<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
Seagull Energy Corporation
--------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
[SEAGULL ENERGY CORPORATION LOGO]
SEAGULL ENERGY CORPORATION
HOUSTON, TEXAS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MONDAY, MAY 15, 1995
To the Shareholders:
The 1995 Annual Meeting of Shareholders (the "Annual Meeting") of Seagull
Energy Corporation (the "Company") will be held on Monday, May 15, 1995 at 10:00
a.m., local time, at the George R. Brown Convention Center, 1001 Convention
Center Blvd., Houston, Texas, for the following purposes:
1. To elect four directors to serve until the 1998 Annual Meeting of
Shareholders;
2. To approve the Seagull Energy Corporation 1995 Omnibus Stock Plan;
3. To ratify the selection of KPMG Peat Marwick LLP as independent auditors
of the Company for the fiscal year ending December 31, 1995; and
4. To transact such other business as may properly come before such meeting
or any adjournment(s) or postponement(s) thereof.
The close of business on March 20, 1995, has been fixed as the record date
for the determination of shareholders entitled to receive notice of and to vote
at the Annual Meeting or any adjournment(s) or postponement(s) thereof.
You are cordially invited to attend the Annual Meeting. WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING, WE ASK THAT YOU SIGN AND RETURN THE ENCLOSED
PROXY AS PROMPTLY AS POSSIBLE. A SELF-ADDRESSED, POSTPAID ENVELOPE IS ENCLOSED
FOR YOUR CONVENIENCE.
By Order of the Board of Directors,
/s/ Sylvia Sanchez
____________________________________
Sylvia Sanchez
Secretary
March 31, 1995
<PAGE> 3
SEAGULL ENERGY CORPORATION
1001 FANNIN, SUITE 1700
HOUSTON, TEXAS 77002
(713) 951-4700
-------------------------------
PROXY STATEMENT
-------------------------------
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of Directors
(the "Board of Directors" or the "Board") of Seagull Energy Corporation (the
"Company") for use at the 1995 Annual Meeting of Shareholders (the "Annual
Meeting") to be held on Monday, May 15, 1995, at 10:00 a.m., local time, at the
George R. Brown Convention Center, 1001 Convention Center Blvd., Houston, Texas,
or at any adjournment(s) or postponement(s) thereof. The solicitation of proxies
by the Board of Directors will be conducted primarily by mail. Georgeson &
Company Inc. has been retained to assist the Company in the solicitation of
proxies in connection with the Annual Meeting for a fee of $10,000, plus
out-of-pocket expenses. In addition, officers, directors and employees of the
Company may solicit proxies personally or by telephone, telegram or other forms
of wire or facsimile communication. The Company will reimburse brokers,
custodians, nominees and fiduciaries for reasonable expenses incurred by them in
forwarding proxy material to beneficial owners of common stock of the Company
("Common Stock"). The costs of the solicitation will be borne by the Company.
This proxy statement and the form of proxy were first mailed to shareholders of
the Company on or about March 31, 1995.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to the voting of the proxy (a) by the execution and submission of
a revised proxy, (b) by written notice to the Secretary of the Company or (c) by
voting in person at the Annual Meeting. In the absence of such revocation,
shares represented by the proxies will be voted at the Annual Meeting.
At the close of business on March 20, 1995, the record date for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting, there were outstanding 36,123,702 shares of Common Stock, each share of
which is entitled to one vote. Common Stock is the only class of outstanding
securities of the Company entitled to notice of and to vote at the Annual
Meeting.
Seagull's annual report to shareholders for the year ended December 31,
1994, including financial statements, is being mailed herewith to all
shareholders entitled to vote at the Annual Meeting. The annual report does not
constitute a part of the proxy soliciting material.
ELECTION OF DIRECTORS
Four directors are to be elected at the Annual Meeting. The Company's
Bylaws provide for a classified Board of Directors. Thus, the Board of Directors
is divided into Classes I, II and III, the terms of office of which are
currently scheduled to expire, respectively, on the dates of the Company's
Annual Meetings of Shareholders in 1996, 1997 and 1995. J. Evans Attwell,
William R. Grant, Richard M. Morrow and Dee S. Osborne have been nominated to
serve in Class III and, if elected, will serve until the Company's 1998 Annual
Meeting of Shareholders and until their respective successors shall have been
elected and qualified. Each of the nominees for director currently serves as a
director of the Company. The remaining seven directors named below will not be
required to stand for election at the Annual Meeting because their present terms
expire in either 1996 or 1997. A plurality of the votes cast in person or by
proxy by the holders of Common Stock is required to elect a director.
Accordingly, under Texas law and the Company's Articles of Incorporation and
Bylaws, abstentions and broker non-votes would have no effect on the election of
directors. A broker non-vote occurs if a broker or other nominee does not have
discretionary authority and has not received instructions with respect to a
particular item. Shareholders may not cumulate their votes in the election of
directors.
<PAGE> 4
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted FOR the election of the nominees listed below.
Although the Board of Directors does not contemplate that any of the nominees
will be unable to serve, if such a situation arises prior to the Annual Meeting,
the persons named in the enclosed proxy will vote for the election of such other
person(s) as may be nominated by the Board of Directors.
The following table sets forth information regarding the names, ages and
principal occupations of the nominees and directors, directorships in other
companies held by them and the length of continuous service as a director of the
Company:
<TABLE>
<CAPTION>
NOMINEES AND DIRECTOR
DIRECTORS PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE SINCE
-------------------------- ------------------------------------------------- --- --------
<S> <C> <C> <C>
CLASS III NOMINEES
--------------------
J. Evans Attwell.......... Attorney, Vinson & Elkins L.L.P.; Director, 64 1974
American General Corporation and First City
Bancorporation of Texas, Inc.
William R. Grant.......... Chairman, Galen Associates (venture capital 70 1986
health care); Director, Allergan, Inc., Fluor
Corporation, New York Life Insurance Company,
SmithKline Beecham, p.l.c. and Witco Corporation
Richard M. Morrow......... Retired Chairman of the Board and Chief Executive 69 1992
Officer, Amoco Corporation; Director, First
Chicago Corporation, The First National Bank of
Chicago, R.R. Donnelley and Sons Company,
Potlatch Corporation, Westinghouse Electric
Corporation and Marsh & McLennan Companies, Inc.
Dee S. Osborne............ President, Finial Investment Corporation 64 1983
(investments); Director, EOTT Energy Corp. (the
general partner of EOTT Energy Partners, L.P.);
and Chairman and Director, People's Choice TV of
Houston, Inc.
CLASS I DIRECTORS
-----------------
John W. Elias............. Executive Vice President and Chief Operating 54 1993
Officer of the Company
Sam F. Segnar............. Retired Chairman of the Board and Chief Executive 67 1986
Officer, Enron Corp.; Director, MAPCO, Inc.,
Hartmarx Corporation and Textron, Inc.; Advisory
Director, Gulf States Utilities Company
George M. Sullivan........ Retired Chairman of the Board, Alaska Railroad 72 1989
Corporation
CLASS II DIRECTORS
-------------------
Peter J. Fluor............ President and Chief Executive Officer, Texas 47 1980
Crude Energy, Inc. (independent oil and gas
company); Director, Fluor Corporation
Barry J. Galt............. Chairman of the Board, President and Chief 61 1983
Executive Officer of the Company; Director,
Standard Insurance Company and Trinity
Industries, Inc.
Dean P. Guerin............ Retired Chairman, Eppler, Guerin and Turner and 73 1982
Berry-Barnett Food Distribution Co., Inc.;
Director, Lone Star Technologies and Trinity
Industries, Inc.
Robert W. Shower.......... Executive Vice President and Chief Financial 57 1992
Officer of the Company; Director, Lear Seating
Corporation
</TABLE>
Each of the nominees and directors named above has been engaged in the
principal occupation set forth opposite his name for the past five years except
as follows:
Mr. Morrow served as Chairman of the Board and Chief Executive Officer of
Amoco Corporation from September 1983 until his retirement in February 1991.
2
<PAGE> 5
Mr. Elias served for 30 years with Amoco Production Company and its parent,
Amoco Corporation, in a variety of operational and management positions. Most
recently, he served as Group Vice President of Worldwide Natural Gas for Amoco
Production from November 1988 to January 1993. Mr. Elias was elected as
Executive Vice President of the Company in March 1993 and was also appointed
Chief Operating Officer as of January 1, 1995.
Mr. Segnar served as Chairman of the Board and Chief Executive Officer of
HNG/InterNorth, Inc. (now Enron Corp.) from 1984 until his retirement in early
1986. He served as Chairman of the Board of Vista Chemical, Inc. from October
1986 to October 1988 and as Chairman of the Board of Collecting Bank, National
Association from April 1988 to February 1993.
Mr. Sullivan served as legislative liaison for the Governor of Alaska
during 1987 and as Chairman of the Board, Alaska Railroad Corporation from
August 1988 until his retirement in January 1991.
Mr. Guerin served as Chairman of the Board of Eppler, Guerin & Turner, Inc.
(an investment banking firm) from 1951 until his retirement in December 1987. He
served as Chairman of the Board of Berry-Barnett Food Distribution Co., Inc.
from 1990 until 1994.
Mr. Shower served for 22 years with The Williams Companies, most recently
as Executive Vice President, Finance and Administration and a director until
1986. He served as a Managing Director, Corporate Finance, for Lehman Brothers
Inc. (formerly Shearson Lehman Hutton) from 1986 to 1990. He served as Vice
President and Chief Financial Officer with AmeriServ Food Company from 1990 to
1991. He served as Senior Vice President, Corporate Development for Albert
Fisher, Inc. from 1991 to 1992. Mr. Shower joined the Company as Senior Vice
President and Chief Financial Officer in March 1992. He was named to his present
position in December 1993.
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(1)
----------------------------------
NUMBER PERCENT
OF SHARES OF CLASS
--------- --------
<S> <C> <C>
NONEMPLOYEE DIRECTORS:
J. Evans Attwell.......................... 32,400(2) *
Peter J. Fluor............................ 20,398(2)(3) *
William R. Grant.......................... 4,000(2) *
Dean P. Guerin............................ 6,400(2) *
Richard M. Morrow......................... 8,400(2) *
Dee S. Osborne............................ 49,200(2) *
Sam F. Segnar............................. 3,800(2) *
George M. Sullivan........................ 3,400(2) *
EXECUTIVE OFFICERS:
Barry J. Galt............................. 624,545(2)(4)(5)(6) 1.7%
John W. Elias............................. 17,779(2)(4)(5)(6) *
Robert W. Shower.......................... 60,628(2)(4)(5)(6) *
Richard F. Barnes......................... 59,020(2)(6) *
Thomas P. McConn.......................... 84,726(2)(4)(5)(6) *
DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP
(17 PERSONS).............................. 1,106,680(7) 3.0%
</TABLE>
---------------
* Less than 1%.
(1) Unless otherwise indicated, beneficial owners have sole voting and
investment power with respect to the shares listed. Amounts shown are as of
March 20, 1995, except for amounts held by the trustee of the Company's
Thrift Plan and Employee Stock Ownership Plan, which are as of December 31,
1994.
3
<PAGE> 6
(2) Includes 654,553 shares that the nonemployee directors and the above named
executive officers have a right to purchase within 60 days pursuant to stock
options ("Options") granted under the Company's stock option plans as
follows: each nonemployee director -- 2,400, Mr. Galt -- 450,000, Mr.
Elias -- 13,333, Mr. Shower -- 54,000, Mr. Barnes -- 47,020 and Mr.
McConn -- 71,000. Prior to exercising these Options, the officers will have
no voting or investment power with respect to said shares.
(3) Includes 4,000 shares held by certain trusts with respect to which Mr. Fluor
is the sole trustee but for which he disclaims any beneficial ownership.
(4) Includes 21,913 shares held by the trustee of the Company's Thrift Plan for
which the above named executive officers have sole voting power and no
investment power. Shares held are as follows: Mr. Galt -- 12,580, Mr.
Elias -- 561, Mr. Shower -- 1,893 and Mr. McConn -- 6,879.
(5) Includes 13,432 shares held by the trustee of the Company's Employee Stock
Ownership Plan for which the above named executive officers have sole voting
power and no investment power. Shares held are as follows: Mr.
Galt -- 5,965, Mr. Elias -- 885, Mr. Shower -- 1,735 and Mr.
McConn -- 4,847.
(6) Includes 16,000 shares of Restricted Stock held by the Company for which the
above named executive officers have sole voting power and no investment
power. Shares held are as follows: Mr. Galt -- 6,000, Mr. Elias -- 3,000,
Mr. Shower -- 3,000, Mr. Barnes -- 2,000 and Mr. McConn -- 2,000.
(7) Includes 67,369 shares held for directors and executive officers as a group
in the Company's Thrift Plan and Employee Stock Ownership Plan for which
such persons have sole voting power and no investment power. Also, includes
736,753 shares for directors and executive officers as a group that said
persons have the right to purchase within 60 days pursuant to Options
granted under the Company's stock option plans. Prior to exercising these
Options, said persons will have no voting or investment power with respect
to said shares.
DIRECTORS' MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held fourteen meetings during 1994. Each director
attended at least 75% of the aggregate total meetings of the Board of Directors
and any committee on which such director served.
The Company has the following standing committees:
Audit Committee. The Audit Committee, which currently consists of
Messrs. Grant, Guerin, Morrow and Segnar, met three times during 1994. Its
principal functions are to confirm the existence of effective accounting
and internal control systems and to oversee the entire audit function, both
independent and internal.
Compensation Committee. The Compensation Committee, which currently
consists of Messrs. Fluor, Osborne and Segnar, met six times during 1994.
Mr. John B. Brock served as a Committee member during 1994 until October 1,
1994 when he resigned as a director. Mr. Segnar was elected a Committee
member on October 4, 1994 to fill the vacancy created by Mr. Brock's
resignation. The Committee's principal functions are to study, advise and
consult with the Company's management respecting the compensation of
officers and other key employees of the Company. Members of the
Compensation Committee are not eligible to participate in any of the plans
or programs they administer.
Executive Committee. The Executive Committee, which currently
consists of Messrs. Attwell, Galt, Osborne and Segnar, met one time during
1994. Its principal function is to aid and assist the Company's management
in the day-to-day operation of the Company. Mr. Brock served as a Committee
member during 1994 until October 1, 1994 when he resigned.
Nominating Committee. The Nominating Committee, which currently
consists of Messrs. Attwell, Grant, Morrow and Sullivan, met four times
during 1994. Its principal function is to make proposals to the full Board
of Directors for candidates to be nominated by the Board to fill vacancies
or for new directorship positions, if any, which may be created from time
to time. The Nominating Committee will consider suggestions from any
source, particularly shareholders, regarding possible candidates for
4
<PAGE> 7
director. With respect to the procedures that must be followed in order for
nominations from shareholders to be considered, see "Shareholder Proposals
and Director Nominations."
COMPENSATION OF DIRECTORS
Effective June 1, 1994, the annual director's fee was increased from
$20,000 per year to $24,000 per year for each director of the Company who is not
a full-time employee. Each nonemployee director receives $1,000 for each meeting
of the Board of Directors attended. Also, effective June 1, 1994, the Audit,
Executive, Compensation and Nominating Committee fees were increased from $750
to $1,000 for each committee meeting attended. A nonemployee director who
attends a meeting of a committee of which he is not a member is entitled to an
attendance fee of $1,000. Each nonemployee director who serves as a committee
chairman receives an additional $1,000 per year.
Stock Options. The Company has a Nonemployee Directors Stock Option Plan
(the "Directors Option Plan") which was approved at the 1993 Annual Meeting of
Shareholders (the "1993 Annual Meeting"). The Company utilizes stock options to
reward and retain highly qualified independent directors, and to allow them to
develop a sense of proprietorship and personal involvement in the development
and financial success of the Company.
The Directors Option Plan provides for the grant of options to acquire
Common Stock to each director who is not and never has been an employee of the
Company (an "Eligible Director"). On the date of any Annual Meeting of
Shareholders prior to the termination of the Directors Option Plan, each
Eligible Director who is continuing in office will automatically receive an
option to purchase an additional 6,000 shares of Common Stock at an exercise
price equal to the fair market value of the Common Stock on the date of grant.
In addition, each Eligible Director who is elected or appointed to the Board of
Directors for the first time will receive on the date of such director's
election or appointment an option to purchase 6,000 shares of Common Stock at an
exercise price equal to the fair market value of the Common Stock on the date of
grant. All outstanding options have terms of ten years and vest 20% per year
over the initial five years of their terms.
Deferred Fee Plan. The Company has an Outside Directors Deferred Fee Plan
(the "Deferred Fee Plan"), a non-qualified plan, which was amended and restated
effective May 1, 1991. The Deferred Fee Plan requires the automatic deferral of
one-half of the annual retainer fee for all directors who are not employees of
the Company ("Outside Directors"). In addition, Outside Directors may elect to
defer all or a portion of their remaining directors' fees under the Deferred Fee
Plan. Amounts automatically deferred under the Deferred Fee Plan are credited
based upon "phantom stock" units, which have the same value as Common Stock,
which increase or decrease in value to the full extent of any increase or
decrease in the value of Common Stock and which receive credit for any cash or
stock dividends paid with respect to Common Stock. With respect to fees deferred
by Outside Directors prior to January 1, 1991, or fees deferred in excess of the
one-half automatic deferral, Outside Directors are permitted to make quarterly
elections regarding the method of income crediting for these deferrals, which
may be credited either based upon "phantom stock" units or with interest
equivalents based upon the prime rate of interest as published in The Wall
Street Journal on the last day of the quarter, plus a bonus rate of interest of
up to 2% depending on the number of years the Outside Director has served on the
Board. All "phantom stock" units credited to Outside Directors' accounts must
remain so credited until distribution or, if distribution is to be in a form
other than lump sum, the effective date of a final income crediting election
made after Board of Directors membership has ceased. Subject to certain
restrictions, Outside Directors may elect the timing and mode of their
distributions from the Deferred Fee Plan, except on the occurrence of events
such as death, plan termination or change of control. Distributions under the
Deferred Fee Plan can be made only in cash. Benefits under the Deferred Fee Plan
constitute unfunded, unsecured obligations of the Company. As of March 20, 1995,
all Outside Directors were participants in the Deferred Fee Plan.
5
<PAGE> 8
The following table sets forth Common Stock "phantom stock" units credited
to each participant's account during 1994 and total units credited as of March
20, 1995:
<TABLE>
<CAPTION>
PHANTOM STOCK UNITS
CREDITED
----------------------------
IN FISCAL AS OF
1994 MARCH 20, 1995
--------- --------------
<S> <C> <C>
J. Evans Attwell..................................... 1,861 26,225
Peter J. Fluor....................................... 1,908 23,413
William R. Grant..................................... 1,741 17,589
Dean P. Guerin....................................... 1,811 18,843
Richard M. Morrow.................................... 1,671 5,123
Dee S. Osborne....................................... 1,824 22,414
Sam F. Segnar........................................ 442 2,174
George M. Sullivan................................... 1,281 3,378
</TABLE>
CERTAIN TRANSACTIONS
The Company's Thrift Plan invests in three different mutual funds (the
"Fidelity Funds") affiliated with FMR Corp. (a beneficial owner of more than 5%
of the outstanding Common Stock; see "Principal Shareholders"). However, the
amount of money invested in those Fidelity Funds depends upon elections made by
the Company's employee participants in the Thrift Plan. The Company believes
that the Thrift Plan invests on the same basis in terms of rates and fees as are
offered generally to similar employee investment vehicles. As of January 31,
1995, the aggregate amount of funds invested by the Thrift Plan in these funds
was $10.6 million.
During 1994, the Company retained the law firm of Vinson & Elkins L.L.P.,
of which Mr. Attwell is an attorney, to perform various legal services for the
Company. Vinson & Elkins L.L.P. has been retained to perform similar services in
1995.
During 1994, the Company retained the law firm of Moyers, Martin, Santee,
Imel & Tetrick ("Moyers, Martin"), of Tulsa, Oklahoma, with respect to matters
of Oklahoma law. Moyers, Martin has been retained to perform similar services
with respect to matters of Oklahoma law in 1995. Mr. D. Stanley Tacker, Mr.
Galt's son-in-law, is a partner in Moyers, Martin. Mr. Galt is Chairman,
President and Chief Executive Officer of the Company.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth annual and long-term compensation for
services in all capacities to the Company for the fiscal years ended December
31, 1992, 1993 and 1994, of those persons who were, at December 31, 1994, the
Chief Executive Officer and the other four most highly compensated executive
officers of the Company (the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
AWARDS
ANNUAL COMPENSATION -------------
-------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME & PRINCIPAL BONUS COMPENSATION OPTIONS/SARS COMPENSATION
POSITION YEAR SALARY($) ($)(1)(2) ($)(3) (SHS.)(4) ($)(5)
-------------------------------------- ---- --------- ---------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Barry J. Galt......................... 1994 $496,000 $ 0 $ 0 100,000 $ 71,892
Chairman of the Board, President 1993 $465,000 $298,000 $ 0 100,000 $ 58,252
and Chief Executive Officer 1992 $440,000 $440,000 $ 0 150,000 $ 75,913
John W. Elias......................... 1994(6) $270,000 $ 0(7) 40,000 $ 41,072
Executive Vice President 1993 $187,500 $ 0 $110,431 100,000 $ 20,340
and Chief Operating Officer $ 80,000
Robert W. Shower...................... 1994(8) $234,000 $ 0 $ 0(9) 30,000 $ 36,715
Executive Vice President 1993 $204,000 $ 86,000 $ 0 30,000 $ 18,180
and Chief Financial Officer 1992 $149,205 $ 95,730 $ 85,637 90,000 $ 23,951
Richard F. Barnes..................... 1994 $232,000 $ 0 $ 0 16,000 $ 10,846
President, ENSTAR 1993 $222,000 $ 17,500 $ 0 16,000 $ 13,413
Natural Gas Company 1992 $210,000 $ 30,000 $ 0 25,000 $ 13,800
Thomas P. McConn...................... 1994 $222,000 $ 0 $ 0 24,000 $ 35,263
President, Seagull 1993 $204,000 $ 84,000 $ 0 24,000 $ 18,180
Energy E&P Inc. 1992 $184,000 $107,560 $ 0 40,000 $ 30,381
</TABLE>
---------------
(1) As more fully described in the Compensation Committee Report on Executive
Compensation, the Named Officers did not receive any bonuses under the
Company's 1994 Executive Incentive Plan. In lieu thereof, the Named Officers
received grants of restricted stock in the following respective share
amounts: Mr. Galt -- 6,000; Mr. Elias -- 3,000; Mr. Shower -- 3,000; Mr.
Barnes -- 2,000; and Mr. McConn -- 2,000.
(2) Amounts shown include cash compensation earned and received by the Named
Officers as well as amounts earned but deferred under the Executive
Incentive Plan for the respective fiscal years.
(3) No amounts are included for perquisites and personal benefits unless they
exceed the lesser of $50,000 or 10% of annual salary and bonus.
(4) No grants of stock appreciation rights have been made.
(5) Amounts reported under "All Other Compensation" represent contributions by
the Company to defined contribution plans.
(6) Mr. Elias joined the Company as an employee on March 8, 1993.
(7) Includes a one-time payment of $100,000 given at the time of Mr. Elias's
employment in lieu of reimbursement for relocation expenses.
(8) Mr. Shower joined the Company as an employee on March 9, 1992.
(9) Includes a one-time payment of $75,000 given at the time of Mr. Shower's
employment in lieu of reimbursement for relocation expenses.
COMPENSATION ARRANGEMENTS
Employment Agreement. In December 1983, Mr. Galt entered into an
employment agreement with the Company with an initial term of three years.
Pursuant to the employment agreement, the term is automatically extended for an
additional year on each anniversary of the agreement, unless terminated prior to
such renewal by either Mr. Galt or the Company, so that the remaining term of
the agreement has ranged
7
<PAGE> 10
from two to three years. If, however, the Company terminates Mr. Galt's
employment because of gross negligence or willful misconduct in the performance
of his duties, the employment agreement will terminate. Similarly, if Mr. Galt
terminates his employment agreement voluntarily other than in connection with a
"change of control" of the Company or other than because he is not re-elected to
his current positions (including as a director) or is assigned materially
inconsistent duties, the employment agreement will terminate. In connection with
the execution of the executive severance agreements described below, Mr. Galt
and the Company plan to enter into an agreement that, in addition to other
matters yet to be determined, under the circumstances described below would
result in a severance payment to Mr. Galt (in addition to any amounts required
by the employment agreement) equal to 2.99 times Mr. Galt's targeted incentive
bonus at the time of "change of control" or involuntary termination, whichever
is greater. If the severance benefits under the agreement, in conjunction with
any other amounts paid to Mr. Galt by the Company constitute a "parachute
payment" within the meaning of section 280G of the Code, the amounts payable
thereunder will either be reduced or paid in full, whichever produces the better
net after-tax position for Mr. Galt.
Mr. Galt's annual salary is subject to review and possible increase by the
Compensation Committee on an annual basis. Mr. Galt had initially received a 4%
salary increase from $496,000 to $516,000 for 1995. However, as described in the
Compensation Committee's "Report on Executive Compensation," Mr. Galt
voluntarily reduced his base annual rate of pay effective as of March 31, 1995
by 5% from $516,000 to $490,200, resulting in an effective annual salary of
$496,650, which is substantially the same as last year.
During the term of his employment, Mr. Galt will also receive the use of an
automobile, various club memberships and certain other personal and business
related benefits.
Executive Severance Agreements. In March 1995, Messrs. Elias, Shower,
Barnes and McConn entered into agreements with the Company (the "Agreements")
that provide certain severance benefits in the event their employment is subject
to an involuntary termination within two years following a change of control of
the Company. The initial term of the Agreements is two years and the Company may
extend the Agreements for successive two-year terms following the initial term;
however, if a change of control occurs during the term of the Agreements, the
Agreements cannot terminate until two years after the change of control. For
purposes of the Agreements, an "involuntary termination" means a termination of
employment that does not result from a resignation (other than a resignation
following certain specified changes in circumstances, including a significant
reduction of duties and a reduction in annual salary), a termination for cause,
death, disability or retirement on or after attaining age sixty-five. A "change
of control" occurs if (a)(1) the Company (i) is not the surviving entity in any
merger, consolidation or other reorganization or (ii) is to be dissolved or
liquidated, or (2) any person or entity acquires ownership or control of 20% or
more of the outstanding shares of the Company's voting stock, and (b) in
connection with such transaction, the persons who were directors of the Company
cease to constitute a majority of the Board. The Agreements generally provide
for (a) the payment of 2.99 times the sum of annual salary and targeted
incentive bonus at the time of the change of control or the involuntary
termination, whichever is greater, (b) the payment of the remaining portion of
prior year's incentive bonuses and, if the involuntary termination occurs after
an incentive bonus is earned but before it is paid, 2 times the objective
portion of the incentive bonus, (c) the continuation of welfare benefit
coverages at active employee cost for up to thirty-six months, and (d)
outplacement services up to a maximum cost of $6,000. If the severance benefits
under an Agreement, in conjunction with any other amounts paid to the applicable
executive by the Company constitute a "parachute payment" within the meaning of
section 280G of the Code, amounts payable under that Agreement will either be
reduced or paid in full, whichever produces the better net after-tax position
for the executive.
8
<PAGE> 11
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following is information with respect to the unexercised options to
purchase Common Stock under the Company's stock option plans granted to the
Named Officers and held by them at December 31, 1994.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS/SARS OPTIONS/SARS
ACQUIRED ON AT DECEMBER 31, 1994(SHS.) AT DECEMBER 31, 1994($)(1)
EXERCISE VALUE --------------------------- ---------------------------
NAME (SHS.) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Barry J. Galt............ 0 0 420,000 320,000 $ 3,914,250 $ 774,375
John W. Elias............ 0 0 6,666 133,333 $ 0 $ 0
Robert W. Shower......... 0 0 36,000 114,000 $ 258,750 $ 388,125
Richard F. Barnes........ 10,000 $ 191,875 42,020 50,000 $ 345,381 $ 120,563
Thomas P. McConn......... 0 0 63,000 78,000 $ 474,812 $ 198,000
</TABLE>
---------------
(1) Value based on the closing price on the NYSE Composite Tape for Common Stock
on December 31, 1994 ($19.125 per share).
OPTION GRANTS
The following is information with respect to grants of Options in fiscal
1994 pursuant to the Company's stock option plans to the Named Officers
reflected in the Summary Compensation Table on page 7. No stock appreciation
rights were granted under those plans in fiscal 1994.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------- ANNUAL RATE OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN OR BASE EXPIRATION -----------------------
NAME GRANTED (SHS.)(1) FISCAL 1994 PRICE ($/SH.) DATE 5% 10%
------------------- ----------------- ----------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Barry J. Galt...... 100,000 17% $ 25.50 6/1/2004 $1,603,681 $4,064,043
John W. Elias...... 40,000 7% $ 25.50 6/1/2004 $ 641,473 $1,625,617
Robert W. Shower... 30,000 5% $ 25.50 6/1/2004 $ 481,104 $1,219,212
Richard F.
Barnes........... 16,000 3% $ 25.50 6/1/2004 $ 256,589 $ 650,247
Thomas P. McConn... 24,000 4% $ 25.50 6/1/2004 $ 384,884 $ 975,370
</TABLE>
---------------
(1) Options were granted to the Named Officers on June 1, 1994. The exercise
price per share is equal to the closing price of Common Stock on the NYSE
Composite Tape on the date of grant. Options granted vest incrementally in
three years beginning three years from the date of grant and will not begin
to become exercisable until June 1, 1997. The Compensation Committee has the
authority to accelerate the vesting of outstanding Options including upon
the occurrence of a "change of control".
(2) The dollar amounts under these columns represent the potential realizable
value of each grant of Options assuming that the market price of Common
Stock appreciates in value from the date of grant at the 5% and 10% annual
rates of return prescribed by the Securities and Exchange Commission
("SEC"). These calculations are not intended to forecast possible future
appreciation, if any, of the price of Common Stock.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is designed to help the
Company attract, motivate and retain the executive resources that the Company
needs in order to maximize its return to shareholders. The fundamental
philosophy is to relate the amount of compensation "at risk" for an executive
directly to his or her contribution to the Company's success in achieving
superior performance objectives. The Company's executive compensation program,
as structured and implemented by the Compensation Committee (the "Committee"),
consists of three main components: (1) base salary; (2) potential for an annual
bonus based
9
<PAGE> 12
on overall Company performance as well as individual performance; and (3) the
opportunity to earn long-term stock-based incentives that are intended to
encourage the achievement of superior results over time and to align executive
officer and shareholder interests. The compensation program is structured to
provide senior management with a total compensation package that -- at expected
levels of performance -- is competitive with those provided to executives who
hold comparable positions or have similar qualifications in other organizations
of the Company's size. The peer companies (the "Peer Group") named under the
heading "Shareholder Return Performance Presentation" are the only group of
companies specifically utilized by the Compensation Committee in evaluating
executive compensation levels of the executive officers named in the Summary
Compensation Table; however, the Committee receives advice regarding
compensation levels from Towers Perrin, an outside compensation consultant,
which utilizes a number of other sources, including information from other
companies depending upon the job content of the executive officer whose salary
is being reviewed.
Base Salary Program. The Company's base salary program is designed to
provide base salaries for senior management that are generally more conservative
than those provided by other companies in the Peer Group. The base salaries for
the Company's senior management group are generally targeted by the Committee to
fall just below the 50th percentile for the Peer Group, although salaries for
certain key managers may be above the 50th percentile. The Committee believes
that the Company's ability to provide salaries that are competitive with market
alternatives, which vary depending upon the nature and level of the position in
question, is critical to attracting and maintaining talented senior managers.
The Committee reviews information contained in proxy statements, special surveys
and other sources and employs the services of Towers Perrin, outside
compensation consultant, to analyze the competitive level of senior management
compensation. Based upon this review, the Committee believes that the percentile
target described above has been met.
The Committee reviews and adjusts executive base salaries annually based on
each individual employee's performance over time (assessed using discretion),
general competitive market salary levels and the Company's market capitalization
and cash flow generated from operations. No specific weight or emphasis is
placed on any one of these factors.
Under the terms of Mr. Galt's employment agreement with the Company, Mr.
Galt's salary is subject to review by the Committee for possible increases each
year. Mr. Galt's salary was increased by 6.7% for the year 1994 in order to
bring Mr. Galt's salary closer in line with the market rate for his position and
to recognize performance above targeted levels in the areas of growth in market
capitalization, actual cash flow generated from operations measured against the
Company's annual operating plan and progress toward achieving the Company's
overall business strategy. No specific weight or emphasis was placed on any one
of these factors in determining the amount of the salary increase.
Because of difficult conditions in the gas and oil industry, primarily
related to a significant downturn in the price of natural gas, the Company's
financial performance and stock price performance fell below levels realized in
recent years. Specifically, the Company had a decline in market capitalization
and did not meet targeted actual cash flow generated from operations. In
determining whether to increase Mr. Galt's base annual salary, no specific
weight or emphasis was placed on any one of the factors described above. Mr.
Galt had initially received a 4% salary increase from $496,000 to $516,000 for
1995. However, in keeping with the Company's philosophy of tying compensation to
the Company's performance, Mr. Galt voluntarily reduced his base annual rate of
pay effective as of March 31, 1995 by 5% from $516,000 to $490,200, resulting in
an effective annual salary of $496,650, which is substantially the same as last
year. The Committee believes that Mr. Galt's base salary for 1995 approximates
the 50th percentile for the Peer Group. Effective March 31, 1995, car allowances
for certain other executive officers were eliminated and their base salaries
were adjusted in a manner that resulted in a reduction in the sum of these two
compensation elements averaging approximately 3.3%.
Short-Term Incentive Compensation. The impact of the Committee's linking
compensation to performance can also be illustrated by the operation of the
Company's Executive Incentive Plan for 1994. Under the Company's Executive
Incentive Plan, the Committee grants annual cash incentive awards that are
dependent
10
<PAGE> 13
upon the Company's achievement of previously established objectives for the
fiscal year and an evaluation of each individual participant's contributions to
those achievements. The Committee utilizes data obtained from an independent
compensation consultant to determine the targeted annual incentive award levels
for plan eligible positions. Such awards are targeted to fall around the 50th
percentile for companies similar in size to the Company.
Annual incentive award targets are expressed as a percentage of total
salary earned during a given year ranging from 10% to 50%, but can increase to a
maximum of two times the targeted percentage or decrease to zero for any year,
based upon the achievement of predetermined Company (objective) and individual
(subjective) performance goals.
One-half of each eligible employee's annual incentive award for 1994, the
objective portion, was based on the Company's actual pre-tax cash flow generated
from operations measured against the Company's annual operating plan. Under the
terms of the Executive Incentive Plan, because the Company's actual pre-tax cash
flow from operations was 77% of the amount targeted in the Company's operating
plan, participants in the Executive Incentive Plan received none of the targeted
amount for the objective half of the award.
The remaining half of the award is the subjective portion. Of this amount,
the Committee has adopted a policy that one-half of this amount (25% of an
individual's target bonus) will be based upon the performance of the Common
Stock for the preceding fiscal year compared to the performance of the common
stock of the Peer Group. The remaining half of the subjective portion is based
upon the individual employee's contribution to the Company's annual success in
his or her area of responsibility, measured by both quantitative and qualitative
factors. No specific formula is utilized for weighing individual performance.
Because of the performance of the Common Stock compared to the stock of the Peer
Group during 1994, no participants in the Executive Incentive Plan received any
awards based upon this factor. As for individual performance, the remaining 25%
of the target award under the plan, the cash awards averaged 76% of the targeted
amount for the component and 38% of the maximum amount that could have been
awarded for the component. The awards were intended to recognize certain
individual achievements and operating performance improvements, assessed using
discretion.
In order to encourage retention of key personnel, annual incentive awards
generally are paid out over a period expiring approximately three years after
the beginning of the annual evaluation period for the award in question.
It is also important to note that six executive officers -- the Chief
Executive Officer, each of the other Named Officers and one other executive
officer -- received no cash bonuses for 1994. In lieu thereof, the Committee
recommended to the Board of Directors that an aggregate of 18,000 shares of
restricted stock be granted to these executive officers. By issuing restricted
stock instead of cash bonuses, the Company avoided having to fund cash bonuses
and also further tied another element of the compensation of these executive
officers to the future performance of the Common Stock. The restricted shares
are subject to transfer and forfeiture restrictions that lapse 100% on the third
anniversary of the March 17, 1995 date of grant. The restrictions also lapse
upon certain other specified events, including involuntary termination following
a "change of control" of the Company, as defined in the applicable restricted
stock agreements.
As noted above, Mr. Galt did not receive a cash bonus for 1994. In lieu
thereof, he received a grant of 6,000 restricted shares of Common Stock. The
size of this award was based upon the Committee's recognition of Mr. Galt's work
in guiding the Company through a difficult period in its industry and
positioning the Company for the coming year. Again, Mr. Galt received no award
for either the objective portion of the Executive Incentive Plan or the half of
the subjective portion attributable to Common Stock performance.
Long-Term Incentive Compensation. The Company currently grants long-term
incentive compensation in the form of stock options. The Committee emphasizes
incentive compensation in the form of stock options because they tend to align
the interests of employees and shareholders by rewarding performance that
increases shareholder values. Option holders will only recognize value when the
stock price increases over the exercise price established on the date of grant.
The Committee does not utilize the number of options or shares held by any
individual as a factor to limit option grants to that individual in subsequent
years.
11
<PAGE> 14
The Committee establishes the overall level of stock options by considering
the stock option grant levels of companies included in the Peer Group. Stock
option awards by the Company are targeted by the Committee to fall at the 75th
percentile or above among the Peer Group. The Committee bases individual option
grants on individual performance (assessed using discretion) and level of
responsibility of the optionee.
All outstanding options have terms of ten years. Because the Committee
believes that it is important to emphasize the long-term nature of this
incentive program, the Committee adopted a policy in May 1993 generally
providing that all options granted after that date would vest 40% on the third
anniversary of the date of grant, and an additional 20% would become exercisable
in each of the next three years. All options have been granted at 100% of the
market value of the Common Stock on the date of grant. The exercise price is
payable in cash, shares of Common Stock, or any combination thereof.
On June 1, 1994, the Committee granted non-qualified stock options to
purchase an aggregate of 100,000 shares of Common Stock to Mr. Galt for an
exercise price of $25.50 per share. The options were granted at 100% of fair
market value on the date of grant. The option grant was based on a competitive
number of options for chief executive officers in the Peer Group granted to the
chief executive officers of the companies in the Peer Group based on an analysis
of information available for fiscal 1993 given the Company's philosophy of
providing stock option awards at or above the 75th percentile. The options will
not produce gain for Mr. Galt unless the Company's share price rises over the
exercise price established on the date of grant and therefore emphasize
pay-for-performance in the form of enhanced shareholder value.
The Committee periodically reviews the Company's executive compensation
package to ensure that the Company provides an appropriate mix of base salary
and short-term and long-term compensation opportunities that are competitive
with market alternatives.
Section 162(m). The Internal Revenue Service ("IRS") has issued proposed
regulations implementing Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code") relating to the limitation of the deductibility for federal
income tax purposes of certain executive compensation in excess of $1 million
annually. Section 162(m) is applicable to such compensation that would otherwise
be deductible in years beginning on or after January 1, 1994. The Committee has
been advised that, pursuant to the transition rules contained in these
regulations, Section 162(m) does not apply to written binding contracts existing
on February 17, 1993 that are not materially modified or to certain
performance-based plans. The transition rules also provide that plans approved
before December 20, 1993 pursuant to Rule 16b-3 under the Exchange Act will be
treated as performance-based until the earliest of (i) the expiration or
material modification of the plan, (ii) the issuance of all stock under the plan
and (iii) the first shareholders meeting to elect directors occurring after
December 31, 1996. Accordingly, the Company's existing stock option plans would
be treated as performance-based plans under the transition rules and the gain
from exercised stock options would be treated as performance-based compensation,
which is excludable from the $1 million limitation. During 1995, no executive of
the Company is expected to receive compensation in excess of $1 million unless a
significant number of vested stock options are exercised. The Seagull Energy
Corporation 1995 Omnibus Stock Plan will be submitted to the Company's
shareholders at the Annual Meeting and, if approved by the shareholders, will
satisfy the requirements of Section 162(m).
Compensation Committee
Peter J. Fluor, Chairman
Dee S. Osborne
Sam F. Segnar
12
<PAGE> 15
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The performance graph shown below was prepared by Towers Perrin (benefits
consultants retained by the Company) using data from the Standard and Poor's
Compustat Database for use in this Proxy Statement. As required by applicable
rules of the SEC, the graph was prepared based upon the following assumptions:
1. $100 was invested in Common Stock, the S&P 500 and the Peer Group
(as defined below) on December 31, 1989.
2. Peer Group investment is weighted based on the market
capitalization of each individual company within the Peer Group at the
beginning of each year.
3. Dividends are reinvested on the ex-dividend dates.
The companies that comprise the Company's Peer Group are as follows:
Anadarko Petroleum Corporation, Apache Corporation, Burlington Resources, Inc.,
Cabot Oil & Gas Corporation, Devon Energy Corporation, Enron Oil & Gas Company,
Equitable Resources, Inc., The Louisiana Land & Exploration Company, Maxus
Energy Corporation, Mesa Inc., Mitchell Energy & Development Corp., Murphy Oil
Corporation, Noble Affiliates, Inc., Oryx Energy Company, Parker & Parsley
Petroleum Company, Plains Petroleum Company, Pogo Producing Company, Santa Fe
Energy Resources, Inc., Southwestern Energy Company and Union Texas Petroleum
Holdings, Inc.
SEAGULL ENERGY CORPORATION
COMPARATIVE TOTAL RETURNS
DECEMBER 1989-DECEMBER 1994
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG SEAGULL ENERGY CORPORATION, S&P 500 INDEX AND A COMPOSITE PEER GROUP
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------
Seagull Energy Corporation $ 100 $ 132 $ 109 $ 137 $ 223 $ 168
S&P 500 Index $ 100 $ 97 $ 126 $ 136 $ 150 $ 152
Peer Group $ 100 $ 83 $ 75 $ 87 $ 103 $ 92
</TABLE>
13
<PAGE> 16
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
The Company has an Executive Supplemental Retirement Plan (the "Retirement
Plan") in which Barry J. Galt is the only current participant. The Retirement
Plan was established to provide supplemental retirement benefits for those
employees who are designated by the Board of Directors as participants and who
complete the required period of employment with the Company. Benefits under the
Retirement Plan constitute unfunded, unsecured obligations of the Company. The
Retirement Plan provides a benefit for the surviving spouse of a participant who
dies before retirement with a vested benefit.
Subject to specified vesting requirements, a participant is entitled to
receive commencing upon termination of his or her employment by the Company or
upon his or her normal retirement date, whichever is later, a pension equal to
the applicable percentage of average monthly compensation less 50% of his or her
social security benefit. Compensation covered by the Retirement Plan includes
base salary only. Mr. Galt is fully vested under the Retirement Plan.
For Mr. Galt, the applicable percentage is 50% and his average monthly base
compensation (which does not include bonuses) is determined based on his last
three consecutive calendar years of employment with the Company. Based on Mr.
Galt's current effective annual salary for 1995 of $496,650, the estimated
annual benefit for Mr. Galt, assuming retirement at age 65, is $265,248 with
such payment continuing to the survivor for life upon the death of either Mr.
Galt or his spouse.
ENSTAR NATURAL GAS COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Richard F. Barnes is the only Named Officer eligible to participate in the
ENSTAR Natural Gas Company Supplemental Executive Retirement Plan (the "ENSTAR
SERP").
On November 7, 1994, the Board of Directors adopted the ENSTAR SERP to
restore retirement benefits lost by certain employees under certain ENSTAR
Natural Gas Company qualified plans, including the ENSTAR Retirement Plan, as a
result of the $150,000 compensation limitation of Section 401(a)(17) of the
Code. Eligible employees become participants of the ENSTAR SERP upon designation
by the Compensation Committee. Benefits under the ENSTAR SERP constitute
unfunded, unsecured obligations of the Company. Subject to specified vesting
requirements, a participant in the ENSTAR SERP (or his beneficiary or
beneficiaries) is entitled to receive a lump sum benefit upon termination of
employment. Mr. Barnes is fully vested in his benefit under the ENSTAR SERP.
The ENSTAR SERP provides a supplemental retirement benefit equal to the
excess, if any, of the present value of the benefit that would have been payable
under the ENSTAR Retirement Plan if such participant's average monthly
compensation was based on his "Plan Compensation" (without regard to the
$150,000 compensation limitation), over the present value of the benefit
actually payable under the ENSTAR Retirement Plan. "Plan Compensation" is
defined as 5/6ths of the sum of a participant's annual base salary as of January
1 of each year and any cash bonus paid during the year. Each present value is
determined based on Pension Benefit Guaranty Corporation interest rates in
effect at the time of the participant's termination of employment.
Based on Mr. Barnes' current compensation level of $270,400, the estimated
supplemental retirement benefit for Mr. Barnes, assuming retirement at age 65
and an interest rate of 6%, is a lump sum payment of $146,400.
ENSTAR NATURAL GAS COMPANY RETIREMENT PLAN
Richard F. Barnes is the only Named Officer eligible to participate in the
ENSTAR Natural Gas Company Retirement Plan (the "ENSTAR Retirement Plan").
The salaried employees of ENSTAR Natural Gas Company, a division of the
Company, are eligible to participate in the ENSTAR Retirement Plan. Under the
non-contributory plan, a participant who retires at or after the age of 65 with
four years of plan participation is eligible for a monthly retirement benefit
equal to 2% of a participant's average monthly compensation multiplied by his or
her years of benefit service not to exceed
14
<PAGE> 17
ten full years, added to an amount equal to 1% of the participant's average
monthly compensation multiplied by his or her years of benefit service exceeding
ten full years. Benefits under the ENSTAR Retirement Plan are not subject to
reduction because of Social Security benefits but are reduced by benefits
payable under another defined benefit plan to the extent that there is a
duplication of benefits for the same period of service.
The ENSTAR Retirement Plan provides that a participant's benefit will be
determined pursuant to the above formula as of the date of termination of
employment, but also provides that such benefit will be at least equal to the
participant's accrued benefit as of December 31, 1988 and December 31, 1993.
A participant (or his or her beneficiary) may also be entitled to the
foregoing benefit under the ENSTAR Retirement Plan if the participant terminates
employment by reason of early retirement (i.e., after the participant has
attained the age of 55 and completed five years of vesting service), by reason
of total and permanent disability, by reason of death or if the participant
terminates employment after the participant has attained a "vested percentage"
in his or her ENSTAR Retirement Plan benefit based on his or her years of
vesting service under the following schedule:
<TABLE>
<CAPTION>
YEARS OF VESTED
SERVICE PERCENTAGE
------------------------------------------------------------------------ ----------
<S> <C>
Less than 5............................................................. 0%
5 or more............................................................... 100%
</TABLE>
The following table shows estimated annual benefits payable upon normal
retirement at age 65 based on certain salary assumptions and years of service.
PENSION PLAN TABLE*
<TABLE>
<CAPTION>
YEARS OF SERVICE
RANGE OF -------------------------------------------------------
COMPENSATION 15 20 25 30 35
--------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 50,000......................... $12,500 $15,000 $17,500 $20,000 $22,500
$ 75,000......................... $18,750 $22,500 $26,250 $30,000 $33,750
$100,000......................... $25,000 $30,000 $35,000 $40,000 $45,000
$125,000......................... $31,250 $37,500 $43,750 $50,000 $56,250
$150,000......................... $37,500 $45,000 $52,500 $60,000 $67,500
</TABLE>
---------------
* For purposes of determining the benefits shown above, plan compensation for
all years of service has been limited to $150,000 in accordance with the
limits on qualified plan compensation under Section 401(a)(17) of the Code,
without regard to any future adjustments for changes in the cost of living.
Benefits accrued prior to January 1, 1994 with respect to plan compensation in
excess of $150,000 have been disregarded.
The following table sets forth the estimated annual benefits payable under
normal retirement at age 65, assuming current remuneration levels and
participation until normal retirement at age 65, with respect to Mr. Barnes
under the provisions of the ENSTAR Retirement Plan.
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED
CURRENT CREDITED ANNUAL BENEFIT
CREDITED YEARS OF CURRENT COMPENSATION PAYABLE
RANGE OF YEARS OF SERVICE CURRENT COMPENSATION ADJUSTED FOR PLAN UPON
COMPENSATION SERVICE AT AGE 65 COVERED BY PLANS COMPENSATION LIMITS RETIREMENT
-------------------- -------- --------- -------------------- -------------------- --------------
<S> <C> <C> <C> <C> <C>
Richard F. Barnes... 22 36 $270,400 $150,000 $ 79,500*
</TABLE>
---------------
* This benefit assumes the current limit on plan compensation, $150,000 will
remain at $150,000 (with no inflationary adjustments). Mr. Barnes' service
from 1967 through 1980 has been recognized under this plan and another
retirement plan. Accordingly, his benefit under the ENSTAR Retirement Plan
formula has been reduced by $7,896 per year, which is his accrued benefit
under the other plan.
15
<PAGE> 18
PROPOSAL TO ADOPT THE
SEAGULL ENERGY CORPORATION 1995 OMNIBUS STOCK PLAN
There will be presented at the Annual Meeting a proposal to approve the
Company's 1995 Omnibus Stock Plan (the "1995 Stock Plan"), a copy of which is
attached as Exhibit A. The Board adopted the 1995 Stock Plan on March 17, 1995,
and directed that it be submitted for shareholder approval. The Board believes
that by providing key employees with an opportunity to acquire a proprietary
interest in the Company and additional incentive and reward opportunities based
on the profitable growth of the Company, the 1995 Stock Plan will give employees
a stronger incentive to work for the continued success of the Company. The Board
also believes that the 1995 Stock Plan will aid the Company in attracting and
retaining outstanding personnel. The principal features of the 1995 Stock Plan
are described below; provided, however, that the following summary is qualified
in its entirety by reference to the complete text of Exhibit A.
GENERAL
The 1995 Stock Plan provides for the granting of options (either incentive
stock options within the meaning of Section 422(b) of the Internal Revenue Code
of 1986, as amended (the "Code"), or options that do not constitute incentive
stock options ("nonqualified stock options")), restricted stock awards, stock
appreciation rights, long-term incentive awards, and phantom stock awards, or
any combination thereof (see "Types of Awards" below). The 1995 Stock Plan
covers an aggregate of 1,200,000 shares of Common Stock (subject to certain
adjustments in the event of stock dividends, stock splits and certain other
events ("adjustments")). No more than 250,000 shares of Common Stock, subject to
adjustments, may be issued pursuant to grants made under the 1995 Stock Plan to
any one employee in any one year. The limitation set forth in the preceding
sentence will be applied in a manner that permits compensation generated in
connection with the exercise of options, stock appreciation rights and, if
determined by the Compensation Committee, restricted stock awards to constitute
"performance-based" compensation for purposes of Section 162(m) of the Code.
Further, no more than 200,000 shares of Common Stock, subject to adjustments,
may be issued pursuant to restricted stock awards under the 1995 Stock Plan.
ADMINISTRATION
The 1995 Stock Plan is administered by the Compensation Committee. The
Compensation Committee has the power to determine which employees will receive
an Award, the time or times when such Award will be made, the type of the Award
and the number of shares of Common Stock to be issued under the Award or the
value of the Award. Only persons who at the time of the grant are employees of
the Company or of any subsidiary of the Company are eligible to receive grants
under the 1995 Stock Plan. As of March 23, 1995, the Company and its
subsidiaries had approximately 756 employees.
TYPES OF AWARDS
Options. The 1995 Stock Plan provides for two types of options: incentive
stock options and nonqualified stock options (see "Federal Tax Consequences"
below). The Compensation Committee will designate the employees to receive the
options, the number of shares subject to the options, and the terms and
conditions of each option granted under the 1995 Stock Plan. The term of any
option granted under the 1995 Stock Plan shall be determined by the Compensation
Committee; provided, however, that the term of any incentive stock option cannot
exceed ten years from the date of the grant and any incentive stock option
granted to an employee who possesses more than 10% of the total combined voting
power of all classes of stock of the Company or of its subsidiary within the
meaning of Section 422(b)(6) of the Code must not be exercisable after the
expiration of five years from the date of grant. The exercise price per share of
Common Stock of options granted under the 1995 Stock Plan will be determined by
the Compensation Committee; provided, however, that such exercise price cannot
be less than the fair market value of a share of Common Stock on a date the
option is granted (subject to adjustments). Further, the exercise price of any
incentive stock option granted to an employee who possesses more than 10% of the
total combined voting power of all classes of stock of the Company or of its
subsidiary within the meaning of Section 422(b)(6) of the Code must be at least
110% of the fair market value of the share at the time such option is granted.
The exercise price of options granted under the 1995 Stock Plan will be paid in
full in a manner prescribed by the Compensation
16
<PAGE> 19
Committee. On March 27, 1995, the closing price of Common Stock on the New York
Stock Exchange was $18.875 per share.
Restricted Stock Awards. Pursuant to a restricted stock award, shares of
Common Stock will be issued or delivered to the employee at any time the award
is made without any cash payment to the Company, except to the extent otherwise
provided by the Compensation Committee or required by law; provided, however,
that such shares will be subject to certain restrictions on the disposition
thereof and certain obligations to forfeit such shares to the Company as may be
determined in the discretion of the Compensation Committee. The restrictions on
disposition and forfeiture obligations may lapse based upon (a) the Company's
attainment of specific performance targets established by the Committee that are
based on (1) the price of a share of Common Stock, (2) the Company's earnings
per share, (3) the Company's revenue, (4) the revenue of a business unit of the
Company designated by the Committee, (5) the return on shareholders' equity
achieved by the Company, or (6) the Company's pre-tax cash flow from operations;
(b) the number of years the grantee remains an employee of the Company, or (c) a
combination of both factors. The Company retains custody of the shares of Common
Stock issued pursuant to a restricted stock award until the disposition and
forfeiture obligations lapse. An employee may not sell, transfer, pledge,
exchange, hypothecate, or otherwise dispose of such shares until the expiration
of the restriction period. However, upon the issuance to the employee of shares
of Common Stock pursuant to a restricted stock award, except for the foregoing
restrictions, such employee will have all the rights of a shareholder of the
Company with respect to such shares, including the right to vote such shares and
to receive all dividends and other distributions paid with respect to such
shares.
Stock Appreciation Rights. A stock appreciation right permits the holder
thereof to receive an amount (in cash, Common Stock, or a combination thereof)
equal to the number of stock appreciation rights exercised by the holder
multiplied by the excess of the fair market value of Common Stock on the
exercise date over the stock appreciation rights' exercise price. Stock
appreciation rights may or may not be granted in connection with the grant of an
option and no stock appreciation right may be exercised earlier than six months
from the date of grant. A stock appreciation right may be exercised in whole or
in such installments and at such times as determined by the Compensation
Committee.
Long-Term Incentive and Phantom Stock Awards. The 1995 Stock Plan permits
grants of long-term incentive awards ("performance awards") and phantom stock
awards, which may be paid in cash, Common Stock, or a combination thereof as
determined by the Compensation Committee. Performance awards granted under the
1995 Stock Plan will have a maximum value established by the Compensation
Committee at the time of the grant. A grantee's receipt of such amount will be
contingent upon satisfaction by the Company, or any subsidiary, division or
department thereof, of future performance conditions established by the
Compensation Committee prior to the beginning of the performance period. Such
performance awards, however, shall be subject to later revisions as the
Compensation Committee shall deem appropriate to reflect significant, unforeseen
events or changes. A performance award will terminate if the grantee's
employment with the Company terminates during the applicable performance period.
Phantom stock awards granted under the 1995 Stock Plan are awards of Common
Stock or rights to receive amounts equal to share appreciation over a specific
period of time. Such awards vest over a period of time or upon the occurrence of
a specific event(s) (including, without limitation, a change of control)
established by the Compensation Committee, without payment of any amounts by the
holder thereof (except to the extent required by law) or satisfaction of any
performance criteria or objectives. A phantom stock award will terminate if the
grantee's employment with the Company terminates during the applicable vesting
period or, if applicable, upon the occurrence of a specific event(s), except as
otherwise provided by the Compensation Committee at the time of grant. In
determining the value of performance awards or phantom stock awards, the
Compensation Committee will take into account the employee's responsibility
level, performance and potential, and other such consideration as it deems
appropriate. Such payment may be made in a lump sum or in installments as
prescribed by the Compensation Committee. Any payment made in Common Stock will
be based upon the fair market value of the Common Stock on the payment date.
Grants. As of the date of this Proxy Statement, the Company has not made
any grants of options (neither incentive stock options nor nonqualified stock
options), restricted stock awards, stock appreciation rights, long-term
incentive awards, or phantom stock awards under the 1995 Stock Plan.
17
<PAGE> 20
AMENDMENT AND TERMINATION
The Board may amend or terminate the 1995 Stock Plan at any time, except
that it may not make any change to a previously granted option that would impair
the employee's rights without the employee's consent and it must obtain
shareholder approval for any amendment which would increase the total number of
shares reserved for issuance (subject to adjustments), modify eligibility
requirements, change the minimum option price or plan term, or materially
increase the benefits accruing to employees. The 1995 Stock Plan is effective
upon the date adopted by the Board, provided the 1995 Stock Plan is timely
approved by the shareholders of the Company, and will remain in effect until all
awards granted under the 1995 Stock Plan have been satisfied or expired, unless
earlier terminated; provided, however, that no options or awards may be granted
under the 1995 Stock Plan after the expiration of ten years from the adoption
date by the Board.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. Options that constitute incentive stock options
within the meaning of Section 422(b) of the Code are subject to special federal
income tax treatment. An employee who has been granted an incentive stock option
will not realize taxable income at the time of the grant or exercise of such
option, and the Company will not be entitled to a deduction at either such time,
if the employee makes no disposition of shares acquired pursuant to such
incentive stock option (a) within two years from the option's date of the grant
or (b) within one year after exercising such option (collectively, the "Holding
Periods"). However, the employee must include the difference between the
exercise price and the fair market value of the Common Stock on the date of
exercise in alternative minimum taxable income. If the employee exercises an
incentive stock option and disposes of the stock in the same year and the amount
realized is less than the fair market value on the exercise date, only the
difference between the amount realized and the adjusted basis of the stock will
be included in alternative minimum taxable income. Upon disposition of the
shares of Common Stock received upon exercise of an incentive stock option after
the Holding Periods, the difference between the amount realized and the exercise
price should constitute a long-term capital gain or loss. Under such
circumstances, however, the Company will not be entitled to any deduction for
federal income tax purposes.
If an employee disposes of shares acquired pursuant to the exercise of an
incentive stock option prior to the end of the Holding Periods, the disposition
would be treated as a disqualifying disposition. The employee will be treated as
having received, at the time of disposition, compensation taxable as ordinary
income equal to the excess of the fair market value of the shares at the time of
exercise (or in the case of a sale in which a loss would be recognized, the
amount realized on the sale, if less) over the exercise price and any amount
realized in excess of the fair market value of the shares at the time of
exercise would be treated as a short-term or long-term capital gain, depending
on the holding period of the shares of Common Stock. In the event of a
disqualifying disposition, the Company may claim a deduction for compensation
paid at the same time and in the same amount as taxable compensation is treated
as received by the employee. However, the Company will not be entitled to any
deduction in connection with any loss to the employee or a portion of any gain
that is taxable to the employee as short-term or long-term capital gain.
Nonqualified Stock Options. Nonqualified stock options (options that are
not incentive stock options within the meaning of Section 422(b) of the Code)
will not qualify for special federal income tax treatment. As a general rule, no
federal income tax is imposed on the employee upon the grant of a nonqualified
stock option and the Company is not entitled to a tax deduction by reason of
such grant. Upon exercise of a nonqualified stock option, the employee will
realize ordinary income in an amount measured by the excess, if any, of the fair
market value of the shares on the date of exercise over the option exercise
price, with the Company entitled to a corresponding deduction, provided that the
Company withholds federal income tax with respect to such amount. Ordinary
income realized upon the exercise of a nonqualified stock option is not an
adjustment for alternative minimum tax purposes. In the case of an option holder
subject to Section 16(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), subject to certain exceptions, ordinary income will be
recognized by the employee (and a deduction by the Company) upon the exercise of
the nonqualified stock option if the exercise occurs more than six months after
the date of grant of the nonqualified stock option. Upon a subsequent
disposition of such shares, the employee will realize a short-term
18
<PAGE> 21
or long-term capital gain or loss to the extent of any intervening appreciation
or depreciation. However, the Company will not be entitled to any further
deduction at that time.
Restricted Stock Awards. An employee who has been granted a restricted
stock award will not realize taxable income at the time of grant, and the
Company will not be entitled to a deduction at that time, assuming that the
restrictions constitute a substantial risk of forfeiture for federal income tax
purposes. Upon lapse of the disposition restrictions (as shares become vested)
the holder will realize ordinary income in an amount equal to the fair market
value of the shares at such time, with the Company entitled to a corresponding
deduction. Dividends paid to the holder during the restriction period will also
be compensation income to the employee and deductible as such by the Company.
The holder of a restricted stock award may elect to be taxed at the time of
grant of the restricted stock award on the fair market value of the shares, in
which case (a) the Company will be entitled to a deduction at the same time and
in the same amount, (b) dividends paid to him during the restriction period will
be taxable as dividends to the holder and not deductible by the Company, and (c)
there will be no further federal income tax consequences when the restrictions
lapse.
Stock Appreciation Rights. An employee who has been granted a stock
appreciation right will not realize taxable income at the time of the grant, and
the Company will not be entitled to a deduction at that time. However, shares or
cash delivered upon exercise of a stock appreciation right will be taxable as
ordinary income to the employee, with the Company entitled to a corresponding
deduction when the performance award or phantom stock is paid. Ordinary income
realized on such an exercise is not an adjustment for alternative minimum tax
purposes. In the case of a holder subject to Section 16(b) of the Exchange Act
who receives shares, subject to certain exceptions, ordinary income will be
recognized by the employee (and a deduction by the Company) upon the exercise of
the stock appreciation right if the exercise occurs more than six months after
the date of grant of the stock appreciation right.
Long-Term Incentive and Phantom Stock Awards. An employee who has been
granted a long-term incentive award ("performance award") or a phantom stock
award generally will not realize taxable income at the time of grant, and the
Company will not be entitled to a deduction at that time. Whether a performance
award or a phantom stock award is paid in cash or shares of Common Stock, the
employee will have taxable compensation and the Company will have a
corresponding deduction. The measure of such income and deduction will be the
fair market value of the shares either at the time the performance award or
phantom stock award is paid or at the time any restrictions (including
restrictions under Section 16(b) of the Exchange Act) subsequently lapse,
depending on the nature, if any, of the restrictions imposed on the shares and
whether the employee elects to be taxed without regard to any such restrictions.
Any dividend equivalents paid with respect to a performance award or phantom
stock award prior to the actual issuance of shares under the award will be
compensation income to the employee and deductible as such by the Company.
Withholding. The Company has the right to deduct from any or all awards
any taxes required by law to be withheld and to require any payments necessary
to enable it to satisfy its withholding obligations.
REQUIRED VOTE AND BOARD RECOMMENDATION
The affirmative vote of a majority of the shares of Common Stock
represented at the Annual Meeting in person or by proxy and entitled to vote is
required for approval of the 1995 Stock Plan. Under Texas law, an abstention
would have the same legal effect as a vote against this proposal, but a broker
non-vote would not be counted for purposes of determining whether a majority had
been achieved.
Shareholder approval of the 1995 Stock Plan is required for listing of the
shares for trading on the New York Stock Exchange and as a condition to the
effectiveness of the 1995 Stock Plan. In addition, approval of the 1995 Stock
Plan it required so that certain transactions under the 1995 Stock Plan qualify
for the applicable exemptions pursuant to Rule 16b-3 under the Exchange Act.
Rule 16b-3 provides an exemption from the operation of the "short-swing profit"
recovery provisions of Section 16(b) of the Exchange Act with respect to
acquisitions of stock options, transactions relating to certain stock
appreciation rights, restricted stock awards, and the use of already owned
shares as payment for the exercise price of stock options.
19
<PAGE> 22
Shareholder approval is also required so that certain awards under the 1995
Stock Plan will qualify as performance-based compensation under Section 162(m)
of the Code.
The Board believes that such approval is essential to enable the Company to
continue to attract and retain key employees in an extremely competitive
industry.
The Board of Directors recommends voting "For" the 1995 Stock Plan.
PRINCIPAL SHAREHOLDERS
To the knowledge of the management of the Company and based upon filings
with the Securities and Exchange Commission (the "SEC"), the only persons who
may be deemed to own beneficially more than 5% of the outstanding Common Stock
(including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of March
20, 1995, are named in the following table:
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
------------------------------------------------------ ---------------- ----------------
<S> <C> <C>
The Equitable Companies Incorporated(1)............... 2,721,800 7.4%
787 Seventh Avenue
New York, NY 10019
FMR Corp.(2).......................................... 2,129,574 5.8%
82 Devonshire Street
Boston, MA 02109
Wellington Management Company(3)...................... 1,952,690 5.3%
75 State Street
Boston, MA 02109
</TABLE>
---------------
(1) According to information furnished by The Equitable Companies Incorporated
and its subsidiaries (collectively, the "Equitable Entities"), the Equitable
Entities beneficially own, in the aggregate, 2,721,800 shares of Common
Stock. The voting power and dispositive power by or on behalf of the Equity
Entities are as follows: The Equitable Life Assurance Society of the United
States and Alliance Capital Management L.P. have sole voting power with
respect to 150,000 shares and 2,295,900 shares, respectively; shared voting
power to vote with respect to 52,000 shares and no shares, respectively; and
sole dispositive power with respect to 202,000 shares and 2,519,800 shares,
respectively.
(2) According to information furnished by FMR Corp., 2,129,574 shares of Common
Stock are beneficially owned by Fidelity Management & Research Company
("Fidelity"), a wholly-owned subsidiary of FMR Corp. and an investment
adviser registered under Section 203 of the Investment Advisers Act of 1940.
Beneficial ownership by Fidelity arises as a result of its acting as
investment adviser to the Fidelity Funds (the "Funds"), an investment
company registered under Section 8 of the Investment Company Act of 1940.
Edward C. Johnson 3d, Chairman of FMR Corp., through his control of Fidelity
and the Funds, has sole power to dispose of the 2,129,574 shares owned by
the Funds. Neither FMR Corp. nor Mr. Johnson, has the sole power to vote or
direct the voting of the shares owned directly by the Funds, which power
resides with the Funds' Boards of Trustees. Fidelity carries out the voting
of the shares under written guidelines established by the Funds' Boards of
Trustees.
Edward C. Johnson 3d and Abigail P. Johnson each own 24.9% of the
outstanding voting common stock of FMR Corp. Various family members and
trusts for the benefit of the Johnson family members own FMR Corp. voting
common stock. These Johnson family members through their ownership of voting
common stock and the execution of a family shareholders' voting agreement,
form a controlling group with respect to FMR Corp.
(3) According to Wellington Management Company's ("WMC") Schedule 13G for the
year ended December 31, 1994, WMC in its capacity as investment adviser, may
be deemed the beneficial owner of 1,952,690 shares of Common Stock which are
owned by numerous investment counseling clients, none of which is known to
have such interest with respect to more than five percent of the class. WMC
has shared voting power as to 1,429,290 shares and shared dispositive power
as to 1,952,690 shares.
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<PAGE> 23
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of KPMG Peat Marwick LLP,
which has served as independent auditors of the Company since 1981, as
independent auditors of the Company for the fiscal year ending December 31,
1995, and recommends ratification by the shareholders of such appointment. Such
ratification requires the affirmative vote of the holders of a majority of the
shares of Common Stock present or represented by proxy and entitled to vote at
the Annual Meeting. Under Texas law, an abstention would have the same legal
effect as a vote against this proposal, but a broker non-vote would not be
counted for purposes of determining whether a majority has been achieved. The
persons named in the accompanying proxy intend to vote for ratification of such
appointment unless instructed otherwise on the proxy. The Board of Directors
recommends a vote "FOR" this proposal.
In the event the appointment is not ratified, the Board of Directors will
consider the appointment of other independent auditors. The Board of Directors
may terminate the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors without the approval of the shareholders of the Company
whenever the Board of Directors deems such termination necessary or appropriate.
A representative of KPMG Peat Marwick LLP is expected to attend the Annual
Meeting and will have the opportunity to make a statement, if such
representative desires to do so, and will be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Shareholders may propose matters to be presented at shareholders' meetings
and may also nominate persons to be directors. Formal procedures have been
established for those proposals and nominations.
PROPOSALS FOR 1996 ANNUAL MEETING
Pursuant to various rules promulgated by the SEC, any proposals of holders
of Common Stock intended to be presented to the annual meeting of shareholders
of the Company to be held in 1996 must be received by the Company, addressed to
Sylvia Sanchez, Corporate Secretary, 1001 Fannin, Suite 1700, Houston, Texas
77002, no later than December 1, 1995, to be included in the Company proxy
statement and form of proxy relating to that meeting. With respect to business
to be brought before the Annual Meeting, the Company has not received any
notices from its shareholders.
In addition to the SEC rules described in the preceding paragraph, the
Company's bylaws provide that for business to be properly brought before the
Company's annual meetings of shareholders beginning with the 1996 Annual Meeting
of Shareholders, it must be either (a) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board of Directors,
(b) otherwise brought before the meeting by or at the direction of the Board of
Directors or (c) otherwise properly brought before the meeting by a shareholder
of the Company who is a shareholder of record at the time of giving of notice
hereinafter provided for, who shall be entitled to vote at such meeting and who
complies with the following notice procedures. In addition to any other
applicable requirements, for business to be brought before an annual meeting by
a shareholder of the Company, the shareholder must have given timely notice in
writing of the business to be brought before an annual meeting of shareholders
of the Company to the Secretary of the Company. To be timely, a shareholder's
notice must be delivered to or mailed and received at the Company's principal
executive offices, 1001 Fannin, Suite 1700, Houston, Texas 77002, on or before
December 31, 1995. A shareholder's notice to the Secretary shall set forth as to
each matter the shareholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and address, as they appear on the Company's books, of the shareholder
proposing such business, (iii) the acquisition date, the class and the number of
shares of Common Stock which are owned beneficially by the shareholder, (iv) any
material interest of the shareholder in such business and (v) a representation
that the shareholder intends to appear in person or by proxy at the meeting to
bring the proposed business before the meeting. Notwithstanding the foregoing
bylaw provisions, a shareholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations thereunder with
respect to the matters set
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<PAGE> 24
forth in the foregoing bylaw provisions. Notwithstanding anything in the
Company's bylaws to the contrary, no business shall be conducted at the annual
meeting except in accordance with the procedures outlined above.
NOMINATIONS FOR 1996 ANNUAL MEETING AND FOR ANY SPECIAL MEETINGS
Only persons who are nominated in accordance with the following procedures
will be eligible for election as directors. Nominations of persons for election
to the Company's Board of Directors may be made at a meeting of shareholders (a)
by or at the direction of the Board of Directors or (b) by any shareholder of
the Company who is a shareholder of record at the time of giving of notice
hereinafter provided for, who shall be entitled to vote for the election of
directors at the meeting and who complies with the following notice procedures.
Such nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Company. To be timely, a shareholder's notice shall be delivered to or
mailed and received at the Company's principal executive offices, 1001 Fannin,
Suite 1700, Houston, Texas 77002 (i) with respect to an election to be held at
the annual meeting of shareholders of the Company, or before December 31, 1995,
and (ii) with respect to an election to be held at a special meeting of
shareholders of the Company for the election of Directors, not later than the
close of business on the 10th day following the date on which notice of the date
of the meeting was mailed or public disclosure of the date of the meeting was
made, whichever first occurs. Such shareholder's notice to the Secretary shall
set forth (a) as to each person whom the shareholder proposes to nominate for
election or re-election as a director, all information relating to the person
that is required to be disclosed in solicitations for proxies for election of
directors, or is otherwise required, pursuant to Regulation 14A under the
Exchange Act (including the written consent of such person to be named in the
proxy statement as a nominee and to serve as a director if elected); and (b) as
to the shareholder giving the notice, (i) the name and address, as they appear
on the Company's books, of such shareholder, and (ii) the class and number of
shares of capital stock of the Company which are beneficially owned by the
shareholder. In the event a person is validly designated as a nominee to the
Board and shall thereafter become unable or unwilling to stand for election to
the Board of Directors, the Board of Directors or the shareholder who proposed
such nominee, as the case may be, may designate a substitute nominee.
Notwithstanding the foregoing bylaw provisions, a shareholder 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 the foregoing
bylaw provisions.
OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for action at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting or any adjournment(s) or postponement(s)
thereof, it is intended that the enclosed proxy will be voted in accordance with
the judgment of the persons named in the proxy.
By Order of the Board of Directors,
/s/ Sylvia Sanchez
_____________________________________
Sylvia Sanchez
Secretary
March 31, 1995
22
<PAGE> 25
EXHIBIT A
SEAGULL ENERGY CORPORATION
1995 OMNIBUS STOCK PLAN
I. PURPOSE
The purpose of the SEAGULL ENERGY CORPORATION 1995 OMNIBUS STOCK PLAN (the
"PLAN") is to provide a means through which SEAGULL ENERGY CORPORATION, a Texas
corporation (the "COMPANY"), and its subsidiaries may attract able persons to
enter the employ of the Company and to provide a means whereby those key
employees upon whom the responsibilities of the successful administration and
management of the Company rest, and whose present and potential contributions to
the welfare of the Company are of importance, can acquire and maintain stock
ownership, thereby strengthening their concern for the welfare of the Company
and their desire to remain in its employ. A further purpose of the Plan is to
provide such key employees with additional incentive and reward opportunities
designed to enhance the profitable growth of the Company. Accordingly, the Plan
provides for granting Incentive Stock Options, options which do not constitute
Incentive Stock Options, Stock Appreciation Rights, Restricted Stock Awards,
Long-Term Incentive Awards, Phantom Stock Awards, or any combination of the
foregoing, as is best suited to the circumstances of the particular employee as
provided herein.
II. DEFINITIONS
The following definitions shall be applicable throughout the Plan unless
specifically modified by any paragraph:
(a) "Award" means, individually or collectively, any Option, Restricted
Stock Award, Phantom Stock Award, Long-Term Incentive Award or Stock
Appreciation Right.
(b) "Board" means the Board of Directors of the Company.
(c) "Change of Control" means the occurrence of any of the following
events: (i) the Company shall not be the surviving entity in any merger,
consolidation or other reorganization (or survives only as a subsidiary of an
entity other than a previously wholly-owned subsidiary of the Company), (ii) the
Company sells, leases or exchanges all or substantially all of its assets to any
other person or entity (other than a wholly-owned subsidiary of the Company),
(iii) the Company is to be dissolved and liquidated, (iv) any person or entity,
including a "GROUP" as contemplated by Section 13(d)(3) of the 1934 Act,
acquires or gains ownership or control (including, without limitation, power to
vote) of more than 40% of the outstanding shares of the Company's voting stock
(based upon voting power), or (v) as a result of or in connection with a
contested election of directors, the persons who were directors of the Company
before such election shall cease to constitute a majority of the Board.
(d) "Change of Control Value" shall mean (i) the per share price offered to
shareholders of the Company in any such merger, consolidation, reorganization,
sale of assets or dissolution transaction, (ii) the price per share offered to
shareholders of the Company in any tender offer or exchange offer whereby a
Change of Control takes place, or (iii) if such Change of Control occurs other
than pursuant to a tender or exchange offer, the Fair Market Value per share of
the shares into which Awards are exercisable, as determined by the Committee. In
the event that the consideration offered to shareholders of the Company consists
of anything other than cash, the Committee shall determine the fair cash
equivalent of the portion of the consideration offered which is other than cash.
(e) "Code" means the Internal Revenue Code of 1986, as amended. Reference
in the Plan to any section of the Code shall be deemed to include any amendments
or successor provisions to any section and any regulations under such section.
A-1
<PAGE> 26
(f) "Committee" means the Compensation Committee of the Board which shall
be (i) constituted so as to permit the Plan to comply with Rule 16b-3 and (ii)
constituted solely of "outside directors," within the meaning of section 162(m)
of the Code and applicable interpretive authority thereunder.
(g) "Company" means Seagull Energy Corporation.
(h) "Director" means an individual elected to the Board by the shareholders
of the Company or by the Board under applicable corporate law who is serving on
the Board on the date the Plan is adopted by the Board or is elected to the
Board after such date.
(i) An "employee" means any person (including an officer or a Director) in
an employment relationship with the Company or any parent or subsidiary
corporation (as defined in section 424 of the Code).
(j) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(k) "Fair Market Value" means, as of any specified date, the reported
closing price of the Stock on the New York Stock Exchange Composite Tape on that
date, or if no closing price is reported on that date, on the last preceding
date on which such closing price of the Stock is so reported. In the event Stock
is not publicly traded at the time a determination of its value is required to
be made hereunder, the determination of its fair market value shall be made by
the Committee in such manner as it deems appropriate.
(l) "Holder" means an employee who has been granted an Award.
(m) "Incentive Stock Option" means an incentive stock option within the
meaning of section 422(b) of the Code.
(n) "Long-Term Incentive Award" means an Award granted under Paragraph X of
the Plan.
(o) "Long-Term Incentive Award Agreement" means a written agreement between
the Company and a Holder with respect to a Long-Term Incentive Award.
(p) "Option" means an Award granted under Paragraph VII of the Plan and
includes both Incentive Stock Options to purchase Stock and Options which do not
constitute Incentive Stock Options to purchase Stock.
(q) "Option Agreement" means a written agreement between the Company and a
Holder with respect to an Option.
(r) "Phantom Stock Award" means an Award granted under Paragraph XI of the
Plan.
(s) "Phantom Stock Award Agreement" means a written agreement between the
Company and a Holder with respect to a Phantom Stock Award.
(t) "Plan" means the Seagull Energy Corporation 1995 Omnibus Stock Plan, as
amended from time to time.
(u) "Restricted Stock Agreement" means a written agreement between the
Company and a Holder with respect to a Restricted Stock Award.
(v) "Restricted Stock Award" means an Award granted under Paragraph IX of
the Plan.
(w) "Rule 16b-3" means SEC Rule 16b-3 promulgated under the 1934 Act, as
such may be amended from time to time, and any successor rule, regulation or
statute fulfilling the same or a similar function.
(x) "Spread" means, in the case of a Stock Appreciation Right, an amount
equal to the excess, if any, of the Fair Market Value of a share of Stock on the
date such right is exercised over the exercise price of such Stock Appreciation
Right.
(y) "Stock" means the common stock of the Company.
(z) "Stock Appreciation Right" means an Award granted under Paragraph VIII
of the Plan.
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(aa) "Stock Appreciation Rights Agreement" means a written agreement
between the Company and a Holder with respect to an Award of Stock Appreciation
Rights.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective upon the date of its adoption by the Board,
provided the Plan is approved by the shareholders of the Company within twelve
months thereafter and on or prior to the date of the first annual meeting of
shareholders of the Company held subsequent to the acquisition of an equity
security by a Holder hereunder for which exemption is claimed under Rule 16b-3.
No further Awards may be granted under the Plan after the expiration of ten
years from the date of its adoption by the Board. The Plan shall remain in
effect until all Awards granted under the Plan have been satisfied or expired.
IV. ADMINISTRATION
(a) Committee. The Plan shall be administered by the Committee.
(b) Powers. Subject to the provisions of the Plan, the Committee shall
have sole authority, in its discretion, to determine which employees shall
receive an Award, the time or times when such Award shall be made, whether an
Incentive Stock Option, nonqualified Option or Stock Appreciation Right shall be
granted, the number of shares of Stock which may be issued under each Option,
Stock Appreciation Right or Restricted Stock Award, and the value of each
Long-Term Incentive Award and Phantom Stock Award. In making such determinations
the Committee may take into account the nature of the services rendered by the
respective employees, their present and potential contribution to the Company's
success and such other factors as the Committee in its discretion shall deem
relevant.
(c) Additional Powers. The Committee shall have such additional powers as
are delegated to it by the other provisions of the Plan. Subject to the express
provisions of the Plan, the Committee is authorized to construe the Plan and the
respective agreements executed thereunder, to prescribe such rules and
regulations relating to the Plan as it may deem advisable to carry out the Plan,
and to determine the terms, restrictions and provisions of each Award, including
such terms, restrictions and provisions as shall be requisite in the judgment of
the Committee to cause designated Options to qualify as Incentive Stock Options,
and to make all other determinations necessary or advisable for administering
the Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in any agreement relating to an Award in the manner
and to the extent it shall deem expedient to carry it into effect. The
determinations of the Committee on the matters referred to in this Article IV
shall be conclusive.
V. GRANT OF OPTIONS, STOCK APPRECIATION RIGHTS,
RESTRICTED STOCK AWARDS,
LONG-TERM INCENTIVE AWARDS
AND PHANTOM STOCK AWARDS;
SHARES SUBJECT TO THE PLAN
(a) Stock Grant and Award Limits. The Committee may from time to time
grant Awards to one or more employees determined by it to be eligible for
participation in the Plan in accordance with the provisions of Paragraph VI.
Subject to Paragraph XII, the aggregate number of shares of Stock that may be
issued under the Plan shall not exceed 1,200,000 shares. Shares shall be deemed
to have been issued under the Plan only (i) to the extent actually issued and
delivered pursuant to an Award, or (ii) to the extent an Award granted under
Paragraph VII, VIII, IX or XI is settled in cash. To the extent that an Award
lapses or the rights of its Holder terminate, any shares of Stock subject to
such Award shall again be available for the grant of an Award. Separate stock
certificates shall be issued by the Company for those shares acquired pursuant
to the exercise of an Incentive Stock Option and for those shares acquired
pursuant to the exercise of any Option which does not constitute an Incentive
Stock Option. Notwithstanding any provision in the Plan to the contrary, the
maximum number of shares of Stock that may be subject to Awards granted to any
one employee during any calendar year is 250,000 shares of Stock (subject to
adjustment in the same manner as
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provided in Paragraph XII with respect to shares of Stock subject to Awards then
outstanding). The limitation set forth in the preceding sentence shall be
applied in a manner which will permit compensation generated in connection with
the exercise of Options and Stock Appreciation Rights and, if determined by the
Committee, Restricted Stock Awards to constitute "performance-based"
compensation for purposes of section 162(m) of the Code, including, without
limitation, counting against such maximum number of shares, to the extent
required under section 162(m) of the Code and applicable interpretive authority
thereunder, any shares subject to Options, Stock Appreciation Rights and, if
applicable, Restricted Stock Awards, that are cancelled or repriced. Further,
notwithstanding any provision of the Plan to the contrary, the maximum number of
shares of Stock that may be granted as Restricted Stock Awards under Paragraph
IX during the term of the Plan is 200,000 shares of Stock (subject to adjustment
in the same manner as provided in Paragraph XII with respect to shares of Stock
subject to Awards then outstanding).
(b) Stock Offered. The stock to be offered pursuant to the grant of an
Award may be authorized but unissued Stock or Stock previously issued and
outstanding and reacquired by the Company.
VI. ELIGIBILITY
Awards may be granted only to persons who, at the time of grant, are key
employees. Awards may not be granted to any Director who is not an employee. An
Award may be granted on more than one occasion to the same person, and, subject
to the limitations set forth in the Plan, such Award may include an Incentive
Stock Option or an Option which is not an Incentive Stock Option, a Stock
Appreciation Right, a Restricted Stock Award, a Long-Term Incentive Award, a
Phantom Stock Award or any combination thereof.
VII. STOCK OPTIONS
(a) Option Period. The term of each Option shall be as specified by the
Committee at the date of grant.
(b) Limitations on Exercise of Option. An Option shall be exercisable in
whole or in such installments and at such times as determined by the Committee.
(c) Special Limitations on Incentive Stock Options. To the extent that the
aggregate Fair Market Value (determined at the time the respective Incentive
Stock Option is granted) of Stock with respect to which Incentive Stock Options
granted after 1986 are exercisable for the first time by an individual during
any calendar year under all incentive stock option plans of the Company and its
parent and subsidiary corporations exceeds $100,000, such Incentive Stock
Options shall be treated as options which do not constitute Incentive Stock
Options. The Committee shall determine, in accordance with applicable provisions
of the Code, Treasury Regulations and other administrative pronouncements, which
of an optionee's Incentive Stock Options will not constitute Incentive Stock
Options because of such limitation and shall notify the optionee of such
determination as soon as practicable after such determination. No Incentive
Stock Option shall be granted to an individual if, at the time the Option is
granted, such individual owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of its parent or
subsidiary corporation, within the meaning of section 422(b)(6) of the Code,
unless (i) at the time such Option is granted the option price is at least 110%
of the Fair Market Value of the Stock subject to the Option and (ii) such Option
by its terms is not exercisable after the expiration of five years from the date
of grant.
(d) Option Agreement. Each Option shall be evidenced by an Option
Agreement in such form and containing such provisions not inconsistent with the
provisions of the Plan as the Committee from time to time shall approve,
including, without limitation, provisions to qualify an Incentive Stock Option
under section 422 of the Code. An Option Agreement may provide for the payment
of the option price, in whole or in part, by the delivery of a number of shares
of Stock (plus cash if necessary) having a Fair Market Value equal to such
option price. Each Option Agreement shall provide that the Option may not be
exercised earlier than six months from the date of grant and shall specify the
effect of termination of employment on the exercisability of the Option.
Moreover, an Option Agreement may provide for a "cashless exercise" of the
Option by establishing procedures whereby the Holder, by a properly-executed
written notice, directs (i) an immediate
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market sale or margin loan respecting all or a part of the shares of Stock to
which he is entitled upon exercise pursuant to an extension of credit by the
Company to the Holder of the option price, (ii) the delivery of the shares of
Stock from the Company directly to a brokerage firm and (iii) the delivery of
the option price from sale or margin loan proceeds from the brokerage firm
directly to the Company. Such Option Agreement may also include, without
limitation, provisions relating to (i) subject to the provisions hereof
accelerating such vesting on a Change of Control, vesting of Options, (ii) tax
matters (including provisions (y) permitting the delivery of additional shares
of Stock or the withholding of shares of Stock from those acquired upon exercise
to satisfy federal or state income tax withholding requirements and (z) dealing
with any other applicable employee wage withholding requirements), and (iii) any
other matters not inconsistent with the terms and provisions of this Plan that
the Committee shall in its sole discretion determine. The terms and conditions
of the respective Option Agreements need not be identical.
(e) Option Price and Payment. The price at which a share of Stock may be
purchased upon exercise of an Option shall be determined by the Committee, but
such purchase price (i) shall not be less than the Fair Market Value of a share
of Stock on the date such Option is granted, and (ii) shall be subject to
adjustment as provided in Paragraph XII. The Option or portion thereof may be
exercised by delivery of an irrevocable notice of exercise to the Company. The
purchase price of the Option or portion thereof shall be paid in full in the
manner prescribed by the Committee.
(f) Shareholder Rights and Privileges. The Holder shall be entitled to all
the privileges and rights of a shareholder only with respect to such shares of
Stock as have been purchased under the Option and for which certificates of
stock have been registered in the Holder's name.
(g) Options and Rights in Substitution for Stock Options Granted by Other
Corporations. Options and Stock Appreciation Rights may be granted under the
Plan from time to time in substitution for stock options held by individuals
employed by corporations who become employees as a result of a merger or
consolidation of the employing corporation with the Company or any subsidiary,
or the acquisition by the Company or a subsidiary of the assets of the employing
corporation, or the acquisition by the Company or a subsidiary of stock of the
employing corporation with the result that such employing corporation becomes a
subsidiary.
VIII. STOCK APPRECIATION RIGHTS
(a) Stock Appreciation Rights. A Stock Appreciation Right is the right to
receive an amount equal to the Spread with respect to a share of Stock upon the
exercise of such Stock Appreciation Right. Stock Appreciation Rights may be
granted in connection with the grant of an Option, in which case the Option
Agreement will provide that exercise of Stock Appreciation Rights will result in
the surrender of the right to purchase the shares under the Option as to which
the Stock Appreciation Rights were exercised. Alternatively, Stock Appreciation
Rights may be granted independently of Options in which case each Award of Stock
Appreciation Rights shall be evidenced by a Stock Appreciation Rights Agreement
which shall contain such terms and conditions as may be approved by the
Committee. The terms and conditions of the respective Stock Appreciation Rights
Agreements need not be identical. The Spread with respect to a Stock
Appreciation Right may be payable either in cash, shares of Stock with a Fair
Market Value equal to the Spread or in a combination of cash and shares of
Stock. With respect to Stock Appreciation Rights that are subject to Section 16
of the 1934 Act, however, the Committee shall, except as provided in Paragraph
XII(c), retain sole discretion (i) to determine the form in which payment of the
Stock Appreciation Right will be made (i.e., cash, securities or any combination
thereof) or (ii) to approve an election by a Holder to receive cash in full or
partial settlement of Stock Appreciation Rights. Each Stock Appreciation Rights
Agreement shall provide that the Stock Appreciation Rights may not be exercised
earlier than six months from the date of grant and shall specify the effect of
termination of employment on the exercisability of the Stock Appreciation
Rights.
(b) Exercise Price. The exercise price of each Stock Appreciation Right
shall be determined by the Committee, but such exercise price (i) shall not be
less than the Fair Market Value of a share of Stock on the date the Stock
Appreciation Right is granted (or such greater exercise price as may be required
if such Stock Appreciation Right is granted in connection with an Incentive
Stock Option that must have an exercise price
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equal to 110% of the Fair Market Value of the Stock on the date of grant
pursuant to Paragraph VII(c)), and (ii) shall be subject to adjustment as
provided in Paragraph XII.
(c) Exercise Period. The term of each Stock Appreciation Right shall be as
specified by the Committee at the date of grant.
(d) Limitations on Exercise of Stock Appreciation Right. A Stock
Appreciation Right shall be exercisable in whole or in such installments and at
such times as determined by the Committee.
IX. RESTRICTED STOCK AWARDS
(a) Forfeiture Restrictions To Be Established by the Committee. Shares of
Stock that are the subject of a Restricted Stock Award shall be subject to
restrictions on disposition by the Holder and an obligation of the Holder to
forfeit and surrender the shares to the Company under certain circumstances (the
"Forfeiture Restrictions"). The Forfeiture Restrictions shall be determined by
the Committee in its sole discretion, and the Committee may provide that the
Forfeiture Restrictions shall lapse upon (i) the attainment of targets
established by the Committee that are based on (1) the price of a share of
Stock, (2) the Company's earnings per share, (4) the Company's revenue, (6) the
revenue of a business unit of the Company designated by the Committee, (7) the
return on stockholders' equity achieved by the Company, or (8) the Company's
pre-tax cash flow from operations (ii) the Holder's continued employment with
the Company for a specified period of time, or (iii) a combination of any two or
more of the factors listed in clauses (i) and (ii) of this sentence. Each
Restricted Stock Award may have different Forfeiture Restrictions, in the
discretion of the Committee. The Forfeiture Restrictions applicable to a
particular Restricted Stock Award shall not be changed except as permitted by
Paragraph IX(b) or Paragraph XII.
(b) Other Terms and Conditions. Stock awarded pursuant to a Restricted
Stock Award shall be represented by a stock certificate registered in the name
of the Holder of such Restricted Stock Award. The Holder shall have the right to
receive dividends with respect to Stock subject to a Restricted Stock Award, to
vote Stock subject thereto and to enjoy all other shareholder rights, except
that (i) the Holder shall not be entitled to delivery of the stock certificate
until the Forfeiture Restrictions shall have expired, (ii) the Company shall
retain custody of the Stock until the Forfeiture Restrictions shall have
expired, (iii) the Holder may not sell, transfer, pledge, exchange, hypothecate
or otherwise dispose of the Stock until the Forfeiture Restrictions shall have
expired, and (iv) a breach of the terms and conditions established by the
Committee pursuant to the Restricted Stock Agreement, shall cause a forfeiture
of the Restricted Stock Award. At the time of such Award, the Committee may, in
its sole discretion, prescribe additional terms, conditions or restrictions
relating to Restricted Stock Awards, including, but not limited to, rules
pertaining to the termination of employment (by retirement, disability, death or
otherwise) of a Holder prior to expiration of the Forfeiture Restrictions. Such
additional terms, conditions or restrictions shall be set forth in a Restricted
Stock Agreement made in conjunction with the Award. Such Restricted Stock
Agreement may also include, without limitation, provisions relating to (i)
subject to the provisions hereof accelerating vesting on a Change of Control,
vesting of Awards, (ii) tax matters (including provisions (y) covering any
applicable employee wage withholding requirements and (z) prohibiting an
election by the Holder under section 83(b) of the Code), and (iii) any other
matters not inconsistent with the terms and provisions of this Plan that the
Committee shall in its sole discretion determine. The terms and conditions of
the respective Restricted Stock Agreements need not be identical.
(c) Payment for Restricted Stock. The Committee shall determine the amount
and form of any payment for Stock received pursuant to a Restricted Stock Award,
provided that in the absence of such a determination, a Holder shall not be
required to make any payment for Stock received pursuant to a Restricted Stock
Award, except to the extent otherwise required by law.
(d) Agreements. At the time any Award is made under this Paragraph IX, the
Company and the Holder shall enter into a Restricted Stock Agreement setting
forth each of the matters contemplated hereby and such other matters as the
Committee may determine to be appropriate. The terms and provisions of the
respective Restricted Stock Agreements need not be identical.
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X. LONG-TERM INCENTIVE AWARDS
(a) Performance Period. The Committee shall establish, with respect to and
at the time of each Long-Term Incentive Award, a performance period over which
the performance of the Holder shall be measured.
(b) Long-Term Incentive Awards. Each Long-Term Incentive Award shall have
a maximum value established by the Committee at the time of such Award.
(c) Performance Measures. A Long-Term Incentive Award shall be awarded to
an employee contingent upon future performance of the employee, the Company or
any subsidiary, division or department thereof by or in which is he employed
during the performance period. The Committee shall establish the performance
measures applicable to such performance prior to the beginning of the
performance period but subject to such later revisions as the Committee shall
deem appropriate to reflect significant, unforeseen events or changes.
(d) Awards Criteria. In determining the value of Long-Term Incentive
Awards, the Committee shall take into account an employee's responsibility
level, performance, potential, other Awards and such other considerations as it
deems appropriate.
(e) Payment. Following the end of the performance period, the Holder of a
Long-Term Incentive Award shall be entitled to receive payment of an amount, not
exceeding the maximum value of the Long-Term Incentive Award, based on the
achievement of the performance measures for such performance period, as
determined by the Committee. Payment of a Long-Term Incentive Award may be made
in cash, Stock or a combination thereof, as determined by the Committee. Payment
shall be made in a lump sum or in installments as prescribed by the Committee.
Any payment to be made in Stock shall be based on the Fair Market Value of the
Stock on the payment date. If a payment of cash is to be made on a deferred
basis, the Committee shall establish whether interest shall be credited, the
rate thereof and any other terms and conditions applicable thereto.
(f) Termination of Employment. A Long-Term Incentive Award shall terminate
if the Holder does not remain continuously in the employ of the Company at all
times during the applicable performance period, except as may be determined by
the Committee or as may otherwise be provided in the Award at the time granted.
(g) Agreements. At the time any Award is made under this Paragraph X, the
Company and the Holder shall enter into a Long-Term Incentive Award Agreement
setting forth each of the matters contemplated hereby, and, in addition such
matters as are set forth in Paragraph IX(b) as the Committee may determine to be
appropriate. The terms and provisions of the respective agreements need not be
identical.
XI. PHANTOM STOCK AWARDS
(a) Phantom Stock Awards. Phantom Stock Awards are rights to receive
shares of Stock (or cash in an amount equal to the Fair Market Value thereof),
or rights to receive an amount equal to any appreciation in the Fair Market
Value of Stock (or portion thereof) over a specified period of time, which vest
over a period of time or upon the occurrence of an event (including without
limitation a Change of Control) as established by the Committee, without payment
of any amounts by the Holder thereof (except to the extent otherwise required by
law) or satisfaction of any performance criteria or objectives. Each Phantom
Stock Award shall have a maximum value established by the Committee at the time
of such Award.
(b) Award Period. The Committee shall establish, with respect to and at
the time of each Phantom Stock Award, a period over which or the event upon
which the Award shall vest with respect to the Holder.
(c) Awards Criteria. In determining the value of Phantom Stock Awards, the
Committee shall take into account an employee's responsibility level,
performance, potential, other Awards and such other considerations as it deems
appropriate.
(d) Payment. Following the end of the vesting period for a Phantom Stock
Award, the Holder of a Phantom Stock Award shall be entitled to receive payment
of an amount, not exceeding the maximum value of the Phantom Stock Award, based
on the then vested value of the Award. Payment of a Phantom Stock
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Award may be made in cash, Stock or a combination thereof as determine by the
Committee. Payment shall be made in a lump sum or in installments as prescribed
by the Committee in its sole discretion. Any payment to be made in Stock shall
be based on the Fair Market Value of the Stock on the payment date. Cash
dividend equivalents may be paid during or after the vesting period with respect
to a Phantom Stock Award, as determined by the Committee. If a payment of cash
is to be made on a deferred basis, the Committee shall establish whether
interest shall be credited, the rate thereof and any other terms and conditions
applicable thereto.
(e) Termination of Employment. A Phantom Stock Award shall terminate if
the Holder does not remain continuously in the employ of the Company at all
times during the applicable vesting period, except as may be otherwise
determined by the Committee or as set forth in the Award at the time of grant.
(f) Agreements. At the time any Award is made under this Paragraph XI, the
Company and the Holder shall enter into a Phantom Stock Award Agreement setting
forth each of the matters contemplated hereby and, in addition such matters as
are set forth in Paragraph IX(b) as the Committee may determine to be
appropriate. The terms and provisions of the respective agreements need not be
identical.
XII. RECAPITALIZATION OR REORGANIZATION
(a) The shares with respect to which Awards may be granted are shares of
Stock as presently constituted, but if, and whenever, prior to the expiration of
an Award theretofore granted, the Company shall effect a subdivision or
consolidation of shares of Stock or the payment of a stock dividend on Stock
without receipt of consideration by the Company, the number of shares of Stock
with respect to which such Award may thereafter be exercised or satisfied, as
applicable, (i) in the event of an increase in the number of outstanding shares
shall be proportionately increased, and the purchase price per share shall be
proportionately reduced, and (ii) in the event of a reduction in the number of
outstanding shares shall be proportionately reduced, and the purchase price per
share shall be proportionately increased.
(b) If the Company recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise or satisfaction, as applicable, of an
Award theretofore granted the Holder shall be entitled to (or entitled to
purchase, if applicable) under such Award, in lieu of the number of shares of
Stock then covered by such Award, the number and class of shares of stock and
securities to which the Holder would have been entitled pursuant to the terms of
the recapitalization if, immediately prior to such recapitalization, the Holder
had been the holder of record of the number of shares of Stock then covered by
such Award.
(c) In the event of a Change of Control, outstanding Awards other than
Options shall immediately vest and become exercisable or satisfiable, as
applicable. The Committee, in its discretion, may determine that upon the
occurrence of a Change of Control, each Award other than an Option outstanding
hereunder shall terminate within a specified number of days after notice to the
Holder, and such Holder shall receive, with respect to each share of Stock
subject to such Award, cash in an amount equal to the excess, if any, of the
Change of Control Value. Further, in the event of a Change of Control, the
Committee, in its discretion shall act to effect one or more of the following
alternatives with respect to outstanding Options, which may vary among
individual Holders and which may vary among Options held by any individual
Holder: (1) accelerate the time at which Options then outstanding may be
exercised so that such Options may be exercised in full for a limited period of
time on or before a specified date (before or after such Change of Control)
fixed by the Committee, after which specified date all unexercised Options and
all rights of Holders thereunder shall terminate, (2) require the mandatory
surrender to the Company by selected Holders of some or all of the outstanding
Options held by such Holders (irrespective of whether such Options are then
exercisable under the provisions of the Plan) as of a date, before or after such
Change of Control, specified by the Committee, in which event the Committee
shall thereupon cancel such Options and the Company shall pay to each Holder an
amount of cash per share equal to the excess, if any, of the Change of Control
Value of the shares subject to such Option over the exercise price(s) under such
Options for such shares, (3) make such adjustments to Options then outstanding
as the Committee deems appropriate to reflect such Change of Control (provided,
however, that the Committee may determine in its sole discretion that no
adjustment is necessary to Options then outstanding) or (4) provide that
thereafter upon any exercise of an Option theretofore granted the
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Holder shall be entitled to purchase under such Option, in lieu of the number of
shares of Stock then covered by such Option the number and class of shares of
stock or other securities or property (including, without limitation, cash) to
which the Holder would have been entitled pursuant to the terms of the agreement
of merger, consolidation or sale of assets and dissolution if, immediately prior
to such merger, consolidation or sale of assets and dissolution the Holder had
been the holder of record of the number of shares of Stock then covered by such
Option. The provisions contained in this paragraph shall be inapplicable to an
Award granted within six (6) months before the occurrence of a Change of Control
if the Holder of such Award is subject to the reporting requirements of Section
16(a) of the 1934 Act. The provisions contained in this paragraph shall not
terminate any rights of the Holder to further payments pursuant to any other
agreement with the Company following a Change of Control.
(d) In the event of changes in the outstanding Stock by reason of
recapitalization, reorganizations, mergers, consolidations, combinations,
exchanges or other relevant changes in capitalization occurring after the date
of the grant of any Award and not otherwise provided for by this Paragraph XII,
any outstanding Awards and any agreements evidencing such Awards shall be
subject to adjustment by the Committee at its discretion as to the number and
price of shares of Stock or other consideration subject to such Awards. In the
event of any such change in the outstanding Stock, the aggregate number of
shares available under the Plan may be appropriately adjusted by the Committee,
whose determination shall be conclusive.
(e) The existence of the Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Board or the shareholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities ahead of or
affecting Stock or the rights thereof, the dissolution or liquidation of the
Company or any sale, lease, exchange or other disposition of all or any part of
its assets or business or any other corporate act of proceeding.
(f) Any adjustment provided for in Subparagraphs (a), (b), (c) or (d) above
shall be subject to any required shareholder action.
(g) Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares of obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Stock subject to Awards theretofore granted or the purchase price per
share, if applicable.
XIII. AMENDMENT AND TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with respect
to any shares for which Awards have not theretofore been granted. The Board
shall have the right to alter or amend the Plan or any part thereof from time to
time; provided that no change in any Award theretofore granted may be made which
would impair the rights of the Holder without the consent of the Holder (unless
such change is required in order to cause the benefits under the Plan to qualify
as performance-based compensation within the meaning of section 162(m) of the
Code and applicable interpretive authority thereunder), and provided, further,
that the Board may not, without approval of the shareholders, amend the Plan:
(a) to increase the maximum number of shares which may be issued on
exercise or surrender of an Award, except as provided in Paragraph XII;
(b) to change the Option price;
(c) to change the class of employees eligible to receive Awards or
materially increase the benefits accruing to employees under the Plan;
(d) to extend the maximum period during which Awards may be granted
under the Plan;
(e) to modify materially the requirements as to eligibility for
participation in the Plan; or
(f) to decrease any authority granted to the Committee hereunder in
contravention of Rule 16b-3.
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XIV. MISCELLANEOUS
(a) No Right To An Award. Neither the adoption of the Plan by the Company
nor any action of the Board or the Committee shall be deemed to give an employee
any right to be granted an Award to purchase Stock, a right to a Stock
Appreciation Right, a Restricted Stock Award, a Long-Term Incentive Award or a
Phantom Stock Award or any of the rights hereunder except as may be evidenced by
an Award or by an Option Agreement, Stock Appreciation Rights Agreement,
Restricted Stock Agreement, Long-Term Incentive Award Agreement or Phantom Stock
Award Agreement duly executed on behalf of the Company, and then only to the
extent and on the terms and conditions expressly set forth therein. The Plan
shall be unfunded. The Company shall not be required to establish any special or
separate fund or to make any other segregation of funds or assets to assure the
payment of any Award.
(b) No Employment Rights Conferred. Nothing contained in the Plan shall
(i) confer upon any employee any right with respect to continuation of
employment with the Company or any subsidiary or (ii) interfere in any way with
the right of the Company or any subsidiary to terminate his or her employment at
any time.
(c) Other Laws; Withholding. The Company shall not be obligated to issue
any Stock pursuant to any Award granted under the Plan at any time when the
shares covered by such Award have not been registered under the Securities Act
of 1933 and such other state and federal laws, rules or regulations as the
Company or the Committee deems applicable and, in the opinion of legal counsel
for the Company, there is no exemption from the registration requirements of
such laws, rules or regulations available for the issuance and sale of such
shares. No fractional shares of Stock shall be delivered, nor shall any cash in
lieu of fractional shares be paid. The Company shall have the right to deduct in
connection with all Awards any taxes required by law to be withheld and to
require any payments required to enable it to satisfy its withholding
obligations.
(d) No Restriction on Corporate Action. Nothing contained in the Plan
shall be construed to prevent the Company or any subsidiary from taking any
corporate action which is deemed by the Company or such subsidiary to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any Award made under the Plan. No employee,
beneficiary or other person shall have any claim against the Company or any
subsidiary as a result of any such action.
(e) Restrictions on Transfer. An Award shall not be transferable otherwise
than by will or the laws of descent and distribution or pursuant to a "qualified
domestic relations order" as defined by the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder, and
shall be exercisable during the Holder's lifetime only by such Holder or the
Holder's guardian or legal representative.
(f) Rule 16b-3. It is intended that the Plan and any grant of an Award
made to a person subject to Section 16 of the 1934 Act meet all of the
requirements of Rule 16b-3. If any provision of the Plan or any such Award would
disqualify the Plan or such Award under, or would otherwise not comply with,
Rule 16b-3, such provision or Award shall be construed or deemed amended to
conform to Rule 16b-3.
(g) Section 162(m). It is intended that the Plan comply fully with and
meet all the requirements of Section 162(m) of the Code so that Options and
Stock Appreciation Rights granted hereunder and, if determined by the Committee,
Restricted Stock Awards, shall constitute "performance-based" compensation
within the meaning of such section. If any provision of the Plan would
disqualify the Plan or would not otherwise permit the Plan to comply with
Section 162(m) as so intended, such provision shall be construed or deemed
amended to conform to the requirements or provisions of Section 162(m); provided
that no such construction or amendment shall have an adverse effect on the
economic value to a Holder of any Award previously granted hereunder.
(h) Governing Law. This Plan shall be construed in accordance with the
laws of the State of Texas.
A-10
<PAGE> 35
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PROXY
SEAGULL ENERGY CORPORATION
ANNUAL MEETING OF SHAREHOLDERS -- MAY 15, 1995
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Barry J. Galt and Robert W.
Shower as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and to vote as designated
below, all the shares of Common Stock of Seagull Energy Corporation
(the "Company"), held of record by the undersigned on March 20, 1995,
at the Annual Meeting of Shareholders to be held May 15, 1995, or any
adjournment(s) or postponement(s) thereof.
The undersigned hereby revokes any proxy to vote said shares
heretofore given. THE UNDERSIGNED ACKNOWLEDGES THAT THIS PROXY WHEN
PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER AND THAT IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND IN FAVOR OF
PROPOSALS 2 AND 3.
Please sign exactly as name appears hereon. When shares are held
by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign
in partnership name by authorized person.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
-----------
SEE REVERSE
SIDE
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<PAGE> 36
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I plan to attend the meeting (Please check if yes) / /
This proxy may be revoked at any time prior to the voting of the
proxy by the execution and submission of a revised proxy, by written
notice to the Secretary of the Company or by voting in person at the
meeting.
1. Election of four directors to serve until the 1998 Annual Meeting
of Shareholders: Class III -- J. Evans Attwell, William R. Grant,
Richard M. Morrow and Dee S. Osborne.
/ / For / / Withhold Authority / / -----------------------------
For all nominees except
as noted above
2. Proposal to approve the Seagull Energy Corporation 1995 Omnibus
Stock Plan.
For / / Against / / Abstain / /
3. Proposal to ratify the appointment by the Board of Directors of
the firm of KPMG Peat Marwick as independent public auditors of
the Company for the fiscal year ending December 31, 1995.
For / / Against / / Abstain / /
4. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting, or any
adjournment(s) thereof.
/ / Mark here for address change and note below
If you receive more than one proxy card, please sign and
return all cards in the accompanying envelope.
Signature: _________________________ Date:____________, 1995
Signature: _________________________ Date:____________, 1995
(If held jointly)
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