the Executive for reasonable legal fees (including without limitation, any and all court costs and reasonable attorneys' fees and expenses) incurred by the Executive in connection with or as a result of any claim, action or proceeding brought by the Company or the Executive with respect to or arising out of this Agreement or any provision hereof; provided, however, that the Company shall have no obligation to pay any such legal fees, if (i) in the case of an action brought by the Executive, the Company is successful in establishing with the court that the Executive's action was frivolous or otherwise without any reasonable legal or factual basis; or (ii) in connection with any such claim, action or proceeding arising out of Section 12 of this Agreement. 8. Obligations Absolute; Non-Exclusivity of Rights; Joint Several Liability. (a) The obligations of the Company to make the payments to the Executive, and to make the arrangements, provided for herein shall be absolute and unconditional and shall not be reduced by any circumstances, including without limitation any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or any third party at any time. (b) Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any other Employer and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any agreements with the Company or any other Employer. (c) Each entity included in the definition of "Employer" and any successors or assigns shall be joint and severally liable with the Company under this Agreement. 9. Not an Employment Agreement; Effect On Other Rights. (a) This Agreement is not, and nothing herein shall be deemed to create, a contract of employment between the Executive and the Company. The Company may terminate the employment of the Executive by the Company at any time, subject to the terms of this Agreement and/or any employment agreement or arrangement between the Company and the Executive that may then be in effect. (b) This Agreement supersedes all prior agreements covering change in control or any other subject matter covered by this Agreement and Executive hereby represents that the Executive has no other oral or written representations, understandings or agreements with the Company or any of its officers, directors or representatives covering any such subject matter and agrees that any and all prior written agreements relating to such subject matter shall be terminated effective as of the date of execution of this Agreement and shall be of no further force or effect. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any Company plan or program of the Company or any other Employer shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement. 10. Successors; Binding Agreement, Assignment. (a) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business of the Company, by agreement to expressly, absolutely and unconditionally assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a material breach of this Agreement and shall entitle the Executive to terminate the Executive's employment with the Company or such successor for Good Reason immediately prior to or at any time after such succession. As used in this Agreement, "Company" shall mean (i) the Company as hereinbefore defined, and (ii) any successor to all the stock of the Company or to all or substantially all of the Company's business or assets which executes and delivers an agreement provided for in this Section 10(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, including any parent or subsidiary of such a successor. (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's estate or designated beneficiary. Neither this Agreement nor any right arising hereunder may be assigned or pledged by the Executive. 11. Notice. For purpose of this Agreement, notices and all other communications provided for in this Agreement or contemplated hereby shall be in writing and shall be deemed to have been duly given when personally delivered, delivered by a nationally recognized overnight delivery service or when mailed United States certified or registered mail, return receipt requested, postage prepaid, and addressed, in the case of the Company, to the Company at: Kerr-McGee Corporation 123 Robert S. Kerr Avenue P.O. Box 25861 Oklahoma City, Oklahoma 73125 Attention: Chief Executive Officer (with a copy to General Counsel) and in the case of the Executive, to the Executive at the address set forth on the execution page at the end hereof. Either party may designate a different address by giving notice of change of address in the manner provided above, except that notices of change of address shall be effective only upon receipt. 12. Confidentiality. (a) The Executive shall retain in confidence any and all confidential information concerning the Company and its respective business which is now known or hereafter becomes known to the Executive, except as otherwise required by law and except information (i) ascertainable or obtained from public information, (ii) received by the Executive at any time after the Executive's employment by the Company shall have terminated, from a third party not employed by or otherwise affiliated with the Company or (iii) which is or becomes known to the public by any means other than a breach of this Section 12. Upon the Termination of employment, the Executive will not take or keep any proprietary or confidential information or documentation belonging to the Company. (b) The Executive acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of this Section 12 would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement during the pendency of any dispute involving such Section and to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available. Upon the resolution of such dispute, any payments or benefits required by this Agreement which were suspended during the pendency of the dispute shall be paid or provided to the Executive if it is determined that no breach of this Section 12 occurred. This paragraph 12 shall survive this Agreement. 13. Release. In the event that the Company requests a release from the Executive, in the form attached hereto as Exhibit A, then as a condition to providing any payments or benefits under this Agreement, the Executive shall deliver such release. 14. Miscellaneous. No provision of this Agreement may be amended, altered, modified, waived or discharged unless such amendment, alteration, modification, waiver or discharge is agreed to in writing signed by the Executive and such officer of the Company as shall be specifically designated by the Committee or by the Board of Directors of the Company. No waiver by either party, at any time, of any breach by the other party of, or of compliance by the other party with, any condition or provision of this Agreement to be performed or complied with by such other party shall be deemed a waiver of any similar or dissimilar provision or condition of this Agreement or any other breach of or failure to comply with the same condition or provision at the same time or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 15. Severability. If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby. To the extent permitted by applicable law, each party hereto waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect. 16. Governing Law; Venue. The validity, interpretation, construction and performance of this Agreement shall be governed exclusively by the laws of the State of Delaware without giving effect to its conflict of laws rules. For purposes of jurisdiction and venue, the Company and each Employer hereby consents to jurisdiction and venue in any suit, action or proceeding with respect to this Agreement in any court of competent jurisdiction in the state in which Executive resides at the commencement of such suit, action or proceeding and waives any objection, challenge or dispute as to such jurisdiction or venue being proper. 17. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. KERR-MCGEE CORPORATION By: Exhibit A RELEASE [__________] ("Executive"), for and in consideration of the payments and benefits that Executive shall receive under this Agreement, hereby executes the following General Release ("Release") and agrees as follows: 1. Executive, on behalf of Executive, Executive's agents, assignees, attorneys, successors, assigns, heirs and executors, to, and Executive does hereby fully and completely forever release the Company and its affiliates, predecessors and successors and all of their respective past and/or present officers, directors, partners, members, managing members, managers, Executives, agents, representatives, administrators, attorneys, insurers and fiduciaries in their individual and/or representative capacities (hereinafter collectively referred to as the "Releasees"), from any and all causes of action, suits, agreements, promises, damages, disputes, controversies, contentions, differences, judgments, claims, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, variances, trespasses, extents, executions and demands of any kind whatsoever, which Executive or Executive's heirs, executors, administrators, successors and assigns ever had, now have or may have against the Releasees or any of them, in law, admiralty or equity, whether known or unknown to Executive, for, upon, or by reason of, any matter, action, omission, course or thing whatsoever occurring up to the date this Release is signed by Executive, including, without limitation, in connection with or in relationship to Executive's employment or other service relationship with the Company or its affiliates, the termination of any such employment or service relationship and any applicable employment, compensatory or equity arrangement with the Company or its respective affiliates; provided that such released claims shall not include any claims to enforce Executive's rights under, or with respect to, this Release (such released claims are collectively referred to herein as the "Released Claims"). 2. Notwithstanding the generality of clause (1) above, the Released Claims include, without limitation, (a) any and all claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Civil Rights Act of 1971, the Civil Rights Act of 1991, the Fair Labor Standards Act, the Executive Retirement Income Security Act of 1974, the Americans with Disabilities Act, the Family and Medical Leave Act of 1993, and any and all other federal, state or local laws, statutes, rules and regulations pertaining to employment or otherwise, and (b) any claims for wrongful discharge, breach of contract, fraud, misrepresentation or any compensation claims, or any other claims under any statute, rule, regulation or under the common law, including compensatory damages, punitive damages, attorney's fees, costs, expenses and all claims for any other type of damage or relief. 3. This means that, by signing this Release, the Executive shall have waived any right to which the Executive may have had to bring a lawsuit or make any claim against the releasees based on any acts or omissions of the releasees up to the date of the signing of this Release. 4. Executive represents that he has read carefully and fully understands the terms of this Release, and that Executive has been advised to consult with an attorney and have had the opportunity to consult with an attorney prior to signing this Release. Executive acknowledges that he is executing this Release voluntarily and knowingly and that he has not relied on any representations, promises or agreements of any kind made to Executive in connection with Executive's decision to accept the terms of this Release, other than those set forth in this Release. Executive acknowledges that Executive has been given at least twenty-one (21) days to consider whether Executive wants to sign this Release and that the Age Discrimination in Employment Act gives Executive the right to revoke this Release within seven (7) days after it is signed, and Executive understands that he will not receive any payments due him under this Release until such seven (7) day revocation period (the "Revocation Period") has passed and then, only if Executive has not revoked this Release. To the extent Executive has executed this Release within less than twenty-one (21) days after its delivery to Executive, Executive hereby acknowledges that his decision to execute this Release prior to the expiration of such twenty-one (21) day period was entirely voluntary. KERR-MCGEE CORPORATION - ------------------------- ------------------------------ Executive Title: Name: EX-12 10 exhibit12ratio.txt RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(1) (Millions of dollars) 2000 1999 1998 1997 1996 ------ ----- ----- ---- ---- Income (loss) from continuing operations $ 842 $146 $(345) $351 $358 Add - Provision (benefit) for income taxes 457 111 (175) 184 225 Interest expense 208 190 157 141 145 Rental expense representative of interest factor 12 14 12 13 10 ------ ---- ----- ---- ----- Earnings $1,519 $461 $(351) $689 $738 ====== ==== ===== ==== ==== Fixed Charges - Interest expense $ 208 $190 $157 $141 $145 Rental expense representative of interest factor 12 14 12 13 10 Interest capitalized 5 9 28 24 25 ------ ---- ---- ---- ----- Total fixed charges $ 225 $213 $197 $178 $180 ====== ==== ==== ==== ==== Ratio of earnings to fixed charges 6.8 2.2 -(1) 3.9 4.1 ====== ==== ==== ==== ===== (1)Earnings were inadequate to cover fixed charges by $548 million in 1998. EX-13 11 annualrpt2000.txt ANNUAL REPORT Exhibit 13 Financial Review Kerr-McGee Corporation Contents Management's Discussion and Analysis.............................20 Overview.......................................................20 Operating Environment and Outlook..............................20 Results of Consolidated Operations.............................21 Segment Operations.............................................23 Financial Condition............................................24 Capital Spending...............................................25 Market Risks...................................................26 Environmental Matters..........................................27 New Accounting Standards.......................................29 Cautionary Statement Concerning Forward-Looking Statements.....................................29 Responsibility for Financial Reporting...........................29 Report of Independent Public Accountants.........................30 Consolidated Statement of Income.................................31 Consolidated Statement of Comprehensive Income and Stockholders' Equity.......................................32 Consolidated Balance Sheet.......................................33 Consolidated Statement of Cash Flows.............................34 Notes to Financial Statements....................................35 1. The Company and Significant Accounting Policies.........35 2. Cash Flow Information...................................37 3. Inventories.............................................37 4. Investments - Equity Affiliates.........................37 5. Investments - Other Assets..............................38 6. Property, Plant and Equipment...........................38 7. Deferred Charges........................................38 8. Asset Securitization....................................39 9. Acquisitions............................................39 10. Accrued Liabilities.....................................39 11. Debt....................................................40 12. Income Taxes............................................41 13. Taxes, Other than Income Taxes..........................42 14. Deferred Credits and Reserves - Other...................42 15. Commitments.............................................42 16. Contingencies...........................................43 17. Financial Instruments and Hedging Activities............44 18. Merger and Restructuring Charges........................46 19. Earnings Per Share......................................46 20. Common Stock............................................47 21. Other Income............................................47 22. Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of..............................48 23. Employee Stock Option Plans.............................48 24. Employee Benefit Plans..................................50 25. Employee Stock Ownership Plan...........................52 26. Reporting by Business Segments and Geographic Locations................................53 27. Discontinued Operations.................................55 28. Costs Incurred in Crude Oil and Natural Gas Activities..................................55 29. Results of Operations from Crude Oil and Natural Gas Activities............................56 30. Capitalized Costs of Crude Oil and Natural Gas Activities................................57 31. Crude Oil, Condensate, Natural Gas Liquids and Natural Gas Net Reserves (Unaudited)..............58 32. Standardized Measure of and Reconciliation of Changes in Discounted Future Net Cash Flows (Unaudited)............................59 33. Quarterly Financial Information (Unaudited).............60 Seven-Year Financial Summary.....................................61 Seven-Year Operating Summary.....................................62 Financial Review Management's Discussion and Analysis Overview Kerr-McGee Corporation is one of the largest independent exploration and production companies and titanium dioxide pigment producers in the world. Since the company merged with Oryx Energy Company in February 1999, its assets have increased approximately 40%, proven oil and natural gas reserves have risen more than 20% through both drill bit success and acquisitions, and the company's equity production capacity of titanium dioxide pigment has increased 90% through the acquisition of plants and minority interests and the expansion of existing facilities. Operating Environment and Outlook Kerr-McGee management continually monitors events that impact the pricing of its products. The supply/demand environment for oil and natural gas and resulting commodity prices dominated global headlines during the winter of 2000-01. Natural gas prices in the U.S. soared to more than $9 per million British thermal units, a result of colder-than-normal temperatures in November and December, a relatively low natural gas storage position at the start of winter, and higher demand to power new electrical generation. The impact of record drought in the western U.S. has contributed to declines in hydroelectric power generation as an alternate power supply. Environmental concerns about coal and heating oil, once preferred fuels for power generation, have placed even more demand on natural gas supplies to power electrical plants. Fourth-quarter 2000 natural gas production volumes in the U.S., however, were generally lower than in the prior year's quarter, reflecting a slowdown in production growth. This slowdown has been caused by several factors, but generally is due to fewer reserves being discovered per well drilled and technological advances allowing for quicker depletion of deposits. During 2000, OPEC indicated that it intends to keep crude oil supplies at levels that support a price of at least $25 per barrel. Recorded shipments of crude oil from OPEC-member countries support this intention. Consumption has continued to increase despite higher gasoline prices during 2000 and early 2001, compared with 1999. The impact of non-OPEC production growth, together with OPEC quota compliance and Iraq's willingness to produce under sanctions, may present the largest risk to a sustained level of crude oil pricing at a minimum $25 per barrel level. With these factors in mind, NYMEX oil prices of $24.50 per barrel and gas prices of $3.75 per MMBtu were used for 2001 budgeting and planning purposes. Kerr-McGee's average daily production volumes of barrels of oil equivalent are expected to remain essentially flat in 2001, compared with 2000. Initial production from the Leadon field in the North Sea and Nansen field in the Gulf of Mexico is expected to come onstream by late 2001, and the Boomvang field in the Gulf of Mexico will begin production by early 2002. The company's average daily barrel-of-oil-equivalent production volumes are expected to increase by about 13% in 2002 with these ongoing developments. The company is the number three supplier of titanium dioxide pigment (TiO2) in the world, with production capacity almost tripling between 1997 and early 2001. TiO2 pigment is the world's preferred opacifier, with 80% of the supply used in coatings and plastics. The company is one of five that owns proprietary chloride technology. The chloride process produces a pigment with optical properties preferred by the paint and plastics industries. In early 2001, 70% of the company's pigment production capacity was derived from chloride technology, with the remainder from sulfate technology, which produces pigment used in paper, food products and cosmetics. Titanium dioxide is a quality-of-life product, in that production follows general economic trends. At year-end 2000, worldwide pigment inventories were at normal seasonal levels of about 38 days in inventory. In the first two months of 2001, pricing in the U.S., Europe and Southeast Asia remained stable. Management is monitoring conditions to determine whether the U.S. or worldwide economies will soften, and if so, to what extent. General economic trends, in particular Gross Domestic Product growth or reduction, will translate into increases or decreases in pigment consumption. High natural gas prices sustained over the longer term will impact future titanium dioxide production costs. To combat energy price increases, the company continues to implement cost reduction and operational performance improvement initiatives at all of its plants. The company has locked in pricing for a significant portion of its U.S. natural gas requirements through mid-2001. In February 2001, the company decided to cease production of manganese metal at its electrolytic plant in Hamilton, Mississippi. Approximately 50 jobs will be eliminated and notices were made to the affected employees. This action will not impact the company's titanium dioxide pigment operations in Hamilton. Results of Consolidated Operations Net income (loss) and per-share amounts for each of the three years in the period ended December 31, 2000, were as follows: (Millions of dollars, except per-share amounts) 2000 1999 1998 - ----------------------------------------------- ----- ----- ----- Net income (loss) $ 842 $ 142 $ (68) Income (loss) from continuing operations excluding special items 940 296 (24) Net income (loss) per share - Net income (loss) - Basic 9.01 1.64 (.78) Diluted 8.37 1.64 (.78) Income (loss) from continuing operations excluding special items - Basic 10.06 3.42 (.28) Diluted 9.31 3.42 (.28) Net income (loss) was impacted by a number of special items in each of the years. These special items affect comparability between the periods and are shown on an after-tax basis in the following table, which reconciles income (loss) from continuing operations excluding special items to net income (loss): (Millions of dollars) 2000 1999 1998 - --------------------- ----- ----- ----- Income (loss) from continuing operations excluding special items $ 940 $ 296 $ (24) ----- ----- ----- Special items, net of taxes - Asset impairment -- -- (299) Merger costs -- (116) -- Net provision for environmental remediation and restoration of inactive sites (59) -- (26) Purchased in-process research and development (32) -- -- Equity affiliate's full-cost ceiling write-down -- -- (27) Restructuring -- (1) (25) Chemical plant closings and product line discontinuations (13) -- -- Pending/settled litigation (7) (20) -- Transition costs (3) (14) -- Settlement of prior years' income taxes 11 1 41 Gain on sale of equity interest in a chemical plant 8 -- -- Other, net (3) -- 15 ----- ----- ----- Total (98) (150) (321) ----- ----- ----- Discontinued operations, net of taxes -- -- 277 Change in accounting principle, net of taxes -- (4) -- ----- ------ ----- Net income (loss) $ 842 $ 142 $ (68) ===== ====== ===== The 2000 special items were both operating and nonoperating and were composed principally of the write-off of purchased in-process research and development projects and provisions for certain environmental costs. In 1999, special items were both operating and nonoperating and were associated principally with the Oryx merger and transition and with pending and settled litigation matters. The 1998 special items related primarily to impairment write-downs reflecting the year's current market value of certain of the company's oil and gas producing fields and certain chemical facilities. Effective January 1, 1999, the company adopted Statement of Position (SOP) No. 98-5, "Reporting on the Costs of Start-Up Activities." The SOP requires costs of start-up activities to be expensed as incurred. Unamortized start-up costs at the beginning of 1999 were required to be recognized as a cumulative effect of a change in accounting principle, which decreased 1999 after-tax income by $4 million. The company sold its coal operations in 1998, resulting in an after-tax gain of $257 million. All amounts related to coal are shown in the Consolidated Statement of Income as discontinued operations. Income from continuing operations excluding special items for 2000 was more than triple the 1999 amount. The $644 million increase resulted primarily from increases in after-tax operating profit for both the exploration and production and chemical operations of $588 million and $34 million, respectively, and a $20 million increase in after-tax foreign currency gains. Income from continuing operations excluding special items for 1999 increased $320 million from 1998. This primarily resulted from a $343 million increase in exploration and production after-tax operating profit excluding special items, which was partially offset by a $29 million increase in net interest expense. [GRAPH]
Sales levels soared as a result of increases in oil and gas prices and oil and pigment sales volumes. Sales ---------------------- (Billions of dollars) 2000 1999 1998 - --------------------- ---- ---- ---- $4.1 $2.7 $2.3
Sales from continuing operations were $4.1 billion in 2000, $2.7 billion in 1999 and $2.3 billion in 1998. Increased sales in 2000 resulted from the significantly higher average sales prices for oil (60% increase) and natural gas (63% increase), higher oil sales volumes and higher pigment sales volumes (principally from the two pigment plants acquired in the second quarter of 2000), partially offset by lower natural gas sales volumes. Sales for 1999 were higher than in 1998 due to higher average sales prices for oil and natural gas (37% and 12% increases, respectively), a 16% increase in oil volumes sold and an increase in titanium dioxide pigment sales volumes (mainly due to a full year of production from the company's German and Belgian pigment operations, compared to nine months in 1998), partially offset by lower electrolytic and forest products sales volumes and lower European pigment sales prices. Costs and operating expenses totaled $1.3 billion in 2000 and $1.0 billion in both 1999 and 1998. The 2000 amount was higher than the prior year principally due to the operating costs for the two acquired pigment plants and the acquired North Sea operations. Following are selling, general and administrative expenses for 2000, 1999 and 1998: (Millions of dollars) 2000 1999 1998 - --------------------- ---- ---- ---- Selling, general and administrative expenses excluding special items $293 $264 $264 ---- ---- ---- Special items - Net provision for environmental remediation and restoration of inactive sites 90 -- 41 Pending/settled litigation 8 30 -- Transition costs associated with the Oryx merger and the purchase of two pigment plants 4 22 -- Restructuring -- -- 36 Other, net -- -- (3) ---- ---- ---- Total 102 52 74 ---- ---- ---- Selling, general and administrative expenses $395 $316 $338 ==== ==== ==== Selling, general and administrative expenses excluding special items for 2000 increased 11% compared with 1999. The increase was primarily due to higher transportation costs, which resulted from higher exploration and production and chemical sales volumes and the selling, general and administrative costs associated with the purchased pigment operations. The 1999 selling, general and administrative expenses were unchanged from 1998 even though synergies were realized from the Oryx merger, principally by the exploration and production segment. The estimated selling, general and administrative synergies of approximately $35 million were offset by higher transportation costs and higher corporate charges primarily due to higher costs associated with improved employee benefit plans. With respect to the special items in selling, general and administrative expense, approximately one-half and three-quarters of the net provisions for environmental remediation and restoration of inactive sites in 2000 and 1998, respectively, relate to the removal of low-level radioactive materials from the company's inactive facility and offsite areas in West Chicago, Illinois. The remainder of the provisions relate to numerous smaller sites. The provisions for pending or settled litigation are principally related to facilities or properties no longer operated or owned by the company. Transition costs are those associated with the ongoing business during the time of the pigment plant acquisitions in 2000 and the Oryx merger in 1999. These costs do not recur in the following year. Restructuring charges in 1998 were primarily for a voluntary severance program for the former Oryx U.S. operations and a work process review and an organizational restructuring for several Kerr-McGee groups. Asset impairments totaled $446 million in 1998 (see Note 22). Of this amount, $389 million was for write-downs associated with certain oil and gas fields located in the North Sea, China and United States. Asset impairments of $57 million were also recognized for certain chemical facilities in Idaho and Alabama. The impairments were recorded because these assets were no longer expected to recover their net book values through future cash flows. Exploration costs for 2000, 1999 and 1998 were $170 million, $140 million and $215 million, respectively. The 2000 increase over 1999 was due to higher dry hole costs, principally in the North Sea, Algeria, Thailand and Australia; higher geophysical projects, primarily in the Gulf of Mexico; and higher amortization of nonproducing leaseholds. The decrease for 1999 resulted from lower dry hole costs, principally in the Gulf of Mexico, Kazakhstan and China; lower costs of geophysical projects, primarily in the United States onshore area; and lower exploration district expense in the United States, the North Sea and China. Taxes, other than income taxes, were $122 million in 2000, $85 million in 1999 and $53 million in 1998. The 2000 and 1999 variances from the prior year were both due principally to severance taxes, a direct result of the increases in oil and gas prices. In connection with the company's second quarter 2000 acquisition of the pigment plant in Savannah, Georgia, certain incomplete research and development projects were identified and valued as part of the purchase price. Since these projects had no alternative future use to the company, $32 million was expensed at the date of acquisition. Merger costs totaling $163 million were recognized in 1999 and represent costs incurred in connection with the Oryx merger, which have no future benefit to the combined operations. The major items included are severance and associated benefit plan adjustments; lease cancellation costs; transfer fees for seismic data; investment bankers, lawyers, and accountants fees; and the write-off of duplicate computer systems and fixtures (see Note 18). Interest and debt expense totaled $208 million in 2000, $190 million in 1999 and $157 million in 1998. The increase in 2000 expense compared with 1999 was the result of higher average borrowing levels during the first half of 2000 and lower capitalized interest. The 1999 increase resulted from lower capitalized interest and higher borrowings related to the costs of the Oryx merger. Other income was as follows for each of the years in the three-year period ended December 31, 2000: (Millions of dollars) 2000 1999 1998 - --------------------- ---- ---- ---- Other income excluding special items $ 65 $ 39 $ 36 ---- ---- ---- Special items - Chemical plant closings and product line discontinuations (21) -- -- Interest income from settlement of prior years' income taxes 3 1 19 Settlements with insurance carriers -- -- 12 Equity affiliate's full-cost ceiling write-down -- -- (27) Gain on sale of equity interest in a chemical plant 14 -- -- Other, net (3) -- 3 ---- ---- ---- Total (7) 1 7 ---- ---- ---- Other income $ 58 $ 40 $ 43 ==== ==== ==== The higher 2000 other income excluding special items compared with 1999 was due primarily to increases in foreign currency gains, interest income and income from unconsolidated affiliates. Higher foreign currency gains, partially offset by lower interest income, were the primary reasons for the increase in 1999 other income excluding special items compared with the prior year. Segment Operations Operating profit (loss) from each of the company's segments is summarized in the following table: (Millions of dollars) 2000 1999 1998 - --------------------- ---- ---- ---- Operating profit excluding special items - Exploration and production $1,470 $ 562 $ 62 ------ ------ ------ Chemicals - Pigment 168 113 89 Other 17 15 26 ------ ------ ------ Total Chemicals 185 128 115 ------ ------ ------ Total 1,655 690 177 Special items (41) (21) (482) ------ ------ ------ Operating profit (loss) $1,614 $ 669 $ (305) ====== ====== ====== [GRAPH]
Both core businesses contributed to the increase in record operating profit in 2000. Consolidated Operating Profit (Loss) ------------------------------------ (Millions of dollars) 2000 1999 1998 - --------------------- ------ ---- ------ $1,614 $669 $(305)
Exploration and Production Exploration and production sales, operating profit (loss) and certain other statistics are shown in the following table: (Millions of dollars, except per-unit amounts) 2000 1999 1998 - ---------------------------------------------- ---- ---- ---- Sales $2,860 $1,784 $1,291 ====== ====== ====== Operating profit excluding special items $1,470 $ 562 $ 62 Special items (3) (20) (423) ------ ------ ------ Operating profit (loss) $1,467 $ 542 $ (361) ====== ====== ====== Exploration expense $ 170 $ 140 $ 215 Net crude oil and condensate produced (thousands of barrels per day) 207 197 172 Average price of crude oil sold (per barrel) $27.64 $17.26 $12.58 Natural gas sold (MMcf per day) 531 580 584 Average price of natural gas sold (per Mcf) $ 3.87 $ 2.38 $ 2.13 Average production cost (per barrel) $ 4.49 $ 3.72 $ 3.91 Special items in 1999 are transition costs associated with the work necessary to accomplish the Oryx merger. Asset impairment for certain oil and gas fields in the North Sea, China and the United States totaled $389 million in 1998 and is reflected in special items. Also in 1998, a $34 million restructuring reserve is shown as a special item. This amount was provided primarily for a voluntary severance program for employees of former Oryx U.S. operations. Chemicals Chemical sales, operating profit and pigment production volumes are shown in the following table: (Millions of dollars) 2000 1999 1998 - --------------------- ---- ---- ---- Sales - Pigment $1,034 $725 $663 Other 227 234 300 ------ ---- ---- Total $1,261 $959 $963 ====== ==== ==== Operating profit excluding special items - Pigment $ 168 $113 $ 89 Other 17 15 26 ------ ---- ---- 185 128 115 Special items - Pigment (38) -- (33) Other -- (1) (26) ------ ---- ---- Operating profit $ 147 $127 $ 56 ====== ==== ==== Gross worldwide pigment production (thousands of tonnes) 480 320 284 Special items in 2000 include $32 million for the write-off of in-process research and development projects with the purchase of the Savannah, Georgia, pigment plant and $6 million for the transition costs incurred in connection with the purchase of the Savannah and Botlek, Netherlands, pigment plants. Severance charges of $1 million and $2 million were recorded as special items in 1999 and 1998, respectively. Also included in 1998 special charges are asset impairments totaling $57 million for noncore chemical assets in Alabama and Idaho. Pigment - The 43% increase in titanium dioxide pigment sales in 2000 compared with 1999 was primarily due to the additional volumes sold from the two acquired plants and higher pigment sales volumes at the other plants. Operating profit excluding special items in 2000 increased $55 million over 1999 due principally to record pigment sales volumes, cost-reduction incentives and the favorable impact of euro exchange rates. The increase in 1999 titanium dioxide pigment sales from the prior year was due principally to increased volumes in Europe as a result of a full year of sales after the company's acquisition at the end of March 1998 of the German and Belgian pigment operations, partially offset by lower European pigment prices. Operating profit excluding special items increased in 1999 due to the higher sales in Europe and lower U.S. per-unit production costs. Other - Other chemical sales and operating profit for 2000 did not change significantly from 1999. The sales were lower in 1999 as compared with 1998 principally due to lower forest products sales volumes, the company's withdrawal from the ammonium perchlorate business in 1998 and lower vanadium sales volumes. Financial Condition (Millions of dollars) 2000 1999 1998 - --------------------- ---- ---- ---- Current ratio 1.0 to 1 1.4 to 1 0.8 to 1 Total debt $2,425 $2,525 $2,250 Total debt less cash 2,281 2,258 2,129 Stockholders' equity $2,633 $1,492 $1,346 Total debt less cash to total capitalization 46% 60% 61% Floating-rate debt to total debt 3% 38% 33% [GRAPH]
Net debt to total capitalization is total debt less cash divided by total debt less cash plus stockholders' equity. Net Debt to Total Capitalization -------------------------------- (Percentages) 2000 1999 1998 - ------------- ---- ---- ---- 46 60 61
Kerr-McGee operates with a philosophy that the company's capital program and dividends will be paid from cash generated by operations. Debt and equity transactions are utilized for acquisition opportunities and short-term needs due to timing of cash flow. Additionally, the company defined a goal in 1999 to reduce its net debt to capitalization to less than 50% over the five-year period 1999-2003. This goal was achieved in 2000 with a year-end ratio of 46%. The improvement from 60% at December 31, 1999, was the result of the impact of the equity increase from 2000 net income as well as lower debt levels. Cash Flow Year-end cash was $144 million, a reduction of $123 million from $267 million at December 31, 1999. Operating activities provided net cash flow of $1.8 billion in 2000, compared with $713 million in 1999. Most of this increase was due to the $700 million rise in net income, which continues to be the company's primary source of cash. Additionally, net cash flow increased $106 million from the company's pigment receivable securitization program. Despite selling the pigment receivables, the company's total receivables increased due to higher oil sales volumes and higher oil and natural gas sales prices and the receivables associated with the acquired Dutch pigment plant. The increased receivables level reduced net cash by $55 million, and the remaining changes in working capital and other increased net cash flow by $19 million. [GRAPH]
Net cash flow from operating activities more than doubled to almost $1.8 billion. Net Cash Flow from Operating Activities --------------------------------------- (Millions of dollars) 2000 1999 1998 --------------------- ---- ---- ---- 1,771 713 385
The company invested $774 million in its 2000 capital program, plus $53 million in unsuccessful exploratory drilling costs. Capital expenditures were $231 million higher than in 1999. Additionally, the company used $975 million for two major acquisitions - the purchase of Repsol S.A.'s North Sea oil and gas operations and Kemira Oyj's U.S. and Dutch titanium dioxide pigment facilities. To finance the acquisitions, the company generated $950 million in net proceeds in February 2000 by issuing common stock (7.5 million shares) and 5-1/4% convertible subordinated debentures due in 2010 ($600 million principal). Additionally, cash flow was used to pay the company's dividends and reduce debt. Total annual dividends of $166 million in 2000 increased approximately $3 million per quarter with the issuance of the additional common stock in February. Debt repayments totaled $969 million. Additionally, debt was impacted by the noncash increase of $187 million in carrying value of the company's debt exchangeable for common stock of Devon Energy Corporation, due August 2, 2004. (The company owns 9,954,000 shares of Devon common stock.) Liquidity The company believes that it has the ability to provide for its operational needs and its long- and short-term capital programs through its operating cash flows, borrowing capacity and ability to raise capital. At December 31, 2000, the company had unused lines of credit and committed amounts under revolving credit agreements totaling $1.6 billion. Two revolving credit agreements consisting of a five-year $650 million facility and a 364-day $650 million facility were signed January 12, 2001. These facilities replaced five revolving credit facilities, which totaled $1.4 billion. Of the two new agreements, $800 million and $400 million can be used to support commercial paper borrowings in the U.S. and Europe, respectively, by certain wholly owned subsidiaries and are guaranteed by the parent company. The borrowings can be made in U.S. dollars, British pound sterling, euros or local European currencies. The company also has a $100 million revolving credit agreement available to its Chinese subsidiary through March 3, 2003. In addition, the company had unused lines of credit of $61 million at December 31, 2000. Interest for each of the revolving credit facilities and lines of credit is payable at varying rates. At December 31, 2000, the company classified $71 million of its short-term obligations as long-term debt. Final settlement of these commercial paper obligations is not expected to occur in 2001. The company has the intent and the ability, as evidenced by committed credit agreements, to refinance this debt on a long-term basis. The company's practice has been to continually refinance its commercial paper while maintaining levels believed to be appropriate. The company also has available, to issue and sell, a total of $525 million remaining debt securities, common or preferred stock, or warrants under its shelf registration with the Securities and Exchange Commission, which was last updated in January 2000. The February stock and convertible debt offerings were issued under the updated shelf registration. The company entered into two leasing arrangements in 2000 for the financing of its working interest obligations for the production platforms and related equipment for the company-operated Nansen and Boomvang fields in the East Breaks area of the Gulf of Mexico. Both arrangements consist of a synthetic lease for the construction phase, with the company acting as construction agent, to be followed by an operating lease during operations. Under the terms of each of the synthetic leases, a special purpose trust advances proceeds to finance construction costs of the platform and related equipment. Upon completion of the construction phase, a trust will become the lessor/owner of the platforms and related equipment. These leases provide a tax-efficient method of financing part of these developments. Additionally, the company began an accounts receivable monetization program in December 2000 for its pigment business. Under the terms of the credit-insurance-backed asset securitization, up to $180 million of selected pigment customers' accounts receivable may be sold to a special-purpose entity, which results in a cost-efficient financing rate to the company. At December 31, 2000, $106 million had been received from the program. Capital Spending Cash capital expenditures are summarized as follows: (Millions of dollars) Est. 2001 2000 1999 1998 - --------------------- --------- ---- ---- ---- Exploration and production $1,030 $651 $447 $871 Chemicals 200 117 90 92 Other 10 6 6 18 ------ ---- ---- ---- $1,240 $774 $543 $981 ====== ==== ==== ==== Capital spending, excluding acquisitions, totaled $2.3 billion in the three-year period ended December 31, 2000, and dividends paid totaled $390 million in the same three-year period, which compares with $2.9 billion of net cash provided by operating activities during the same period. This is indicative of the company's philosophy of providing for its capital programs and dividends through internally generated funds. During the past three years, the company made four major acquisitions, in addition to the merger with Oryx, which further expanded its global presence - the 1998 acquisitions of Gulf Canada's North Sea assets and Bayer's titanium dioxide pigment plants in Germany and Belgium for a total of $518 million and the 2000 acquisitions of Repsol S.A.'s North Sea oil and gas operations and Kemira Oyj's U.S. and Dutch pigment plants for a total of $975 million. [GRAPH]
2001 estimate of capital spending is a record $1.2 billion. Capital Expenditures --------------------------------- 2001 (Millions of dollars) estimate 2000 1999 1998 - --------------------- -------- ---- ---- ---- 1,240 774 543 981
Kerr-McGee has budgeted $1.2 billion for its capital program in 2001. This level is the highest in the company's history and represents a 60% increase over 2000. In addition, the company has budgeted $205 million for exploration activities. Successful exploration and appraisal drilling programs in 1999 and 2000 have led to three major company-operated development projects - Nansen (50% working interest) and Boomvang (30% working interest) in the Gulf of Mexico and the 100%-owned Leadon project in the North Sea. Chemical capital expenditures in 2001 will primarily be directed toward improvements to its pigment business, including upgrades of the facilities acquired in 2000. The 2001 budget also includes capital for a 10% capacity expansion project for the Kwinana, Western Australia, titanium dioxide pigment plant to 95,000 tonnes annually. Management anticipates that the 2001 capital program and selected acquisitions that support the company's global growth strategy can continue to be provided through internally generated funds and selective borrowings. Exploration and Production Capital spending in 2000 supported the company's global growth and deepwater focus. Major expenditures were for appraisal and the start of development of the company's operated Nansen and Boomvang fields in the Gulf of Mexico in about 3,700 feet of water; the Quad 9 area of the North Sea, which included the appraisal and start of development of the Leadon field and its satellites, Birse and Glassel, and the Skene gas field; and successful exploratory and appraisal drilling in blocks 04/36 and 05/36 in Bohai Bay, offshore China. The three major company-operated development projects - Leadon, Nansen, and Boomvang - as well as the Skene field and the Bayu-Undan project in the Timor Sea, represent 64% of budgeted 2001 capital projects. Chemicals Eighty-five percent of Chemical's 2000 capital spending was for the pigment business. Over one-third of the capital was for upgrading facilities of the U.S. and Dutch plants acquired in the second quarter. Other expenditures were primarily for maintenance capital items at the pigment facilities in Mississippi, Germany and Australia, and the U.S. electrolytic operations. The budget for 2001 is estimated to increase 71% to $200 million. This includes funds for the Kwinana, Western Australia, pigment plant expansion, various upgrades at the Hamilton facility, and continuation of upgrades at the Savannah and Dutch facilities. Additionally, the 20% minority interest in the titanium dioxide pigment plants in Uerdingen, Germany, and Antwerp, Belgium, was acquired from Bayer AG in January 2001 for $24 million. Market Risks The company is exposed to a variety of market risks, including the effects of movements in foreign currency exchange rates, interest rates and certain commodity prices. The company addresses its risks through a controlled program of risk management that includes the use of derivative financial instruments. The company does not hold or issue derivative financial instruments for trading purposes. See Notes 1 and 17 for additional discussions of the company's financial instruments and hedging activities. Foreign Currency Exchange The U.S. dollar is the functional currency for the company's international operations, except for its European chemical operations. The company intends to hedge a portion of its cash flows denominated in foreign currencies. Periodically, the company purchases foreign currency forward contracts to provide funds for operating and capital expenditure requirements that will be denominated in foreign currencies, primarily Australian dollars and British pound sterling. These contracts generally have durations of less than three years. The company also enters into forward contracts to hedge the sale of various foreign currencies, principally generated from accounts receivable for titanium dioxide pigment sales denominated in foreign currencies. These contracts are principally for European currencies and generally have durations of less than a year. Even though the company sold certain of its pigment receivables (including foreign currency receivables) in the December 2000 asset monetization program discussed previously in the Liquidity section, the risk of exchange rate changes remains with the company since the foreign currency receivables were sold at the equivalent dollar value at the date of sale. Because the forward sales contracts qualified as hedges and correlate to currency movements, any gains or losses resulting from exchange rate changes were deferred and recognized as adjustments of the hedged transaction when they were settled in cash. See the New Accounting Standards section in Management's Discussion and Analysis for a discussion of the effects of adoption of the new accounting requirements for derivatives. Following are the notional amounts at the contract exchange rates, weighted-average contractual exchange rates and estimated contract value for open contracts at year-end 2000 and 1999 to purchase (sell) foreign currencies. Contract values are based on the estimated forward exchange rates in effect at year-end. All amounts are U.S. dollar equivalents.
Notional Weighted-Average Estimated Contract (Millions of dollars, except average contract rates) Amount Contract Rate Value - ---------------------------------------------------- -------- ---------------- ------------------ Open contracts at December 31, 2000 - Maturing in 2001 - British pound sterling $293 1.4595 $300 Australian dollar 60 .6168 54 Euro 21 .8525 23 Euro (3) 1.1442 (4) German mark (2) 2.2352 (2) British pound sterling (1) .6893 (1) Japanese yen (1) 110.7123 (1) New Zealand dollar (1) 2.5045 (1) Maturing in 2002 - Australian dollar 42 .6156 38 Maturing in 2003 - Australian dollar 18 .5935 17 Open contracts at December 31, 1999 - Maturing in 2000 - Australian dollar 48 .6306 50 French franc (1) 6.2908 (1) British pound sterling (1) .6187 (1) Italian lira (1) 1839.8282 (1) New Zealand dollar (1) 1.9775 (1) Japanese yen (1) 102.4479 (1) Maturing in 2001 - Australian dollar 32 .6499 32 Maturing in 2002 - Australian dollar 16 .6538 16
Interest Rates The company's exposure to changes in interest rates relates primarily to long-term debt obligations. The company has participated in various interest rate hedging arrangements to help manage the floating-rate portion of its debt. No interest rate hedging contracts were entered into during the three-year period ended December 31, 2000. Certain interest rate contracts expired during 1998. The table below presents principal amounts and related weighted-average interest rates by maturity date for the company's long-term debt obligations outstanding at year-end 2000. All borrowings are in U.S. dollars.
There- Fair Value (Millions of dollars) 2001 2002 2003 2004 2005 after Total 12/31/00 - --------------------- ---- ---- ---- ---- ---- ----- ----- -------- Fixed-rate debt - Principal amount $175 $36 $116 $678 $162 $1,181 $2,348 $2,558 Weighted-average interest rate 9.83% 8.85% 8.04% 6.19% 8.10% 6.13% 6.69% Variable-rate debt - Principal amount -- $71 -- -- -- -- $71 $ 71 Weighted-average interest rate -- 7.29% -- -- -- -- 7.29%
At December 31, 1999, long-term debt included fixed-rate debt of $1.573 billion (fair value - $1.612 billion) with a weighted-average interest rate of 7.40% and $943 million of variable-rate debt, which approximated fair value, with a weighted-average interest rate of 6.69%. Commodity Prices The company periodically uses commodity futures and collar contracts to hedge a portion of its crude oil and natural gas sales and natural gas purchased for operations in order to minimize the associated price risks. Because the contracts qualify as hedges and correlate to price movements of crude oil and natural gas, any gain or loss from these contracts is deferred and recognized as part of the hedged transaction. The company did not enter into any commodity hedging arrangements in 2000 or 1999. All open 1998 contracts were settled during 1999. At December 31, 1998, the company had open crude oil collar contracts that hedged 4% of its 1999 worldwide crude oil sales volumes at an average floor price of $15.85 per barrel and an average ceiling price of $17.35 per barrel. Also at December 31, 1998, the company had collar arrangements that hedged 21% of its 1999 worldwide natural gas sales volumes at an average floor price of $2.29 per MMBtu and an average ceiling price of $2.47 per MMBtu. The aggregate carrying value of these contracts at December 31, 1998, was $7 million, and the aggregate fair value, based on quotes from brokers, was approximately $22 million. Environmental Matters The company and its subsidiaries are subject to various environmental laws and regulations. Under these laws, the company and/or its subsidiaries are or may be required to remove or mitigate the effects on the environment of the disposal or release of certain chemical, petroleum, low-level radioactive or other substances at various sites, including sites that have been designated Superfund sites by the U.S. Environmental Protection Agency (EPA) pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), as amended and, which are included on the National Priority List. At December 31, 2000, the company and/or its subsidiaries have received notices that they have been named potentially responsible parties (PRPs) with respect to 12 existing EPA Superfund sites on the National Priorities List (NPL) that require remediation. The company and/or its subsidiaries may share liability at certain of these sites with numerous other PRPs. In addition, the company and/or its subsidiaries have executed consent orders, operate under licenses or have reached agreements to perform or have performed remediation or remedial investigations and feasibility studies on sites not included as EPA Superfund NPL sites. The company does not consider the number of sites for which it has been named a PRP to be a relevant measure of liability. The company and/or its subsidiaries are uncertain as to the scope of their involvement in or responsibility for many of the sites because of continually changing environmental laws and regulations; the nature of the company's businesses; the possibility of other PRPs; the present state of the law, which imposes joint and several liability on all PRPs under CERCLA; and pending legal proceedings. Therefore, the company is unable to reliably estimate the potential liability and the timing of future expenditures that may arise from many of these environmental sites. Reserves have been established for the remediation and restoration of active and inactive sites where it is probable that future costs will be incurred and the liability is estimable. In 2000, $128 million was added to the reserve for active and inactive sites, including reserve changes of $16 million relating to acquisitions and divestitures. At December 31, 2000, the company's reserve for these sites totaled $216 million. In addition, at year-end 2000, the company had a reserve of $287 million for the future costs of the abandonment and removal of offshore well and production facilities at the end of their productive lives. In the Consolidated Balance Sheet, $434 million of the total reserve is classified as a deferred credit, and the remaining $69 million is included in current liabilities. Management believes that currently the company has reserved adequately for the reasonably estimable costs of known environmental contingencies. However, additional reserves may be required in the future due to the previously noted uncertainties (see Note 16). Expenditures for the environmental protection and cleanup of existing sites for each of the last three years and for the three-year period ended December 31, 2000, are as follows: (Millions of dollars) 2000 1999 1998 Total - --------------------- ---- ---- ---- ----- Charges to environmental reserves $116 $121 $109 $346 Recurring expenses 23 17 13 53 Capital expenditures 28 5 24 57 ---- ---- ---- ---- Total $167 $143 $146 $456 ==== ==== ==== ==== The company has not recorded in the financial statements potential reimbursements from governmental agencies or other third parties, except for certain amounts due from the U.S. government under Title X of the Energy Policy Act of 1992 (see Notes 14 and 16). The following table reflects the company's portion of the known estimated costs of investigation and/or remediation that is probable and estimable. The table summarizes EPA Superfund NPL sites where the company has been notified it is a PRP under CERCLA and other sites for which the company believes it had some ongoing financial involvement in investigation and/or remediation at year-end 2000.
Total Known Total Estimated Expenditures Cost Through 2000 ----------- ------------ Location of Site Stage of Investigation/Remediation (Millions of dollars) - -------------------------------- ---------------------------------- --------------------------------- EPA Superfund sites on National Priorities List (NPL) Milwaukee, Wis. Executed consent decree to remediate the site of a former wood-treating facility. Initiated groundwater and soil treatment. $ 19 $ 12 West Chicago, Ill., four sites Began cleanup of first site in 1995. At second site, outside the facility removal work and surface restoration are complete, and closeout report has been submitted to the EPA. Two sites are under study (see Note 16). 108 95 7 other sites Various stages of investigation/remediation. 25 19 ---- ---- 152 126 ---- ---- Sites under consent order, license or agreement not on EPA Superfund NPL West Chicago, Ill., facility Decommissioning is in progress under State of Illinois supervision (see Note 16). Began shipments to a permanent disposal facility in 1994. 407 310 Cleveland/Cushing, Okla. Began cleanup in 1996. 83 75 Henderson, Nev. Entered consent agreement in 1999. Recovery of perchlorate has been initiated. 69 32 ------ ---- 559 417 ------ ---- Other sites Various stages of investigation/remediation. 291 243 ------ ---- Total for all sites $1,002 $786 ====== ====
New Accounting Standards In June 1998, the Financial Accounting Standards Board (FASB) issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133). The statement as amended requires recording all derivative instruments as assets or liabilities, measured at fair value. Kerr-McGee adopted this standard on January 1, 2001, by recording the fair value of all the foreign currency forward contracts discussed previously under Market Risks and by separating and recording the fair value of the options associated with the company's debt exchangeable for stock of Devon Energy Corporation presently owned by the company. Also, in accordance with FAS 133, the company chose to reclassify 85% of the Devon shares owned to "trading" from the "available for sale" category of investments. This reclassification will mean that 85% of the stock investment will be marked-to-market through income each month. The change in the market value of this portion of the Devon stock should essentially offset the change in the value of the options associated with the exchangeable debt. The following table summarizes the effect of the initial FAS 133 application on January 1, 2001. None of the changes are reflected in the 2000 financial statements.
Increase (Decrease) --------------------------------------------------- (Millions of dollars) Assets Liabilities Equity(1) Net Income - --------------------- ------ ----------- --------- ---------- Foreign currency forward contracts $ 9 $11 $ (3) $ 1 Designate 85% of Devon stock as trading -- -- (118) 118 Separate the options from the debt and record at fair value (6) 15 -- (21) --- --- ----- ---- $ 3 $26 $(121) $ 98 === === ===== ====
(1) All of these equity changes will be reflected in Other Comprehensive Income in the 2001 Consolidated Statement of Comprehensive Income and Stockholders' Equity. The effects of the changes flowing through net income are not reflected in the equity changes above. In September 2000, the FASB issued Statement No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" (FAS 140). This statement revises the methods of accounting for securitizations and other transfers of financial assets occurring after March 31, 2001, and requires certain additional disclosure for years ending after December 15, 2000. The company's first asset securitization occurred in December 2000 and is discussed in the Liquidity section of this discussion and in Notes 1 and 8. Kerr-McGee believes the application of FAS 140 will have no significant effect on the accounting for the current securitization program. The disclosures required by FAS 140 are included in Notes 1 and 8. Cautionary Statement Concerning Forward-Looking Statements This Financial Review contains forward-looking statements regarding the company's or management's intentions, beliefs or expectations within the meaning of the Securities Litigation Reform Act. Future results and developments discussed in these statements may be affected by numerous factors and risks, such as the accuracy of the assumptions that underlie the statements, the success of the oil and gas exploration and production program, drilling risks, the market value of Kerr-McGee's products, uncertainties in interpreting engineering data, demand for consumer products for which Kerr-McGee's businesses supply raw materials, general economic conditions, and other factors and risks discussed in the company's SEC filings. Actual results and developments may differ materially from those expressed or implied in this Financial Review. Responsibility for Financial Reporting The company's management is responsible for the integrity and objectivity of the financial data contained in the financial statements. These financial statements have been prepared in conformity with generally accepted accounting principles appropriate under the circumstances and, where necessary, reflect informed judgments and estimates of the effects of certain events and transactions based on currently available information at the date the financial statements were prepared. The company's management depends on the company's system of internal accounting controls to assure itself of the reliability of the financial statements. The internal control system is designed to provide reasonable assurance, at appropriate cost, that assets are safeguarded and transactions are executed in accordance with management's authorizations and are recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. Periodic reviews are made of internal controls by the company's staff of internal auditors, and corrective action is taken if needed. The Board of Directors reviews and monitors financial statements through its audit committee, which is composed solely of directors who are not officers or employees of the company. The audit committee meets regularly with the independent public accountants, internal auditors and management to review internal accounting controls, auditing and financial reporting matters. The independent public accountants are engaged to provide an objective and independent review of the company's financial statements and to express an opinion thereon. Their audits are conducted in accordance with generally accepted auditing standards, and their report is included on the following page. Report of Independent Public Accountants To the Stockholders and Board of Directors of Kerr-McGee Corporation: We have audited the accompanying consolidated balance sheet of Kerr-McGee Corporation (a Delaware corporation) and subsidiary companies as of December 31, 2000 and 1999, and the related consolidated statements of income, comprehensive income and stockholders' equity and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the 1998 financial statements of Oryx Energy Company, which was merged into the company during 1999 in a transaction accounted for as a pooling of interests, as discussed in Note 1. Such statements are included in the consolidated financial statements of Kerr-McGee Corporation and reflect 37 percent of consolidated total revenues in 1998, after restatement to reflect certain adjustments necessary to conform accounting policies and presentation. The financial statements of Oryx Energy Company prior to those adjustments were audited by other auditors whose report has been furnished to us and our opinion, insofar as it relates to the amounts included for Oryx Energy Company, is based solely on the report of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Kerr-McGee Corporation and subsidiary companies as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Oklahoma City, Oklahoma, February 23, 2001 ARTHUR ANDERSEN LLP Report of Independent Accountants To the Shareholders and Board of Directors, Oryx Energy Company: In our opinion, the accompanying consolidated balance sheet of Oryx Energy Company and its Subsidiaries and the related consolidated statements of income, cash flows and changes in shareholders' equity (not presented separately herein) present fairly, in all material respects, the consolidated financial position of Oryx Energy Company and its Subsidiaries as of December 31, 1998 and the consolidated results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Dallas, Texas February 26, 1999 Consolidated Statement of Income
(Millions of dollars, except per-share amounts) 2000 1999 1998 - ----------------------------------------------- ------ ------ ------ Sales $4,121 $2,743 $2,254 ------ ------ ------ Costs and Expenses Costs and operating expenses 1,269 1,025 1,047 Selling, general and administrative expenses 395 316 338 Depreciation and depletion 684 607 561 Asset impairment -- -- 446 Exploration, including dry holes and amortization of undeveloped leases 170 140 215 Taxes, other than income taxes 122 85 53 Purchased in-process research and development 32 -- -- Merger costs -- 163 -- Interest and debt expense 208 190 157 ------ ------ ------ Total Costs and Expenses 2,880 2,526 2,817 ------ ------ ------ 1,241 217 (563) Other Income 58 40 43 ------ ------ ------ Income (Loss) from Continuing Operations before Income Taxes and Change in Accounting Principle 1,299 257 (520) Taxes on Income (457) (111) 175 ------ ------ ------ Income (Loss) from Continuing Operations before Change in Accounting Principle 842 146 (345) Income from Discontinued Operations, net of taxes of $156 -- -- 277 ------ ------ ------ Income (Loss) before Change in Accounting Principle 842 146 (68) Cumulative Effect of Change in Accounting Principle, net of taxes of $2 -- (4) -- ------ ------ ------ Net Income (Loss) $ 842 $ 142 $ (68) ====== ====== ====== Net Income (Loss) per Common Share Basic - Continuing operations $ 9.01 $ 1.69 $(3.98) Discontinued operations -- -- 3.20 Cumulative effect of accounting change -- (.05) -- ------ ------ ------ Net income (loss) $ 9.01 $ 1.64 $ (.78) ====== ====== ====== Diluted - Continuing operations $ 8.37 $ 1.69 $(3.98) Discontinued operations -- -- 3.20 Cumulative effect of accounting change -- (.05) -- ------ ------ ------ Net income (loss) $ 8.37 $ 1.64 $ (.78) ====== ====== ====== The accompanying notes are an integral part of this statement.
Consolidated Statement of Comprehensive Income and Stockholders' Equity
Accumulated Capital in Other Deferred Total Comprehensive Common Excess of Retained Comprehensive Treasury Compensation Stockholders' (Millions of dollars) Income (Loss) Stock Par Value Earnings Income (Loss) Stock and Other Equity - --------------------- ------------- ------ ---------- -------- ------------- -------- ------------ ------------- Balance December 31, 1997 $ 93 $1,274 $ 731 $(29) $(363) $(148) $1,558 Net loss $(68) -- -- (68) -- -- -- (68) Foreign currency trans- lation adjustment (5) -- -- -- (5) -- -- (5) Minimum pension liability adjustment (2) -- -- -- (2) -- -- (2) Shares issued -- -- 8 -- -- -- -- 8 Shares acquired -- -- -- -- -- (25) -- (25) Dividends declared ($1.80 per share) -- -- -- (86) -- -- -- (86) Effect of equity affiliate's merger -- -- -- (51) -- -- -- (51) Other -- -- -- 1 -- -- 16 17 ---- ---- ------ ----- ---- ----- ----- ------ Total $(75) ==== Balance December 31, 1998 93 1,282 527 (36) (388) (132) 1,346 Net income $142 -- -- 142 -- -- -- 142 Unrealized gains on securities, net of $42 income tax 79 -- -- -- 79 -- -- 79 Foreign currency trans- lation adjustment (23) -- -- -- (23) -- -- (23) Minimum pension liability adjustment 25 -- -- -- 25 -- -- 25 Shares issued -- -- 2 -- -- -- -- 2 Dividends declared ($1.80 per share) -- -- -- (156) -- -- -- (156) Effect of equity affiliate's merger -- -- -- 63 -- -- -- 63 Other -- -- -- -- -- -- 14 14 ---- ---- ------ ----- ---- ----- ----- ------ Total $223 ==== Balance December 31, 1999 93 1,284 576 45 (388) (118) 1,492 Net income $842 -- -- 842 -- -- -- 842 Unrealized gains on securities, net of $32 income tax 60 -- -- -- 60 -- -- 60 Foreign currency trans- lation adjustment 3 -- -- -- 3 -- -- 3 Minimum pension liability adjustment 5 -- -- -- 5 -- -- 5 Shares issued -- 8 375 -- -- -- -- 383 Dividends declared ($1.80 per share) -- -- -- (170) -- -- -- (170) Other -- -- 1 (15) -- 5 27 18 ---- ---- ------ ------ ---- ----- ------ ------ Total $910 ==== Balance December 31, 2000 $101 $1,660 $1,233 $113 $(383) $ (91) $2,633 ==== ====== ====== ==== ===== ===== ====== The accompanying notes are an integral part of this statement.
Consolidated Balance Sheet
(Millions of dollars) 2000 1999 - --------------------- ------ ------ ASSETS Current Assets Cash $ 144 $ 267 Accounts receivable, net of allowance for doubtful accounts of $11 in 2000 and $8 in 1999 667 501 Inventories 391 281 Deposits, prepaid expenses and other 113 112 ------ ------ Total Current Assets 1,315 1,161 Investments Equity affiliates 41 59 Other assets 729 467 Property, Plant and Equipment - Net 5,383 4,085 Deferred Charges 198 127 ------ ------ Total Assets $7,666 $5,899 ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 638 $ 404 Short-term borrowings 6 9 Long-term debt due within one year 175 20 Taxes on income 190 70 Taxes, other than income taxes 25 40 Accrued liabilities 315 297 ------ ------ Total Current Liabilities 1,349 840 ------ ------ Long-Term Debt 2,244 2,496 ------ ------ Deferred Credits and Reserves Income taxes 704 401 Other 736 670 ------ ------ Total Deferred Credits and Reserves 1,440 1,071 ------ ------ Stockholders' Equity Common stock, par value $1.00 - 300,000,000 shares authorized, 101,417,309 shares issued in 2000 and 93,494,186 shares issued in 1999 101 93 Capital in excess of par value 1,660 1,284 Preferred stock purchase rights 1 1 Retained earnings 1,233 576 Accumulated other comprehensive income 113 45 Common stock in treasury, at cost - 6,932,790 shares in 2000 and 7,010,790 shares in 1999 (383) (388) Deferred compensation (92) (119) ------ ------ Total Stockholders' Equity 2,633 1,492 ------ ------ Total Liabilities and Stockholders' Equity $7,666 $5,899 ====== ====== The "successful efforts" method of accounting for oil and gas exploration and production activities has been followed in preparing this balance sheet. The accompanying notes are an integral part of this balance sheet.
Consolidated Statement of Cash Flows
(Millions of dollars) 2000 1999 1998 - --------------------- ------- ------ ----- Cash Flow from Operating Activities Net income (loss) $ 842 $ 142 $ (68) Adjustments to reconcile to net cash provided by operating activities - Depreciation, depletion and amortization 732 648 615 Deferred income taxes 18 -- (98) Dry hole cost 54 43 100 Merger and transition costs -- 131 -- Asset impairment -- -- 446 Provision for environmental remediation and restoration of inactive sites 90 -- 41 Gain on sale of coal operations, net of income taxes -- -- (257) Gain on asset retirements and sales (6) (3) (7) Purchased in-process research and development 32 -- -- Noncash items affecting net income 45 67 13 Changes in current assets and liabilities and other, net of effects of operations acquired and sold - (Increase) decrease in accounts receivable (55) (56) 164 Increase in inventories (46) (34) (54) (Increase) decrease in deposits and prepaids 3 10 (92) Increase (decrease) in accounts payable and accrued liabilities 60 (198) (103) Increase (decrease) in taxes payable 137 92 (165) Other (135) (129) (150) ------ ------ ----- Net cash provided by operating activities 1,771 713 385 ------ ------ ----- Cash Flow from Investing Activities Capital expenditures (774) (543) (981) Cash dry hole cost (53) (33) (92) Acquisitions (1,018) (78) (518) Purchase of long-term investments (56) (39) (3) Proceeds from sale of long-term investments 35 27 12 Proceeds from sale of discontinued operations -- -- 599 Proceeds from sale of other assets 42 4 161 ------- ------ ----- Net cash used in investing activities (1,824) (662) (822) ------- ------ ----- Cash Flow from Financing Activities Issuance of long-term debt 677 1,084 563 Issuance of common stock 383 4 6 Increase (decrease) in short-term borrowings (3) (27) 11 Repayment of long-term debt (966) (782) (93) Dividends paid (166) (138) (86) Lease buyout -- (41) -- Treasury stock purchased -- -- (25) ------- ------ ----- Net cash provided by (used in) financing activities (75) 100 376 ------- ------ ----- Effects of Exchange Rate Changes on Cash and Cash Equivalents 5 (5) (10) ------- ------ ----- Net Increase (Decrease) in Cash and Cash Equivalents (123) 146 (71) Cash and Cash Equivalents at Beginning of Year 267 121 192 ------- ------ ----- Cash and Cash Equivalents at End of Year $ 144 $ 267 $ 121 ======= ====== ===== The accompanying notes are an integral part of this statement.
Notes to Financial Statements 1. The Company and Significant Accounting Policies Kerr-McGee is an energy and chemical company with worldwide operations. It explores for, develops, produces and markets crude oil and natural gas, and its chemical operations primarily produce and market titanium dioxide pigment. The exploration and production unit produces and explores for oil and gas in the United States, the United Kingdom sector of the North Sea, Indonesia, China, Kazakhstan and Ecuador. Exploration efforts also extend to Australia, Benin, Brazil, Gabon, Morroco, Canada, Thailand, Yemen and the Danish sector of the North Sea. The chemical unit has operations in the United States, Australia, Germany, Belgium and the Netherlands. On February 26, 1999, the merger between Kerr-McGee and Oryx Energy Company (Oryx) was completed. Oryx was a worldwide independent oil and gas exploration and production company. Under the merger agreement, each outstanding share of Oryx common stock was effectively converted into the right to receive 0.369 shares of newly issued Kerr-McGee common stock. The merger qualified as a tax-free exchange to Oryx's shareholders and has been accounted for as a pooling of interests. In the aggregate, Kerr-McGee issued approximately 39 million shares of Kerr-McGee common stock. Kerr-McGee's consolidated financial statements have been restated for periods prior to the merger to include the operations of Oryx, adjusted to conform to Kerr-McGee's accounting policies and presentation. Basis of Presentation The consolidated financial statements include the accounts of all subsidiary companies that are more than 50% owned and the proportionate share of joint ventures in which the company has an undivided interest. Investments in affiliated companies that are 20% to 50% owned are carried as Investments - Equity affiliates in the Consolidated Balance Sheet at cost adjusted for equity in undistributed earnings. Except for dividends and changes in ownership interest, changes in equity in undistributed earnings are included in the Consolidated Statement of Income. All material intercompany transactions have been eliminated. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates as additional information becomes known. Foreign Currencies The U.S. dollar is considered the functional currency for each of the company's international operations, except for its European chemical operations. Foreign currency transaction gains or losses are recognized in the period incurred. The company recorded net foreign currency transaction gains of $30 million and $11 million in 2000 and 1999, respectively. The net foreign currency transaction losses in 1998 were immaterial. The euro is the functional currency for the European chemical operations. Translation adjustments resulting from translating the functional currency financial statements into U.S. dollar equivalents are reported separately in Accumulated Other Comprehensive Income (Loss) in the Consolidated Statement of Comprehensive Income and Stockholders' Equity. Cash Equivalents The company considers all investments with a maturity of three months or less to be cash equivalents. Cash equivalents totaling $39 million in 2000 and $156 million in 1999 were comprised of time deposits, certificates of deposit and U.S. government securities. Receivable Sales Under a credit-insurance-backed asset securitization program, Kerr-McGee sells selected pigment customers' accounts receivable to a special-purpose entity (SPE). The company does not own any of the SPE's common stock. When the receivables are sold, Kerr-McGee retains interests in the securitized receivables for servicing and in preference stock of the SPE. The interest in the preference stock is essentially a deposit to provide further credit enhancement to the securitization program, if needed, but otherwise recoverable by the company at the end of the program. The recorded value of the preference stock is adjusted with each sale and is equal to its fair value. The servicing fee is estimated by management to be adequate compensation and is equal to what would otherwise be charged by an outside servicing agent. The company records the loss associated with the receivable sales by comparing cash received and fair value of the retained interests to the carrying amount of the receivables sold. The estimate of fair value of the retained interests is based on the present value of future cash flows discounted at rates estimated by management to be commensurate with the risks. Inventories The costs of the company's product inventories are determined by the first-in, first-out (FIFO) method. Inventory carrying values include material costs, labor and the associated indirect manufacturing expenses. Materials and supplies are valued at average cost. Property, Plant and Equipment Exploration and Production - Exploration expenses, including geological and geophysical costs, rentals and exploratory dry holes, are charged against income as incurred. Costs of successful wells and related production equipment and developmental dry holes are capitalized and amortized by field using the unit-of-production method as the oil and gas are produced. Undeveloped acreage costs are capitalized and amortized at rates that provide full amortization on abandonment of unproductive leases. Costs of abandoned leases are charged to the accumulated amortization accounts, and costs of productive leases are transferred to the developed property accounts. Other - Property, plant and equipment is stated at cost less reserves for depreciation, depletion and amortization. Maintenance and repairs are expensed as incurred, except that costs of replacements or renewals that improve or extend the lives of existing properties are capitalized. Costs of nonproducing mineral acreage surrendered or otherwise disposed of are charged to expense at the time of disposition. Depreciation and Depletion - Property, plant and equipment is depreciated or depleted over its estimated life by the unit-of-production or the straight-line method. Capitalized exploratory drilling and development costs are amortized using the unit-of-production method based on total estimated proved developed oil and gas reserves. Amortization of producing leasehold, platform costs and acquisition costs of proved properties is based on the unit-of-production method using total estimated proved reserves. In arriving at rates under the unit-of-production method, the quantities of recoverable oil, gas and other minerals are established based on estimates made by the company's geologists and engineers. Retirements and Sales - The costs and related depreciation, depletion and amortization reserves are removed from the respective accounts upon retirement or sale of property, plant and equipment. The resulting gain or loss is included in other income. Interest Capitalized - The company capitalizes interest costs on major projects that require a considerable length of time to complete. Interest capitalized in 2000, 1999 and 1998 was $5 million, $9 million and $28 million, respectively. Impairment of Long-Lived Assets Proved oil and gas properties are reviewed for impairment on a field-by-field basis when facts and circumstances indicate that their carrying amounts may not be recoverable. In performing this review, future cash flows are estimated by applying estimated future oil and gas prices to estimated future production, less estimated future expenditures to develop and produce the reserves. If the sum of these estimated future cash flows (undiscounted and without interest charges) is less than the carrying amount of the property, an impairment loss is recognized for the excess of the carrying amount over the estimated fair value of the property. Other assets are reviewed for impairment by asset group for which the lowest level of independent cash flows can be identified and impaired in the same manner as proved oil and gas properties. Revenue Recognition Except for natural gas sales and most crude oil, revenue is recognized when title passes to the customer. Natural gas revenues and gas-balancing arrangements with partners in natural gas wells are recognized when the gas is produced and delivered using the entitlements method of accounting and are based on the company's net working interests. At December 31, 2000 and 1999, both the quantity and dollar amount of gas balancing arrangements were immaterial. Crude oil sales are recognized when produced and delivered using the entitlements method if a contract exists for the sale of the production. Income Taxes Deferred income taxes are provided to reflect the future tax consequences of differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Site Dismantlement, Remediation and Restoration Costs The company provides for the estimated costs at current prices of the dismantlement and removal of oil and gas production and related facilities. Such costs are accumulated over the estimated lives of the facilities by the use of the unit-of-production method. As sites of environmental concern are identified, the company assesses the existing conditions, claims and assertions, generally related to former operations, and records an estimated undiscounted liability when environmental assessments and/or remedial efforts are probable and the associated costs can be reasonably estimated. Employee Stock Option Plan The company accounts for its employee stock option plans using the intrinsic value method in accordance with Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees." Futures, Forward and Option Contracts The company hedges a portion of its monetary assets, liabilities and commitments denominated in foreign currencies. Periodically, the company purchases foreign currency forward contracts to provide funds for operating and capital expenditure requirements that will be denominated in foreign currencies and sells foreign currency forward contracts to convert receivables that will be paid in foreign currencies to U.S. dollars. Because these contracts qualify as hedges and correlate to currency movements, any gain or loss resulting from market changes is offset by gains or losses on the hedged receivable, capital item or operating cost. In some prior years the company has from time to time entered into arrangements to hedge the impact of price fluctuations on anticipated crude oil and natural gas sales. Gains or losses on such hedging activities are recognized in oil and gas revenues in the period in which the hedged production is sold. In some prior years the company has periodically entered into interest rate hedging agreements to alter the floating rate portion of its underlying debt portfolio. Advance proceeds received under the agreements are included in deferred credits and are amortized as offsets to interest and debt expense over the relevant periods. The differentials paid or received during the terms of such agreements are accrued as interest rates change and are recorded as adjustments to interest and debt expense. Shipping and Handling Fees and Costs During 2000, the Emerging Issues Task Force (EITF) reached a consensus on EITF Issue No. 00-10, "Accounting for Shipping and Handling Fees and Costs," stating that all amounts billed to a customer in a sales transaction related to shipping and handling, if any, represent revenues earned and should be reported as revenue, and that the costs incurred by the seller for shipping and handling should be reported as an expense. During the fourth quarter of 2000, the company adopted the requirements of this EITF issue and reclassified certain prior-period amounts to conform with the current presentation. Previously the company had reported certain shipping and handling costs as a reduction of revenue, and certain other costs billed to customers were reported as a reduction in operating expenses. The company has classified all costs incurred for shipping and handling as selling, general and administrative expenses in the Consolidated Statement of Income. These costs totaled $97 million in 2000, $78 million in 1999 and $61 million in 1998. 2. Cash Flow Information Net cash provided by operating activities reflects cash payments for income taxes and interest as follows: (Millions of dollars) 2000 1999 1998 - --------------------- ---- ---- ---- Income tax payments $338 $111 $151 Less refunds received (34) (85) (40) ---- ---- ---- Net income tax payments $304 $ 26 $111 ==== ==== ==== Interest payments $193 $191 $180 ==== ==== ==== Noncash investing and financing activities not reflected in the Consolidated Statement of Cash Flows are as follows: (Millions of dollars) 2000 1999 1998 - --------------------- ---- ---- ---- Accrued capital expenditures $ 96 $ 28 $ 43 Dividends declared but not paid 4 17 -- Issuance of restricted stock from treasury 5 -- -- Decrease in deferred compensation associated with the ESOP 13 14 10 Increase (decrease) in equity affiliate carrying value -- 98 (87) Increase in fair value of the stock owned in an investee 280 118 -- Increase (decrease) in fair value of debt exchangeable into stock of an investee 187 (3) -- 3. Inventories Major categories of inventories at year-end 2000 and 1999 are: (Millions of dollars) 2000 1999 - --------------------- ---- ---- Chemicals and other products $259 $212 Materials and supplies 129 67 Crude oil and natural gas liquids 3 2 ---- ---- Total $391 $281 ==== ==== 4. Investments - Equity Affiliates At December 31, 2000 and 1999, investments in equity affiliates are as follows: (Millions of dollars) 2000 1999 - --------------------- ---- ---- Javelina Company $25 $27 National Titanium Dioxide Company Limited -- 18 Other 16 14 --- --- Total $41 $59 === === In October 2000, the company sold its 25% equity interest in the National Titanium Dioxide Company Limited, a Saudi Arabian pigment operation. The gain on this sale was $8 million, net of $5 million for income taxes, and is included in Other Income in the Consolidated Statement of Income. Javelina Company represents the company's investment of 40% in a non-exploration and production partnership. Following are financial summaries of the company's equity affiliates. Due to immateriality, investments shown as Other in the preceding table have been excluded from the information below. (Millions of dollars) 2000 1999 1998 - --------------------- ---- ---- ---- Results of operations - Net sales(1) $213 $256 $593 Net income (loss)(2) 47 33 (41) Financial position - Current assets 45 125 Property, plant and equipment - net 113 234 Total assets 158 361 Current liabilities 21 91 Total liabilities 21 144 Stockholders' equity 137 217 (1) Includes net sales to the company of $2 million for 1998. There were no net sales to the company in 2000 or 1999. (2) The 1998 loss includes a full-cost write-down recorded by Devon Energy Corporation, a former equity affiliate. The company's proportionate share of the write-down was $27 million. 5. Investments - Other Assets Investments in other assets consist of the following at December 31, 2000 and 1999: (Millions of dollars) 2000 1999 - --------------------- ---- ---- Devon Energy Corporation common stock(1) $607 $327 Long-term receivables, net of $9 allowance for doubtful notes in both 2000 and 1999 107 110 U.S. government obligations 4 11 Net deferred tax asset -- 12 Other 11 7 ---- ---- Total $729 $467 ==== ==== (1) See Note 17. 6. Property, Plant and Equipment Fixed assets and related reserves at December 31, 2000 and 1999, are as follows:
Reserves for Depreciation and Gross Property Depletion Net Property ---------------- ----------------- --------------- (Millions of dollars) 2000 1999 2000 1999 2000 1999 - --------------------- ------- ------- ------ ------ ------ ------ Exploration and production $10,894 $ 9,689 $6,581 $6,245 $4,313 $3,444 Chemicals 1,736 1,224 721 640 1,015 584 Other 140 136 85 79 55 57 ------- ------- ------ ------ ------ ------ Total $12,770 $11,049 $7,387 $6,964 $5,383 $4,085 ======= ======= ====== ====== ====== ======
7. Deferred Charges Deferred charges are as follows at year-end 2000 and 1999: (Millions of dollars) 2000 1999 - --------------------- ---- ---- Pension plan prepayments $132 $ 79 Unamortized debt issue costs 27 18 Nonqualified benefit plans deposits 23 -- Amounts pending recovery from third parties 7 10 Intangible assets - pension plan -- 6 Other 9 14 ---- ---- Total $198 $127 ==== ==== Effective January 1, 1999, the company began expensing the costs of start-up activities in accordance with Statement of Position No. 98-5, "Reporting on the Costs of Start-Up Activities." Unamortized start-up costs totaling $6 million at the end of 1998 were recognized in 1999 as the cumulative effect of a change in accounting principle ($4 million after taxes). 8. Asset Securitization In December 2000, the company began an accounts receivable monetization for its pigment business through the sale of selected accounts receivable in a credit-insurance-backed asset securitization program. The company retained servicing responsibilities and subordinated interests and will receive a servicing fee of 1.07% of the receivables sold for the period of time outstanding, generally 60 to 120 days. No recourse obligations were recorded since the company has very limited obligations for any recourse actions on the sold receivables. The collection of the receivables is insured, and only receivables that qualify for credit insurance can be sold. A portion of the insurance is reinsured by the company's captive insurance company; however, the company believes that the risk of insurance loss is very low since its bad debt experience has historically been insignificant. The company also received preference stock in the special-purpose entity equal to 3.5% of the receivables sold. This preference stock is essentially a retained deposit to provide further credit enhancements, if needed. At the initiation of the monetization program, the company sold receivables with a value of $115 million and recognized a pretax loss on the sale of $2 million. The loss was equal to the difference in the book value of the receivables sold and the total of cash and the fair value of the deposit retained by the special-purpose entity. Additional receivables will be sold net of collections during each month. During 2000, the company sold $160 million of its pigment receivables resulting in pretax losses of $3 million. At year-end 2000, the outstanding balance on receivables sold totaled $113 million. No credit losses or delinquencies occurred on the sold receivables in 2000. 9. Acquisitions In January 2000, the company completed the acquisition of Repsol S.A.'s upstream United Kingdom North Sea operations for $555 million. During the second quarter of 2000, the company finalized the agreements with Kemira Oyj of Finland to purchase its titanium dioxide pigment operations in Savannah, Georgia, and Botlek, Netherlands, for $403 million. The acquisitions were accounted for using the purchase method of accounting for business combinations. The results of operations from the purchased Repsol assets have been reported in the company's income statement beginning January 1, 2000. The Savannah and Botlek pigment operating results have been included in the company's income statements beginning April 1 and May 1, 2000, respectively. The following table provides selected pro-forma unaudited information as if the operations had been combined as of January 1, 1999. (Millions of dollars) (Unaudited) 2000 1999 - --------------------------------- ------ ------ Sales $4,211 $3,215 ====== ====== Net Income $ 837 $ 183 ====== ====== Net Income per Common Share Basic - Income before accounting change $ 8.97 $ 2.17 Cumulative effect of accounting change -- (.05) ------ ------ Net income $ 8.97 $ 2.12 ====== ====== Diluted - Income before accounting change $ 8.32 $ 2.17 Cumulative effect of accounting change -- (.05) ------ ------ Net income $ 8.32 $ 2.12 ====== ====== 10. Accrued Liabilities Accrued liabilities at year-end 2000 and 1999 are as follows: (Millions of dollars) 2000 1999 - --------------------- ---- ---- Interest payable $ 81 $ 72 Employee-related costs and benefits 75 66 Current environmental reserves 69 70 Royalties payable 28 22 Litigation reserves 20 18 Drilling and operating costs 15 15 Merger reserve(1) 10 20 Other 17 14 ---- ---- Total $315 $297 ==== ==== (1) See Note 18. 11. Debt Lines of Credit and Short-Term Borrowings At year-end 2000, the company had available unused bank lines of credit and revolving credit facilities of $1.582 billion. Of this amount, $885 million and $450 million could be used to support commercial paper borrowing arrangements of Kerr-McGee Credit LLC and Kerr-McGee Oil (U.K.) PLC, respectively. The company has arrangements to maintain compensating balances with certain banks that provide credit. At year-end 2000, the aggregate amount of such compensating balances was immaterial, and the company was not legally restricted from withdrawing all or a portion of such balances at any time during the year. Short-term borrowings at year-end 2000 and 1999 consisted of notes payable totaling $6 million (4.94% average interest rate) and $9 million (4.88% average interest rate), respectively. The notes are denominated in a foreign currency and represent approximately 6 million euros and 9 million euros in 2000 and 1999, respectively. Long-Term Debt The company's policy is to classify certain borrowings under revolving credit facilities and commercial paper as long-term debt since the company has the ability under certain revolving credit agreements and the intent to maintain these obligations for longer than one year. At year-end 2000 and 1999, debt totaling $71 million and $793 million, respectively, was classified as long-term consistent with this policy. Long-term debt consisted of the following at year-end 2000 and 1999:
(Millions of dollars) 2000 1999 - --------------------- ------ ------ Debentures - 7-1/2% Convertible subordinated debentures, $10 due annually May 15, 2001 through 2013 and $50 due May 15, 2014 $ 180 $ 190 7.125% Debentures due October 15, 2027 (7.01% effective rate) 150 150 7% Debentures due November 1, 2011, net of unamortized debt discount of $99 in 2000 and $103 in 1999 (14.25% effective rate) 151 147 5-1/4% Convertible subordinated debentures due February 15, 2010 600 -- Notes payable - 5-1/2% Exchangeable notes due August 2, 2004 514 327 10% Notes due April 1, 2001 150 150 6.625% Notes due October 15, 2007 150 150 8.375% Notes due July 15, 2004 150 150 8.125% Notes due October 15, 2005 150 150 8% Notes due October 15, 2003 100 100 Variable interest rate revolving credit agreements with banks -- 85 Variable interest rate notes -- 150 Medium-Term Notes (9.29% average effective interest rate at December 31, 2000), $11 due January 2, 2002 and $2 due February 1, 2002 13 13 Commercial paper (7.39% average effective interest rate at December 31, 2000) 50 612 Euro Commercial paper (7.06% average effective interest rate at December 31, 2000) 21 96 Guaranteed Debt of Employee Stock Ownership Plan 9.61% Notes due in installments through January 2, 2005 33 43 Other 7 3 ------ ------ 2,419 2,516 Long-term debt due within one year (175) (20) ------ ------ Total $2,244 $2,496 ====== ======
Maturities of long-term debt due after December 31, 2000, are $175 million in 2001, $107 million in 2002, $116 million in 2003, $678 million in 2004, $162 million in 2005 and $1.181 billion thereafter. Certain of the company's long-term debt agreements contain restrictive covenants, including a minimum tangible net worth requirement and a maximum total debt to total capitalization ratio. At December 31, 2000, the company was in compliance with its debt covenants. Additional information regarding the major changes in debt during the periods and unused commitments for financing is included in Management's Discussion and Analysis. 12. Income Taxes The taxation of a company that has operations in several countries involves many complex variables, such as differing tax structures from country to country and the effect on U.S. taxation of international earnings. These complexities do not permit meaningful comparisons between the U.S. and international components of income before income taxes and the provision for income taxes, and disclosures of these components do not provide reliable indicators of relationships in future periods. Income (loss) from continuing operations before income taxes and extraordinary charge is composed of the following: (Millions of dollars) 2000 1999 1998 - --------------------- ------ ---- ----- United States $ 562 $ (30) $(345) International 737 287 (175) ------ ----- ----- Total $1,299 $ 257 $(520) ====== ===== ===== The corporate income tax rate in Australia decreased to 30% from 34% for the year 2001, and decreased to 34% from 36% for the year 2000. Effective January 1, 2001, the German corporate income tax rate decreased to 25% from 30%. The deferred income tax asset and liability balances were adjusted to reflect these revised rates, causing a net increase in the 2000 international deferred provision for income taxes of $2 million. The corporate tax rate in the United Kingdom decreased to 30% from 31% effective April 1, 1999. The deferred income tax liability balance was adjusted to reflect the revised rate, which decreased the international deferred provision for income taxes by $10 million in 1998. The 2000, 1999 and 1998 taxes on income from continuing operations are summarized below: (Millions of dollars) 2000 1999 1998 - --------------------- ---- ---- ---- U.S. Federal - Current $105 $(38) $(159) Deferred 82 38 20 ---- ---- ----- 187 -- (139) ---- ---- ----- International - Current 286 147 18 Deferred (18) (37) (55) ---- ---- ----- 268 110 (37) ---- ---- ----- State 2 1 1 ---- ---- ----- Total $457 $111 $(175) ==== ==== ===== At December 31, 2000, the company had foreign operating loss carryforwards totaling $49 million - $7 million that expire in 2001, $8 million that expire in 2003, $11 million that expire in 2004 and $23 million that have no expiration date. Realization of these operating loss carryforwards is dependent on generating sufficient taxable income. The net deferred tax asset, classified as Investments - Other assets in the Consolidated Balance Sheet, represents the net deferred taxes in certain foreign jurisdictions. The deferred tax asset changed to a liability in 2000 as a result of income in the foreign jurisdictions and the tax rate reductions in Australia. Deferred tax liabilities and assets at December 31, 2000 and 1999, are composed of the following: (Millions of dollars) 2000 1999 - --------------------- ---- ---- Net deferred tax liabilities - Accelerated depreciation $858 $564 Exploration and development 31 34 Undistributed earnings of foreign subsidiaries 28 28 Postretirement benefits (89) (86) AMTcredit carryforward (18) (60) Foreign operating loss carryforward (18) (35) Dismantlement, remediation, restoration and other reserves (55) (30) Other (33) (14) ---- ---- 704 401 ---- ---- Net deferred tax asset - Accelerated depreciation -- 5 Foreign operating loss carryforward -- (13) Other -- (4) ---- ---- -- (12) ---- ---- Total $704 $389 ==== ==== In the following table, the U.S. Federal income tax rate is reconciled to the company's effective tax rates for income (loss) from continuing operations as reflected in the Consolidated Statement of Income. 2000 1999 1998 ---- ---- ---- U.S. statutory rate 35.0% 35.0% (35.0)% Increases (decreases) resulting from - Taxation of foreign operations .5 4.8 9.6 Adjustment of prior years' accruals (.6) -- (.4) Refunds of prior years' income taxes (.7) -- (5.6) Adjustment of deferred tax balances due to tax rate changes .1 -- (2.0) Other - net .8 3.3 (.2) ---- ---- ----- Total 35.1% 43.1% (33.6)% ==== ==== ===== The Internal Revenue Service has examined the Kerr-McGee Corporation and subsidiaries' pre-merger Federal income tax returns for all years through 1994, and the years have been closed through 1994. The Oryx income tax returns have been examined through 1997, and the years have been closed through 1978. The company believes that it has made adequate provision for income taxes that may become payable with respect to open tax years. 13. Taxes, Other than Income Taxes Taxes, other than income taxes, as shown in the Consolidated Statement of Income for the years ended December 31, 2000, 1999 and 1998, are composed of the following: (Millions of dollars) 2000 1999 1998 - --------------------- ---- ---- ---- Production/severance $ 85 $52 $26 Payroll 21 19 12 Property 13 11 14 Other 3 3 1 ---- --- --- Total $122 $85 $53 ==== === === 14. Deferred Credits and Reserves - Other Other deferred credits and reserves consist of the following at year-end 2000 and 1999: (Millions of dollars) 2000 1999 - --------------------- ---- ---- Reserves for site dismantlement, remediation and restoration $434 $391 Postretirement benefit obligations 185 186 Pension plan liabilities 43 20 Minority interest in subsidiary companies 24 23 Other 50 50 ---- ---- Total $736 $670 ==== ==== The company provided for environmental remediation and restoration of former plant sites, net of authorized reimbursements, during each of the years 2000, 1999 and 1998 as follows: (Millions of dollars) 2000 1999 1998 - --------------------- ---- ---- ---- Provision, net of authorized reimbursements $112 $ 3 $47 Reimbursements received 66 15 14 Reimbursements accrued -- 67 -- The reimbursements, which pertain to the former facility in West Chicago, Illinois, are authorized pursuant to Title X of the Energy Policy Act of 1992 (see Note 16). 15. Commitments Lease Obligations Total lease rental expense was $36 million in 2000, $41 million in 1999 and $37 million in 1998. The company has various commitments under non-cancelable operating lease agreements, principally for office space, production facilities and drilling equipment. The aggregate minimum annual rentals under these leases in effect at December 31, 2000, totaled $73 million, of which $18 million is due in 2001, $9 million in 2002, $22 million in the period 2003 through 2005 and $24 million thereafter. During the second quarter of 2000, the company entered into a 5-year lease commitment with Kerr-McGee Nansen Business Trust. The trust was created to construct an independent spar production platform that will be used in the development of the Gulf of Mexico Nansen field in which the company has a 50% working interest. The construction of the platform is being financed by a $137 million synthetic lease credit facility between the trust and a group of financial institutions. In addition, in the third quarter of 2000, the company entered into a similar arrangement with Kerr-McGee Boomvang Trust to construct a platform to be used in the development of the Boomvang field in which the company has a 30% working interest. The construction of the platform is being financed by a $78 million synthetic lease credit facility between the trust and a group of financial institutions. After construction, the company and the trusts are committed to enter into operating leases for the use of the spar platforms. Currently, the company is obligated to make lease payments in amounts sufficient to pay interest at varying rates on both of the financings. The payments for both obligations are expected to be $10 million in 2002, $11 million in 2003, $11 million in 2004, $13 million in 2005, and $265 million thereafter. The future minimum annual rentals due under non-cancelable operating leases shown above exclude any payments related to these agreements. Drilling Rig Commitments During 1999, the company entered into lease agreements to participate in the use of various drilling rigs. The exposure with respect to these commitments ranges from nil to $177 million, depending on partner participation. These agreements extend through 2004. 16. Contingencies West Chicago, Illinois In 1973, a wholly owned subsidiary, Kerr-McGee Chemical Corporation, now Kerr-McGee Chemical LLC (Chemical), closed the facility in West Chicago, Illinois, that processed thorium ores. Historical operations had resulted in low-level radioactive contamination at the facility and in the surrounding areas. In 1979, Chemical filed a plan with the Nuclear Regulatory Commission (NRC) to decommission the facility. In 1990, the NRC transferred jurisdiction over the facility to the State of Illinois (the State). Following is the current status of various matters associated with the closed facility. Closed Facility - In 1994, Chemical, the City of West Chicago (the City) and the State reached agreement on the initial phase of the decommissioning plan for the closed West Chicago facility, and Chemical began shipping material from the site to a licensed permanent disposal facility. In February 1997, Chemical executed an agreement with the City covering the terms and conditions for completing the final phase of decommissioning work. The State has indicated approval of the agreement and has issued license amendments authorizing much of the work. Chemical expects most of the work to be completed within the next three years, leaving principally only groundwater remediation and/or monitoring for subsequent years. In 1992, the State enacted legislation imposing an annual storage fee equal to $2 per cubic foot of byproduct material located at the closed facility, which cannot exceed $26 million per year. Initially, all storage fee payments were reimbursed to Chemical as decommissioning costs were incurred. Chemical was fully reimbursed for all storage fees paid pursuant to this legislation. In June 1997, the legislation was amended to provide that future storage fee obligations are to be offset against decommissioning costs incurred but not yet reimbursed. Vicinity Areas - The United States Environmental Protection Agency (EPA) has listed four areas in the vicinity of the closed West Chicago facility on the National Priority List promulgated by EPA under authority of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) and has designated Chemical as a potentially responsible party in these four areas. Two of the four areas presently are being studied to determine the extent of contamination and the nature of any remedy. These two areas are known as the Sewage Treatment Plant and Kress Creek. The scope of the required cleanup for these two areas has not been determined. The EPA previously issued unilateral administrative orders for the other two areas (known as the residential areas and Reed-Keppler Park), which require Chemical to conduct removal actions to excavate contaminated soils and ship the soils elsewhere for disposal. Without waiving any of its rights or defenses, Chemical is conducting the work required by the two orders. Chemical has completed the required excavation and restoration work at the park site, and will be monitoring the site pending final EPA approval. Judicial Proceedings - In December 1996, a lawsuit was filed against the company and Chemical in Illinois state court on behalf of a purported class of present and former West Chicago residents. The lawsuit seeks damages for alleged diminution in property values and the establishment of a medical monitoring fund to benefit those allegedly exposed to thorium wastes originating from the former facility. The case was removed to federal court. In August 2000, the court approved a settlement that resolves the litigation on a class-wide basis. Government Reimbursement - Pursuant to Title X of the Energy Policy Act of 1992 (Title X), the U.S. Department of Energy is obligated to reimburse Chemical for certain decommissioning and cleanup costs in recognition of the fact that much of the facility's production was dedicated to United States government contracts. Title X was amended in 1998 to increase the amount authorized for reimbursement to $140 million plus inflation adjustments. Through December 31, 2000, Chemical has been reimbursed approximately $135 million under Title X. These reimbursements are provided by congressional appropriations. Other Matters The company and/or its subsidiaries are parties to a number of legal and administrative proceedings involving environmental and/or other matters pending in various courts or agencies. These include proceedings associated with facilities currently or previously owned, operated or used by the company, its subsidiaries and/or their predecessors, and include claims for personal injuries and property damages. The company's current and former operations also involve management of regulated materials and are subject to various environmental laws and regulations. These laws and regulations will obligate the company and/or its subsidiaries to clean up various sites at which petroleum and other hydrocarbons, chemicals, low-level radioactive substances and/or other materials have been disposed of or released. Some of these sites have been designated Superfund sites by EPA pursuant to CERCLA. The company provides for costs related to contingencies when a loss is probable and the amount is reasonably estimable. It is not possible for the company to estimate reliably the amount and timing of all future expenditures related to environmental and legal matters and other contingencies because: - some sites are in the early stages of investigation, and other sites may be identified in the future; - cleanup requirements are difficult to predict at sites where remedial investigations have not been completed or final decisions have not been made regarding cleanup requirements, technologies or other factors that bear on cleanup costs; - environmental laws frequently impose joint and several liability on all potentially responsible parties, and it can be difficult to determine the number and financial condition of other potentially responsible parties and their share of responsibility for cleanup costs; and - environmental laws and regulations are continually changing, and court proceedings are inherently uncertain. As of December 31, 2000, the company has reserves totaling $216 million for cleaning up and remediating environmental sites, reflecting the reasonably estimable costs for addressing these sites. This includes $110 million for the West Chicago sites. Cumulative expenditures at all environmental sites through December 31, 2000, total $786 million. Management believes, after consultation with general counsel, that currently the company has reserved adequately for the reasonably estimable costs of contingencies. However, additions to the reserves may be required as additional information is obtained that enables the company to better estimate its liabilities, including liabilities at sites now under review, though the company cannot now reliably estimate the amount of future additions to the reserves. 17. Financial Instruments and Hedging Activities Investments in Certain Debt and Equity Securities The company has certain investments that are considered to be available for sale. The company also has debt that is exchangeable into equity securities of an investee that are considered available for sale. These financial instruments are carried in the Consolidated Balance Sheet at fair value, which is based on quoted market prices. The company had no securities classified as held to maturity or trading at December 31, 2000 and 1999. At December 31, 2000 and 1999, available-for-sale securities for which fair value can be determined are as follows:
2000 1999 ---------------------------- ----------------------------- Gross Gross Unrealized Unrealized Fair Holding Fair Holding (Millions of dollars) Value Cost Gain (Loss) Value Cost Gains (Loss) - --------------------- ----- ---- ----------- ----- ---- ------------ Equity securities $607 $209 $ 398 $327 $209 $118 U.S. government obligations - Maturing within one year 2 2 -- 5 5 -- Maturing between one year and four years 4 4 -- 11 11 -- Exchangeable debt 514 330 (184) 327 330 3 ---- ---- Total $214 $121 ==== ====
The equity securities represent the company's investment in Devon Energy Corporation common stock. The securities are carried in the Consolidated Balance Sheet as Investments - Other assets. U.S. government obligations are carried as Current Assets or as Investments - Other assets, depending on their maturities. The exchangeable debt represents 5-1/2% notes exchangeable into common stock (DECS) of Devon held by the company. The notes are due August 2, 2004, and holders of the notes will receive between .84746 and one common share of Devon per DECS, depending on the average trading price of Devon's common stock at that time, or the cash equivalent of such common stock. The DECS are carried at exchange value in the Consolidated Balance Sheet as Long-Term Debt (see Note 11). The change in unrealized holding gains, net of income taxes, as shown in accumulated other comprehensive income for the years ended December 31, 2000, 1999 and 1998, is as follows: (Millions of dollars) 2000 1999 1998 - --------------------- ---- ---- ---- Beginning balance - $ 79 $-- $-- Net unrealized holding gain 60 79 -- ---- --- --- Ending balance $139 $79 $-- ==== === === Financial Instruments for Other than Trading Purposes In addition to the financial instruments previously discussed, the company holds or issues financial instruments for other than trading purposes. At December 31, 2000 and 1999, the carrying amount and estimated fair value of these instruments for which fair value can be determined are as follows: 2000 1999 ---------------- ---------------- Carrying Fair Carrying Fair (Millions of dollars) Amount Value Amount Value - --------------------- -------- ----- -------- ----- Cash and cash equivalents $ 144 $ 144 $ 267 $ 267 Long-term notes receivable 67 146 26 23 Long-term receivables 33 28 72 60 Contracts to sell foreign currencies -- (1) -- -- Contracts to purchase foreign currencies -- (2) -- 2 Short-term borrowings 6 6 9 9 Long-term debt, excluding DECS 1,905 2,115 2,189 2,228 The carrying amount of cash and cash equivalents approximates fair value of those instruments due to their short maturity. The fair value of notes receivable is based on discounted cash flows or the fair value of the notes' collateral. The fair value of long-term receivables is based on discounted cash flows. The fair value of the company's short-term and long-term debt is based on the quoted market prices for the same or similar debt issues or on the current rates offered to the company for debt with the same remaining maturity. The fair value of foreign currency forward contracts is based on the estimated forward exchange rates at December 31 and represents the net gains and losses that would have been realized if the contracts had been closed out at year-end. Hedging Activities Most of the company's foreign currency contracts are hedges principally for chemical's accounts receivable generated from titanium dioxide pigment sales denominated in foreign currencies, the operating costs and capital expenditures of international pigment operations, and the operating costs and capital expenditures of U.K. oil and gas operations. The purpose of these foreign currency hedging activities is to protect the company from the risk that the functional currency amounts from sales to foreign customers and purchases from foreign suppliers could be adversely affected by changes in foreign currency exchange rates. The company recognized net foreign currency hedging losses of $6 million and $5 million in 2000 and 1999, respectively. The net foreign currency hedging loss recognized in 1998 was immaterial. Net unrealized losses on foreign currency contracts totaled $3 million and $7 million at year-end 2000 and 1998, respectively. Net unrealized gains on foreign currency contracts totaled $2 million at year-end 1999. The company's foreign currency contract positions at year-end 2000 and 1999 were as follows: December 31, 2000 - - Contracts maturing January 2001 through December 2003 to purchase $196 million Australian for $120 million, 201 million British pound sterling for $293 million and 25 million euro for $21 million - Contracts maturing January through April 2001 to sell various foreign currencies (principally European) for $9 million December 31, 1999 - - Contracts maturing January 2000 through December 2002 to purchase $150 million Australian for $96 million - Contracts maturing January through March 2000 to sell various foreign currencies (principally European) for $5 million The company has periodically used oil or natural gas futures or collar contracts to reduce the effect of the price volatility of crude oil and natural gas. The futures contracts permitted settlement by delivery of commodities. The company did not enter into any hedging arrangements in 2000 or 1999 and settled all open 1998 contracts in 1999. Net hedging gains recognized in 1999 totaled $28 million. The effect of the gains was to increase the company's 1999 average gross margin for crude oil and natural gas by $.11 per barrel and $.09 per Mcf, respectively. During 1998, the company entered into hedging arrangements for 7 million barrels of crude oil and 61 billion cubic feet of natural gas representing approximately 11% and 29% of its worldwide crude oil and natural gas sales volumes, respectively. Net hedging gains recognized in 1998 totaled $45 million. The effect of the gains was to increase the company's 1998 average gross margin for crude oil and natural gas by $.55 per barrel and $.05 per Mcf, respectively. At year-end 1998, open crude oil and natural gas contracts had an aggregate value of $7 million, and the unrecognized gain on the contracts totaled $15 million. Contract amounts do not quantify risk or represent assets or liabilities of the company but are used in the calculation of cash settlements under the contracts. These financial instruments limit the company's market risks, are with major financial institutions, expose the company to credit risks and at times may be concentrated with certain institutions or groups of institutions. However, the credit worthiness of these institutions is subject to continuing review, and full performance is anticipated. Additional information regarding market risk is included in Management's Discussion and Analysis. Year-end hedge positions and activities during a particular year are not necessarily indicative of future activities and results. 18. Merger and Restructuring Charges In 1999, the company recorded an accrual of $163 million for items associated with the Oryx merger. Included in this charge were transaction costs, severance and other employee-related costs, contract termination costs, lease cancellations, write-off of redundant systems and equipment and other merger-related costs. The merger resulted in approximately 550 employees being terminated during 1999 under an involuntary termination program. During the three-year period ended December 31, 2000, the company accrued a total of $204 million for the cost of special termination benefits for retiring employees to be paid from retirement plan assets, future compensation, relocation, transaction costs related to the merger, lease cancellation and outplacement. The merger reserve at December 31, 2000, includes $10 million for costs associated with an office lease obligation that has no economic benefit to the company but will be paid through the cancellation date in 2001. The accruals, expenditures and reserve balances for 2000 and 1999 are set forth in the following table: Restructuring Merger Reserve Reserve -------------- ------- (Millions of dollars) 2000 1999 1999 - --------------------- ---- ---- ---- Beginning balance $ 20 $ -- $ 20 Accruals -- 163 1 Benefits to be paid from employee benefit plans -- (31) -- Payments (10) (126) (15) Transfer to merger reserve from restructuring reserve and other accrued liabilities(1) -- 14 (6) ---- ----- ---- Ending balance $ 10 $ 20 $ -- ==== ===== ==== (1) In a prior Oryx reduction in force, a $6 million reserve was established for lease cancellation costs on a portion of the Dallas, Texas, office space. Addi- tionally, Oryx had planned to cancel the remainder of the lease and had established an accrued liability of $8 million. These liabilities were com- bined with the 1999 merger reserve since Kerr-McGee also plans to cancel the lease at the date of the first option to cancel. 19. Earnings Per Share Basic net income (loss) per share includes no dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that could occur if security interests were exercised or converted into common stock. The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31, 2000, 1999 and 1998.
2000 1999 1998 ---------------------------- ---------------------------- -------------------------- (Millions of dollars, except Net Net Income Net Net Income Net Net Loss per-share amounts) Income Shares Per Share Income Shares Per Share Loss Shares Per Share - ---------------------------- ------ ------ ---------- ------ ------ ---------- ---- ------ --------- Basic earnings per share - Income (loss) available to common stockholders $842 93,406 $9.01 $142 86,414 $1.64 $(68) 86,688 $(.78) Diluted earnings per share - Effect of dilutive securities: 5-1/4% convertible debentures 19 8,720 -- -- -- -- 7-1/2% convertible debentures 9 1,697 -- -- -- -- Employee stock options -- 164 -- 83 -- -- ---- ------- ----- ---- ------ ----- ---- ------- ----- Income (loss) available to common stockholders, including assumed dilution $870 103,987 $8.37 $142 86,497 $1.64 $(68) 86,688 $(.78) ==== ======= ===== ==== ====== ===== ==== ====== =====
Not included in the calculation of the denominator for diluted earnings per share were 2,113,284 and 2,063,079 employee stock options outstanding at year-end 2000 and 1999, respectively. The inclusion of these options would have been antidilutive since they were not "in the money" at the end of the respective years. No dilution for 1998 existed because the company incurred a loss from continuing operations. The company has reserved 9,823,778 and 1,697,333 shares of common stock for issuance to the owners of its 5-1/4% Convertible Subordinated Debentures due 2010 and its 7-1/2% Convertible Subordinated Debentures due 2014, respectively. These debentures are convertible into the company's common stock at any time prior to maturity at $61.08 per share of common stock for the 5-1/4% debentures and $106.03 per share for the 7-1/2% debentures. The 7-1/2% debentures were outstanding prior to 2000, but conversion of these debentures was not considered for purposes of calculating net income per share for the years ended December 31, 1999 and 1998, as the impact would have been antidilutive to net income or loss per share. 20. Common Stock Changes in common stock issued and treasury stock held for 2000, 1999 and 1998 are as follows:
(Thousands of shares) Common Stock Treasury Stock - --------------------- ------------ -------------- Balance December 31, 1997 93,228 6,434 Exercise of stock options and stock appreciation rights 150 -- Issuance of shares for achievement awards -- (3) Stock purchase program -- 580 ------- ----- Balance December 31, 1998 93,378 7,011 Exercise of stock options and stock appreciation rights 112 -- Issuance of restricted stock 4 -- ------- ----- Balance December 31, 1999 93,494 7,011 Exercise of stock options and stock appreciation rights 423 -- Public offering 7,500 -- Issuance of restricted stock -- (78) ------- ----- Balance December 31, 2000 101,417 6,933 ======= =====
The company has 40 million shares of preferred stock without par value authorized, and none is issued. There are 1,107,692 shares of the company's common stock registered in the name of a wholly owned subsidiary of the company. These shares are not included in the number of shares shown in the preceding table or in the Consolidated Balance Sheet. These shares are not entitled to be voted. In mid-1998, the Board of Directors authorized management to purchase up to $300 million of company common stock over the following three years. A total of 580,000 shares was acquired at a cost of $25 million before this stock purchase program was cancelled because of the merger with Oryx. The company has granted 74,000 and 4,000 shares of restricted common stock in 2000 and 1999, respectively, to certain key employees under the 1998 Long-Term Incentive Plan. Shares are awarded in the name of the employee, who has all the rights of a shareholder, subject to certain restrictions on transferability and a risk of forfeiture. The forfeiture provisions on awards granted in 2000 lapse one-third per year over a three-year period beginning on January 11, 2003. The forfeiture provisions on the 1999 awards expire on December 1, 2003. The company has had a stockholders-rights plan since 1986. The current rights plan is dated July 6, 1996, and replaced the previous plan prior to its expiration. Rights were distributed under the original plan as a dividend at the rate of one right for each share of the company's common stock. Generally, the rights become exercisable the earlier of 10 days after a public announcement that a person or group has acquired, or a tender offer has been made for, 15% or more of the company's then-outstanding stock. If either of these events occurs, each right would entitle the holder (other than a holder owning more than 15% of the outstanding stock) to buy the number of shares of the company's common stock having a market value two times the exercise price. The exercise price is $215. Generally, the rights may be redeemed at $.01 per right until a person or group has acquired 15% or more of the company's stock. The rights expire in July 2006. 21. Other Income Other income was as follows during each of the years in the three-year period ended December 31, 2000: (Millions of dollars) 2000 1999 1998 - --------- ----------- ---- ---- ---- Income (loss) from unconsolidated affiliates $ 23 $16 $(12) Interest 29 14 38 Gain (loss) on foreign currency exchange 30 11 (2) Gain on sale of assets 6 3 7 Plant closing/product line discontinuation (21) -- -- Settlements with insurance carriers -- -- 12 Other (9) (4) -- ---- --- ---- Total $ 58 $40 $ 43 ==== === ==== 22. Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of Assets to Be Held and Used At year-end 1998, certain oil and gas fields located in the North Sea, China and the United States and two U.S. chemical plants were deemed to be impaired because the assets were no longer expected to recover their net book values through future cash flows. Expectations of future cash flows were lower than those previously forecasted primarily as a result of weakness in crude oil, natural gas and certain chemical product prices at the end of 1998. Downward reserve revisions were also deemed necessary for certain fields. The impairment loss was determined based on the difference between the carrying value of the assets and the present value of future cash flows or market value, when appropriate. There was no impairment loss recognized in 2000 or 1999. Following is the impairment loss for assets held and used by segment for the year ended December 31, 1998: (Millions of dollars) 1998 - --------------------- ---- Exploration and production $389 Chemicals - pigment 32 Chemicals - other 25 ---- Total $446 ==== Assets to Be Disposed Of The company withdrew from the ammonium perchlorate business in 1998. The carrying value of these assets was approximately $9 million. The gain on the sale was immaterial. The Chemicals - other segment recorded sales of $11 million and nil pretax income in the Consolidated Statement of Income in 1998 for assets sold that year. The company had no material assets held for disposal at year-end 2000, 1999 or 1998. 23. Employee Stock Option Plans The 2000 Long Term Incentive Plan (2000 Plan) authorizes the issuance of shares of the company's common stock any time prior to April 30, 2010, in the form of stock options, restricted stock or long-term performance awards. The options may be accompanied by stock appreciation rights. A total of 2,500,000 shares of the company's common stock is authorized to be issued under the 2000 Plan. No grants had been made under the 2000 Plan as of December 31, 2000. In January 1998, the Board of Directors approved a broad-based stock option plan (BSOP) that provides for the granting of options to purchase the company's common stock to full-time non-bargaining unit employees, except officers. A total of 1,500,000 shares of common stock is authorized to be issued under the BSOP. The 1987 Long Term Incentive Program (1987 Program) and the 1998 Long term Incentive Plan (1998 Plan) authorized the issuance of shares of the company's stock over a 15-year period and 10-year period, respectively, in the form of stock options, restricted stock or long-term performance awards. The 1987 Program was terminated when the stockholders approved the 1998 Plan and the 1998 Plan was terminated with the approval of the 2000 Plan. No options could be granted under the 1987 Program or the 1998 Plan after that time, although options and any accompanying stock appreciation rights outstanding may be exercised prior to their respective expiration dates. The company's employee stock options are fixed-price options granted at the fair market value of the underlying common stock on the date of the grant. Generally, one-third of each grant vests and becomes exercisable over a three-year period immediately following the grant date and expires 10 years after the grant date. In connection with the merger with Oryx (see Note 1), outstanding stock options under the stock option plans maintained by Oryx were assumed by the company. Stock option transactions summarized below include amounts for the 1998 Plan, the BSOP, the 1987 Program and the Oryx plans using the merger exchange rate of 0.369 for each Oryx share under option.
2000 1999 1998 --------------------------- --------------------------- --------------------------- Weighted-Average Weighted-Average Weighted-Average Exercise Price Exercise Price Exercise Price Options per Option Options per Option Options per Option --------- ---------------- --------- ---------------- --------- ---------------- Outstanding, beginning of year 2,823,334 $56.78 2,783,482 $58.77 2,050,671 $56.84 Options granted 719,550 63.53 377,000 46.53 1,105,043 61.97 Options exercised (426,561) 46.59 (110,521) 42.20 (127,576) 44.34 Options surrendered upon exercise of stock appreciation rights (7,300) 45.57 (14,000) 45.25 (4,000) 38.06 Options forfeited (46,779) 61.79 (45,929) 60.73 (24,928) 60.26 Options expired (25,639) 72.95 (166,698) 72.95 (215,728) 65.65 --------- --------- --------- Outstanding, end of year 3,036,605 59.66 2,823,334 56.78 2,783,482 58.77 ========= ========= ========= Exercisable, end of year 2,007,036 59.70 2,003,138 57.63 1,497,753 55.38 ========= ========= =========
The following table summarizes information about stock options issued under the plans described above that are outstanding and exercisable at December 31, 2000:
Options Outstanding Options Exercisable --------------------------------------------------------------------------- ---------------------------- Range of Weighted-Average Weighted-Average Weighted-Average Exercise Prices Remaining Contractual Exercise Price Exercise Price Options per Option Life (years) per Option Options per Option --------- --------------- --------------------- ---------------- --------- ---------------- 25,830 $30.00-$39.99 2.5 $35.61 25,830 $35.61 442,381 40.00- 49.99 4.6 43.24 339,045 44.16 910,188 50.00- 59.99 6.1 57.12 642,780 57.07 1,446,873 60.00- 69.99 6.0 64.76 788,048 65.78 209,584 70.00- 79.99 3.4 72.72 209,584 72.72 1,749 90.00- 99.99 .1 97.56 1,749 97.56 --------- --------- 3,036,605 30.00- 99.99 5.6 59.66 2,007,036 59.70 ========= =========
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," (FAS 123) prescribes a fair-value method of accounting for employee stock options under which compensation expense is measured based on the estimated fair value of stock options at the grant date and recognized over the period that the options vest. The company, however, chooses to account for its stock option plans under the optional intrinsic value method of APB No. 25, "Accounting for Stock Issued to Employees," whereby no compensation expense is recognized for fixed-price stock options. Compensation cost for stock appreciation rights, which is recognized under both accounting methods, was immaterial for 2000, 1999 and 1998. If compensation expense had been determined in accordance with FAS 123, the resulting compensation expense would have affected net income and per-share amounts as shown in the following table. These amounts may not be representative of future compensation expense using the fair-value method of accounting for employee stock options as the number of options granted in a particular year may not be indicative of the number of options granted in future years, and the fair-value method of accounting has not been applied to options granted prior to January 1, 1995. (Millions of dollars, except per-share amounts) 2000 1999 1998 - --------------------------- ---- ---- ---- Net income (loss) - As reported $842 $142 $(68) Pro forma 835 136 (76) Net income (loss) per share - Basic - As reported 9.01 1.64 (.78) Pro forma 8.94 1.57 (.88) Diluted - As reported 8.37 1.64 (.78) Pro forma 8.30 1.57 (.88) The fair value of each option granted in 2000, 1999 and 1998 was estimated as of the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions. The use of ranges in 1998 was necessitated by the Oryx merger (see Note 1).
Assumptions -------------------------------------------------------------- Weighted Average Risk-Free Expected Expected Life Expected Fair Value of Interest Rate Dividend Yield (years) Volatility Options Granted ------------- -------------- ------------- ---------- ---------------- 2000 6.6% 3.1% 5.8 31.3% $19.15 1999 5.4 3.1 5.8 25.2 11.33 1998 5.0 - 5.4 0 - 3.0 5.8 - 10 17.3 - 30.3 $9.78 - 11.20
24. Employee Benefit Plans The company has both noncontributory and contributory defined-benefit retirement plans and company-sponsored contributory postretirement plans for health care and life insurance. Most employees are covered under the company's retirement plans, and substantially all U.S. employees may become eligible for the postretirement benefits if they reach retirement age while working for the company. Following are the changes in the benefit obligations during the past two years:
Postretirement Health Retirement Plans and Life Plans ------------------ --------------------- (Millions of dollars) 2000 1999 2000 1999 - --------------------- ------ ------ ---- ---- Benefit obligation, beginning of year $ 977 $1,027 $215 $217 Service cost 17 15 2 1 Interest cost 72 69 15 9 Plan amendments (3) 70 -- 4 Net actuarial gain (12) (15) (8) (2) Acquisitions 58 -- 21 -- Foreign exchange rate changes (1) -- -- -- Assumption changes -- (50) -- -- Changes resulting from plan mergers -- 14 -- (7) Dispositions, curtailments and settlements -- 21 -- -- Benefits paid (94) (174) (15) (7) ------ ------ ---- ---- Benefit obligation, end of year $1,014 $ 977 $230 $215 ====== ====== ==== ====
The benefit amount that can be covered by the retirement plans that qualify under the Employee Retirement Income Security Act of 1974 (ERISA) is limited by both ERISA and the Internal Revenue Code. Therefore, the company has unfunded supplemental plans designed to maintain benefits for all covered employees at the plan formula level and to provide senior executives with benefits equal to a specified percentage of their final average compensation. The benefit obligation for the U.S and certain foreign unfunded retirement plans was $37 million and $42 million at December 31, 2000 and 1999, respectively. Although not considered plan assets, a grantor trust was established from which payments for certain of these U.S. supplemental plans are made. The trust had a balance of $24 million at year-end 2000 and $5 million at year-end 1999. The postretirement plans are also unfunded. Following are the changes in the fair value of plan assets during the past two years and the reconciliation of the plans' funded status to the amounts recognized in the financial statements at December 31, 2000 and 1999:
Postretirement Health Retirement Plans and Life Plans ------------------ --------------------- (Millions of dollars) 2000 1999 2000 1999 - --------------------- ------ ------ ----- ----- Fair value of plan assets, beginning of year $1,653 $1,404 $ -- $ -- Actual return on plan assets (80) 381 -- -- Employer contribution 20 35 -- -- Acquisitions 61 -- -- -- Foreign exchange rate changes (2) -- -- -- Changes resulting from plan mergers -- 7 -- -- Benefits paid (94) (174) -- -- ------ ------ ----- ----- Fair value of plan assets, end of year 1,558 1,653 -- -- Benefit obligation (1,014) (977) (230) (215) ------ ------ ----- ----- Funded status of plans - over (under) 544 676 (230) (215) Amounts not recognized in the Consolidated Balance Sheet - Transition asset -- (6) -- -- Prior service costs 76 86 4 5 Net actuarial loss (gain) (508) (704) 3 11 ------ ------ ----- ----- Prepaid expense (accrued liability) $ 112 $ 52 $(223) $(199) ====== ====== ===== =====
Following is the classification of the amounts recognized in the Consolidated Balance Sheet at December 31, 2000 and 1999:
Postretirement Health Retirement Plans and Life Plans ------------------ --------------------- (Millions of dollars) 2000 1999 2000 1999 - --------------------- ---- ---- ----- ----- Prepaid benefits expense $140 $ 79 $ -- $ -- Accrued benefit liability (29) (39) (223) (199) Additional minimum liability - Intangible asset -- 6 -- -- Accumulated other comprehensive income 1 6 -- -- ---- ---- ----- ----- Total $112 $ 52 $(223) $(199) ==== ==== ===== =====
Total costs recognized for employee retirement and postretirement benefit plans for each of the years ended December 31, 2000, 1999 and 1998 were as follows:
Retirement Plans Postretirement Health and Life Plans --------------------------- ------------------------------------ (Millions of dollars) 2000 1999 1998 2000 1999 1998 - --------------------- ----- ---- ---- ---- ---- ---- Net periodic cost - Service cost $ 17 $ 15 $ 16 $ 2 $ 1 $ 3 Interest cost 72 69 66 15 9 13 Expected return on plan assets (111) (98) (94) -- -- -- Net amortization - Transition asset (5) (6) (8) -- -- -- Prior service cost 8 12 3 1 -- -- Net actuarial loss (gain) (17) (3) 1 -- -- (1) ----- ---- ---- --- --- --- (36) (11) (16) 18 10 15 Dispositions, curtailments, settlements -- 29 26 -- -- (1) ----- ---- ---- --- --- --- Total $ (36) $ 18 $ 10 $18 $10 $14 ===== ==== ==== === === ===
The following assumptions were used in estimating the actuarial present value of the plans' benefit obligations and net periodic expense: 2000 1999 1998 ----------- ----------- --------- Discount rate 5.50 - 7.75% 5.50 - 7.75% 6.75% Expected return on plan assets 7.0 - 9.0 6.25 - 9.5 9.0 - 9.5 Rate of compensation increases 3.0 - 5.0 3.0 - 5.0 4.0 - 5.0 The health care cost trend rates used to determine the year-end 2000 postretirement benefit obligation was 7.25% in 2001, gradually declining to 5% in the year 2010 and thereafter. A 1% increase in the assumed health care cost trend rate for each future year would increase the postretirement benefit obligation at December 31, 2000, by $24 million and increase the aggregate of the service and interest cost components of net periodic postretirement expense for 2000 by $2 million. A 1% decrease in the trend rate for each future year would reduce the benefit obligation at year-end 2000 by $22 million and decrease the aggregate of the service and interest cost components of the net periodic postretirement expense for 2000 by $1 million. 25. Employee Stock Ownership Plan In 1989, the company's Board of Directors approved a leveraged Employee Stock Ownership Plan (ESOP) into which is paid the company's matching contribution for the employees' contributions to the Kerr-McGee Corporation Savings Investment Plan (SIP). Most of the company's U.S. employees are eligible to participate in both the ESOP and the SIP. Although the ESOP and the SIP are separate plans, matching contributions to the ESOP are contingent upon participants' contributions to the SIP. In 1989, the ESOP trust borrowed $125 million from a group of lending institutions and used the proceeds to purchase approximately three million shares of the company's treasury stock. The company used the $125 million in proceeds from the sale of the stock to acquire shares of its common stock in open-market and privately negotiated transactions. In 1996, a portion of the third-party borrowings was replaced with a note payable to the company (sponsor financing). The third-party borrowings are guaranteed by the company and are reflected in the Consolidated Balance Sheet as Long-Term Debt, while the sponsor financing does not appear in the company's balance sheet. The Oryx Capital Accumulation Plan (CAP) was a combined stock bonus and leveraged employee stock ownership plan available to substantially all U.S. employees of the former Oryx operations. On August 1, 1989, Oryx privately placed $110 million of notes pursuant to the provisions of the CAP. Oryx loaned the proceeds to the CAP, which used the funds to purchase Oryx common stock that was placed in a trust. This loan was sponsor financing and does not appear in the accompanying balance sheet. During 1999, the company merged the Oryx CAP into the ESOP and SIP. As a result, a total of 159,000 and 294,000 shares was transferred from the CAP into the ESOP and SIP, respectively. The company stock owned by the ESOP trust is held in a loan suspense account. Deferred compensation, representing the unallocated ESOP shares, is reflected as a reduction of stockholders' equity. The company's matching contribution and dividends on the shares held by the ESOP trust are used to repay the loan, and stock is released from the loan suspense account as the principal and interest are paid. The expense is recognized and stock is then allocated to participants' accounts at market value as the participants' contributions are made to the SIP. Long-term debt is reduced as payments are made on the third-party financing. Dividends paid on the common stock held in participants' accounts are also used to repay the loans, and stock with a market value equal to the amount of dividends is allocated to participants' accounts. Shares of stock allocated to the ESOP participants' accounts and in the loan suspense account are as follows: (Thousands of shares) 2000 1999 - --------------------- ----- ----- Participants' accounts 1,303 1,357 Loan suspense account 1,114 1,380 The shares allocated to ESOP participants at December 31, 2000, included approximately 57,000 shares released in January 2001, and at December 31, 1999, included approximately 51,000 shares released in January 2000. All ESOP shares are considered outstanding for net income per-share calculations. Dividends on ESOP shares are charged to retained earnings. Compensation expense is recognized using the cost method and is reduced for dividends paid on the unallocated ESOP shares. The company recognized ESOP expense of $11 million in 2000 and ESOP and CAP-related expense of $14 million and $17 million in 1999 and 1998, respectively. These amounts include interest expense incurred on the third-party ESOP debt of $3 million in 2000, $4 million in 1999 and $5 million in 1998. The company contributed $21 million to the ESOP in 2000 and $25 million and $23 million to the ESOP and CAP in 1999 and 1998, respectively. Included in the contributions were $12 million, $17 million and $21 million in 2000, 1999 and 1998, respectively, used for principal and interest payments on the sponsor financings. The cash contributions are net of $4 million for the dividends paid on the company stock held by the ESOP trust in each of the years 2000, 1999 and 1998. 26. Reporting by Business Segments and Geographic Locations The company has three reportable segments: oil and gas exploration and production and manufacturing and marketing of titanium dioxide pigment and other chemicals. The exploration and production unit produces and explores for oil and gas in the United States, the United Kingdom sector of the North Sea, Indonesia, China, Kazakhstan and Ecuador. Exploration efforts also extend to Australia, Benin, Brazil, Gabon, Morocco, Canada, Thailand, Yemen and the Danish sector of the North Sea. The chemical unit primarily produces and markets titanium dioxide pigment and has operations in the United States, Australia, Germany, Belgium and the Netherlands. Other chemicals include the company's electrolytic manufacturing and marketing operations and forest products treatment business. All of these operations are in the United States. Crude oil sales to individually significant customers totaled $1.407 billion and $420 million in 2000 and 1999, respectively. In addition, natural gas sales to an individually significant customer totaled $522 million in 2000. There were no individually significant customers in 1998. Sales to subsidiary companies are eliminated as described in Note 1. (Millions of dollars) 2000 1999 1998 - ---------------------- ------ ------ ------ Sales - Exploration and production $2,860 $1,784 $1,291 ------ ------ ------ Chemicals - Pigment 1,034 725 663 Other 227 234 300 ------ ------ ------ Total Chemicals 1,261 959 963 ------ ------ ------ Total $4,121 $2,743 $2,254 ====== ====== ====== Operating profit (loss)(1) - Exploration and production $1,467 $ 542 $ (361) ------ ------ ------ Chemicals - Pigment 130 113 56 Other 17 14 -- ------ ------ ------ Total Chemicals 147 127 56 ------ ------ ------ Total $1,614 $ 669 $ (305) ====== ====== ====== Net operating profit (loss)(1) - Exploration and production $ 946 $ 338 $ (266) ------ ------ ------ Chemicals - Pigment 70 73 35 Other 11 9 -- ------ ------ ------ Total Chemicals 81 82 35 ------ ------ ------ Total 1,027 420 (231) Net interest expense(1) (117) (117) (77) Net nonoperating expense(1) (68) (157) (37) Income from discontinued operations, net of taxes -- -- 277 Cumulative effect of change in accounting principle, net of taxes -- (4) -- ------ ------- ------ Net income (loss) $ 842 $ 142 $ (68) ====== ======= ====== Depreciation, depletion and amortization - Exploration and production $ 632 $ 578 $ 527 ------ ------ ------ Chemicals - Pigment 71 45 49 Other 21 18 19 ------ ------ ------ Total Chemicals 92 63 68 ------ ------ ------ Other 8 7 6 Discontinued operations -- -- 14 ------ ------ ------ Total $ 732 $ 648 $ 615 ====== ====== ====== (1) Includes special items. Refer to Management's Discussion and Analysis. (Millions of dollars) 2000 1999 1998 - --------------------- ------ ------ ------ Cash capital expenditures - Exploration and production $ 651 $ 447 $ 871 ------ ------ ------ Chemicals - Pigment 100 76 69 Other 17 14 23 ------ ------ ------ Total Chemicals 117 90 92 ------ ------ ------ Other 6 6 8 Discontinued operations -- -- 10 ------ ------ ------ Total 774 543 981 ------ ------ ------ Cash exploration expenses - Exploration and production - Dry hole costs 54 43 100 Amortization of undeveloped leases 48 41 40 Other 68 56 75 ------ ------ ------ Total exploration expenses 170 140 215 Less - Amortization of leases and other noncash expenses (49) (51) (42) ------ ------ ------ Total cash exploration expenses 121 89 173 ------ ------ ------ Total cash capital expenditures and cash exploration expenses $ 895 $ 632 $1,154 ====== ====== ====== Identifiable assets - Exploration and production $5,108 $4,013 $4,083 ------ ------ ------ Chemicals - Pigment(1) 1,415 921 863 Other 228 229 235 ------ ------ ------ Total Chemicals 1,643 1,150 1,098 ------ ------ ------ Total 6,751 5,163 5,181 Corporate and other assets 915 736 270 ------ ------ ------ Total $7,666 $5,899 $5,451 ====== ====== ====== Sales - U.S. operations $2,197 $1,499 $1,330 ------ ------ ------ International operations - North Sea - exploration and production 1,277 752 491 Other - exploration and production 144 80 69 Europe - pigment 300 223 173 Australia - pigment 203 189 182 Other - pigment -- -- 9 ------ ------ ------ 1,924 1,244 924 ------ ------ ------ Total $4,121 $2,743 $2,254 ====== ====== ====== Operating profit (loss)(2) - U.S. operations $ 863 $ 364 $ (116) ------ ------ ------ International operations - North Sea - exploration and production 651 270 (146) Other - exploration and production 29 -- (85) Australia - pigment 38 21 19 Europe - pigment 33 14 23 ------ ------ ------ 751 305 (189) ------ ------ ------ Total $1,614 $ 669 $ (305) ====== ====== ====== (1) Includes net deferred tax asset of $12 million and $17 million at December 31, 1999 and 1998, respectively. There was no deferred tax asset at December 31, 2000 (see Note 12). (2) Includes special items. Refer to Management's Discussion and Analysis. (Millions of dollars) 2000 1999 1998 - --------------------- ------ ------ ------ Net property, plant and equipment - U.S. operations $2,368 $2,106 $2,095 ------ ------ ------ International operations - North Sea - exploration and production 2,350 1,547 1,617 Other - exploration and production 300 219 213 Australia - pigment 127 132 129 Europe - pigment 238 81 99 ------ ------ ------ 3,015 1,979 2,058 ------ ------ ------ Total $5,383 $4,085 $4,153 ====== ====== ====== 27. Discontinued Operations The company exited the coal business in 1998 with the sales of its mining operations at Galatia, Illinois, and Kerr-McGee Coal Corporation, which held Jacobs Ranch Mine in Wyoming. The cash sales resulted in proceeds of approximately $600 million. The 1998 gain on the sale was $257 million ($2.97 per share), net of $149 million for income taxes. The income from operations of the discontinued coal business totaled $20 million ($.23 per share), net of $7 million for income taxes, in 1998. Revenues applicable to the discontinued operations totaled $174 million in 1998. 28. Costs Incurred in Crude Oil and Natural Gas Activities Total expenditures, both capitalized and expensed, for crude oil and natural gas property acquisition, exploration and development activities for the three years ended December 31, 2000, are reflected in the following table: Property Acquisition Exploration Development (Millions of dollars) Costs(1) Costs(2) Costs(3) - --------------------- ----------- ----------- ----------- 2000 - United States $ 41 $112 $230 North Sea 566 53 290 Other international 39 57 48 ---- ---- ---- Total $646 $222 $568 ==== ==== ==== 1999 - United States $ 81 $ 92 $224 North Sea 30 18 106 Other international 8 32 9 ---- ---- ---- Total $119 $142 $339 ==== ==== ==== 1998 - United States $117 $136 $347 North Sea 423 38 311 Other international 5 75 29 ---- ---- ---- Total $545 $249 $687 ==== ==== ==== (1) Includes $561 million, $49 million and $280 million applicable to purchases of reserves in place in 2000, 1999 and 1998, respectively. (2) Exploration costs include delay rentals, exploratory dry holes, dry hole and bottom hole contributions, geological and geophysical costs, costs of carrying and retaining properties and capital expenditures, such as costs of drilling and equipping successful exploratory wells. (3) Development costs include costs incurred to obtain access to proved reserves (surveying, clearing ground, building roads), to drill and equip development wells, and to acquire, construct and install production facilities and improved recovery systems. Development costs also include costs of developmental dry holes. 29. Results of Operations from Crude Oil and Natural Gas Activities The results of operations from crude oil and natural gas activities for the three years ended December 31, 2000, consist of the following:
Results of Production Other Depreciation Income Tax Operations, Gross (Lifting) Related Exploration and Depletion Asset Expenses Producing (Millions of dollars) Revenues Costs Costs(1) Expenses Expenses Impairment (Benefits) Activities - --------------------- -------- ---------- -------- ----------- ------------- ---------- ---------- ----------- 2000 - United States $1,436 $198 $ 67 $ 95 $286 $ -- $277 $ 513 North Sea 1,264 262 55 26 283 -- 219 419 Other international 143 24 27 49 14 -- 21 8 ------ ---- ---- ---- --- ---- ---- ----- Total crude oil and natural gas activities 2,843 484 149 170 583 -- 517 940 Other(2) 17 6 -- -- 1 -- 4 6 -- ------ ---- ---- ---- ---- ---- ---- ----- Total $2,860 $490 $149 $170 $584 $ -- $521 $ 946 ====== ==== ==== ==== ==== ==== ==== ===== 1999 - United States $ 950 $178 $ 85 $ 97 $316 $ -- $96 $ 178 North Sea 731 199 54 22 205 -- 99 152 Other international 79 23 20 21 15 -- 2 (2) ------ ---- ---- --- ---- ---- --- ----- Total crude oil and natural gas activities 1,760 400 159 140 536 -- 197 328 Other(2) 24 6 -- -- 1 -- 7 10 -- ------ ---- ---- ---- ---- ---- ---- ----- Total $1,784 $406 $159 $140 $537 $ -- $204 $ 338 ====== ==== ==== ==== ==== ==== ==== ===== 1998 - United States $ 724 $184 $129 $141 $285 $114 $(36) $ (93) North Sea 450 189 32 21 170 160 (20) (102) Other international 69 12 11 52 31 115 (45) (107) ------ ---- ---- ---- ---- ---- ---- ----- Total crude oil and natural gas activities 1,243 385 172 214 486 389 (101) (302) Other(2) 48 5 1 -- -- -- 6 36 -- ------ ---- ---- ---- ---- ---- ---- ----- Total $1,291 $390 $173 $214 $486 $389 $(95) $(266) ====== ==== ==== ==== ==== ==== ==== ===== (1) Includes transition and restructuring charges of $20 million and $34 million in 1999 and 1998, respectively (see Note 18). (2) Includes gas marketing, gas processing plants, pipelines and other items that do not fit the definition of crude oil and natural gas activities but have been included above to reconcile to the segment presentations.
The table below presents the company's average per-unit sales price of crude oil and natural gas and production costs per barrel of oil equivalent for each of the past three years. Natural gas production has been converted to a barrel of oil equivalent based on approximate relative heating value (6 MCF equals 1 barrel). 2000 1999 1998 ------ ------ ------ Average sales price - Crude oil (per barrel) - United States $27.50 $16.90 $12.78 North Sea 27.92 17.88 12.93 Other international 26.13 14.77 10.19 Average 27.64 17.26 12.58 Natural gas (per Mcf) - United States 4.11 2.41 2.10 North Sea 2.32 2.12 2.46 Average 3.87 2.38 2.13 Production costs - (per barrel of oil equivalent) United States 3.59 2.92 3.23 North Sea 5.55 4.81 5.44 Other international 4.39 4.32 1.78 Average 4.49 3.72 3.91 30. Capitalized Costs of Crude Oil and Natural Gas Activities Capitalized costs of crude oil and natural gas activities and the related reserves for depreciation, depletion and amortization at the end of 2000 and 1999 are set forth in the table below. (Millions of dollars) 2000 1999 - --------------------- ------- ------ Capitalized costs - Proved properties $10,244 $9,153 Unproved properties 549 438 Other 101 98 ------- ------ Total 10,894 9,689 ------- ------ Reserves for depreciation, depletion and amortization - Proved properties 6,413 6,100 Unproved properties 119 102 Other 49 43 ------ ------ Total 6,581 6,245 ------ ------ Net capitalized costs $4,313 $3,444 ====== ====== 31. Crude Oil, Condensate, Natural Gas Liquids and Natural Gas Net Reserves (Unaudited) The estimates of proved reserves have been prepared by the company's geologists and engineers in accordance with the Securities and Exchange Commission definitions. Such estimates include reserves on certain properties that are partially undeveloped and reserves that may be obtained in the future by improved recovery operations now in operation or for which successful testing has been demonstrated. The company has no proved reserves attributable to long-term supply agreements with governments or consolidated subsidiaries in which there are significant minority interests. The following table summarizes the changes in the estimated quantities of the company's crude oil, condensate, natural gas liquids and natural gas reserves for the three years ended December 31, 2000.
Crude Oil, Condensate and Natural Gas Liquids Natural Gas (Millions of barrels) (Billions of cubic feet) ----------------------------------- ------------------------------------- Other Other United North Interna- United North Interna- States(1) Sea tional Total States(1) Sea tional Total --------- ----- -------- ----- --------- ----- -------- ----- Proved developed and undeveloped reserves - Balance December 31, 1997 271 192 104 567 1,493 203 256 1,952 Revisions of previous estimates 6 6 (15) (3) (4) 7 13 16 Purchases of reserves in place -- 45 -- 45 4 46 -- 50 Sales of reserves in place (13) -- -- (13) (90) -- -- (90) Extensions, discoveries and other additions 14 9 21 44 132 3 103 238 Production (24) (32) (7) (63) (202) (17) -- (219) --- --- --- --- ----- --- --- ----- Balance December 31, 1998 254 220 103 577 1,333 242 372 1,947 Revisions of previous estimates 5 14 1 20 14 9 5 28 Purchases of reserves in place 4 7 -- 11 19 36 -- 55 Sales of reserves in place (1) (5) -- (6) (1) -- -- (1) Extensions, discoveries and other additions 1 34 13 48 103 2 138 243 Production (29) (38) (5) (72) (194) (23) -- (217) --- --- --- --- ----- --- --- ----- Balance December 31, 1999 234 232 112 578 1,274 266 515 2,055 Revisions of previous estimates (9) 7 -- (2) 11 40 -- 51 Purchases of reserves in place 1 68 -- 69 19 173 -- 192 Sales of reserves in place (1) -- -- (1) (37) -- -- (37) Extensions, discoveries and other additions 30 91 11 132 227 13 20 260 Production (27) (43) (6) (76) (169) (25) -- (194) --- --- --- --- ----- --- --- ----- Balance December 31, 2000 228 355 117 700 1,325 467 535 2,327 === ==== === === === === ===== === === ===== Proved developed reserves - December 31, 1998 148 141 38 327 829 163 -- 992 December 31, 1999 166 167 32 365 854 157 -- 1,011 December 31, 2000 153 185 27 365 848 150 -- 998 (1) Prior-year volumes for U.S. natural gas liquids and natural gas volumes have been restated to reflect Kerr-McGee's decision to standardize its worldwide financial reporting gas pressure base to 14.73 psia.
The following presents the company's barrel of oil equivalent proved developed and undeveloped reserves based on approximate relative heating value (6 Mcf equals 1 barrel).
United North Other (Millions of equivalent barrels) States(1) Sea International Total - -------------------------------- --------- ----- ------------- ----- December 31, 1998 476 260 165 901 December 31, 1999 446 276 198 920 December 31, 2000 449 433 206 1,088 (1) Prior-year volumes for U.S. natural gas liquids and natural gas volumes have been restated to reflect Kerr-McGee's decision to standardize its worldwide financial reporting gas pressure base to 14.73 psia.
32. Standardized Measure of and Reconciliation of Changes in Discounted Future Net Cash Flows (Unaudited) The standardized measure of future net cash flows presented in the following table was computed using year-end prices and costs and a 10% discount factor. The future income tax expense was computed by applying the appropriate year-end statutory rates, with consideration of future tax rates already legislated, to the future pre-tax net cash flows less the tax basis of the properties involved. However, the company cautions that actual future net cash flows may vary considerably from these estimates. Although the company's estimates of total reserves, development costs and production rates were based on the best information available, the development and production of the oil and gas reserves may not occur in the periods assumed. Actual prices realized and costs incurred may vary significantly from those used. Therefore, such estimated future net cash flow computations should not be considered to represent the company's estimate of the expected revenues or the current value of existing proved reserves.
Standardized Future Measure of Future Development 10% Discounted Cash and Production Future Future Net Annual Future Net (Millions of dollars) Inflows Costs Income Taxes Cash Flows Discount Cash Flows - --------------------- ------- -------------- ------------ ---------- -------- ------------ 2000 - United States $14,825 $3,945 $3,698 $ 7,182 $2,940 $4,242 North Sea 9,051 3,625 1,807 3,619 1,312 2,307 Other international 4,284 1,813 944 1,527 850 677 ------- ------ ------ ------- ------ ------ Total $28,160 $9,383 $6,449 $12,328 $5,102 $7,226 ======= ====== ====== ======= ====== ====== 1999 - United States $ 7,928 $3,332 $1,398 $ 3,198 $1,343 $1,855 North Sea 6,146 2,608 1,245 2,293 665 1,628 Other international 3,693 1,665 783 1,245 717 528 ------- ------ ------ ------- ------ ------ Total $17,767 $7,605 $3,426 $ 6,736 $2,725 $4,011 ======= ====== ====== ======= ====== ====== 1998 - United States $ 4,780 $2,108 $ 718 $ 1,954 $ 713 $1,241 North Sea 3,121 2,474 82 565 160 405 Other international 1,499 977 181 341 264 77 ------- ------ ------ ------- ------ ------ Total $ 9,400 $5,559 $ 981 $ 2,860 $1,137 $1,723 ======= ====== ====== ======= ====== ======
The changes in the standardized measure of future net cash flows are presented below for each of the past three years:
(Millions of dollars) 2000 1999 1998 - --------------------- ------- ------- ------- Net change in sales, transfer prices and production costs $ 3,849 $ 4,310 $(2,156) Changes in estimated future development costs (33) (318) (377) Sales and transfers less production costs (2,358) (1,314) (847) Purchases of reserves in place 1,065 117 159 Changes due to extensions, discoveries, etc. 1,477 592 173 Changes due to revisions in quantity estimates 56 272 43 Changes due to sales of reserves in place (166) (104) (107) Current period development costs 568 339 687 Accretion of discount 601 231 437 Changes in income taxes (1,706) (1,414) 693 Timing and other (138) (423) (169) ------- ------- ------- Net change 3,215 2,288 (1,464) Total at beginning of year 4,011 1,723 3,187 ------- ------- -------- Total at end of year $ 7,226 $ 4,011 $ 1,723 ======= ======= ========
33. Quarterly Financial Information (Unaudited) A summary of quarterly consolidated results for 2000 and 1999 is presented below. The 2000 quarterly per-share amounts do not add to the annual amounts due to the weighted average effect of stock and convertible debt issued during the year. Refer to Management's Discussion and Analysis for information about special items.
Diluted Income (Loss) per Common Share ------------------------------ Income Income (Loss) Before Net (Loss) Before (Millions of dollars, Operating Accounting Income Accounting Net except per-share amounts) Sales Profit Change (Loss) Change Income (Loss) - --------------------------- ------ --------- ------------- ------ ------------- ------------- 2000 Quarter Ended - March 31 $ 886 $ 328 $ 185 $ 185 $ 1.94 $ 1.94 June 30 1,011 334 110 110 1.11 1.11 September 30 1,106 459 265 265 2.57 2.57 December 31 1,118 493 282 282 2.73 2.73 ------ ------ ----- ----- ------ ------ Total $4,121 $1,614 $ 842 $ 842 $ 8.37 $ 8.37 ====== ====== ===== ===== ====== ====== 1999 Quarter Ended - March 31 $ 498 $ 51 $(107) $(111) $(1.23) $(1.28) June 30 664 133 45 45 .52 .52 September 30 765 239 98 98 1.13 1.13 December 31 816 246 110 110 1.27 1.27 ------ ------ ----- ----- ------ ------ Total $2,743 $ 669 $ 146 $ 142 $ 1.69 $ 1.64 ====== ====== ===== ===== ====== ======
The company's common stock is listed for trading on the New York Stock Exchange and at year-end 2000 was held by approximately 30,000 Kerr-McGee stockholders of record and Oryx owners who have not yet exchanged their stock. The ranges of market prices and dividends declared during the last two years are as follows: Market Prices ------------------------------------ Dividends 2000 1999 per Share ---------------- ---------------- ------------- High Low High Low 2000 1999 ------ ------ ------ ------ ---- ---- Quarter Ended - March 31 $67.94 $39.88 $41.44 $28.50 $.45 $.45 June 30 62.50 51.13 52.13 32.50 .45 .45 September 30 68.00 53.13 60.06 49.31 .45 .45 December 31 71.19 59.00 62.00 52.00 .45 .45
Seven-Year Financial Summary Millions of dollars, except per-share amounts) 2000 1999 1998 1997 1996 1995 1994 - ---------------------------------------------- ------ ------ ------ ------ ------ ------ ------- Summary of Net Income (Loss) Sales $4,121 $2,743 $2,254 $2,667 $2,792 $2,466 $ 2,389 ------ ------ ------ ------ ------ ------ ------- Costs and operating expenses 2,672 2,336 2,660 2,073 2,174 2,352 2,215 Interest and debt expense 208 190 157 141 145 193 211 ------ ------ ------ ------ ------ ------ ------- Total costs and expenses 2,880 2,526 2,817 2,214 2,319 2,545 2,426 ------ ------ ------ ------ ------ ------ ------- 1,241 217 (563) 453 473 (79) (37) Other income 58 40 43 82 110 147 15 Taxes on income (457) (111) 175 (184) (225) 42 (9) ------ ------ ------ ------ ------ ------ ------- Income (loss) from continuing operations 842 146 (345) 351 358 110 (31) Income from discontinued operations -- -- 277 33 56 27 55 Extraordinary charge -- -- -- (2) -- (23) (12) Cumulative effect of change in accounting principle -- (4) -- -- -- -- (948) ------ ------ ------ ------ ------ ------ ------- Net income (loss) $ 842 $ 142 $ (68) $ 382 $ 414 $ 114 $ (936) ====== ====== ====== ====== ====== ====== ======= Effective Income Tax Rate 35.1% 43.1% (33.6)% 34.4% 38.6% (61.8)% 40.9% Common Stock Information, per Share Diluted net income (loss) - Continuing operations $ 8.37 $ 1.69 $(3.98) $ 4.02 $ 4.05 $ 1.23 $ (.36) Discontinued operations -- -- 3.20 .38 .63 .30 .63 Extraordinary charge -- -- -- (.02) -- (.26) (.14) Cumulative effect of accounting change -- (.05) -- -- -- -- (10.82) ------- ------ ------ ------- ------ ------ ------- Net income (loss) $ 8.37 $ 1.64 $ (.78) $ 4.38 $ 4.68 $ 1.27 $(10.69) ======= ====== ====== ======= ====== ====== ======= Dividends declared $ 1.80 $ 1.80 $ 1.80 $ 1.80 $ 1.64 $ 1.55 $1.52 Stockholders' equity 25.01 17.19 15.58 17.88 14.59 12.47 12.33 Market high for the year 71.19 62.00 73.19 75.00 74.13 64.00 51.00 Market low for the year 39.88 28.50 36.19 55.50 55.75 44.00 40.00 Market price at year-end $ 66.94 $62.00 $38.25 $ 63.31 $72.00 $63.50 $ 46.25 Shares outstanding at year-end (thousands) 94,484 86,483 86,367 86,794 87,032 89,613 90,143 Balance Sheet Information Working capital $ (34) $ 321 $ (173) $ -- $ 161 $ (106) $ (254) Property, plant and equipment - net 5,383 4,085 4,153 3,919 3,693 3,807 4,497 Total assets 7,666 5,899 5,451 5,339 5,194 5,006 5,918 Long-term debt 2,244 2,496 1,978 1,736 1,809 1,683 2,219 Total debt 2,425 2,525 2,250 1,766 1,849 1,938 2,704 Total debt less cash 2,281 2,258 2,129 1,574 1,719 1,831 2,612 Stockholders' equity 2,633 1,492 1,346 1,558 1,279 1,124 1,112 Cash Flow Information Net cash provided by operating activities 1,771 713 385 1,097 1,169 728 678 Cash capital expenditures 774 543 981 836 875 745 611 Dividends paid 166 138 86 85 83 79 79 Treasury stock purchased $ -- $ -- $ 25 $ 60 $ 195 $ 45 $ -- Ratios and Percentage Current ratio 1.0 1.4 .8 1.0 1.2 .9 .8 Average price/earnings ratio 6.6 27.6 NM 14.9 13.9 42.5 NM Total debt less cash to total capitalization 46% 60% 61% 50% 57% 62% 70% Employees Total wages and benefits $ 333 $ 327 $ 359 $ 367 $ 367 $ 402 $ 422 Number of employees at year-end 4,426 3,653 4,400 4,792 4,827 5,176 6,724
Seven-Year Operating Summary 2000 1999 1998 1997 1996 1995 1994 ------ ------ ------ ------ ------ ------ ---- Exploration and Production Net production of crude oil and condensate - (thousands of barrels per day) United States 73.7 79.3 66.2 70.6 73.8 74.8 73.4 North Sea 117.7 102.9 87.4 83.3 86.5 91.9 88.7 Other international 15.3 14.7 18.4 18.1 16.8 17.4 26.4 ------ ------ ------ ------ ------ ------ ---- Total 206.7 196.9 172.0 172.0 177.1 184.1 188.5 ====== ====== ====== ====== ====== ====== ===== Average price of crude oil sold (per barrel) - United States $27.50 $16.90 $12.78 $18.45 $19.56 $15.78 $14.25 North Sea 27.92 17.88 12.93 18.93 19.60 16.56 15.33 Other international 26.13 14.77 10.19 15.50 15.85 14.70 14.58 Average $27.64 $17.26 $12.58 $18.37 $19.23 $16.07 $14.80 Natural gas sales (MMCF per day) 531 580 584 685 781 809 872 Average price of natural gas sold (per MCF) $ 3.87 $ 2.38 $ 2.13 $ 2.44 $ 2.11 $ 1.63 $ 1.82 Net exploratory wells drilled - Productive(1) 1.25 1.70 4.40 7.65 6.91 4.71 11.61 Dry 10.54 3.75 14.42 7.42 5.52 11.16 13.47 ------ ------ ------ ------ ------ ------ ----- Total 11.79 5.45 18.82 15.07 12.43 15.87 25.08 ====== ====== ====== ====== ====== ====== ===== Net development wells drilled - Productive 47.79 46.23 62.30 95.78 143.33 135.86 69.27 Dry 5.44 5.89 9.00 7.00 13.04 11.95 9.63 ------ ------ ------ ------ ------ ------ ---- Total 53.23 52.12 71.30 102.78 156.37 147.81 78.90 ====== ====== ====== ====== ====== ====== ===== Undeveloped net acreage (thousands) - United States 2,020 1,560 1,487 1,353 1,099 1,280 1,415 North Sea 923 861 908 523 560 570 629 Other international 26,078 19,039 14,716 14,630 4,556 4,031 7,494 ------ ------ ------ ------ ------ ------ ----- Total 29,021 21,460 17,111 16,506 6,215 5,881 9,538 ====== ====== ====== ====== ====== ====== ===== Developed net acreage (thousands) - United States 729 796 810 830 871 1,190 1,270 North Sea 115 105 115 70 79 58 68 Other international 656 785 612 201 198 207 1,015 ------ ------ ------ ------ ------ ------ ----- Total 1,500 1,686 1,537 1,101 1,148 1,455 2,353 ====== ====== ====== ====== ====== ====== ===== Estimated proved reserves (millions of equivalent barrels) 1,088 920 901 892 849 864 1,059 Chemicals Gross worldwide titanium dioxide production (thousands of tonnes) 480 320 284 168 155 154 148 (1) The 2000 net well count does not include 15.35 successful net wells drilled in 2000 but suspended at the end of the year.
Glossary of Terms Acreage: Land or offshore area leased or licensed for oil and gas exploration and production. Appraisal drilling: Drilling carried out following the discovery of a new field to obtain more information on the physical extent, amount of reserves and likely production rate. Articulated compliant tower: A freestanding, flexible production facility that moves or "complies" with wave forces. Kerr-McGee's Baldpate facility in the Gulf of Mexico features an articulation point that enhances flexibility and represents an industry "first." b/d: Barrels of oil per day. BOE: Barrels of oil equivalent. One barrel of oil equals 6,000 cubic feet of natural gas. Chloride process: One of two processes for the production of titanium dioxide pigment. This process accounts for about 70% of Kerr-McGee's worldwide pigment production capacity. Condensate: Hydrocarbon liquids that exist in gaseous form in the reservoir but condense to liquids as the gas flows to the surface. Continental shelf: The extension of a continental land mass into the ocean in relatively shallow water. Deep water: More than 1,000 feet deep. Development: Drilling of wells following an oil or gas discovery, and bringing a field into production. Discovery well: An exploratory well that finds a new petroleum deposit or opens a new formation in an established field. Exploitation: Additional drilling or application of new technology to further extend production and reserves of an existing field. Exploratory well: A well drilled to test the presence of oil or gas in an undeveloped area. Floating production, storage and offloading (FPSO) system: A moored ship-shaped facility capable of producing oil from subsea wells and storing and offloading the oil into shuttle tankers. Kerr-McGee's Gryphon field in the North Sea uses an FPSO, and a second company-operated FPSO is being outfitted for the Leadon field. Gross acres or production: The total number of acres or the total production volume in which a company owns an interest. Independent: An oil and gas exploration and production company not engaged in petroleum refining and marketing or "downstream" operations. Kerr-McGee became an independent after selling its refining business in 1995. MMBtu: Millions of British thermal units. One Btu is the amount of heat needed to raise the temperature of one pound of water by one degree Fahrenheit. MMcf/d: Millions of cubic feet of natural gas per day. Play: A group of prospects and/or fields with similar geologic histories and conditions. The Atlantic Margin deepwater plays - focus of Kerr-McGee's exploration program - resulted from sandstone deposition as continental drift opened up the Atlantic Ocean basin. Before drift started, Morocco was adjacent to Nova Scotia, and Brazil next to Gabon, so similar geologic conditions are expected. Possible reserves: Estimated quantities of unproved oil and natural gas which analysis of geological and engineering data suggests could possibly be recovered but are less certain than probable reserves. Probable reserves: Estimated quantities of unproved oil and natural gas which analysis of geological and engineering data suggests are likely to be recovered but do not meet proved criteria. Prospect: A specified location or an area targeted for leasing and drilling. Proved reserves: Estimated quantities of oil and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Reservoir: A porous, permeable sedimentary rock formation containing oil and/or natural gas, enclosed or surrounded by layers of less permeable or impervious rock. Seismic survey: Technique for determining the structure of underground rock formations by sending energy waves or sound waves into the earth and recording the wave reflections. Three-dimensional seismic surveys provide enhanced data for determining well locations. Semisubmersible: A floating drilling rig or a floating production facility. Spar: A deep-floating cylindrical hull. Kerr-McGee operates the industry's first production spar, which was installed in 1996 in the Neptune field in the Gulf of Mexico and began production in 1997. Subsea tree: Seafloor installation of the assembly of valves through which a well is produced. Sulfate process: One of two processes used in the production of titanium dioxide pigment. TiO2: Molecular formula for titanium dioxide pigment. Titanium dioxide pigment: The world's preferred whitener, opacifier and brightener for paint, coatings, plastics, paper and many other products. This inorganic white pigment is Kerr-McGee's major chemical product. Tonne: Metric ton; 1,000 kilograms or 2,204.62 pounds. Working interest: A cost-bearing interest in a well expressed as a percentage of the whole. Stockholder and Investor Information Stock Exchange Listing Kerr-McGee common stock is listed on the New York Stock Exchange under the ticker symbol KMG and also is traded on the Boston, Chicago, Pacific and Philadelphia stock exchanges. Stockholder Assistance Contact UMB Bank, N.A., of Kansas City, Missouri, toll-free at (877) 860-5820 or (800) 884-4225 for assistance with: * Direct deposit of cash dividends * Direct stock purchase and dividend reinvestment plan * Transfer of stock certificates * Replacement of lost or destroyed stock certificates and dividend checks Stockholder Information and Publications Contact the Office of the Corporate Secretary toll-free at (800) STOCK KM (800-786-2556) for general information and assistance or to request the company's annual report on Form 10-K and quarterly reports on Form 10-Q, as filed with the Securities and Exchange Commission, and the company's annual report to stockholders. Information also is available on the company's website at http://www.kerr-mcgee.com, including webcasts of conference calls discussing quarterly financial and operating results. Direct Purchase and Dividend Reinvestment Plan This plan allows stockholders to buy Kerr-McGee common stock directly from the company and to reinvest quarterly dividends in additional shares. The company pays all fees and commissions for these services. For a prospectus, please call (800) 786-2556. Investor Information Stockholders, security analysts and other interested parties may direct inquiries to Richard C. Buterbaugh, Vice President of Investor Relations, at (866) 378-9899 (toll-free). Transfer Agent and Registrar UMB Bank, N.A. Securities Transfer Division P.O. Box 410064 Kansas City, MO 64141-0064 Toll-free telephones: (877) 860-5820 or (800) 884-4225 Corporate Headquarters Kerr-McGee Corporation Kerr-McGee Center 123 Robert S. Kerr Avenue Oklahoma City, OK 73102 Mailing address: P.O. Box 25861 Oklahoma City, OK 73125 Telephone: (405) 270-1313 Forward-Looking Information This annual report contains forward-looking statements regarding the company's or management's intentions, beliefs or expectations within the meaning of the Securities Litigation Reform Act. Future results and developments discussed in these statements may be affected by numerous factors and risks, such as the accuracy of the assumptions that underlie the statements, the success of the oil and gas exploration and production program, drilling risks, the market value of Kerr-McGee's products, uncertainties in interpreting engineering data, demand for consumer products for which Kerr-McGee's businesses supply raw materials, general economic conditions, and other factors and risks discussed in the company's SEC filings. Actual results and developments may differ materially from those expressed or implied in this annual report. EX-21 12 subexhibit21.txt SIGNIFICANT SUBSIDIARIES EXHIBIT 21 KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES SUBSIDIARIES State or Country Percent Name of Subsidiary of Incorporation Owned - ----------------------------------- ------------------ ------- Kerr-McGee Oil & Gas Corporation Delaware 100% Kerr-McGee Oil (U.K.)PLC England 100% Kerr-McGee Resources (U.K.) Limited England 100% Kerr-McGee North Sea (U.K.) Limited England 100% Kerr-McGee Gryphon Limited England 100% Kerr-McGee L.P. Corporation Delaware 100% Kerr-McGee Oil & Gas Onshore LP Delaware 100% Kerr-McGee Chemical LLC Delaware 100% KMCC Western Australia PTY. Ltd Western Australia 100% Kerr-McGee Pigments GmbH & Co. KG Germany 100% Kerr-McGee Pigments N.V. Belgium 100% Kerr-McGee Pigments Limited Bahama Islands 100% Kerr-McGee Pigments (Holland) B.V. Netherlands 100% Kerr-McGee Pigments (Savannah), Inc. Georgia 100% A number of additional subsidiaries are omitted since, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary as of December 31, 2000. EX-23 13 aaconsentexh23.txt CONSENT Exhibit 23.1 Consent of Independent Public Accountants As independent public accountants, we hereby consent to the incorporation of our reports dated February 23, 2001, included in the company's 2000 Annual Report to Stockholders and incorporated by reference in this Form 10-K and on page 32 of this Form 10-K, into the company's previously filed Registration Statements on Form S-8 File Nos. 33-24274, 33-50949, 333-05999, 333-28235, 333-39222, 333-41000, 333-41006, 333-41008 and 333-92865, and the company's previously filed Registration Statements on Form S-3 File Nos. 33-66112 and 333-94091. (ARTHUR ANDERSEN LLP) ARTHUR ANDERSEN LLP Oklahoma City, Oklahoma, March 28, 2001 EX-23 14 pwcconsentexh23.txt CONSENT Exhibit 23.2 Consent of Independent Accountants We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 33-66112 and 333-94091) and Form S-8 (Nos. 33-24274; 33-50949, 333-05999, 333-28235, 333-39222, 333-41000, 333-41006, 333-41008 and 333-92865) of Kerr-McGee Corporation of our report dated February 26, 1999 appearing in Kerr-McGee Corporation's 2000 Annual Report to Stockholders and incorporated herein by reference in this Form 10-K, relating to the consolidated financial statements of Oryx Energy Company, which such financial statements are not separately presented therein. (PRICEWATERHOUSECOOPERS LLP) PricewaterhouseCoopers LLP Dallas, Texas March 28, 2001 EX-24 15 powersofattorney.txt POWERS OF ATTORNEY Exhibit 24 KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation ("Company"), intends to file with the Securities and Exchange Commission ("Commission") under the Securities Exchange Act of 1934, as amended ("ACT"), an Annual Report on Form 10-K for the year ended December 31, 2000 ("Form 10-K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents. NOW, THEREFORE, the undersigned in his capacity as a Director of the Company, does hereby appoint Luke R. Corbett, Deborah A. Kitchens, Gregory F. Pilcher and Robert M. Wohleber, and each of them severally, his true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for him and in his name, place and stead, in his capacity as a Director of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument effective March 13, 2001. (WILLIAM E. BRADFORD) -------------------------------- William E. Bradford, Director KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation ("Company"), intends to file with the Securities and Exchange Commission ("Commission") under the Securities Exchange Act of 1934, as amended ("ACT"), an Annual Report on Form 10-K for the year ended December 31, 2000 ("Form 10-K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents. NOW, THEREFORE, the undersigned in his capacity as a Director or Officer or both, as the case may be, of the Company, does hereby appoint Deborah A. Kitchens, Gregory F. Pilcher and Robert M. Wohleber, and each of them severally, his true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for him and in his name, place and stead, in his capacity as a Director or Officer or both, as the case may be, of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument effective March 13, 2001. (LUKE R. CORBETT) -------------------------------- Luke R. Corbett Chief Executive Officer and Director KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation ("Company"), intends to file with the Securities and Exchange Commission ("Commission") under the Securities Exchange Act of 1934, as amended ("ACT"), an Annual Report on Form 10-K for the year ended December 31, 2000 ("Form 10-K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents. NOW, THEREFORE, the undersigned in her capacity as a Director of the Company, does hereby appoint Luke R. Corbett, Deborah A. Kitchens Gregory F. Pilcher and Robert M. Wohleber, and each of them severally, her true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for her and in her name, place and stead, in her capacity as a Director of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument effective March 13, 2001. (SYLVIA A. EARLE) ------------------------------------- Sylvia A. Earle, Director KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation ("Company"), intends to file with the Securities and Exchange Commission ("Commission") under the Securities Exchange Act of 1934, as amended ("ACT"), an Annual Report on Form 10-K for the year ended December 31, 2000 ("Form 10-K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents. NOW, THEREFORE, the undersigned in his capacity as a Director of the Company, does hereby appoint Luke R. Corbett, Deborah A. Kitchens, Gregory F. Pilcher and Robert M. Wohleber, and each of them severally, his true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for him and in his name, place and stead, in his capacity as a Director of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument effective March 13, 2001. (DAVID C. GENEVER-WATLING) -------------------------------- David C. Genever-Watling, Director KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation ("Company"), intends to file with the Securities and Exchange Commission ("Commission") under the Securities Exchange Act of 1934, as amended ("ACT"), an Annual Report on Form 10-K for the year ended December 31, 2000 ("Form 10-K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents. NOW, THEREFORE, the undersigned in his capacity as a Director of the Company, does hereby appoint Luke R. Corbett, Deborah A. Kitchens, Gregory F. Pilcher and Robert M. Wohleber, and each of them severally, his true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for him and in his name, place and stead, in his capacity as a Director of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument effective March 13, 2001. (MARTIN C. JISCHKE) -------------------------------- Martin C. Jischke, Director KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation ("Company"), intends to file with the Securities and Exchange Commission ("Commission") under the Securities Exchange Act of 1934, as amended ("ACT"), an Annual Report on Form 10-K for the year ended December 31, 2000 ("Form 10-K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents. NOW, THEREFORE, the undersigned in his capacity as a Director of the Company, does hereby appoint Luke R. Corbett, Deborah A. Kitchens, Gregory F. Pilcher and Robert M. Wohleber, and each of them severally, his true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for him and in his name, place and stead, in his capacity as a Director of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument effective March 13, 2001. (WILLIAM C. MORRIS) -------------------------------- William C. Morris, Director KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation ("Company"), intends to file with the Securities and Exchange Commission ("Commission") under the Securities Exchange Act of 1934, as amended ("ACT"), an Annual Report on Form 10-K for the year ended December 31, 2000 ("Form 10-K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents. NOW, THEREFORE, the undersigned in his capacity as a Director of the Company, does hereby appoint Luke R. Corbett, Deborah A. Kitchens, Gregory F. Pilcher and Robert M. Wohleber, and each of them severally, his true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for him and in his name, place and stead, in his capacity as a Director of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument effective March 13, 2001. (JOHN J. MURPHY) -------------------------------- John J. Murphy, Director KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation ("Company"), intends to file with the Securities and Exchange Commission ("Commission") under the Securities Exchange Act of 1934, as amended ("ACT"), an Annual Report on Form 10-K for the year ended December 31, 2000 ("Form 10-K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents. NOW, THEREFORE, the undersigned in his capacity as a Director of the Company, does hereby appoint Luke R. Corbett, Deborah A. Kitchens, Gregory F. Pilcher and Robert M. Wohleber, and each of them severally, his true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for him and in his name, place and stead, in his capacity as a Director of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument effective March 13, 2001. (LEROY C. RICHIE) -------------------------------- Leroy C. Richie, Director KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation ("Company"), intends to file with the Securities and Exchange Commission ("Commission") under the Securities Exchange Act of 1934, as amended ("ACT"), an Annual Report on Form 10-K for the year ended December 31, 2000 ("Form 10-K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents. NOW, THEREFORE, the undersigned in his capacity as a Director of the Company, does hereby appoint Luke R. Corbett, Deborah A. Kitchens, Gregory F. Pilcher and Robert M. Wohleber, and each of them severally, his true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for him and in his name, place and stead, in his capacity as a Director of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument effective March 13, 2001. (MATTHEW R. SIMMONS) -------------------------------- Matthew R. Simmons, Director KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation ("Company"), intends to file with the Securities and Exchange Commission ("Commission") under the Securities Exchange Act of 1934, as amended ("ACT"), an Annual Report on Form 10-K for the year ended December 31, 2000 ("Form 10-K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents. NOW, THEREFORE, the undersigned in her capacity as a Director of the Company, does hereby appoint Luke R. Corbett, Deborah A. Kitchens, Gregory F. Pilcher and Robert M. Wohleber, and each of them severally, her true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for her and in her name, place and stead, in her capacity as a Director of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument effective March 13, 2001. (FARAH M. WALTERS) ------------------------------------- Farah M. Walters, Director KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation ("Company"), intends to file with the Securities and Exchange Commission ("Commission") under the Securities Exchange Act of 1934, as amended ("ACT"), an Annual Report on Form 10-K for the year ended December 31, 2000 ("Form 10-K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents. NOW, THEREFORE, the undersigned in his capacity as a Director of the Company, does hereby appoint Luke R. Corbett, Deborah A. Kitchens, Gregory F. Pilcher and John M. Rauh, and each of them severally, his true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for him and in his name, place and stead, in his capacity as a Director of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument effective March 13, 2001. (IAN L. WHITE-THOMSON) -------------------------------- Ian L. White-Thomson, Director -----END PRIVACY-ENHANCED MESSAGE-----