<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 9, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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SEAGULL ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
TEXAS 4923 74-1764876
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
WILLIAM L. TRANSIER
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
1001 FANNIN SEAGULL ENERGY CORPORATION
SUITE 1700 1001 FANNIN, SUITE 1700
HOUSTON, TEXAS 77002-6714 HOUSTON, TEXAS 77002-6714
(713) 951-4700 (713) 951-4700
(Address, including zip code, and telephone (Name, address, including zip code, and
number, including area code, of telephone number, including area
registrant's principal executive offices) code, of agent for service)
</TABLE>
Copies to:
<TABLE>
<S> <C>
J. MARK METTS JON M. JENKINS
VINSON & ELKINS L.L.P. PILIERO GOLDSTEIN JENKINS & HALL, L.L.P.
1001 FANNIN, SUITE 2300 292 MADISON AVENUE
HOUSTON, TEXAS 77002-6760 NEW YORK, NEW YORK 10017-6307
(713) 758-2222 (212) 213-8200
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable following the effectiveness of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM OFFERING AGGREGATE
SECURITIES TO BE TO BE PRICE PER OFFERING AMOUNT OF
REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.10 per
share(3)...................... 27,573,709 17.9375 494,603,405 170,553
==================================================================================================
</TABLE>
(1) Consists of the following numbers of shares of Common Stock of the
Registrant ("Seagull Common Stock") that may be issued in connection with
the acquisition by merger of Global Natural Resources Inc. ("Global"): (a)
up to 26,194,520 through conversion of shares of Common Stock of Global
("Global Common Stock") currently outstanding, (b) up to 1,377,068 through
conversion of shares of Global Common Stock issued prior to the Effective
Time upon exercise of Global Options and (c) up to 2,121 through conversion
of shares of Global Common Stock that may be issued pursuant to Global's
401(k) employee savings plan.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c), based on the average of the low
and high sales prices of Global Common Stock on the New York Stock Exchange
on August 6, 1996 of $17.9375 and the maximum Common Stock Exchange Ratio of
0.88 shares of Seagull Common Stock for each share of Global Common Stock.
(3) This Registration Statement also pertains to rights to purchase shares of
Series B Junior Participating Preferred Stock of the Registrant. One right
is attached to and trades with each share of Seagull Common Stock. Until the
occurrence of certain events, the rights are not exercisable and will not be
evidenced or transferred apart from the Seagull Common Stock. Any value
attributable to such rights is reflected in the market price of the Seagull
Common Stock.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
[LETTERHEAD OF GLOBAL NATURAL RESOURCES INC.]
, 1996
Dear Shareholders:
You are cordially invited to attend a Special Meeting of Shareholders (the
"Global Special Meeting") of Global Natural Resources Inc. ("Global") to be held
at a.m., Houston time, on , 1996 at the , Houston,
Texas.
At the Global Special Meeting, you will be asked to consider and vote upon
the approval and adoption of an Agreement and Plan of Merger (the "Merger
Agreement") providing for the merger of GNR Merger Corporation, a wholly owned
subsidiary of Seagull Energy Corporation ("Seagull"), with and into Global (the
"Merger"). Pursuant to the terms of the Merger Agreement, each outstanding share
of Global Common Stock will be converted into a number of shares of Seagull
Common Stock based upon an exchange ratio ranging from .88 to .72 shares
(depending upon the average price of Seagull Common Stock during a period
specified in the Merger Agreement).
The proposed Merger is subject to a number of conditions, including
obtaining the approval of the shareholders of Global with respect to the Merger
Agreement, the approval of the issuance of Seagull Common Stock in the Merger by
the shareholders of Seagull and regulatory approvals. The Board of Directors of
Global has approved the Merger Agreement and the transactions contemplated
thereby. A summary of the basic terms and conditions of the proposed Merger,
certain financial and other information relating to the Merger and a copy of the
Merger Agreement are set forth in the Joint Proxy Statement/Prospectus. Please
review and consider the enclosed materials carefully.
THE BOARD OF DIRECTORS AND MANAGEMENT OF GLOBAL BELIEVE THAT THE PROPOSED
MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, GLOBAL'S SHAREHOLDERS AND
UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR ITS APPROVAL.
In making that recommendation, the Board of Directors of Global received
and took into account the opinion dated July 21, 1996 of Petrie Parkman & Co.,
Inc. ("Petrie Parkman"), an investment banking firm retained by Global for that
purpose, that, as of such date, the consideration to be received by shareholders
of Global in the Merger was fair to the shareholders of Global from a financial
point of view. Petrie Parkman subsequently delivered its written opinion dated
the date of the accompanying Joint Proxy Statement/Prospectus that, as of such
date, the consideration to be received by shareholders of Global in the Merger
was fair to the shareholders of Global from a financial point of view. A copy of
the Petrie Parkman opinion is included in the accompanying Joint Proxy
Statement/Prospectus as Appendix C thereto.
Your vote is very important. The affirmative vote of the holders of a
majority of the votes cast is required to approve and adopt the Merger
Agreement. Accordingly, we urge you to complete, sign, date and return the
enclosed proxy immediately, whether or not you plan to attend the Global Special
Meeting. You may, of course, attend the Global Special Meeting and vote in
person even if you have returned a proxy.
Very truly yours,
Robert F. Vagt
Chairman of the Board, President and
Chief Executive Officer
<PAGE> 3
GLOBAL NATURAL RESOURCES INC.
5300 MEMORIAL, SUITE 800
HOUSTON, TEXAS 77007
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Global Natural Resources Inc.:
Notice is hereby given that a special meeting (the "Global Special
Meeting") of the shareholders of Global Natural Resources Inc. ("Global") will
be held on , , 1996, at the , Houston,
Texas, at a.m., Houston time, to consider and act upon the following
matters that are described in more detail in the accompanying Joint Proxy
Statement/Prospectus:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger dated as of July 22, 1996 (the "Merger
Agreement") among Seagull Energy Corporation, a Texas corporation
("Seagull"), GNR Merger Corporation, a New Jersey corporation and a
wholly owned subsidiary of Seagull ("Merger Sub"), and Global.
Pursuant to the Merger Agreement, Merger Sub would be merged with and
into Global (the "Merger") and, among other things, each share of
common stock, par value $1.00 per share, of Global ("Global Common
Stock") outstanding at the effective time of the Merger would be
converted into a number of shares of common stock, par value $.10 per
share, of Seagull ("Seagull Common Stock") ranging from .72 to .88
(the "Common Stock Exchange Ratio"), depending upon the average
closing sales price of Seagull Common Stock, rounded to four decimal
places, as reported under "NYSE Composite Transaction Reports" in The
Wall Street Journal for each of the first 20 consecutive trading days
in the period commencing 25 trading days prior to the date of the
Global Special Meeting, all as more fully set forth in the
accompanying Joint Proxy Statement/Prospectus and in the Merger
Agreement, a copy of which is included as Appendix A thereto;
2. To consider and take action upon such other matters as may properly
come before the Global Special Meeting, or any adjournment(s) or
postponement(s) thereof.
The record date for the determination of shareholders entitled to notice of
and vote at the Global Special Meeting is , 1996. Only holders of
record of shares of Global Common Stock at the close of business on the record
date are entitled to notice of, and to vote at, the Global Special Meeting. A
list of the shareholders entitled to vote at the Global Special Meeting may be
examined at the offices of Global at 5300 Memorial Drive, Suite 800, Houston,
Texas 77007, during the ten-day period preceding such meeting. Shareholders of
Global are not entitled to any appraisal or dissenters' rights under the New
Jersey Business Corporation Act in respect of the Merger.
When the proxies are returned properly executed, the shares represented
thereby will be voted in accordance with the indicated instructions. However, if
no instructions have been specified on a returned proxy, the shares represented
thereby will be voted FOR approval and adoption of the Merger Agreement. Any
shareholder giving a proxy has the power to revoke it at any time before it is
voted by filing, with the Secretary of Global, either an instrument revoking the
proxy or a duly executed proxy bearing a later date. Proxies also may be revoked
by attending the meeting and voting in person.
By Order of the Board of Directors,
E. Lynn Hill
Secretary
Houston, Texas
, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE GLOBAL SPECIAL MEETING. HOWEVER,
WHETHER OR NOT YOU EXPECT TO ATTEND, PLEASE COMPLETE, SIGN, DATE AND RETURN THE
ACCOMPANYING PROXY WITHOUT DELAY IN THE ENCLOSED POSTPAID ENVELOPE. THE PROXY IS
REVOCABLE AND WILL NOT BE USED IF YOU ARE PRESENT AND PREFER TO VOTE IN PERSON.
<PAGE> 4
[LETTERHEAD OF SEAGULL ENERGY CORPORATION]
, 1996
To Our Shareholders:
You are cordially invited to attend a Special Meeting of Shareholders of
Seagull Energy Corporation ("Seagull") at , ,
Houston, Texas on , , at a.m., Houston time (the
"Seagull Special Meeting").
At the Seagull Special Meeting, you will be asked to consider and vote upon
a proposal to approve the issuance of shares of common stock of Seagull
("Seagull Common Stock") pursuant to the Agreement and Plan of Merger dated as
of July 22, 1996 (the "Merger Agreement") providing for the merger (the
"Merger") of a wholly owned subsidiary of Seagull with and into Global Natural
Resources Inc. ("Global"). The Merger Agreement provides that, upon consummation
of the Merger, each issued and outstanding share of common stock of Global would
be converted into a number of shares of Seagull Common Stock ranging from .72 to
.88 (the "Common Stock Exchange Ratio"), depending upon the average closing
sales price of Seagull Common Stock, rounded to four decimal places, as reported
under "NYSE Composite Transaction Reports" in The Wall Street Journal for each
of the first 20 consecutive trading days in the period commencing 25 trading
days prior to the date of Global's special meeting of shareholders. Pursuant to
the Merger, Global would become a wholly owned subsidiary of Seagull. The Merger
Agreement and the Merger are discussed in more detail in the accompanying Joint
Proxy Statement/Prospectus. Please review and consider the enclosed materials
carefully.
For the reasons set forth in the accompanying Joint Proxy
Statement/Prospectus, your Board of Directors believes that the Merger is fair
to, and in the best interests of, the shareholders of Seagull and recommends
that you vote in favor of the issuance of Seagull Common Stock pursuant to the
Merger Agreement. For example, by combining Global's portfolio of properties and
exploratory team with Seagull's properties, cash flow and financial resources,
Seagull believes that the exploratory and development performance of the
combined company will be enhanced.
In making the determination described above, your Board of Directors
received and took into account the opinion dated July 22, 1996 of Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ"), an investment banking firm
retained by Seagull for that purpose, that, as of such date, the Common Stock
Exchange Ratio was fair to the shareholders of Seagull from a financial point of
view. DLJ subsequently delivered its written opinion dated the date of the Joint
Proxy Statement/Prospectus (the "DLJ Opinion") that, as of such date, the Common
Stock Exchange Ratio was fair to the shareholders of Seagull from a financial
point of view. A copy of the DLJ Opinion is included in the accompanying Joint
Proxy Statement/Prospectus as Appendix D thereto.
At the Seagull Special Meeting, shareholders will also be asked to approve,
subject to consummation of the transactions contemplated by the Merger
Agreement, the election of three individuals designated by Global to the Seagull
Board of Directors upon the effectiveness of the Merger. The Seagull Board of
Directors believes that these three individuals will be excellent additions to
the Board, and the Board recommends that you vote in favor of the election of
these three individuals as directors.
If you have any questions prior to the Seagull Special Meeting or need
further assistance, please call Georgeson & Company Inc., who will be assisting
in connection with the Seagull Special Meeting, at (800) 223-2064. Whether or
not you plan to attend the Seagull Special Meeting, please be sure to sign, date
and return the enclosed proxy or voting instruction card in the enclosed
envelope as promptly as possible so that your shares may be represented at the
Seagull Special Meeting and voted in accordance with your wishes. Your vote is
important regardless of the number of shares you own.
Sincerely,
Barry J. Galt
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 5
SEAGULL ENERGY CORPORATION
1001 FANNIN, SUITE 1700
HOUSTON, TEXAS 77002-6714
(713) 951-4700
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1996
To the Shareholders of Seagull Energy Corporation:
A Special Meeting of Shareholders (the "Seagull Special Meeting") of
Seagull Energy Corporation, a Texas corporation ("Seagull"), will be held on
, , 1996 at :00 a.m., Houston, at
, , , for the following purposes:
1. To consider and vote upon a proposal to approve the issuance of up to
27,573,709 shares of common stock, par value $.10 per share, of
Seagull ("Seagull Common Stock") pursuant to the Agreement and Plan of
Merger dated as of July 22, 1996 (the "Merger Agreement") among
Seagull, GNR Merger Corporation, a New Jersey corporation and a wholly
owned subsidiary of Seagull ("Merger Sub"), and Global Natural
Resources Inc., a New Jersey corporation ("Global"). Pursuant to the
Merger Agreement, Merger Sub would be merged with and into Global (the
"Merger") and, among other things, each share of common stock, par
value $1.00 per share, of Global ("Global Common Stock") outstanding
at the effective time of the Merger would be converted into a number
of shares of Seagull Common Stock ranging from .72 to .88 (the "Common
Stock Exchange Ratio"), depending upon the average closing sales price
of Seagull Common Stock, rounded to four decimal places, as reported
under "NYSE Composite Transaction Reports" in The Wall Street Journal
for each of the first 20 consecutive trading days in the period
commencing 25 trading days prior to the date of the Global special
meeting of shareholders, all as more fully set forth in the
accompanying Joint Proxy Statement/Prospectus and in the Merger
Agreement, a copy of which is included as Appendix A thereto;
2. To consider and vote upon a proposal to elect three individuals
designated by Global to serve as directors on the Board of Directors
of Seagull subject to and effective upon the consummation of the
Merger as follows: (a) one person to serve in Class II until Seagull's
1997 Annual Meeting of Shareholders, (b) one person to serve in Class
III until Seagull's 1998 Annual Meeting of Shareholders and (c) one
person to serve in Class I until Seagull's 1999 Annual Meeting of
Shareholders; and
3. To transact such other business as may properly come before the
Seagull Special Meeting or any adjournment(s) or postponement(s)
thereof.
The Board of Directors of Seagull has fixed the close of business on
, 1996 as the record date for the determination of shareholders
entitled to notice of, and to vote at, the Seagull Special Meeting and any
adjournment(s) or postponement(s) thereof. Only holders of record of shares of
Seagull Common Stock at the close of business on the record date are entitled to
notice of, and to vote at, the Seagull Special Meeting. A complete list of such
shareholders will be available for examination at the offices of Seagull in
Houston, Texas during normal business hours by any Seagull shareholder, for any
purpose germane to the Seagull Special Meeting, for a period of 10 days prior to
the meeting. Shareholders of Seagull are not entitled to any appraisal or
dissenters' rights under the Texas Business Corporation Act in respect of the
Merger.
Your vote is important. The affirmative vote of the holders of a majority
of the outstanding shares of Seagull Common Stock represented in person or by
proxy and entitled to vote is required for approval of the issuance of Seagull
Common Stock pursuant to the Merger Agreement. Even if you plan to attend the
Seagull Special Meeting in person, we request that you sign and return the
enclosed proxy or voting instruction card and thus ensure that your shares will
be represented at the Seagull Special Meeting if you are unable to attend. If
you do attend the Seagull Special Meeting and wish to vote in person, you may
withdraw your proxy and vote in person.
By Order of the Board of Directors,
Sylvia Sanchez
Corporate Secretary
Houston, Texas
, 1996
<PAGE> 6
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* *
* Information contained herein is subject to completion or amendment. A *
* registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may not *
* be sold nor may offers to buy be accepted prior to the time the *
* registration statement becomes effective. This prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* nor shall there be any sale of these securities in any State in which *
* such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of any such *
* State. *
* *
***************************************************************************
SUBJECT TO COMPLETION, DATED AUGUST 9, 1996
SEAGULL ENERGY CORPORATION
AND
GLOBAL NATURAL RESOURCES INC.
JOINT PROXY STATEMENT
---------------------
SEAGULL ENERGY CORPORATION
PROSPECTUS
SPECIAL MEETING OF SHAREHOLDERS OF SEAGULL ENERGY CORPORATION
TO BE HELD ON , 1996
SPECIAL MEETING OF SHAREHOLDERS OF GLOBAL NATURAL RESOURCES INC.
TO BE HELD ON , 1996
This Joint Proxy Statement/Prospectus ("Joint Proxy Statement/Prospectus")
is being furnished to shareholders of Seagull Energy Corporation, a Texas
corporation ("Seagull"), and to shareholders of Global Natural Resources Inc., a
New Jersey corporation ("Global"), in connection with the solicitation of
proxies by the Board of Directors of each corporation for use at the Special
Meeting of Shareholders of Seagull (the "Seagull Special Meeting") and the
Special Meeting of Shareholders of Global (the "Global Special Meeting," and
together with the Seagull Special Meeting, the "Special Meetings"),
respectively, in each case including any adjournment(s) or postponement(s)
thereof. The Special Meetings are both scheduled to be held on ,
1996. This Joint Proxy Statement/Prospectus relates to the proposed merger (the
"Merger") of GNR Merger Corporation, a New Jersey corporation and a wholly owned
subsidiary of Seagull ("Merger Sub"), with and into Global pursuant to the
Agreement and Plan of Merger, dated as of July 22, 1996 (the "Merger
Agreement"), among Seagull, Merger Sub and Global. In addition, the Seagull
shareholders also will be asked to vote upon a proposal at the Seagull Special
Meeting to elect three persons designated by Global to the Seagull Board of
Directors, subject to, and effective upon, the consummation of the Merger (the
"Election Proposal"). See "Election of Directors."
At the effective time of the Merger (the "Effective Time"), Merger Sub will
be merged with and into Global, which will be the surviving corporation in the
Merger (the "Surviving Corporation"). As a result of the Merger, Global will
become a wholly owned subsidiary of Seagull. Each issued and outstanding share
of common stock, par value $1.00 per share, of Global (the "Global Common
Stock") will be converted into such number of shares of fully paid and
nonassessable voting common stock, par value $.10 per share, of Seagull
("Seagull Common Stock") equal to the Common Stock Exchange Ratio. The "Common
Stock Exchange Ratio" is determined as follows: (i) if the Seagull Transaction
Value, as defined below, is equal to or greater than $27.50, then the Common
Stock Exchange Ratio will be .72; (ii) if the Seagull Transaction Value is equal
to or less than $22.50, then the Common Stock Exchange Ratio will be .88; and
(iii) if the Seagull Transaction Value is less than $27.50 and greater than
$22.50, the Common Stock Exchange Ratio will be determined by linear
interpolation between .72 and .88. The term "Seagull Transaction Value" means
the average closing sales price of Seagull Common Stock, rounded to four decimal
places, as reported under "NYSE Composite Transaction Reports" in The Wall
Street Journal for each of the first 20 consecutive trading days in the period
commencing 25 trading days prior to the date of the Global Special Meeting. Cash
will be paid in lieu of fractional shares of Seagull Common Stock. See "Certain
Terms of the Merger Agreement -- Manner and Basis of Converting Shares; and --
Treatment of Fractional Interests."
This Joint Proxy Statement/Prospectus constitutes a prospectus of Seagull
with respect to up to 27,573,709 shares of Seagull Common Stock issuable to
Global shareholders in the Merger pursuant to the Merger Agreement upon
conversion of shares of Global Common Stock outstanding on the date hereof or
issued subsequent to the date hereof and prior to the Effective Time pursuant to
Global's 401(k) employee savings plan or upon the exercise of certain stock
options of Global which, if not exercised prior to the Effective Time, pursuant
to the Merger Agreement and the terms of the related stock option plans, will
constitute options to purchase shares of Seagull Common Stock upon the terms set
forth in such stock option plans and the Merger Agreement. See "Certain Terms of
the Merger Agreement -- Treatment of Global Stock Options."
The Seagull Common Stock is listed for trading on the New York Stock
Exchange (the "NYSE") under the symbol "SGO," and the Global Common Stock is
listed for trading on the NYSE under the symbol "GNR." On August 5, 1996, the
last sale prices of the Seagull Common Stock and the Global Common Stock as
reported on the NYSE Composite Transaction Tape were 18 1/4 per share and 15 3/8
per share, respectively. For a description of the Seagull Common Stock, see
"Description of Seagull Capital Stock" and "Comparative Rights of Seagull and
Global Shareholders."
SEE "RISK FACTORS AND OTHER CONSIDERATIONS" BEGINNING ON PAGE 17 FOR A
DISCUSSION OF CERTAIN RISKS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN
INVESTMENT IN THE SECURITIES OFFERED HEREBY.
This Joint Proxy Statement/Prospectus, the accompanying applicable form of
proxy and the other enclosed documents are first being mailed to shareholders of
Seagull and Global on or about , 1996.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY OTHER STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS , 1996.
<PAGE> 7
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE
OFFERING OF SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY SEAGULL OR
GLOBAL. NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF THE SECURITIES OFFERED HEREBY SHALL UNDER ANY CIRCUMSTANCES
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF SEAGULL OR
GLOBAL SINCE THE DATE HEREOF OR THAT THE INFORMATION SET FORTH OR INCORPORATED
BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS JOINT
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION OF AN OFFER OR PROXY SOLICITATION.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY
REFERENCE THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SEAGULL AND
GLOBAL EACH UNDERTAKE TO PROVIDE COPIES OF SUCH DOCUMENTS (OTHER THAN EXHIBITS
TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE), WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO
WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST TO, IN THE CASE OF DOCUMENTS RELATING TO SEAGULL, ALAN PAYNE, DIRECTOR,
INVESTOR RELATIONS, SEAGULL ENERGY CORPORATION, 1001 FANNIN, SUITE 1700,
HOUSTON, TEXAS, 77002-6714 (TELEPHONE (713) 951-4700), AND, IN THE CASE OF
DOCUMENTS RELATING TO GLOBAL, E. LYNN HILL, CORPORATE SECRETARY, GLOBAL NATURAL
RESOURCES INC., 5300 MEMORIAL DRIVE, SUITE 800, HOUSTON, TEXAS 77007-8295
(TELEPHONE (713) 880-5464). IN ORDER TO ENSURE DELIVERY OF THE DOCUMENTS, SUCH
REQUESTS SHOULD BE RECEIVED BY , 1996.
AVAILABLE INFORMATION
Seagull and Global are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by Seagull and Global can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional Offices at Seven
World Trade Center, 13th Floor, New York, New York 10048 and CitiCorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60621-2511. Copies of
such material can be obtained by mail from the Public Reference Section of the
Commission at 450 West 5th Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, reports, proxy statements and other information concerning
Seagull and Global may be inspected at the offices of the NYSE, 20 Broad Street,
New York, New York 10005. Certain of such reports, proxy statements and other
information filed by Seagull or Global are also available on the Commission's
World Wide Web site at http://www.sec.gov.
Seagull has filed with the Commission a Registration Statement on Form S-4
(together with all amendments, supplements and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Seagull Common Stock to be issued
pursuant to the Merger Agreement. The information contained herein with respect
to Seagull and its affiliates, including Merger Sub, has been provided by
Seagull, and the information contained herein with respect to Global and its
affiliates has been provided by Global. This Joint Proxy Statement/Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which were omitted in accordance with the rules and regulations
of the Commission. For further information, reference is hereby made to the
Registration Statement. Any statements contained herein concerning the
provisions of any document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission are not necessarily complete, and in each
instance reference is made to the copy of such document so filed. Each such
statement is qualified in its entirety by such reference.
2
<PAGE> 8
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission pursuant
to the Exchange Act, are incorporated herein by reference:
1. For Seagull (Exchange Act Registration No. 1-8094), its:
(a) Annual Report on Form 10-K for the fiscal year ended December 31,
1995;
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996
and June 30, 1996;
(c) the description of the Seagull Common Stock contained in the
Registration Statement on Form 8-A declared effective by the
Commission on January 30, 1981, together with the amendments on
Form 8 filed with the Commission on January 29, 1981, January 30,
1981 and October 28, 1991;
(d) the description of Seagull's Series B Junior Participating Preferred
Stock and related rights contained in the Registration Statement on
Form 8-A filed with the Commission on March 17, 1989; and
(e) the information set forth under the headings "Election of Directors"
and "Executive Compensation" on pages 1 through 15 of the Definitive
Proxy Statement for the Annual Meeting of Shareholders held on May
14, 1996 filed under cover of Schedule 14A with the Commission.
2. For Global (Exchange Act Registration No. 1-8674), its:
(a) Annual Report on Form 10-K for the fiscal year ended December 31,
1995;
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996
and June 30, 1996;
(c) Current Report on Form 8-K dated July 22, 1996 (as amended by
Amendment No. 1 on Form 8-K/A dated August 2, 1996);
(d) the description of the Global Common Stock contained in the
Registration Statement on Form 8-A declared effective by the
Commission on March 16, 1984;
(e) the description of Global's Preferred Share Purchase Rights
contained in the Registration Statement on Form 8-A declared
effective by the Commission on December 11, 1988, together with the
amendments on Form 8 filed with the Commission on August 16, 1989
and February 17, 1993 and on Form 8-A/A filed with the Commission on
October 22, 1993; and
(f) the description of the Global Common Stock contained in the
Registration Statement on Form 8-A and the description of Global's
Preferred Share Purchase Rights contained in the Registration
Statement on Form 8-A, both filed on December 6, 1990 and declared
effective by the Commission on December 12, 1990 and January 10,
1991.
All documents filed by Seagull or Global pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Joint Proxy
Statement/Prospectus and prior to the date of the Special Meetings shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Joint Proxy Statement/Prospectus
to the extent that a statement contained herein or in any other subsequently
filed document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Joint Proxy Statement/Prospectus.
3
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY............................................ 5
The Companies.................................... 5
Post-Merger Profile and Strategy................. 5
The Seagull Special Meeting...................... 6
The Global Special Meeting....................... 7
Recommendations of the Boards of Directors....... 8
Opinions of Financial Advisors................... 8
The Merger and the Merger Agreement.............. 8
Risk Factors and Other Considerations............ 11
Forward-Looking Information...................... 11
Market Prices of Seagull and Global Common Stock
and Dividend Information....................... 12
Seagull Selected Historical Consolidated
Financial Information.......................... 13
Global Selected Historical Consolidated Financial
Information.................................... 14
Selected Unaudited Pro Forma Financial
Information.................................... 15
Comparative Per Share Data....................... 16
RISK FACTORS AND OTHER CONSIDERATIONS.............. 17
Risk Factors and Other Considerations with
Respect to the Merger.......................... 17
Operating Risks.................................. 17
THE COMPANIES...................................... 19
Seagull.......................................... 19
Merger Sub....................................... 21
Global........................................... 21
POST-MERGER PROFILE AND STRATEGY................... 23
Oil and Gas Interests............................ 23
Strategy......................................... 23
Management....................................... 23
THE SPECIAL MEETINGS............................... 24
The Seagull Special Meeting...................... 24
The Global Special Meeting....................... 24
Voting of Proxies................................ 25
Revocability of Proxies.......................... 25
No Dissenters' or Appraisal Rights............... 26
Solicitation of Proxies.......................... 26
THE MERGER......................................... 27
General.......................................... 27
Background of the Merger......................... 27
Global's Reasons for the Merger; Recommendation
of Board of Directors of Global................ 30
Seagull's Reasons for the Merger; Recommendation
of Board of Directors of Seagull............... 31
Opinions of Financial Advisors................... 33
Interests of Certain Persons in the Merger....... 44
Certain Federal Income Tax Consequences.......... 45
Accounting Treatment............................. 45
Governmental and Regulatory Approvals............ 46
Restrictions on Resales by Affiliates............ 46
Global Preferred Share Purchase Rights Plan...... 47
Factors Affecting Forward-Looking Statements..... 47
CERTAIN TERMS OF THE MERGER AGREEMENT.............. 48
Effective Time of the Merger..................... 48
Manner and Basis of Converting Shares............ 48
Treatment of Global Stock Options................ 48
Surrender and Exchange of Certificates........... 49
Treatment of Fractional Interests................ 50
No Dissenters' or Appraisal Rights............... 50
Representations and Warranties................... 50
Conduct of Business Prior to the Merger.......... 50
No Solicitation.................................. 52
Certain Additional Agreements.................... 53
Certain Post-Merger Matters...................... 53
Conditions to the Merger......................... 53
Termination and Amendment of the Merger
Agreement...................................... 54
Expenses......................................... 55
Indemnification of Directors and Officers........ 56
VOTING AGREEMENT................................... 56
UNAUDITED PRO FORMA CONDENSED FINANCIAL
INFORMATION...................................... 58
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS OF
SEAGULL AND GLOBAL............................... 66
Seagull.......................................... 66
Global........................................... 67
DESCRIPTION OF SEAGULL CAPITAL STOCK............... 68
Seagull Common Stock............................. 68
Seagull Preferred Stock.......................... 69
COMPARATIVE RIGHTS OF SEAGULL AND GLOBAL
SHAREHOLDERS..................................... 73
Voting of Shares of Common Stock................. 73
Dividend Rights.................................. 74
Shareholder Approval............................. 74
Dissenters' or Appraisal Rights.................. 74
Action by Shareholders Without a Meeting......... 75
Shareholders Proposals........................... 75
Special Meetings................................. 75
Classifications of Board of Directors............ 75
Vacancies and Increases in the Board of
Directors...................................... 75
Removal of Directors............................. 76
Indemnification of Directors; Director's
Liability...................................... 76
ELECTION OF DIRECTORS.............................. 77
INDEPENDENT PUBLIC ACCOUNTANTS..................... 78
LEGAL MATTERS...................................... 78
EXPERTS............................................ 79
CERTAIN DEFINITIONS................................ 79
SHAREHOLDER PROPOSALS.............................. 81
Seagull.......................................... 81
Global........................................... 82
Appendix A -- Agreement and Plan of Merger
Appendix B -- Voting Agreement
Appendix C -- Opinion of Petrie Parkman & Co., Inc.
Appendix D -- Opinion of Donaldson, Lufkin &
Jenrette Securities Corporation
</TABLE>
4
<PAGE> 10
SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained in or
incorporated by reference in this Joint Proxy Statement/Prospectus and the
Appendices hereto. Shareholders are urged to read carefully this Joint Proxy
Statement/Prospectus and the Appendices hereto in their entirety. Shareholders
should carefully consider the information set forth below under the heading
"Risk Factors and Other Considerations." As used in this Joint Proxy
Statement/Prospectus, unless otherwise required by the context, the term
"Seagull" means Seagull Energy Corporation and its consolidated subsidiaries and
the term "Global" means Global Natural Resources Inc. and its consolidated
subsidiaries. Capitalized terms relating to the Merger used herein without
definition are, unless otherwise indicated, defined in the Merger Agreement and
used herein with such meanings. Certain terms relating to the oil and gas
industry are defined under "Certain Definitions" in this Joint Proxy
Statement/Prospectus.
THE COMPANIES
SEAGULL AND MERGER SUB. Seagull is an independent energy company primarily
engaged in natural gas exploration, development and production ("E&P") with its
operations focused offshore Texas and Louisiana in the Gulf of Mexico and
onshore in three principal geographic regions: (i) western Oklahoma and the
Texas Panhandle; (ii) the Arklatex area in eastern Texas and northern Louisiana
and the Arkoma Basin in eastern Oklahoma and western Arkansas; and (iii) western
Canada. Seagull's other business activities are also natural gas related: (i)
natural gas marketing and pipeline engineering, design, construction and
operation; and (ii) natural gas transmission and distribution in Alaska. Seagull
has interests in 2,624 producing natural gas wells and 217 producing oil wells
located on approximately 1,261,000 gross (603,000 net) acres held by production
with estimated proved reserves of 21.1 MMbbls of oil and 986 Bcf of natural gas
at December 31, 1995.
Seagull was incorporated in Texas in 1973 as a wholly owned subsidiary of
Houston Oil & Minerals Corporation ("HO&M"). In March 1981, Seagull became an
independent entity as a result of spin-offs of its shares to the stockholders of
HO&M. The principal executive offices of Seagull are located at 1001 Fannin,
Suite 1700, Houston, Texas 77002-6714, and its telephone number at such offices
is (713) 951-4700.
Merger Sub is a wholly owned subsidiary of Seagull incorporated on July 22,
1996 in the State of New Jersey solely for the purpose of effecting the Merger.
GLOBAL. Global is an independent oil and gas exploration and production
company with interests in 2,101 producing oil wells and 745 producing natural
gas wells located on approximately 959,000 gross (149,000 net) acres held by
production with estimated proved reserves of 30.4 MMbbls of oil and 164 Bcf of
natural gas at December 31, 1995. The reserves are located in the United States
(principally in the Texas gulf coast and offshore Gulf of Mexico) and in Egypt,
Cote d'Ivoire, Indonesia and Tatarstan-Russia.
Global was incorporated in New Jersey in 1983 and is the successor to
Global Natural Resources PLC, a company organized in 1970 under the laws of the
United Kingdom.
Global's principal executive offices are located at 5300 Memorial Drive,
Suite 800, Houston, Texas 77007-8295, and its telephone number at such offices
is (713) 880-5464.
POST-MERGER PROFILE AND STRATEGY
OIL AND GAS INTERESTS. As a result of the Merger, Seagull will have
extensive interests in domestic and international oil and gas properties.
Following the Merger, Seagull will have interests in an aggregate of 2,220,000
gross (752,000 net) developed acres and 16,030,000 gross (8,889,000 net)
undeveloped acres, excluding interests associated with Seagull's pending
acquisition of certain properties in Egypt.
Based upon the December 31, 1995 estimated proved reserves of Seagull and
Global, Seagull will have estimated proved reserves after the Merger of 1,459
Bcfe (approximately 79% of which will be natural gas).
5
<PAGE> 11
As of December 31, 1995, after giving effect to the Merger, Seagull and Global
had interests in an aggregate of 5,687 producing natural gas and oil wells.
STRATEGY. After the Merger, Seagull will pursue its long-term goal of
increasing shareholder value through growing its reserve base of natural gas and
crude oil with a more balanced mix of assets. A higher percentage of the
combined company's proved reserves will represent crude oil and a significant
percentage will be located in international areas.
Seagull and Global bring disparate operational qualities to the post-merger
company. Seagull's management believes that Global's properties contain a
substantial number of exploratory prospects with significant upside potential.
In addition, Global brings a talented technical team that has developed an
attractive portfolio of both exploratory and exploitative prospects, primarily
in its key international areas. By contrast, Seagull brings a large portfolio of
long-lived domestic natural gas producing properties with substantial
exploitative upside and a large, stable cash flow base generated from gas and
oil sales and its non-E&P activities. By combining Global's portfolio of
properties and exploratory team with Seagull's properties, cash flow and
financial resources, Seagull and Global believe that exploratory and development
performance of the combined company will be enhanced. Specifically, the cash
flow that the combined company will be able to generate from E&P and non-E&P
activities following the Merger will enable the combined company to conduct
accelerated exploration and development programs on Global's international crude
oil properties. As a result, Seagull and Global believe that the combined
company will have the ability to generate material growth in both its base of
proved reserves and its capacity to produce natural gas and crude oil over the
next several years.
MANAGEMENT. If approved by the shareholders of Seagull at the Seagull
Special Meeting, at the effective time of the Merger (the "Effective Time"),
Seagull's Board of Directors will be increased from 11 to 14 members, and three
new directors that have been designated by Global (the "Global Designees") will
fill the newly created vacancies. Global has informed Seagull that Robert F.
Vagt, R. A. Walker and Sidney R. Petersen will be the Global Designees. Each of
the Global Designees is currently a director of Global. See "Election of
Directors."
In addition, following the Effective Time, Barry J. Galt will continue as
Chairman and Chief Executive Officer of Seagull, and Robert F. Vagt, currently
the Chairman, President and Chief Executive Officer of Global, will become
President and Chief Operating Officer of Seagull. See "Post-Merger Profile and
Strategy -- Management."
SECURITY OWNERSHIP. Based on the number of shares outstanding on the Record
Date, upon consummation of the Merger, there will be approximately
shares of Seagull Common Stock outstanding, and the shares of Seagull Common
Stock issued to shareholders of Global pursuant to the Merger Agreement will
comprise, depending on the ultimate Exchange Ratio, between approximately 37%
and 42% of the total number of shares of Seagull Common Stock outstanding
(between approximately % and % on a fully diluted basis). See "Certain
Terms of the Merger Agreement -- Manner and Basis for Converting Shares."
THE SEAGULL SPECIAL MEETING
TIME AND PLACE. The Seagull Special Meeting will be held at a.m.,
Houston time, on , 1996, at the .
RECORD DATE. The record date for the determination of holders of Seagull
Common Stock entitled to notice of and to vote at the Seagull Special Meeting is
(the "Record Date"). On that date, Seagull had outstanding shares
of Seagull Common Stock.
MATTERS TO BE CONSIDERED. At the Seagull Special Meeting, holders of shares
of Seagull Common Stock will consider and vote upon (a) a proposal to issue
shares of Seagull Common Stock in the Merger in accordance with the listing
requirements of the NYSE (the "Share Issuance") and (b) in connection with an
increase in the size of the Seagull Board of Directors from 11 to 14, a proposal
to elect three persons designated by Global to the Seagull Board of Directors,
subject to, and effective upon, the consummation of the Merger (the "Election
Proposal"). See "Election of Directors." Holders of shares of Seagull Common
6
<PAGE> 12
Stock entitled to vote also will consider and vote upon any other matter that
may properly come before the Seagull Special Meeting or any adjournment(s) or
postponement(s) thereof.
VOTE REQUIRED; QUORUM. The Share Issuance requires the affirmative vote of
holders of a majority of the shares of Seagull Common Stock represented in
person or by proxy and entitled to vote at the Seagull Special Meeting. With
respect to the Election Proposal, a plurality of the votes cast in person or by
proxy by the holders of Seagull Common Stock is required to elect a director.
The holders of a majority of the outstanding shares of Seagull Common Stock
entitled to vote must be present in person or by proxy at the Seagull special
meeting in order for a quorum to be present.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN AFFILIATES. As of the Record
Date, directors and executive officers of Seagull and their affiliates were
beneficial owners of an aggregate of outstanding shares of Seagull Common
Stock, representing approximately % of the outstanding shares of Seagull
Common Stock entitled to vote at the Seagull Special Meeting and % of the
maximum and % of the minimum votes that could be required to approve the
Share Issuance. Each of the directors and executive officers of Seagull has
advised Seagull that he or she plans to vote or to direct the vote of all of the
shares of Seagull Common Stock beneficially owned by him or her in favor of the
Merger Agreement and the transactions contemplated thereby, including the
Election Proposal.
THE GLOBAL SPECIAL MEETING
TIME AND PLACE. The Global Special Meeting will be held at a.m.,
Houston time, on , 1996, at the .
RECORD DATE. The record date for the determination of holders of Global
Common Stock entitled to notice of and to vote at the Global Special Meeting is
also . On that date, Global had outstanding shares of Global
Common Stock.
MATTERS TO BE CONSIDERED. At the Global Special Meeting, holders of shares
of Global Common Stock will consider and vote upon a proposal to approve and
adopt the Merger Agreement. Holders of shares of Global Common Stock entitled to
vote also will consider and vote upon any other matter that may properly come
before the Global Special Meeting or any adjournment(s) or postponement(s)
thereof.
VOTE REQUIRED; QUORUM The adoption and approval of the Merger Agreement
requires the affirmative vote of holders of a majority of the votes cast by
holders of Global Common Stock entitled to vote. The holders of 33 1/3% of the
outstanding shares of Global Common Stock entitled to vote must be present in
person or by proxy at the Global Special Meeting in order for a quorum to be
present.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN AFFILIATES. As of the Record
Date, directors and executive officers of Global and their affiliates (including
The Prudential Insurance Company of America ("Prudential")) were beneficial
owners of an aggregate of [7,504,349] shares of Global Common Stock,
representing approximately [25.3%] of the outstanding shares of Global Common
Stock entitled to vote at the Global Special Meeting and % of the maximum
and all of the minimum votes that could be required to adopt and approve the
Merger Agreement. Each of the directors and executive officers of Global has
advised Global that he or she plans to vote or to direct the vote of all of the
shares of Global Common Stock beneficially owned by him or her in favor of the
Merger Agreement.
Prudential, which owns an aggregate of 6,311,547 shares, or approximately
[21.2%] of the outstanding shares of Global Common Stock on the Record Date, has
agreed to vote all of such stock in favor of the Merger so long as (i) the value
of Seagull Common Stock is not less than $17.00 per share, which value will be
calculated based on the average closing sales price of Seagull Common Stock for
a specified twenty-day period prior to the Global Special Meeting, and (ii)
Prudential has obtained from the Commission any approvals required under
Sections 9(a) and 2(a) of the Public Utility Holding Company Act of 1935, as
amended (the "1935 Act"). See "Voting Agreement."
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<PAGE> 13
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
The respective Boards of Directors of Seagull and Global believe that the
terms of the Merger are fair to and advisable and in the best interests of their
respective shareholders and have unanimously approved the Merger Agreement, the
Merger and the other related transactions.
The Board of Directors of Seagull unanimously recommends that the holders
of Seagull Common Stock approve the Share Issuance and the Election Proposal.
The Board of Directors of Global unanimously recommends that the holders of
Global Common Stock approve and adopt the Merger Agreement.
For additional information with respect to the determinations and
recommendations made by the Seagull and Global Boards of Directors, see "The
Merger -- Seagull's Reasons for the Merger; Recommendation of Board of Directors
of Seagull" and "-- Global's Reasons for the Merger; Recommendation of Board of
Directors of Global."
OPINIONS OF FINANCIAL ADVISORS
SEAGULL. Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
delivered its written opinion dated July 22, 1996 to the Seagull Board of
Directors that, as of such date, the Common Stock Exchange Ratio pursuant to the
Merger Agreement is fair, from a financial point of view, to the holders of
Seagull Common Stock. DLJ subsequently delivered its written opinion, dated the
date hereof, to the Seagull Board of Directors that as of the date hereof the
Common Stock Exchange Ratio pursuant to the Merger Agreement is fair, from a
financial point of view, to the holders of Seagull Common Stock.
The full text of the written opinion of DLJ, dated the date hereof, which
sets forth the assumptions made, matters considered and limitations on the view
undertaken in connection with the opinion, is attached hereto as Appendix D and
is incorporated herein by reference. Holders of Seagull Common Stock are urged
to, and should, read DLJ's opinion in its entirety. See "The Merger -- Opinions
of Financial Advisors -- DLJ Opinion to the Seagull Board of Directors."
GLOBAL. Petrie Parkman & Co., Inc. ("Petrie Parkman") delivered its written
opinion dated July 21, 1996 to the Global Board of Directors that, as of July
21, 1996, the consideration to be received by the holders of Global Common Stock
pursuant to the Merger Agreement (the "Merger Consideration") is fair to the
holders of Global Common Stock. Petrie Parkman subsequently delivered its
written opinion, dated the date hereof, to the Global Board of Directors that as
of the date hereof the Merger Consideration is fair to the holders of Global
Common Stock.
The full text of the written opinion of Petrie Parkman, dated the date
hereof, which sets forth the assumptions made, matters considered and
limitations on the review undertaken in connection with the opinion, is attached
hereto as Appendix C and is incorporated herein by reference. Holders of Global
Common Stock are urged to, and should, read Petrie Parkman's opinion in its
entirety. See "The Merger -- Opinions of Financial Advisors -- Petrie Parkman
Opinion to the Global Board of Directors."
THE MERGER AND THE MERGER AGREEMENT
EFFECT OF THE MERGER. At the Effective Time, Merger Sub will be merged with
and into Global, which will be the surviving corporation in the Merger (the
"Surviving Corporation"). As a result of the Merger, Global will become a wholly
owned subsidiary of Seagull. Each issued and outstanding share of Global Common
Stock will be converted in the Merger into such number of shares of Seagull
Common Stock equal to the Common Stock Exchange Ratio. The Common Stock Exchange
Ratio is determined as follows: (i) if the Seagull Transaction Value, as defined
below, is equal to or greater than $27.50, then the Common Stock Exchange Ratio
will be .72; (ii) if the Seagull Transaction Value is equal to or less than
$22.50, then the Common Stock Exchange Ratio will be .88; and (iii) if the
Seagull Transaction Value is less than $27.50 and greater than $22.50, the
Common Stock Exchange Ratio shall be determined by linear interpolation between
.72 and .88. The term "Seagull Transaction Value" means the average closing
sales price of Seagull Common
8
<PAGE> 14
Stock, rounded to four decimal places, as reported under "NYSE Composite
Transaction Reports" in The Wall Street Journal for each of the first 20
consecutive trading days in the period commencing 25 trading days prior to the
date of the Global Special Meeting. Cash will be paid in lieu of fractional
shares of Seagull Common Stock. See "Certain Terms of the Merger
Agreement -- Treatment of Fractional Interests."
EFFECTIVE TIME OF THE MERGER. The Merger will become effective upon the
filing and acceptance of the Certificate of Merger with the Secretary of State
of New Jersey or such later date as is specified in such Certificate. The filing
of the Certificate of Merger will occur as soon as practicable following the
satisfaction or waiver of the conditions set forth in the Merger Agreement. See
"Certain Terms of the Merger Agreement -- Conditions to the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER. If approved by Seagull's
shareholders, at the Effective Time, the Seagull Board of Directors will be
increased from 11 to 14 members, and the three Global Designees will fill the
newly created vacancies. Robert F. Vagt will be elected to Class I of the
Seagull Board (with a term expiring in 1999), R. A. Walker will be elected to
Class II of the Seagull Board (with a term expiring in 1997) and Sidney R.
Petersen will be elected to Class III of the Seagull Board (with a term expiring
in 1998). See "Election of Directors." Also after the Effective Time, Barry J.
Galt will continue as Chairman and Chief Executive Officer of Seagull and Robert
F. Vagt, currently the Chairman, President and Chief Executive Officer of
Global, will become President and Chief Operating Officer of Seagull. Two
additional persons designated by Global will serve on Seagull's Senior Advisory
Council.
In addition, the Merger Agreement provides for certain directors, officers
and other employees of Global to continue to receive or be eligible for certain
benefits and other matters following the Effective Time. See "Post-Merger
Profile and Strategy -- Management," "The Merger -- Interests of Certain Persons
in the Merger" and "Election of Directors."
INDEMNIFICATION OF GLOBAL DIRECTORS AND OFFICERS. Pursuant to the Merger
Agreement, Seagull is obligated to cause the Surviving Corporation to indemnify
the present and former officers, directors, employees and agents of Global and
its subsidiaries against claims arising out of actions or omissions by them
occurring at or prior to the Merger (to the full extent permitted under New
Jersey law or Global's Restated Certificate of Incorporation (as defined
below)). Such indemnification will continue for a period of six years after the
consummation of the Merger. Seagull also has agreed to cause the Surviving
Corporation to maintain in effect Global's existing officers' and directors'
liability insurance policy during such period, provided that the Surviving
Corporation is not obligated to pay more than $1,000,000 for such insurance
during such period.
CONDITIONS TO THE MERGER. The obligations of Seagull, Merger Sub and Global
to consummate the Merger are subject to various conditions including, among
other things, obtaining the requisite shareholder approvals, the authorization
for listing on the NYSE of the shares of Seagull Common Stock issuable to Global
shareholders pursuant to the Merger Agreement, the expiration or termination of
the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), the effectiveness of the Registration
Statement covering the Seagull Common Stock issuable to Global shareholders, and
the absence of any order or other legal restraint or prohibition preventing the
consummation of the Merger. The obligation of Seagull to consummate the Merger
is subject to the fulfillment or waiver of various additional conditions,
including, among other things, that based on the advice of its independent
accountants and such other advice as Seagull deems relevant, Seagull shall have
no reasonable basis for believing that following the Merger the combination of
Global and Merger Sub may not be accounted for as a "pooling of interests" in
accordance with generally accepted accounting principles. The obligation of
Global to consummate the Merger is subject to the fulfillment or waiver of
various additional conditions, including, among other things, that Seagull shall
have taken steps to cause Seagull's shareholders to take all necessary and
appropriate actions to cause the number of directors comprising its Board of
Directors to be increased by three and the directorships thus created to be
filled at the Effective Time by the election of the Global Designees. See
"Post-Merger Profile and Strategy -- Management," "The Merger -- Governmental
and Regulatory Approvals," "Certain Terms of the Merger Agreement -- Conditions
to the Merger" and "Election of Directors."
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<PAGE> 15
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated
at any time prior to the Effective Time under certain circumstances and in
certain events, including (i) by mutual consent of Seagull and Global, (ii) by
either Seagull or Global (a) if any court or other governmental entity shall
have issued a final and nonappealable order, decree or ruling or taken any other
final and nonappealable action permanently enjoining or otherwise prohibiting
the Merger, (b) if the Merger shall not have been consummated on or before
January 31, 1997 (other than due to a material breach by the party seeking to
terminate the Merger Agreement), or (c) if, under certain circumstances, the
required shareholder approvals are not obtained, (iii) by Seagull or Global in
certain other situations, including in the event of material breaches by either
Seagull or Global, as the case may be, of representations, warranties, covenants
or agreements set forth in the Merger Agreement or in the event of certain
competing transactions with respect to Global and (iv) by Seagull if the Global
Board of Directors withdraws or modifies its recommendation of the Merger. See
"Certain Terms of the Merger Agreement -- Termination and Amendment of the
Merger Agreement."
The Merger Agreement provides that in the event of a termination in certain
situations in which there is a competing transaction with respect to Global, or
in the event that Global enters into certain business combination transactions
with another person within nine months following termination under certain
events, Seagull will receive a termination fee of $20 million, plus
reimbursement of expenses up to $2 million. See "Certain Terms of the Merger
Agreement -- Expenses." The Merger Agreement prohibits Global from soliciting,
initiating or encouraging any merger or other business combination or any other
extraordinary corporate transaction other than the Merger. Global may respond to
and engage in negotiations about an unsolicited inquiry regarding any such
transaction if Global determines that the inquiring third party has the good
faith intent to proceed with negotiations regarding, and the financial
capability to consummate, such a transaction. Among other things, Global is
obligated to keep Seagull advised of any discussions between Global and any such
third party.
NO DISSENTERS' OR APPRAISAL RIGHTS. Under the applicable provisions of the
Texas Business Corporation Act (the "TBCA") and the New Jersey Business
Corporation Act (the "NJBCA"), the shareholders of Seagull and Global are not
entitled to any dissenters' or appraisal rights in connection with the Merger.
See "The Special Meetings -- No Dissenter's or Appraisal Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. For U.S. federal income tax
purposes, it is intended that the Merger qualify as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and if it so qualifies, no gain or loss will be recognized by
Seagull, Global or Merger Sub as a result of the Merger, and no gain or loss
will be recognized by shareholders of Global upon the conversion of their Global
Common Stock into shares of Seagull Common Stock pursuant to the Merger except
with respect to cash, if any, received in lieu of fractional shares of Seagull
Common Stock. Special rules which could modify or alter these tax consequences
may apply to shareholders of Global who, for U.S. federal income tax purposes,
are dealers in securities, foreign persons, mutual funds, insurance companies,
tax-exempt entities, or holders who do not hold their shares as capital assets.
For a discussion of these and other federal income tax considerations in
connection with the Merger, see "The Merger -- Certain Federal Income Tax
Consequences."
EACH HOLDER OF GLOBAL COMMON STOCK SHOULD CONSULT HIS OWN TAX ADVISOR
REGARDING THE TAX CONSEQUENCES OF THE MERGER IN LIGHT OF SUCH HOLDER'S OWN
SITUATION, INCLUDING THE APPLICATION AND THE EFFECT OF ANY STATE, LOCAL OR
FOREIGN INCOME AND OTHER TAX LAWS.
ACCOUNTING TREATMENT OF THE MERGER. The Merger is expected to be accounted
for as a "pooling of interests" in accordance with generally accepted accounting
principles. Pursuant to such treatment, the assets and liabilities of Seagull
and Global are carried forward to the combined corporation at their recorded
amounts. The reported income for Seagull and Global are combined for all periods
and presented as income of the combined corporation. See "The
Merger -- Accounting Treatment" and "Unaudited Pro Forma Condensed Financial
Information."
COMPARISON OF RIGHTS OF HOLDERS OF GLOBAL COMMON STOCK AND SEAGULL COMMON
STOCK. Rights of shareholders of Global are currently governed by the NJBCA, the
Restated Certificate of Incorporation of
10
<PAGE> 16
Global and the By-Laws of Global. At the Effective Time, Global shareholders
will become shareholders of Seagull, and their rights as shareholders of Seagull
will be governed by the TBCA, the Articles of Incorporation of Seagull and the
Bylaws of Seagull. There are various differences between the rights of Global
shareholders and the rights of Seagull shareholders. See "Comparative Rights of
Seagull and Global Shareholders" for a summary of the material differences
between the rights of holders of Global Common Stock and Seagull Common Stock.
RISK FACTORS AND OTHER CONSIDERATIONS
The following factors should be carefully considered by the shareholders of
Seagull and Global in evaluating the Merger.
PRICE FLUCTUATION. In determining whether to approve the transactions
pursuant to the Merger Agreement, Seagull and Global shareholders should
consider that the price of the Seagull Common Stock at the Effective Time, as
well as the prices at the date of this Joint Proxy Statement/Prospectus and at
the date of the Special Meetings, may vary as a result of changes in the
business, operations or prospects of Seagull, market assessments of the
likelihood that the Merger will be consummated and the timing thereof, general
market and economic conditions and other factors. Because the Effective Time may
occur at a later date than the date of the Special Meetings, there can be no
assurance that the trading price of Seagull Common Stock on the date of the
Special Meetings will be indicative of the price at which Seagull Common Stock
trades at or after the Effective Time. The Effective Time will occur as soon as
practicable following the Special Meetings and the satisfaction or waiver of the
other conditions set forth in the Merger Agreement. See "Certain Terms of the
Merger Agreement -- Conditions to the Merger."
ESSO SUEZ ACQUISITION. Seagull's pending Esso Suez Acquisition is subject
to a number of conditions, including obtaining governmental approvals and other
conditions outside the control of the parties, and no assurance can be given
that each of such conditions will be satisfied or waived by the appropriate
party. The pending Esso Suez Acquisition has a significant impact on certain of
the pro forma financial information contained in this Joint Proxy
Statement/Prospectus.
OTHER CONSIDERATIONS. Global shareholders should also consider that the
rights of Seagull Common Stock differ in certain respects from the rights of
holders of Global Common Stock. In addition, the shareholders of Seagull and
Global should consider the risks associated with integrating the two companies
and with the current operations of Seagull and Global and the future operations
of the combined company, such as the risks associated with foreign operations,
the uncertainty of reserve estimates, volatility of oil and gas prices,
competition, drilling and operating risks, government regulation and operating
hazards.
FORWARD-LOOKING INFORMATION
Information included in this Joint Proxy Statement/Prospectus, including
information incorporated by reference herein, contains forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act, including projections, estimates and expectations.
Those statements by their nature are subject to certain risks, uncertainties and
assumptions and will be influenced by various factors. Should one or more of
these statements or their underlying assumptions prove to be incorrect, actual
results could vary materially. See "Risk Factors and Other Considerations" and
"The Merger -- Factors Affecting Forward-Looking Statements."
11
<PAGE> 17
MARKET PRICES OF SEAGULL AND GLOBAL COMMON STOCK AND DIVIDEND INFORMATION
MARKET PRICES. Seagull Common Stock is traded on the NYSE under the symbol
"SGO," and Global Common Stock is traded on the NYSE under the symbol "GNR." The
following table sets forth, for the periods indicated, the range of high and low
per share sales prices for Seagull Common Stock and Global Common Stock as
reported on the NYSE Composite Tape.
<TABLE>
<CAPTION>
SEAGULL GLOBAL
---------------- ----------------
HIGH LOW HIGH LOW
------- ------- ------- -------
<S> <C> <C> <C> <C>
1994
First Quarter..................................... $25 5/8 $23 5/8 $ 8 3/8 $ 6 3/4
Second Quarter.................................... 29 3/4 23 7 7/8 6 3/8
Third Quarter..................................... 28 5/8 22 3/4 8 1/8 7 1/8
Fourth Quarter.................................... 26 17 5/8 9 5/8 6 5/8
1995
First Quarter..................................... $20 $15 1/4 $ 8 3/4 $ 7
Second Quarter.................................... 19 7/8 16 1/2 12 3/8 7 1/2
Third Quarter..................................... 22 1/2 16 11 3/4 9
Fourth Quarter.................................... 22 1/4 16 5/8 10 5/8 9 3/8
1996
First Quarter..................................... $22 7/8 $17 1/8 $13 7/8 $10 3/8
Second Quarter.................................... 25 1/2 21 16 1/2 13 1/8
Third Quarter (through August 5).................. 26 17 5/8 16 3/8 14 1/8
</TABLE>
On July 19, 1996, the last trading day prior to the joint announcement by
Seagull and Global that they had executed the Merger Agreement, the per share
closing prices of Seagull Common Stock and Global Common Stock, as reported on
the NYSE Composite Tape, were $19 3/4 and $15 5/8 respectively. See the cover
page of this Joint Proxy Statement/Prospectus for recent closing prices of
Seagull Common Stock and Global Common Stock.
Following the Effective Time, the Seagull Common Stock will continue to be
traded on the NYSE, the Global Common Stock will cease to be traded on the NYSE,
and there will be no further market for the Global Common Stock.
DIVIDENDS. Since becoming a public entity in 1981, Seagull has never paid
any cash dividends on the Seagull Common Stock. Global has never paid cash
dividends on the Global Common Stock. The decision of Seagull to pay cash
dividends in the future will depend upon Seagull's earnings and financial
condition and such other factors as Seagull's Board of Directors deems relevant.
Seagull's credit agreement (the "Credit Agreement") restricts the declaration or
payment of dividends on and repurchases of Seagull Common Stock unless certain
tests have been met and after making such dividend payment such tests continue
to be met. These restrictions do not apply to dividends payable solely in the
form of additional shares of Seagull Common Stock or to dividends payable on up
to $150 million of preferred stock of Seagull.
12
<PAGE> 18
SEAGULL
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected financial information for each of the years ended
December 31, 1991 through 1995 have been derived from Seagull's audited
consolidated financial statements. The selected consolidated financial
information as of June 30, 1996 and for the six months ended June 30, 1996 and
1995 have been derived from the unaudited consolidated financial statements of
Seagull, have been prepared on the same basis as the other financial statements
of Seagull and, in the opinion of Seagull, reflect and include all adjustments
necessary for a fair presentation of the financial position and results of
operations of Seagull for such periods. The information set forth below is
qualified by reference to and should be read in conjunction with the
consolidated financial statements and related notes included in Seagull's Annual
Report on Form 10-K for the year ended December 31, 1995 and its Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996, both of which are
incorporated by reference in this Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------------- ------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SELECTED INCOME STATEMENT DATA(1)(2):
Revenues................................ $ 196,435 $ 176,337 $ 336,273 $ 408,104 $ 377,165 $ 238,829 $248,537
Costs of operations:
Operating costs....................... 73,470 83,230 152,002 174,452 167,355 135,810 156,225
Exploration charges................... 14,841 14,019 29,555 26,888 17,265 9,905 9,227
Depreciation, depletion and
amortization........................ 62,320 66,584 124,790 144,697 116,556 63,231 52,902
Impairment of gas and oil
properties(3)....................... -- 44,376 44,376 -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- --------
150,631 208,209 350,723 346,037 301,176 208,946 218,354
---------- ---------- ---------- ---------- ---------- ---------- --------
Operating profit (loss)................. 45,804 (31,872) (14,450) 62,067 75,989 29,883 30,183
Other (income) expense:
General and administrative(4)......... 7,933 12,501 19,167 10,252 11,666 10,099 8,427
Interest expense...................... 22,654 27,931 52,814 51,550 36,753 17,574 17,875
Interest income and other(5).......... (852) (749) (84,751) (667) (5,708) (4,705) (1,426)
---------- ---------- ---------- ---------- ---------- ---------- --------
29,735 39,683 (12,770) 61,135 42,711 22,968 24,876
---------- ---------- ---------- ---------- ---------- ---------- --------
Earnings (loss) before income taxes..... 16,069 (71,555) (1,680) 932 33,278 6,915 5,307
Income tax expense (benefit)............ 7,130 (25,880) (2,312) (2,314) 6,080 2,500 200
---------- ---------- ---------- ---------- ---------- ---------- --------
Earnings (loss) before cumulative effect
of changes in accounting principles... 8,939 (45,675) 632 3,246 27,198 4,415 5,107
Cumulative effect of changes in
accounting principles(6).............. -- -- -- -- -- 2,273 --
---------- ---------- ---------- ---------- ---------- ---------- --------
Net earnings (loss)..................... $ 8,939 $ (45,675) $ 632 $ 3,246 $ 27,198 $ 6,688 $ 5,107
========== ========== ========== ========== ========== ========== ========
Earnings (loss) per share:
Earnings (loss) before cumulative
effect of changes in accounting
principles.......................... $ 0.24 $ (1.27) $ 0.02 $ 0.09 $ 0.76 $ 0.17 $ 0.23
Cumulative effect of changes in
accounting principles(6)............ -- -- -- -- -- 0.09 --
---------- ---------- ---------- ---------- ---------- ---------- --------
Net earnings (loss)................... $ 0.24 $ (1.27) $ 0.02 $ 0.09 $ 0.76 $ 0.26 $ 0.23
========== ========== ========== ========== ========== ========== ========
Weighted average number of common shares
outstanding (in thousands)(7)......... 37,062 36,107 36,717 36,904 35,790 25,583 22,692
========== ========== ========== ========== ========== ========== ========
SELECTED BALANCE SHEET DATA(1)(2):
Property, plant and equipment, net...... $1,017,670 $1,044,833 $1,011,415 $1,124,307 $ 933,189 $ 937,802 $500,255
Total assets............................ 1,191,564 1,198,855 1,198,796 1,299,550 1,118,251 1,102,964 618,552
Long-term debt.......................... 522,632 628,690 545,343 620,805 459,787 608,011 219,154
Shareholders' equity(7)(8).............. 459,533 398,261 447,668 441,101 439,379 243,673 235,797
SELECTED CASH FLOW DATA(1)(2):
Net cash provided by operating
activities............................ $ 102,883 $ 36,230 $ 63,283 $ 170,925 $ 119,761 $ 72,187 $ 69,773
Capital expenditures.................... 52,468 34,791 85,347 150,252 112,042 43,651 71,709
SELECTED FINANCIAL RATIOS(1)(2):
Long-term debt to total
capitalization........................ 53.2% 61.2% 54.9% 58.5% 51.1% 71.4% 48.2%
EBITDAX to interest(9).................. 4.9 2.7 3.0 4.2 5.3 5.4 4.6
</TABLE>
- ---------------
(1) Includes (i) certain gas and oil assets purchased from Mesa Limited
Partnership since March 8, 1991, (ii) Seagull Mid-South Inc. since December
31, 1992 and (iii) Seagull Energy Canada Ltd. since January 4, 1994, the
respective dates of acquisition of these entities or assets.
(2) On September 25, 1995, Seagull sold substantially all of its gas gathering
and gas processing assets to a third party.
(3) Effective March 31, 1995, Seagull adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of.
(4) The six months ended June 30, 1995 and the year ended December 31, 1995
include one-time pre-tax charges of $8 million for expenses related to a
workforce reduction and consolidation.
(5) The year ended December 31, 1995 includes a pre-tax gain of $82 million on
the sale of substantially all of Seagull's gas gathering and gas processing
assets.
(6) Effective January 1, 1992, Seagull adopted SFAS No. 109, Accounting for
Income Taxes, and SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions.
(7) Reflects the December 1991 and February 1993 issuance and sale of 3,000,000
and 10,120,000 shares, respectively, of Seagull Common Stock pursuant to
underwritten public offerings. Number of shares for all periods adjusted to
reflect two-for-one split of the Seagull Common Stock effected June 4, 1993.
(8) Seagull has not declared any cash dividends on the Seagull Common Stock
since it became a public entity in 1981.
(9) "EBITDAX" represents net earnings (excluding gains and losses on sales and
retirements of assets, non-cash write downs and charges resulting from
accounting convention changes) before deduction for federal and state taxes,
interest expense, dry hole expense and depreciation, depletion and
amortization expense, all determined in accordance with generally accepted
accounting principles.
13
<PAGE> 19
GLOBAL
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected financial information for each of the years ended
December 31, 1991 through 1995 have been derived from Global's audited
consolidated financial statements. The selected consolidated financial
information as of June 30, 1996 and for the six months ended June 30, 1996 and
1995 have been derived from the unaudited consolidated financial statements of
Global, have been prepared on the same basis as the other financial statements
of Global and, in the opinion of Global, reflect and include all adjustments
necessary for a fair presentation of the financial position and results of
operations of Global for such periods. The information set forth below is
qualified by reference to and should be read in conjunction with the
consolidated financial statements and related notes included in Global's Annual
Report on Form 10-K for the year ended December 31, 1995 and its Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996, both of which are
incorporated by reference in this Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Revenues................................ $ 55,516 $ 36,598 $ 78,457 $ 62,943 $ 75,084 $ 57,506 $ 60,194
Costs of operations:
Operating costs(1).................... 23,638 18,738 40,964 36,960 54,651 38,794 35,281
Exploration charges................... 5,944 7,020 11,768 19,325 6,946 6,522 11,925
Depreciation, depletion and
amortization........................ 12,278 11,584 21,520 9,837 8,376 10,247 17,592
Impairment of long-lived assets(2).... -- -- 4,466 -- -- -- --
Loss on producing property
transactions(3)..................... -- -- -- -- -- -- 28,515
-------- -------- -------- -------- -------- -------- --------
41,860 37,342 78,718 66,122 69,973 55,563 93,313
-------- -------- -------- -------- -------- -------- --------
Operating profit (loss)................. 13,656 (744) (261) (3,179) 5,111 1,943 (33,119)
Other (income) expense:
Interest expense...................... 29 77 164 124 101 246 5,403
Interest income and other............. (531) (838) (3,149) (1,706) (6,009) (1,929) (5,553)
-------- -------- -------- -------- -------- -------- --------
(502) (761) (2,985) (1,582) (5,908) (1,683) (150)
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) before income taxes..... 14,158 17 2,724 (1,597) 11,019 3,626 (32,969)
Income tax expense...................... 7,012 4,674 9,031 6,656 6,532 6,472 6,136
-------- -------- -------- -------- -------- -------- --------
Net earnings (loss)(4).................. $ 7,146 $ (4,657) $ (6,307) $ (8,253) $ 4,487 $ (2,846) $(39,105)
======== ======== ======== ======== ======== ======== ========
Earnings (loss) per share:
Primary............................... $ 0.24 $ (0.16) $ (0.21) $ (0.28) $ 0.16 $ (0.12) $ (1.66)
======== ======== ======== ======== ======== ======== ========
Fully diluted......................... $ 0.23 $ (0.16) $ (0.21) $ (0.28) $ 0.15 $ (0.12) $ (1.66)
======== ======== ======== ======== ======== ======== ========
Weighted average number of common shares
outstanding (in thousands)............ 29,657 29,458 29,497 29,661 28,361 23,593 23,515
======== ======== ======== ======== ======== ======== ========
SELECTED BALANCE SHEET DATA:
Property, plant and equipment, net...... $127,034 $100,974 $118,763 $ 93,349 $ 71,110 $ 61,001 $ 71,539
Total assets............................ 167,328 145,549 160,329 154,500 161,931 131,511 140,177
Long-term debt.......................... 16,250 -- 11,764 1,275 -- 55 234
Redeemable bearer shares................ 16,265 17,130 16,591 17,467 18,375 -- --
Shareholders' equity(5)................. 110,912 103,651 102,226 107,756 120,376 114,653 118,156
SELECTED CASH FLOW DATA:
Net cash provided by operating
activities............................ $ 21,198 $ 27,793 $ 54,751 $ 38,189 $ 19,531 $ 6,713 $ 15,071
Capital expenditures.................... 22,800 23,881 58,754 52,301 25,852 7,873 24,649
SELECTED FINANCIAL RATIOS:
Long-term debt to capitalization........ 22.7% 14.2% 21.7% 14.8% 13.2% --% 0.2%
</TABLE>
- ---------------
(1) Global's general and administrative expenses are deducted in determining
operating profit by including the expenses in operating costs.
(2) Effective December 31, 1995, Global adopted SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
(3) Represents losses incurred on sale of oil and gas properties.
(4) Effective January 1, 1993, Global adopted SFAS No. 109, Accounting for
Income Taxes, with no impact on 1993 net income.
(5) No cash dividends have ever been declared on the Global Common Stock.
14
<PAGE> 20
SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following selected unaudited pro forma information is based on the
historical consolidated financial statements of Seagull, Esso Suez Inc. ("Esso
Suez") and Global. The unaudited pro forma balance sheet data as of June 30,
1996 gives effect to (i) the Merger using the pooling of interests method of
accounting for business combinations and (ii) the Esso Suez Acquisition (as
hereinafter defined), financed under Seagull's revolving credit facilities (the
"Credit Facilities") and using the purchase method of accounting, as if the
acquisition had occurred on June 30, 1996. The selected unaudited pro forma
income statement data for the six months ended June 30, 1996 and each of the
years in the three-year period ended December 31, 1995 give effect to (i) the
Merger using the pooling of interests method of accounting for business
combinations and (ii) the Esso Suez Acquisition, financed under the Credit
Facilities, as if the acquisition had occurred on January 1, 1995.
The transactions contemplated by the Merger Agreement will be accounted for
under the pooling of interests method whereby the assets, liabilities and
results of operations of Seagull and Global are combined using the historical
cost-based amounts of the two separate entities. Where different methods were
used, adjustments have been made to conform the methods of accounting used by
Seagull and Global. The pro forma earnings per share data assumes the maximum
Common Stock Exchange Ratio of .88. See "Unaudited Pro Forma Condensed Financial
Information."
The information set forth below should be read in conjunction with the
unaudited pro forma condensed financial statements and related notes thereto
included elsewhere in this Joint Proxy Statement/Prospectus. The unaudited pro
forma information presented does not purport to be indicative of actual results,
if the combinations had been in effect on the dates or for the periods
indicated, or of future results.
<TABLE>
<CAPTION>
SEAGULL/GLOBAL SEAGULL/GLOBAL/ESSO SUEZ
------------------------------------------------- -------------------------
SIX MONTHS SIX MONTHS YEAR
ENDED YEAR ENDED DECEMBER 31, ENDED ENDED
JUNE 30, ------------------------------------ JUNE 30, DECEMBER 31,
1996 1995 1994 1993 1996 1995
---------- ---------- ---------- ---------- ---------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Revenues................................. $ 251,951 $ 414,730 $ 471,047 $ 452,249 $ 278,853 $ 491,039
Costs of operations:
Operating costs........................ 93,385 187,410 204,821 214,342 98,499 199,606
Exploration charges.................... 20,185 40,223 43,813 21,811 20,185 40,223
Depreciation, depletion and
amortization......................... 75,198 147,410 156,934 127,332 82,790 169,523
Impairment of long-lived assets(1)..... -- 48,842 -- -- -- 48,842
--------- ---------- ---------- ---------- --------- ----------
188,768 423,885 405,568 363,485 201,474 458,194
--------- ---------- ---------- ---------- --------- ----------
Operating profit (loss).................. 63,183 (9,155) 65,479 88,764 77,379 32,845
Other (income) expense:
General and administrative(2).......... 11,656 24,723 16,843 19,330 11,656 24,723
Interest expense....................... 22,683 52,978 51,674 36,854 24,747 57,602
Interest income and other(3)........... (1,383) (87,900) (2,373) (11,717) (1,433) (87,944)
--------- ---------- ---------- ---------- --------- ----------
32,956 (10,199) 66,144 44,467 34,970 (5,619)
--------- ---------- ---------- ---------- --------- ----------
Earnings (loss) before income taxes...... 30,227 1,044 (665) 44,297 42,409 38,464
Income tax expense....................... 14,849 2,782 3,740 16,411 20,693 24,007
--------- ---------- ---------- ---------- --------- ----------
Net earnings (loss)...................... $ 15,378 $ (1,738) $ (4,405) $ 27,886 21,716 14,457
========= ========== ========== ========== ========= ==========
Earnings (loss) per share................ $ 0.24 $ (0.03) $ (0.07) $ 0.46 $ 0.34 $ 0.23
========= ========== ========== ========== ========= ==========
Weighted average number of common shares
outstanding (in thousands)............. 63,160 62,674 63,006 60,748 63,160 62,674
========= ========== ========== ========== ========= ==========
SELECTED BALANCE SHEET DATA:
Property, plant and equipment, net....... $1,144,704 $1,130,178 $1,217,656 $1,004,299 $1,199,051 $1,189,078
Total assets............................. 1,358,892 1,359,125 1,454,050 1,280,182 1,429,148 1,433,925
Long-term debt........................... 538,882 557,107 622,080 459,787 606,882 625,107
Redeemable bearer shares................. 16,265 16,591 17,467 18,375 16,265 16,591
Shareholders' equity..................... 576,256 556,412 551,437 561,734 576,256 556,412
SELECTED FINANCIAL RATIOS:
Long-term debt to total capitalization... 49.1% 50.8% 53.7% 46.0% 52.0% 53.6%
EBITDAX to interest...................... 6.1 3.7 4.6 5.9 6.5 4.5
</TABLE>
- ---------------
(1) During 1995, Seagull and Global adopted SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
resulting in pre-tax non-cash charges of $44.4 million and $4.5 million,
respectively.
(2) The year ended December 31, 1995 includes one-time pre-tax charges of $8
million for expenses related to Seagull's workforce reduction and
consolidation.
(3) The year ended December 31, 1995 includes a pre-tax gain of $82 million on
the sale of substantially all of Seagull's gas gathering and gas processing
assets.
15
<PAGE> 21
COMPARATIVE PER SHARE DATA
Set forth below are the net earnings (loss) and book value per share data
for Seagull and Global on an historical basis, a pro forma basis for Seagull and
an equivalent pro forma basis for Global. The Seagull pro forma data was derived
by combining historical consolidated financial information of Seagull, Esso Suez
and Global using the purchase method of accounting for Esso Suez and the pooling
of interests method of accounting for Global, all on the basis described under
"Selected Unaudited Pro Forma Financial Information" in this Summary. The
equivalent pro forma data for Global was calculated by multiplying the Seagull
pro forma per common share data by the maximum Common Stock Exchange Ratio of
.88. See "Unaudited Pro Forma Condensed Financial Statements." Seagull has not
paid any cash dividends on its Common Stock since becoming a public company in
1981, and Global has never paid any cash dividends on its Common Stock.
The information set forth below should be read in conjunction with the
respective audited and unaudited consolidated financial statements and related
notes of Seagull and Global incorporated by reference in this Joint Proxy
Statement/Prospectus and the unaudited pro forma condensed financial information
and notes thereto included elsewhere in this Joint Proxy Statement/Prospectus.
SEAGULL
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------
1996 1995 1994 1993
---------- ------ ------ ------
<S> <C> <C> <C> <C>
Historical Per Common Share Data:
Net earnings.......................................... $ 0.24 $ 0.02 $ 0.09 $ 0.76
Book value............................................ 12.60 12.35 12.22 12.19
Pro Forma Per Common Share Data with the Merger:
Net earnings (loss)................................... $ 0.24 $(0.03) $(0.07) $ 0.46
Book value............................................ 9.20 8.83
Pro Forma Per Common Share Data with
the Esso Suez Acquisition:
Net earnings.......................................... $ 0.41 $ 0.46
Book value............................................ 12.60 12.35
Pro Forma Per Common Share Data with the
Merger and the Esso Suez Acquisition:
Net earnings.......................................... $ 0.34 $ 0.23
Book value............................................ 9.20 8.83
</TABLE>
GLOBAL
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------
1996 1995 1994 1993
---------- ------ ------ ------
<S> <C> <C> <C> <C>
Historical Per Common Share Data:
Net earnings (loss)................................... $ 0.24 $(0.21) $(0.28) $ 0.16
Book value............................................ 3.73 3.46 3.67 4.01
Equivalent Pro Forma Per Common Share
Data with the Merger:
Net earnings (loss)................................... $ 0.21 $(0.03) $(0.06) $ 0.40
Book value............................................ 8.10 7.77
Equivalent Pro Forma Per Common Share Data
with the Merger and the Esso Suez Acquisition:
Net earnings.......................................... $ 0.30 $ 0.20
Book value............................................ 8.10 7.77
</TABLE>
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RISK FACTORS AND OTHER CONSIDERATIONS
RISK FACTORS AND OTHER CONSIDERATIONS WITH RESPECT TO THE MERGER
The following factors should be carefully considered by the shareholders of
Seagull and Global in evaluating the Merger.
PRICE FLUCTUATIONS. In determining whether to approve the transactions
pursuant to the Merger Agreement, Seagull and Global shareholders should
consider that the price of the Seagull Common Stock at the Effective Time, as
well as the prices at the date of this Joint Proxy Statement/Prospectus and at
the date of the Special Meetings, may vary as a result of changes in the
business, operations or prospects of Seagull, market assessments of the
likelihood that the Merger will be consummated and the timing thereof, general
market and economic conditions and other factors. Because the Effective Time may
occur at a later date than the date of the Special Meetings, there can be no
assurance that the sales price of Seagull Common Stock on the date of the
Special Meetings will be indicative of the sales price of Seagull Common Stock
at the Effective Time. The Effective Time will occur as soon as practicable
following the Special Meetings and the satisfaction or waiver of the other
conditions set forth in the Merger Agreement. See "Certain Terms of the Merger
Agreement -- Conditions to the Merger."
ESSO SUEZ ACQUISITION. Seagull's pending Esso Suez Acquisition is subject
to a number of conditions, and no assurance can be given that each of such
conditions will be satisfied or waived by the appropriate party. The pending
Esso Suez Acquisition has a significant impact on certain of the pro forma
financial information contained in this Joint Proxy Statement/Prospectus. See
"The Companies -- Seagull -- Recent Developments" and "Unaudited Pro Forma
Financial Information."
RISKS ASSOCIATED WITH INTEGRATING THE COMPANIES. Growth through
acquisitions entails certain risks that currently unanticipated difficulties may
arise in integrating the operations of the combining entities and that acquired
operations could be subject to unanticipated business uncertainties or
liabilities. Moreover, such combinations present the risk that the synergies
expected from the combined operations may not be realized. The various risks
associated with the operational integration of Seagull and Global and the
subsequent performance of the combined company may adversely affect the combined
company's future results of operations. For a description of the synergies that
the managements of Seagull and Global anticipate to be realized from the Merger,
see "Post-Merger Profile and Strategy," "The Merger -- Global's Reasons for the
Merger; Recommendation of Board of Directors of Global" and "The
Merger -- Seagull's Reasons for the Merger; Recommendation of Board of Directors
of Seagull."
DIFFERING SHAREHOLDER RIGHTS. Global shareholders should also consider that
the rights of holders of Seagull Common Stock differ in certain respects from
the rights of holders of Global Common Stock. For a discussion of the rights of
the Seagull Common Stock, see "Description of Capital Stock of Seagull" and
"Comparison of Rights of Seagull and Global Shareholders."
OPERATING RISKS
The following risk factors relating to the current operations of Seagull
and Global and the future combined operations of the companies should be
carefully considered by the shareholders of Seagull and Global.
FOREIGN OPERATIONS. A significant portion of Global's activities are
conducted in foreign countries, including Egypt, Cote d'Ivoire, Indonesia and
Tatarstan -- Russia. Such activities are subject to the usual risks associated
with foreign operations, including political and economic uncertainties, risks
of cancellation or unilateral modification of agreements, operating
restrictions, currency repatriation restrictions, expropriation, export
restrictions, the imposition of new taxes and the increase of existing taxes,
inflation, foreign exchange fluctuations and other risks arising out of foreign
government sovereignty over areas in which the operations are conducted. Global
has endeavored to protect itself against certain political and commercial risks
inherent in the venture. There is no certainty that the steps taken by Global
will provide adequate protection. If the
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Esso Suez Acquisition is consummated, Seagull's operations in Egypt also will be
subject to these risks. See "The Companies -- Seagull -- Recent Developments."
UNCERTAINTY OF RESERVE ESTIMATES. There are numerous uncertainties inherent
in estimating oil and natural gas reserves and their estimated values, including
many factors beyond the control of the producer. The reserve data set forth in
this Joint Proxy Statement/Prospectus represents only estimates. Reserve
engineering is a subjective process of estimating underground accumulations of
oil and natural gas that cannot be measured in an exact manner. The accuracy of
any reserve estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. As a result, estimates
of different engineers may vary.
In addition, estimates of reserves and of Seagull's and Global's future net
revenues from such reserves and the present value thereof are based on
assumptions regarding production levels, future oil and natural gas prices,
operating costs and other factors that may not prove to be correct over time.
Any significant variance in these assumptions could materially affect the
estimated quantity and value of reserves set forth in this Joint Proxy
Statement/Prospectus.
VOLATILITY OF OIL AND NATURAL GAS PRICES. Historically, the markets for oil
and natural gas have been volatile and are likely to continue to be volatile in
the future. Prices for oil and natural gas are subject to wide fluctuation in
response to relatively minor changes in the supply of and demand for oil and
natural gas, market uncertainty and a variety of additional factors that will be
beyond the control of Seagull and Global. These factors include the level of
consumer product demand, weather conditions, proximity and capacity of natural
gas pipelines and other transportation facilities, domestic and foreign
governmental regulations, the price and availability of alternative fuels,
political conditions in the Middle East, the foreign supply of oil and natural
gas, the price of foreign imports and overall economic conditions. It is
impossible to predict future oil and natural gas price movements with any
certainty. Declines in oil and natural gas prices may adversely affect the
financial condition, liquidity and results of operations of Seagull, Global and
the combined company. Lower oil and natural gas prices also may reduce the
amount of oil and natural gas reserves that Seagull, Global and the combined
company can produce economically.
COMPETITION. The oil and gas business is highly competitive in both the
exploration and the acquisition of reserves and in the marketing of oil and gas
production. Exploration for oil and gas is subject to a high degree of risk, and
Global and Seagull face intense competition from present and potential
competitors, many of whom have greater resources than Global and Seagull.
DRILLING AND OPERATING RISKS. Large expenditures are required to locate and
acquire properties and to drill exploratory and development wells, and there can
never be certainty that such expenditures will result in the discovery of oil
and gas reserves in commercial quantities sufficient to replace reserves
currently being produced and sold. In certain areas where Global operates, even
where natural gas or crude oil is present in substantial quantities, there may
be no means to transport the gas or oil to market.
GOVERNMENT REGULATION. The operations of Seagull and Global have been, and
in the future from time to time may be, affected by political developments in
countries in which they operate and by federal, state and local laws and
regulations, such as restrictions on production, changes in taxes, royalties and
other amounts payable to governments or governmental agencies, price controls
and environmental protection regulations.
OPERATING HAZARDS. The exploration, development, and production of crude
oil and natural gas are also subject to such operating risks as fires, blowouts,
pollution and other hazards. In many cases, insurance for such risk is
unavailable or prohibitively expensive, and the occurrence of certain uninsured
hazards could have a material adverse effect on financial position and operating
results of Global and Seagull.
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THE COMPANIES
SEAGULL
Seagull is an independent energy company primarily engaged in natural gas
exploration, development and production with its operations focused offshore
Texas and Louisiana in the Gulf of Mexico and onshore in three principal
geographic regions: (i) western Oklahoma and the Texas Panhandle; (ii) the
Arklatex area in eastern Texas and northern Louisiana and the Arkoma Basin in
eastern Oklahoma and western Arkansas; and (iii) western Canada. Seagull's other
business activities are also natural gas related: (i) natural gas marketing and
pipeline engineering, design, construction and operation; and (ii) natural gas
transmission and distribution in Alaska.
GAS AND OIL OPERATIONS. Gas and oil operations consist of Seagull's
exploration and production activities and its natural gas marketing and pipeline
engineering, design, construction and operation activities.
Exploration and Production. Seagull has interests in 2,624 producing
natural gas wells and 217 producing oil wells located on approximately 1,261,000
gross (603,000 net) acres held by production with estimated proved reserves of
21.1 MMbbls of oil and 986 Bcf of natural gas at December 31, 1995. E&P is
Seagull's primary growth area. This growth was accomplished predominantly
through acquisitions: HO&M in 1988, Houston Oil Trust in 1989, Wacker Oil Inc.
in 1990, certain gas and oil assets purchased from Mesa Limited Partnership in
1991, Arkla Exploration Company in 1992 and Novalta Resources Inc. in 1994.
Seagull's ongoing North American exploration program has been concentrated
in the Gulf of Mexico, primarily in shallow waters off the central Texas and
Louisiana Gulf Coast. Seagull's other exploration activities outside North
America consist of several production licenses awarded to two exploration
groups, which include Seagull, in United Kingdom waters. Seagull currently has
no producing properties in the United Kingdom waters.
Seagull has in the past financed its E&P activities through internally
generated funds and participation by industry partners on a prospect-by-prospect
basis. Seagull believes that its gas and oil exploration and development
activities in the foreseeable future will be financed by internally generated
funds. In 1996, Seagull expects E&P capital expenditures to total approximately
$142 million. Of this amount, about $58 million will be devoted to exploration,
primarily in the Gulf of Mexico, $75 million to development and $9 million to
leasehold acquisitions. By comparison, 1995 capital expenditures for E&P
activities totaled $76 million. Management believes that Seagull's capital
resources will be sufficient to finance current and forecasted operations.
Gas Marketing. Seagull actively provides marketing services geared toward
matching gas supplies available in major producing areas with attractive markets
available in the Midwest, Northwest, Mid-Atlantic, Appalachian and
Texas/Louisiana Gulf Coast areas. The matching process includes arranging
transportation on a network of open-access pipelines on a firm or interruptible
basis. Seagull contracts to provide natural gas and oil to various customers and
aggregates supplies from various sources including third-party producers,
marketing companies, pipelines, financial institutions and its own production.
In 1995, Seagull initiated an active risk management program for both its
own E&P production and third party activities, utilizing such derivative
financial instruments as futures contracts, options and swaps. The primary
objective of the risk management program is to help ensure more stable cash
flow. However, Seagull expects to leave the majority of its own E&P production
either unhedged or protected only from price decreases so that it can benefit
from expected gas price strengthening. The risk management program also is an
important part of its third party marketing efforts, allowing Seagull to convert
a customer's requested price to a price structure that is consistent with
Seagull's overall pricing strategy.
Pipeline Operations and Construction. Seagull operates certain pipelines
owned by other companies. In some cases, the operating agreements provide for
reimbursement of expenses incurred in connection with operations plus a profit
margin. In other cases, Seagull receives a negotiated annual fee. Seagull also
builds pipelines for other companies for which it receives construction fees
that are fixed, cost-plus or a combination of both.
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ALASKA TRANSMISSION AND DISTRIBUTION. Seagull's Alaskan operations
distribute natural gas to approximately 92,100 residential, commercial,
industrial and electric power generation customers in the greater Anchorage area
and transport gas through approximately 350 miles of natural gas transmission
pipelines. Natural gas is readily available in Seagull's Alaskan service area,
and existing contractual arrangements provide for a stable natural gas supply at
a reasonable cost into the next decade.
BUSINESS STRATEGY. Historically, Seagull has concentrated on natural gas as
the fuel of choice to pursue in first maintaining and then increasing its base
of proved reserves and its ability to sustain its productive capacity.
Generally, Seagull has considered that its exploitative activities could allow
it to maintain its productive capacity while exploratory activities could
provide incremental growth, both in productive capacity and in Seagull's base of
proved reserves.
Two other tenants also have been crucial in Seagull's historical
development of its E&P activities. First, Seagull has chosen to curtail gas
production when it considered prices unfavorable, preferring instead to defer
production until prices strengthened. Second, Seagull has made it a practice to
limit capital expenditures to a level that can be funded by internally generated
cash flow.
As Seagull has grown, especially since acquiring Arkla Exploration Company
in late 1992, it has begun the process of expanding its E&P focus outside the
United States, recognizing that potentially larger reserve deposits were more
likely to be found in such areas. Seagull also recognized that pursuit of
international reserves would probably increase the component of crude oil
reserves in its overall mix of oil and gas reserves.
Seagull's first international venture was its acquisition of Novalta
Resources Inc. in Canada in early 1994, followed later that same year by its
entry into an exploratory venture in offshore waters of the United Kingdom. In
the interim, Seagull has carefully studied the potential for successful E&P
ventures in many other areas and, as a result, has identified countries where a
requisite combination of political, economic and geological/geophysical risks
are deemed to be acceptable for investment. Egypt was identified as one of those
countries.
In the future, Seagull will strive to grow further its base of proved
reserves and its productive capacity through a combination of internal
exploitative and exploratory drilling and external acquisitions. Such activities
will be conducted in both the United States and various appropriate
international areas.
RECENT DEVELOPMENTS. On July 22, 1996, Seagull announced that it had agreed
to purchase the stock (the "Esso Suez Acquisition") of Esso Suez Inc. ("Esso
Suez") and certain assets of Esso Egypt Limited ("EEL") from Exxon Corporation
("Exxon"). Esso Suez holds a 100 percent interest in the East Zeit oil producing
concession in the offshore Gulf of Suez, where current gross production averages
approximately 16,000 barrels of crude oil per day. EEL owns the entire operating
interest in the South Hurghada exploration concession located onshore on the
coast of the Gulf of Suez approximately 250 miles south of Cairo.
The total gross purchase price, including cash and certain receivables,
will be approximately $168 million, including $4.5 million allocated to the
South Hurghada exploration concession. The prompt collection of certain
receivables will preclude any necessity for financing beyond approximately $68
million.
Seagull estimates that the East Zeit concession area will contain 17.4
million net barrels of proved oil reserves as of the expected closing date.
Substantial additional reserves are expected to result from exploitation
drilling on several identified, multiple zone reservoir locations. The
63,000-acre South Hurghada concession contains two existing oil discoveries as
well as a number of currently drillable exploratory prospects and substantial
additional exploration and exploitation potential. The consummation of the Esso
Suez Acquisition is subject to certain conditions, including obtaining
governmental approvals and other conditions outside the control of the parties,
and no assurance can be given that each of such condition will be satisfied or
waived by the relevant party. See "Risk Factors and Other Considerations -- Risk
Factors and Other Considerations with respect to the Merger -- Esso Suez
Acquisition."
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MERGER SUB
Merger Sub is a wholly owned subsidiary of Seagull incorporated on July 22,
1996 in the State of New Jersey for the sole purpose of effecting the Merger.
Merger Sub presently conducts no business and has no material assets or
liabilities.
GLOBAL
Global was incorporated in New Jersey in 1983 and is the successor to
Global Natural Resources PLC, a company organized in 1970 under the laws of the
United Kingdom. Global is an independent producer of oil and natural gas and has
operations in the United States, Egypt, Cote d'Ivoire, Tatarstan-Russia and
Indonesia. The principal executive offices of Global are located at 5300
Memorial Drive, Suite 800, Houston, Texas 77007-8295.
BUSINESS STRATEGY. In 1992, Global adopted a two-fold strategy to direct
internally generated cash at growing Global's base domestic assets, while
directing the balance sheet cash primarily towards international opportunities.
The primary objective is to generate significant growth in assets by means of
exploratory drilling, both domestically and internationally.
DOMESTIC ACTIVITIES. In general, Global's domestic operations focus on oil
and gas exploration and development for its own interest or in conjunction with
others. In this connection, Global may develop its own prospects and "farm-out"
a portion of such prospects by assigning interests to third parties or "farm-in"
prospects by acquiring interests from third parties. Global continually seeks to
add to its seismic database, from which it will identify suitable opportunities
of reserve potential and geologic risk.
Recently Global's domestic activities have been conducted principally in
the offshore Gulf of Mexico and gulf coast areas, and the majority of
expenditures in 1996 are planned for such areas.
Global's principal domestic activities during 1995 were similarly
concentrated in the Texas gulf coast and offshore Gulf of Mexico. During 1995,
Global continued to expand its seismic data base, from which it identifies
opportunities of suitable reserve potential and geologic risk. One of the six
exploratory wells completed in 1995 was developed and operated by Global. In
addition, Global will continue evaluating farm-in opportunities from other
companies.
USAgas Pipeline, Inc. ("USAgas"), a wholly owned subsidiary of Global, is
engaged in the operation and development of natural gas gathering and
transmission systems, natural gas processing and treating plants, and the
marketing and transportation of natural gas for Global and its joint interest
partners. Most sales of gas production have been to unaffiliated third parties
for spot market prices.
INTERNATIONAL ACTIVITIES. Most of Global's international activities have
been conducted through various types of joint ventures.
EGYPT. In August 1994, Global acquired a 25% operating interest in the 1.9
million acre Qarun block located in the western desert of Egypt. During 1994,
Global drilled two discoveries on this block (Qarun A and Qarun B) and added a
third discovery (Sakr) in 1995. Limited oil production began in the fourth
quarter of 1995. Global is proceeding with the development of this block
including construction of a pipeline, two 20,000 Bbls/d gross of oil production
trains and storage facilities which are projected to be operational in the
fourth quarter of 1996. In December 1995, Global signed concession agreements
for the 6.8 million acre East Beni Suef block which lies adjacent to the south
of the Qarun concession and the 460,000 acre Darag block located in the northern
portion of the Gulf of Suez. Global has a 50% operating interest in each block
and is the operator of East Beni Suef. The three Egyptian concessions require
the operating interest partners to pay 100% of the capital and operating costs.
A portion of the oil and gas produced and sold from the Concessions is available
to the operating interest partners to recover costs. The remaining oil and gas
produced and sold is divided between the Egyptian government and the working
interest partners. All Egyptian government royalties and the working interest
partners' Egyptian income taxes attributable to their share of Egyptian taxable
income (converted to Bbls of crude oil based on the value of such Bbls) are
included in the Egyptian government's share of petroleum.
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<PAGE> 27
COTE D'IVOIRE. In May 1993, Global acquired an interest in 335,320 gross
acres in block CI-11 offshore Cote d'Ivoire, West Africa. Global acquired a 10%
working interest in an area referred to as the "Special Area" and a 16% working
interest in an area referred to as the "Remaining Area." During 1995, Global
drilled and completed four development wells. First oil production occurred in
the second quarter of 1995 with initial gas production commencing in the fourth
quarter of 1995. Block CI-11 is currently producing approximately 20,000 Bbls/d
gross of oil and 50 MMcf/d gross of gas. In April 1995, Global and its working
interest partners signed a production sharing contract with the government of
Cote d'Ivoire on the 524,845 acre CI-12 block which lies adjacent to the west of
CI-11. In June 1996, Global signed a Memorandum of Understanding for the 249,290
acre CI-104 block which lies adjacent to the west of block CI-12 and anticipates
signing a production sharing contract for the CI-104 block in late August 1996.
Global has a 16.67% working interest in the CI-12 block and a 100% working
interest in the CI-104 block. In general, the working interest partners
(including Global) pay the capital and operating costs, with production split
between the Ivorian government and the working interest partners. Up to 40% (in
the case of Block CI-11), up to 50% (in the case of Block CI-12) and up to 75%
(in the case of Block CI-104) of the oil and gas produced and sold from the
acreage is available to the working interest partners to recover costs. The
remaining oil and gas produced and sold is divided between the Ivorian
government and the working interest partners. All Ivorian government royalties
and the working interest partners' Ivorian income taxes attributable to their
share of Ivorian taxable income (converted to Bbls of crude oil based on the
value of such Bbls) are included in the Ivorian government's share of petroleum.
TATARSTAN-RUSSIA. Global's Tatarstan activities began in 1990 and are
conducted through its 90% owned subsidiary, Texneft Inc. ("Texneft"), which has
a 50% interest in a joint venture ("Tatex") in Tatarstan, a republic which is
part of the Russian Federation. Texneft's 50% partner in the joint venture is
Tatneft, a Russian open joint stock company which operates the oil fields of
Tatarstan. Joint venture activities currently include three projects: (i) vapor
recovery, (ii) the development and operation of the Onbysk field and (iii) the
development and operation of the Suncheleevsky and Demkinsky fields.
INDONESIA. In Indonesia, Global has a 1.714% interest in a joint venture
for the exploration, development and production of oil and gas in East
Kalimantan, Indonesia, under a production sharing contract with Perusahaan
Pertambangan Minyak Dan Gas Bumi Negara, the state petroleum enterprise of
Indonesia.
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<PAGE> 28
POST-MERGER PROFILE AND STRATEGY
OIL AND GAS INTERESTS
As a result of the Merger, Seagull will have extensive interests in
domestic and international oil and gas properties. Following the Merger, Seagull
will have interests in an aggregate of approximately 2,220,000 gross (752,000
net) developed acres and 16,030,000 gross (8,889,000 net) undeveloped acres,
excluding interests associated with the Esso Suez Acquisition.
STRATEGY
After the Merger, Seagull will pursue its long-term goal of increasing
shareholder value through growing its reserve base of natural gas and crude oil
with a more balanced mix of assets. A higher percentage of the combined
company's proved reserves will represent crude oil and a significant percentage
will be located in international areas.
Seagull and Global bring disparate operational qualities to the post-merger
company. Seagull's management believes that Global's properties contain a
substantial number of exploratory prospects with significant upside potential.
In addition, Global brings a talented technical team that has developed an
attractive portfolio of both exploratory and exploitative prospects, primarily
in its key international areas. By contrast, Seagull brings a large portfolio of
long-lived domestic natural gas producing properties with substantial
exploitative upside and a large, stable cash flow base generated from gas and
oil sales and its non-E&P activities. By combining Global's portfolio of
properties and exploratory team with Seagull's properties, cash flow and
financial resources, Seagull and Global believe that exploratory and development
performance of the combined company will be enhanced. Specifically, the cash
flow that the combined company will be able to generate from E&P and non-E&P
activities following the Merger will enable the combined company to conduct
accelerated exploration and development programs on Global's international crude
oil properties. As a result, Seagull and Global believe that the combined
company will have the ability to generate material growth in both its base of
proved reserves and its capacity to produce natural gas and crude oil over the
next several years.
MANAGEMENT
If approved by the Seagull shareholders at the Seagull Special Meeting, at
the Effective Time, Seagull's Board of Directors will be increased from 11 to 14
members, and the Global Designees will fill the newly created vacancies. Global
has informed Seagull that Robert F. Vagt, R. A. Walker and Sidney R. Petersen
will be the Global Designees. All of the Global Designees currently are
directors of Global. See "Election of Directors."
In addition, following the Effective Time, Barry J. Galt will continue as
Chairman and Chief Executive Officer of Seagull, and Robert F. Vagt, currently
the Chairman, President and Chief Executive Officer of Global, will become
President and Chief Operating Officer of Seagull.
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THE SPECIAL MEETINGS
THE SEAGULL SPECIAL MEETING
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM. Only holders of record of
Seagull Common Stock at the close of business on the Record Date ( ,
1996) will be entitled to receive notice of and to vote at the Seagull Special
Meeting. On the Record Date, there were shares of Seagull Common Stock
outstanding. The holders of Seagull Common Stock are entitled to one vote per
share on each matter submitted to a vote at the Seagull Special Meeting. The
holders of a majority of the outstanding shares of Seagull Common Stock entitled
to vote must be present in person or by proxy at the Seagull Special Meeting in
order for a quorum to be present. Shares of Seagull Common Stock represented by
proxies that are marked "abstain" or which are not marked as to any particular
matter or matters and "broker non-votes" will be counted as shares present for
purposes of determining the presence of a quorum on all matters. "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.
In the event a quorum is not present in person or by proxy at the Seagull
Special Meeting, the Seagull Special Meeting is expected to be adjourned or
postponed.
MATTERS TO BE CONSIDERED. The Board of Directors of Seagull has unanimously
approved the Merger Agreement, the Merger and the other transactions
contemplated thereby, including the Share Issuance and the Election Proposal,
and recommends a vote FOR the approval thereof. See "The Merger -- Seagull's
Reasons for the Merger; Recommendation of the Board of Directors of Seagull."
At the date of this Joint Proxy Statement/Prospectus, the Board of
Directors of Seagull does not know of any business to be presented at the
Seagull Special Meeting other than as set forth in the notice accompanying this
Joint Proxy Statement/Prospectus. If any other matters should properly come
before the Seagull Special Meeting, it is intended that the shares represented
by proxies will be voted with respect to such matters in accordance with the
judgment of the persons voting such proxies.
VOTE REQUIRED. The Share Issuance requires the affirmative vote of a
majority of the shares of Seagull Common Stock represented in person or by proxy
and entitled to vote at the Seagull Special Meeting, which approval is required
for listing of the shares for trading on the NYSE. 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.
With respect to the Election Proposal, a plurality of the votes cast in
person or by proxy by the holders of Seagull Common Stock is required to elect a
director. Accordingly, under Texas law and Seagull's Articles of Incorporation
and Bylaws, abstentions and broker non-votes would have no effect on the
election of directors. Seagull shareholders may not cumulate their votes in the
election of directors.
SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN AFFILIATES. As of the Record
Date, directors and executive officers of Seagull and their affiliates were
beneficial owners of an aggregate of outstanding shares of Seagull Common
Stock, representing approximately % of the outstanding shares of Seagull
Common Stock entitled to vote at the Seagull Special Meeting and % of the
maximum and % of the minimum votes that could be required to approve the
Share Issuance. Each of the directors and executive officers of Seagull has
advised Seagull that he or she plans to vote or to direct the vote of all of the
outstanding shares of Seagull Common Stock beneficially owned by him or her in
favor of the Share Issuance and the Election Proposal.
THE GLOBAL SPECIAL MEETING
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM. Only holders of record of
Global Common Stock at the close of business on the Record Date ( ,
1996) will be entitled to receive notice of and to vote at the Global Special
Meeting. On the Record Date, there were shares of Global Common Stock
outstanding. The holders of Global Common Stock are entitled to one vote per
share on each matter submitted to a vote at the Global Special Meeting. The
holders of 33 1/3% of the outstanding shares of Global
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<PAGE> 30
Common Stock entitled to vote must be present in person or by proxy at the
Global Special Meeting in order for a quorum to be present. Shares of Global
Common Stock represented by proxies which are marked "abstain" or which are not
marked as to any particular matter or matters and broker non-votes will be
counted as shares present for purposes of determining the presence of a quorum
on all matters.
MATTERS TO BE CONSIDERED. At the Global Special Meeting, holders of shares
of Global Common Stock will consider and vote upon a proposal to approve and
adopt the Merger Agreement and the Merger. Holders of shares of Global Common
Stock entitled to vote also will consider and vote upon any other matter that
may properly come before the Global Special Meeting or any adjournment(s) or
postponement(s) thereof.
The Board of Directors of Global has unanimously approved the Merger
Agreement, the Merger and the other transactions contemplated thereby, and
recommends a vote FOR the approval and adoption of the Merger Agreement. See
"The Merger -- Global's Reasons for the Merger; Recommendation of the Board of
Directors of Global."
At the date of this Joint Proxy Statement/Prospectus, the Board of
Directors of Global does not know of any business to be presented at the Global
Special Meeting other than as set forth in the notice accompanying this Joint
Proxy Statement/Prospectus. If any other matters should properly come before the
Global Special Meeting, it is intended that the shares represented by proxies
will be voted with respect to such matters in accordance with the judgment of
the persons voting such proxies.
VOTE REQUIRED. The Merger Agreement must be approved and adopted by the
affirmative vote of the holders of a majority of the votes cast by holders of
Global Common Stock entitled to vote. Under New Jersey law, a vote cast as an
abstention will have the same legal effect as a vote against the proposal. A
broker non-vote will not be counted for purposes of determining whether a
majority has been achieved.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN AFFILIATES. As of the Record
Date, directors and executive officers of Global and their affiliates (including
Prudential) were beneficial owners of an aggregate of [7,504,349] shares of
Global Common Stock, representing approximately [25.3%] of the outstanding
shares of Global Common Stock entitled to vote at the Global Special Meeting and
% of the maximum and all of the minimum votes that could be required to adopt
and approve the Merger Agreement. Each of the directors and executive officers
of Global has advised Global that he or she plans to vote or to direct the vote
of all of the shares of Global Common Stock beneficially owned by him or her in
favor of the Merger Agreement.
Prudential, which owns an aggregate of 6,311,547 shares, or approximately
[21.2%] of the outstanding shares of Global Common Stock on the Record Date, has
agreed to vote all of such stock in favor of the Merger so long as the value of
Seagull Common Stock is not less than $17.00 per share, which value will be
calculated based on the average closing sales price of Seagull Common Stock for
a specified twenty-day period prior to the Global Special Meeting, and
Prudential has obtained from the Commission any approvals required under Section
9(a) or 2(a) of the 1935 Act. See "Voting Agreement."
VOTING OF PROXIES
Shares represented by all properly executed proxies received in time for
the Special Meetings and which have not been revoked will be voted at such
meetings in the manner specified by the holders thereof. Proxies which do not
contain an instruction to vote for or against or to abstain from voting on a
particular matter described in the proxy will be voted in favor of such matter.
It is not expected that any matter other than those referred to herein will
be brought before either of the Special Meetings. If, however, other matters are
properly presented, the persons named as proxies will vote in accordance with
their judgment with respect to such matters, unless authority to do so is
withheld in the proxy.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed Seagull or Global form of proxy does
not preclude a shareholder from voting in person. A shareholder may revoke a
proxy at any time prior to its exercise by submitting a later dated proxy with
respect to the same shares, by filing with the Secretary of Seagull (in the case
of a Seagull shareholder) or the Secretary of Global (in the case of a Global
shareholder) a duly executed revocation, or
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by voting in person at the meeting. Attendance at the relevant Special Meeting
will not in and of itself constitute a revocation of a proxy.
In the event a quorum is not present in person or by proxy at the Global
Special Meeting, the Global Special Meeting is expected to be adjourned or
postponed.
NO DISSENTERS' OR APPRAISAL RIGHTS
Holders of Global Common Stock who vote against the Merger will not be
entitled to dissenters' or appraisal rights under the NJBCA if the Merger is
consummated. Holders of Seagull Common Stock who vote against the Merger will
not be entitled to dissenters' or appraisal rights under the TBCA if the Merger
is consummated.
SOLICITATION OF PROXIES
Subject to the Merger Agreement, each of Seagull and Global will bear the
cost of the solicitation of proxies from its own shareholders, except that
Seagull and Global will share equally the cost of printing and mailing this
Joint Proxy Statement/Prospectus. In addition to solicitation by mail, the
directors, officers and employees of each corporation and its subsidiaries may
solicit proxies from shareholders of such corporation by telephone or telegram
or in person. Such directors, officers and employees will not be additionally
compensated for such solicitation but may be reimbursed for out-of-pocket
expenses in connection therewith. Arrangements also will be made with brokerage
houses and other custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of shares held of record by such
persons, and Seagull and Global will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in connection therewith.
Global has engaged the services of to distribute proxy
solicitation materials to brokers, banks and other nominees and to assist in the
solicitation of proxies from Global shareholders for a fee of $ plus
reasonable out-of-pocket expenses. Seagull has engaged the services of Georgeson
& Company Inc. to distribute proxy solicitation materials to brokers, banks and
other nominees and to assist in the solicitation of proxies from Seagull
shareholders for a fee of $ plus reasonable out-of-pocket expenses.
HOLDERS OF SEAGULL COMMON STOCK AND GLOBAL COMMON STOCK SHOULD NOT SEND
STOCK CERTIFICATES WITH THEIR PROXY CARDS.
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THE MERGER
The description of the Merger and the Merger Agreement contained in this
Joint Proxy Statement/Prospectus is qualified in its entirety by reference to
the Merger Agreement, a copy of which is included as Appendix A to this Joint
Proxy Statement/Prospectus and is incorporated herein by reference.
GENERAL
Seagull, Merger Sub and Global have entered into the Merger Agreement,
which provides that, subject to the satisfaction or waiver of the conditions set
forth therein (see "Certain Terms of the Merger Agreement-- Conditions to the
Merger"), Merger Sub will be merged with and into Global, and Global will be the
Surviving Corporation and a wholly owned subsidiary of Seagull. As soon as
practicable after the satisfaction or waiver (where permissible) of the
conditions under the Merger Agreement, the Certificate of Merger will be filed
with the Secretary of State of the State of New Jersey, and the time of such
filing will be the Effective Time unless otherwise provided in the Certificate
of Merger.
BACKGROUND OF THE MERGER
From time to time over the past several years, management of Global has
received inquiries from other oil and gas companies about possible corporate
transactions. Management of Global reviewed those inquiries, reported them to
Global's Board of Directors and conducted preliminary analyses to determine if
any form of corporate transaction or strategic alliance with those interested
parties would be consistent with Global's long-term growth plan to maximize
shareholder value. In every instance, management and the Global Board of
Directors concluded that the options presented and the ideas being considered
were not in Global's best interests. Further, in each instance management and
the Global Board of Directors elected to continue as an independent entity and
confirmed that Global was not for sale.
On April 4, 1996, representatives of DLJ approached Barry J. Galt,
Chairman, President and Chief Executive Officer of Seagull and other
representatives of Seagull, to ascertain whether Seagull might have an interest
in pursuing a combination with Global. On April 10, 1996, Mr. Galt authorized
representatives of DLJ to contact Robert F. Vagt, the Chairman, President and
Chief Executive Officer of Global, on behalf of Seagull.
On April 24, 1996, representatives of DLJ met with Mr. Vagt to provide him
with an overview of Seagull's financial condition and a summary of Seagull's
business activities and to explore in general terms the possibility of a
transaction between Seagull and Global. The meeting between DLJ and Mr. Vagt was
initiated by DLJ and was not solicited by Global. Subsequently, Mr. Galt
contacted Mr. Vagt and proposed a meeting to discuss a possible business
combination between Seagull and Global. On April 29, 1996, Mr. Galt and Mr. Vagt
met and discussed in general terms the possibility of a corporate transaction,
including, for example, a stock-for-stock merger.
Promptly following that meeting, Mr. Vagt reported to the members of the
Global Board of Directors that he had met with Mr. Galt to discuss a possible
transaction, and although the Global Board of Directors confirmed that Global
was not for sale, the Global Board of Directors authorized Mr. Vagt to continue
discussions with Seagull, to determine if a strategic alliance with Seagull was
in Global's best interests.
On May 14, 1996, Seagull held its annual meeting of shareholders. At a
meeting of the Seagull Board of Directors held the night before the annual
meeting, Seagull's management presented the concept of a possible business
combination with Global. The Seagull Board of Directors encouraged management to
pursue further discussions with Global regarding a potential combination.
On May 15, 1996, Global management, including Mr. Vagt, met again with DLJ
to continue their initial due diligence review of Seagull, to discuss Global's
and Seagull's respective business activities and to identify potential synergies
that would result from a combination. Thereafter from time to time, management
of Global and management of Seagull spoke and discussed their respective
businesses and otherwise shared information about their companies.
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On May 30, 1996, Mr. Galt, Mr. Vagt, other executives of Seagull and Global
and representatives of DLJ met at Seagull's headquarters. At the meeting, each
company gave an overview of its operations and business strategy in order to
help the other company determine whether to continue to proceed with the
possible business combination. On June 12, 1996, Mr. Galt and Mr. Vagt met to
further discuss a combination, and at the conclusion of the meeting they agreed
to continue to explore whether or not a transaction could be structured in a
manner that would be beneficial to the shareholders of both companies.
In June 1996, Global and Seagull continued to exchange information about
each company and met from time to time to answer questions and provide other
responses to inquiries, although specific merger proposals were not discussed.
On July 2, 1996, Mr. Vagt and Mr. Galt again met to review the status of
the ongoing discussions and due diligence, and Mr. Galt outlined a preliminary
structure of a combination of the two companies.
On July 3 and July 5, 1996, Mr. Vagt discussed with representatives of
Petrie Parkman, Global's financial advisor, the services Petrie Parkman could
render in evaluating a possible merger between Seagull and Global. On July 6,
1996, Global representatives met with Petrie Parkman representatives to provide
Petrie Parkman with information about Global in order to enable Petrie Parkman
to evaluate the financial merits of a possible transaction with Seagull. On July
8, 1996, Global and Seagull executed and delivered a Confidentiality Agreement
to facilitate the exchange of additional confidential information between the
two companies. Global management met and worked with representatives of Petrie
Parkman from July 8 through July 10 to enable Petrie Parkman to evaluate the
Global and Seagull businesses and to analyze the effect of a possible merger of
the two companies. On July 11, 1996, Global management and Global counsel met
with Petrie Parkman to review the status of Petrie Parkman's analysis, and
Global and Petrie Parkman executed and delivered a formal engagement letter
confirming the appointment of Petrie Parkman as Global's financial advisor.
Discussions and meetings between representatives of Global and Seagull
continued after this date. On July 12, 1996, management of Global presented
management of Seagull with a review of Global's international operations, and on
July 13, 1996, the parties met to review Global's domestic operations.
On Sunday, July 14, 1996, Mr. Galt and Mr. Vagt met and confirmed that both
companies were interested in continuing discussions about a merger, although
neither company was prepared to commit to any particular form or any particular
terms of a transaction, Mr. Galt also suggested that, if a transaction were ever
consummated, Mr. Vagt should consider continuing as an executive officer of
Seagull, and Mr. Vagt agreed to consider that suggestion and disclose that
possibility to the Global Board of Directors.
On that same day, the Global Board of Directors held a special telephonic
meeting to enable Global management to update the Global Board of Directors on
the status of the discussions with Seagull and to review with counsel the legal
duties imposed on directors when considering a merger transaction. Mr. Vagt
advised the Global Board that both Global and Seagull continued to conduct due
diligence reviews of the two companies. Following a discussion of the initial
results of the financial analysis by Petrie Parkman, the Global Board of
Directors reviewed the strategic benefits that could result from a merger, and,
while confirming again that Global was not for sale, the Global Board of
Directors authorized Global management to continue discussions with Seagull.
On July 15, 1996, counsel for Seagull distributed a proposed form of merger
agreement to Global and its counsel, as well as a proposed form of voting
agreement to be executed by Prudential in support of the merger.
On July 15, 1996, a meeting of Seagull's Board of Directors was held. At
that meeting, Mr. Galt gave the Seagull Board of Directors a brief overview of
the proposed transaction. In addition, Seagull's counsel presented to the
Seagull Board of Directors the terms and provisions of the proposed form of
merger agreement. Counsel also described for the Seagull Board the terms of the
proposed voting agreement with Prudential, and that Seagull was requesting, as a
condition to Seagull's entering into a merger agreement with Global, that
Prudential enter into an acceptable form of voting agreement in support of the
Merger.
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On July 16, 1996, Seagull's Board of Directors met again, and Mr. Galt and
other senior executives of Seagull gave a presentation of Global's business,
assets and financial performance, as well as certain pro forma financial
information related to the combined operations of the two companies.
Representatives of DLJ also presented financial and other information related to
Global and the combined operations of Seagull and Global. Although the Seagull
Board of Directors took no formal action, the Seagull Board of Directors
considered all of the matters presented to it at that meeting, as well as the
meeting held the night before, and encouraged Seagull's management to continue
discussions with Global with respect to a merger.
On July 15 and July 16, 1996, representatives of Global met with
representatives of Seagull to review, among other things, the reserves held by
Seagull and financial results and operations of Seagull.
On July 17, 1996, Global management met with Petrie Parkman to review
Petrie Parkman's memorandum to Global's Board of Directors regarding a possible
transaction with Seagull and authorized Petrie Parkman to deliver the memorandum
to the Global Board of Directors.
On July 18, 1996, counsel for Seagull and Global met to discuss the terms
of the merger agreement.
On July 19, 1996, the Global Board and counsel met to review the analysis
of the possible merger prepared by Petrie Parkman. Management of Global and
representatives of Petrie Parkman provided their analyses of the proposed merger
and various matters in connection with proposed structures for the Merger. The
Global Board of Directors also analyzed and discussed, together with Petrie
Parkman, Seagull's financial condition, oil and natural gas reserves and
business prospects and the potential strategic synergies that might result from
a merger of Global and Seagull, as well as the status of the negotiations
regarding the proposed form of merger agreement. In light of recent activity in
the price of Seagull Common Stock, the Global Board of Directors suggested that,
if the transaction were to proceed, a collar provision be included in any
exchange ratio to assure that in no event would Global shareholders receive less
than .72 shares of Seagull Common Stock for each share of Global Common Stock.
Based upon the information provided to the Global Board, the Global Board
of Directors determined to pursue discussions with Seagull based on a framework
suggested by management and Petrie Parkman, including a stock-for-stock exchange
of not more than .88, and not less than .72, shares of Seagull Common Stock for
each share of Global Common Stock.
The Board also instructed management to discuss with Seagull the
appointment of Mr. Vagt to a significant executive position with Seagull as a
condition to the Merger.
On July 20, 1996, representatives of Global and Seagull met and Seagull
confirmed its proposal for the Merger, which provided for a strategic merger in
which holders of Global Common Stock would receive up to .88, and not less than
.72, shares of Seagull Common Stock for each share of Global Common Stock held
by them. The Seagull proposal also included provisions for the continuation of
Mr. Vagt as President and Chief Operating Officer of Seagull and a requirement
that Prudential enter into an acceptable form of voting agreement in support of
the Merger.
On July 21, 1996, the Seagull Board of Directors again met with Seagull's
management, counsel and representatives from DLJ. Mr. Galt advised the Seagull
Board of Directors as to the status of the discussions with Global. Mr. Galt and
DLJ also reviewed for the Seagull Board of Directors recent market activity in
the Seagull Common Stock and the Global Common Stock and the expected market
reaction to the announcement of the transaction. Seagull's counsel reviewed the
terms of the proposed form of merger agreement. DLJ confirmed for the Seagull
Board of Directors that, in their opinion, the Common Stock Exchange Ratio was
fair to the holders of Seagull Common Stock from a financial point of view. The
Seagull Board of Directors considered all of the matters presented to it at that
meeting and previous meetings, and unanimously determined that the Merger is
fair to, and in the best interests of Seagull and its shareholders and approved
the Merger Agreement and the transactions contemplated thereby. It was the
consensus of the Seagull Board of Directors that the Merger Agreement be
executed as expeditiously as possible.
On July 21, 1996, the Global Board of Directors again met with management,
counsel and Petrie Parkman representatives and were advised that Seagull had
agreed to a collar on the exchange ratio and to
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retain Mr. Vagt as President and Chief Operating Officer. The Global Board of
Directors reviewed the terms of the Merger Agreement with management and
counsel, and Petrie Parkman confirmed that, in its opinion, the Merger
Consideration was fair to the holders of Global Common Stock. At the July 21
meetings, the Global Board of Directors unanimously declared the Merger fair to
and advisable and in the best interests of Global's shareholders and approved
the Merger and the Merger Agreement.
Following the board meetings of the two companies on July 21, 1996,
representatives of Seagull and Global met throughout the remainder of the day to
finalize the terms of the Merger Agreement. In addition, several discussions
were held with representatives from Prudential to finalize the terms of the
Voting Agreement. The Merger Agreement and Voting Agreement were executed early
in the morning on July 22, 1996.
GLOBAL'S REASONS FOR THE MERGER; RECOMMENDATION OF BOARD OF DIRECTORS OF GLOBAL
By a unanimous vote of the Board of Directors at a meeting held on July 21,
1996, the Global Board of Directors determined the Merger to be fair to and
advisable and in the best interests of Global and its shareholders and approved
the Merger and the Merger Agreement. As described above under "-- Background of
the Merger," the decision of the Global Board of Directors to declare the Merger
advisable and to approve the Merger and the Merger Agreement at its July 21st
Board meeting followed an extensive review of the strategic merits of the
Merger.
At its meetings held on July 14, 1996, July 19, 1996 and July 21, 1996, the
Global Board received the presentation of management and, in the July 19 and
July 21 meetings, the independent presentation of Petrie Parkman with respect to
the possible transaction, including reviews of, among other things: historical
information relating to the business, financial condition and results of
operations of Seagull and Global; information provided by Seagull and Global
management and reviewed and adjusted by Global management regarding the reserves
of Seagull and Global; information regarding the management of Seagull;
historical data relating to market prices and trading volumes of Seagull Common
Stock and Global Common Stock; market prices for Seagull Common Stock as
compared to those of other comparable publicly traded companies; and the
possible effects of the Merger on Seagull's financial condition and the possible
market effects of the announcement of the proposed Merger and the consummation
thereof on the Seagull Common Stock and Global Common Stock.
During the course of its deliberations, the Global Board of Directors, with
the assistance of management and its legal and financial advisors, considered a
number of other factors, including the following:
(i) The strategic fit between Seagull and Global, including the match
of Seagull's strong cash flow with Global's extensive international
operations and exploration strategy, and the complementary mix of
geological, engineering and production expertise and the value to be
derived from a combination of management of Global and Seagull;
(ii) The strategic and financial alternatives available to Global,
including remaining a separate company and pursuing its existing growth
strategy;
(iii) The exchange ratio proposed by Seagull and the implied premium
over the then current market price of Global Common Stock as compared to
the premiums and valuations found in certain other transactions;
(iv) The proposed terms and conditions of the proposed combination of
Seagull and Global, including (a) the restrictions on Global's ability to
consider unsolicited competing merger or acquisition proposals from third
parties following the execution of the Merger Agreement and Global's
ability, subject to certain determinations regarding the Global Board's
fiduciary duties, to provide information to, and enter into negotiations
with, such third parties, (b) the right of Global to terminate the Merger
Agreement upon receipt of an offer determined by the Global Board of
Directors in good faith to be more advantageous than the Merger, (c) the
right of Global to terminate the Merger Agreement upon the occurrence of a
material adverse change in Seagull, (d) the ability of the Global Board of
Directors,
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subject to certain determinations regarding the Global Board's fiduciary
duties, to withdraw or modify its recommendation to Global's shareholders
and (e) the size and structure of the termination fees;
(v) The due diligence investigations of Seagull by Global's management
and Petrie Parkman and presentations of management regarding the strong
growth of Seagull's natural gas reserves, the inherent value of Seagull's
oil and gas assets and its prospects for future growth;
(vi) The fact that the combined company after the Merger would be
widely held, providing shareholders with a more liquid market for their
shares;
(vii) The historical performance and strategic objectives of Seagull,
as well as the risks involved in achieving those objectives in the oil and
natural gas industry under current economic and market conditions;
(viii) The preliminary pro forma financial condition, results of
operations and other financial information of the combined entity,
including an analysis of the opportunities for costs savings and economies
of scale;
(ix) The structure of the Merger, which would permit the holders of
Global Common Stock to exchange all their shares for shares of Seagull
Common Stock in a transaction intended, in general, to be tax-free for
federal income tax purposes except to the extent of cash received in lieu
of fractional shares of Seagull Common Stock;
(x) The expected accounting treatment of the Merger as a pooling of
interests (thereby avoiding the reduction in future earnings that would
result under purchase accounting);
(xi) The published reports of research analysts regarding Seagull; and
(xii) The presentations of Petrie Parkman delivered to the Global
Board of Directors at its meetings on July 19, 1996 and July 21, 1996,
including the written opinion of Petrie Parkman to the effect that, as of
July 21, 1996, the Merger Consideration is fair to the holders of Global
Common Stock.
Petrie Parkman has delivered a written opinion to the Global Board of
Directors, dated the date of this Joint Proxy Statement/Prospectus, that as of
the date hereof, the Merger Consideration is fair to the holders of Global
Common Stock from a financial point of view. A copy of the written opinion of
Petrie Parkman dated the date hereof setting forth the assumptions made, matters
considered and limitations on the review undertaken by Petrie Parkman in
rendering its opinion is attached to this Joint Proxy Statement/Prospectus as
Appendix C (and is incorporated herein by reference), and shareholders of Global
are urged to read such opinion carefully in its entirety. See "-- Opinions of
Financial Advisors -- Petrie Parkman Opinion to the Global Board of Directors."
The foregoing discussion of the information and factors considered and
given weight by the Global Board is not intended to be exhaustive. In view of
the variety of factors considered in connection with its evaluation of the
Merger, the Global Board of Directors did not find it practicable to and did not
quantify or otherwise assign relative weights to the specific factors considered
in reaching its determination. In addition, individual members of the Global
Board of Directors may have given different weights to different factors. For a
discussion of the interests of certain members of Global management and the
Global Board of Directors in the Merger, see "-- Interests of Certain Persons in
the Merger."
Based on the factors described above, the Global Board of Directors
unanimously declared the Merger fair to and advisable and in the best interests
of the holders of Global Common Stock. THE BOARD OF DIRECTORS OF GLOBAL
UNANIMOUSLY RECOMMENDS TO THE HOLDERS OF GLOBAL COMMON STOCK THAT THE MERGER AND
THE MERGER AGREEMENT BE APPROVED.
SEAGULL'S REASONS FOR THE MERGER; RECOMMENDATION OF BOARD OF DIRECTORS OF
SEAGULL
By the unanimous vote of the Board of Directors at a meeting held on July
21, 1996, the Seagull Board determined the Merger to be fair to and advisable
and in the best interests of Seagull and its shareholders and
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approved the Merger and the Merger Agreement. As described above under
"-- Background of the Merger," the Seagull Board's decision to declare the
Merger advisable and to approve the Merger and the Merger Agreement at its July
21st Board Meeting followed an extensive review of the strategic synergies
offered by the Merger.
At its meetings held on July 15, 1996, July 16, 1996 and July 21, 1996, the
Seagull Board received the presentation of management and, in the July 21
meeting, the independent presentation of DLJ with respect to the possible
transaction, including reviews of, among other things: historical information
relating to the business, financial condition and results of operations of
Seagull and Global; information provided by Seagull and Global management and
reviewed and adjusted by Seagull management regarding the reserves of Seagull
and Global; information regarding the management of Global; historical data
relating to market prices and trading volumes of Seagull Common Stock and Global
Common Stock; market prices for Global Common Stock as compared to those of
other comparable publicly traded companies; and the possible effects of the
Merger on Seagull's financial condition and the possible market effects of the
announcement of the proposed Merger and the consummation thereof on the Seagull
Common Stock and Global Common Stock.
During the course of its deliberations, the Seagull Board of Directors,
with the assistance of management and its legal and financial advisors,
considered a number of other factors, including the following:
(i) The strategic and financial alternatives available to Seagull;
(ii) The proposed exchange ratio and the implied premium over the
then-current market price of Global Common Stock as compared to the
premiums and valuations found in certain other transactions;
(iii) The proposed terms and conditions of the proposed combination of
Seagull and Global;
(iv) The strategic fit between Seagull and Global, including the match
of Seagull's strong cash flow with Global's extensive international
operations and exploration strategy, the complementary mix of geological,
engineering and production expertise, and the track record of Global's
exploration team;
(v) The inherent value of Global's oil and gas assets and its
exploration and exploitation prospects for future growth;
(vi) The fact that the combined company after the Merger would be
widely held, providing shareholders with a more extensive market for their
shares;
(vii) The historical performance and strategic objective of Global, as
well as the risks involved in achieving those objectives in the oil and
natural gas industry under current economic and market conditions;
(viii) The preliminary pro forma financial condition, results of
operations and other financial information of the combined entity,
including an analysis of the opportunities for costs savings and economies
of scale;
(ix) Internal analyses of future financial performance which indicate
that the post-merger company will realize immediate accretion in its
earnings per share and dilution in cash flow per share only through 1997;
(x) The expected accounting treatment of the Merger as a pooling of
interests (thereby avoiding the reduction in future earnings which would
result under purchase accounting);
(xi) The published reports of research analysts regarding Global; and
(xii) The presentations of DLJ delivered to the Seagull Board of
Directors at its meeting on July 21, 1996, including the opinion of DLJ
(later confirmed in writing) to the effect that, as of such date, the
Common Stock Exchange Ratio is fair to the holders of Seagull Common Stock.
DLJ has delivered a written opinion to the Seagull Board of Directors,
dated the date of this Joint Proxy Statement/Prospectus, that as of the date
hereof, the Common Stock Exchange Ratio pursuant to the Merger Agreement is fair
to the holders of Seagull Common Stock. A copy of the written opinion of DLJ
dated the
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date hereof setting forth the assumptions made, matters considered and
limitations on the review undertaken by DLJ in rendering their opinion is
attached to this Joint Proxy Statement/Prospectus as Appendix D (and is
incorporated herein by reference), and shareholders of Seagull are urged to read
such opinion carefully in its entirety. See "-- Opinions of Financial
Advisors -- DLJ Opinion to the Global Board of Directors."
The foregoing discussion of the information and factors considered and
given weight by the Seagull Board of Directors is not intended to be exhaustive.
In view of the variety of factors considered in connection with its evaluation
of the Merger, the Seagull Board of Directors did not find it practicable to and
did not quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. In addition, individual members of the
Seagull Board of Directors may have given different weights to different
factors. For a discussion of the interests of certain members of Seagull
management and the Seagull Board of Directors in the Merger, see "-- Interests
of Certain Persons in the Merger."
Based on the factors described above, the Seagull Board of Directors
unanimously declared the Merger fair to and advisable and in the best interests
of the holders of Seagull Common Stock. THE BOARD OF DIRECTORS OF SEAGULL
UNANIMOUSLY RECOMMENDS TO THE HOLDERS OF SEAGULL COMMON STOCK THAT THE SHARE
ISSUANCE BE APPROVED.
OPINIONS OF FINANCIAL ADVISORS
PETRIE PARKMAN OPINION TO THE GLOBAL BOARD OF DIRECTORS. The Global Board
of Directors engaged Petrie Parkman to act as its financial advisor in
connection with the Merger. The Global Board instructed Petrie Parkman, in its
role as financial advisor, to evaluate the fairness, from a financial point of
view, to the holders of Global Common Stock of the Merger Consideration in
connection with the Merger and, in such regard, to conduct such investigations
as Petrie Parkman deemed appropriate for such purpose.
On July 21, 1996, Petrie Parkman rendered its written opinion to the Global
Board that, as of such date, the Merger Consideration is fair to the holders of
Global Common Stock from a financial point of view. Petrie Parkman confirmed, by
delivery of its written opinion as of the date of this Joint Proxy
Statement/Prospectus, its opinion of July 21, 1996. In rendering such
confirmation, Petrie Parkman performed procedures to update certain of its
analyses made in connection with its July 21, 1996 opinion and reviewed the
assumptions on which such analyses were based and the factors considered in
connection therewith. Petrie Parkman considered, among other things, Global's
and Seagull's recent financial performance and recent market conditions and
developments based on the foregoing.
THE FULL TEXT OF PETRIE PARKMAN'S WRITTEN OPINION, WHICH CONTAINS A
DESCRIPTION OF THE ASSUMPTIONS MADE, THE MATTERS CONSIDERED BY PETRIE PARKMAN,
AND THE LIMITS OF ITS REVIEW IS ATTACHED HERETO AS APPENDIX C, AND IS
INCORPORATED HEREIN BY REFERENCE. GLOBAL SHAREHOLDERS ARE ENCOURAGED TO READ
PETRIE PARKMAN'S OPINION CAREFULLY IN ITS ENTIRETY.
In connection with its opinion, Petrie Parkman, among other things (i)
reviewed certain publicly available business and financial information relating
to Global and Seagull, including the audited financial statements on Form 10-K
for Global and Seagull as of December 31, 1995, and the unaudited financial
statements on Form 10-Q for Global and Seagull as of March 31, 1996; (ii)
reviewed draft financial statements for Global and Seagull as of June 30, 1996;
(iii) reviewed certain estimates of reserves including: (a) estimates of proved,
probable, and possible oil and gas reserves of Global in Egypt and estimates of
proved oil and gas reserves of Global in Cote d'Ivoire, all as prepared by
Netherland, Sewell & Associates, Inc. as of January 1, 1996 (Egypt) and December
31, 1995 (Cote d'Ivoire), (b) estimates of proved oil and gas reserves of Global
in the United States and proved oil reserves of Global in Russia all as prepared
by Ryder Scott Company Petroleum Engineers as of December 31, 1995, (c)
estimates of proved oil and gas reserves of Global in Indonesia provided by the
management and staff of Global based upon publicly available information as of
December 31, 1995, and (d) estimates of proved and probable oil and gas reserves
of Seagull in the United States and Canada all as prepared by DeGolyer and
MacNaughton as of December 31, 1995; (iv) reviewed certain other estimates of
oil and gas reserves of Global and Seagull as prepared by their respective
managements and staffs; (v) analyzed certain internal financial and operating
forecasts and
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financial and operating data and budgets concerning Global and Seagull, all of
which were prepared or provided by the management of Global and Seagull, as the
case may be; (vi) discussed the current operations and prospects of Global and
Seagull with the management and operating staff of Global and Seagull, as the
case may be; (vii) discussed with the management and operating staff of Global
the expected operations and prospects of the combined company, giving proforma
effect to the Merger; (viii) reviewed the historical stock market prices of the
shares of Seagull Common Stock and Global Common Stock; (ix) compared the
financial terms of the Merger with the financial terms of certain other
transactions which it deemed to be relevant; (x) reviewed the Merger Agreement;
(xi) reviewed the Voting Agreement, and (xii) made such other analyses and
examinations as it deemed necessary or appropriate.
In rendering its opinion, Petrie Parkman assumed and relied upon, without
assuming any responsibility for verification, the accuracy and completeness of
the financial, operating, and other information reviewed by it and assumed that
the financial and operating forecasts provided to it had been reasonably
prepared on bases reflecting the best currently available estimates and
judgments relating to the future financial and operational performance of Global
and Seagull. Petrie Parkman did not make independent evaluations or appraisals
of the assets or liabilities of Global or Seagull nor, except for the reserve
estimates referred to in its opinion, was Petrie Parkman furnished with any such
evaluations or appraisals. Petrie Parkman's opinion relates only to the Merger
Consideration in connection with the Merger and does not constitute a
recommendation to any holder of Global Common Stock as to how such holder should
vote at the Global Special Meeting.
In rendering its opinion, Petrie Parkman conducted several analyses
including (i) discounted cash flow analyses of each of Global and Seagull
("Discounted Cash Flow Analyses"); (ii) comparisons with selected
publicly-traded companies ("Capital Market Comparisons"); (iii) analyses of
selected comparable industry transactions ("Comparable Transactions Analyses");
(iv) analyses of the potential future financial performance of Global and
Seagull ("Going Concern Analyses"); and (v) an analysis of the potential
financial effects of the Merger ("Pro Forma Merger Analysis"). These analyses
are described below. Based upon the reference value ranges resulting from the
various analyses and subject to the assumptions and limitations set forth in its
opinion, Petrie Parkman came to a composite range of asset reference values for
Global of $522 million to $675 million. After deducting long-term obligations of
Global of approximately $32.5 million from the Global composite asset reference
value range, dividing by the number of shares of Global Common Stock outstanding
and adjusting for the exercise of outstanding stock options, Petrie Parkman
arrived at a composite equity reference value range per share of Global Common
Stock on a fully-diluted basis of $16.00 to $21.00.
DISCOUNTED CASH FLOW ANALYSIS -- GLOBAL. Under this method, Petrie Parkman
calculated estimates of future after-tax cash flows for the reserve assets based
on the reserve estimates referred to above and for the non-reserve assets
utilizing information provided by Global. Three scenarios were evaluated in
which the principal variables were oil and gas prices. The three pricing
scenarios used by Petrie Parkman were based on benchmarks for posted prices for
West Texas Intermediate equivalent crude oil and for spot sales of Louisiana
offshore gas delivered to an interstate pipeline ("Pricing Case I," "Pricing
Case II" and "Pricing Case III"). To these benchmarks, Petrie Parkman applied
appropriate quality and transportation adjustments. For Pricing Cases I, II, and
III, benchmark oil prices were projected to be $16.00, $17.50, and $19.00 per
barrel, respectively, for 1996 and to escalate annually thereafter at the rates
of 4.0%, 5.0%, and 5.0%, respectively; oil prices in each pricing case were
capped at $50.00 per barrel. Benchmark gas prices for 1996 and 1997 were based
on the 6-month NYMEX natural gas strip for the 6 months ended December 31, 1996
and the 12-month 1997 NYMEX natural gas strip (as of July 12, 1996),
respectively. Benchmark gas prices for Pricing Cases I, II, and III for 1998
were projected to be $2.00, $2.21, and $2.37 MMbtu, respectively, and to
escalate annually thereafter at the rates of 4.0%, 5.0%, and 5.0%, respectively;
gas prices in each pricing case were capped at $6.00 per MMBtu. Operating and
capital costs were escalated at 3.0% per year. Other factors involved in this
analysis included the use of after-tax discount rates ranging from 10.0% to
25.0%, a carry-over of Global's existing tax positions, and the evaluation of
certain other assets of Global. This methodology resulted in asset reference
value ranges of $297.7 million to $370.9 million for Pricing Case I, $340.9
million to $427.1 million for Pricing Case II, and $376.5 million to $468.6
million for Pricing Case III.
COMPARABLE TRANSACTIONS ANALYSIS -- GLOBAL. Petrie Parkman reviewed certain
publicly-available information on 98 oil and gas property acquisition
transactions greater than five million dollars involving U.S. Gulf
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of Mexico, U.S. Gulf Coast, U.S. Rockies and other, and international assets
which took place between January 1993 and July 1996 (and two such transactions
for which Petrie Parkman had proprietary information). Petrie Parkman calculated
purchase price multiples of equivalent proved reserves for the acquired assets
in each transaction. (In all Comparable Transactions Analysis summaries, the
highest, average, and lowest multiples presented exclude the transactions for
which certain historical measures were not available). The highest, average, and
lowest multiples of barrel of oil equivalent using a six Mcf of gas to one
barrel of oil conversion ratio ("BOE6") for the U.S. Gulf of Mexico transactions
were $9.58, $5.07, and $1.06, respectively. The highest, average, and lowest
multiples of BOE6 for the U.S. Gulf Coast transactions were $13.61, $5.52, and
$1.52, respectively. The highest, average, and lowest multiples of BOE6 for the
U.S. Rockies and Other transactions were $14.24, $5.12, and $2.07, respectively.
The highest, average, and lowest multiples of barrel of oil equivalent using a
ten Mcf of gas to one barrel of oil conversion ratio ("BOE10") for the
International transactions were $10.63, $3.41, and $0.29, respectively. Petrie
Parkman determined that, with respect to Global, the appropriate benchmark
multiples for equivalent proved reserves for the U.S Gulf of Mexico, U.S Gulf
Coast, U.S. Rockies and Other, and International assets were in the ranges of
$6.00 to $8.00 per BOE6, $6.00 to $7.00 per BOE6, $3.50 to $5.00 per BOE6 and
$3.00 to $5.00 per BOE10, respectively. These benchmarks were applied by Petrie
Parkman to Global's corresponding proved reserve figures for each of the
geographic regions to yield asset reference value ranges for Global's reserves.
Following adjustments for Global's non-reserve assets, Petrie Parkman determined
from the asset reference value ranges implied by these multiples a composite
asset reference value range under this method of $235 million to $350 million.
In addition, Petrie Parkman reviewed certain publicly-available information
on 38 company acquisition transactions and offers for control in the oil and gas
exploration and production industry which took place between January 1994 and
May 1996. Using publicly-available information, Petrie Parkman calculated total
investment (purchase price plus obligations assumed) multiples of gross pretax
cash flow for the target company in each transaction. For these 38 transactions,
the highest, average, and lowest multiples of gross pretax cash flow were 27.3x,
8.3x, and 0.7x, respectively. Petrie Parkman also calculated purchase price
multiples of discretionary cash flow and implied purchase price of reserves
(total investment less estimated values of non-reserve assets) multiples of SEC
Value (as defined below) and equivalent proved reserves for the target company
in each transaction. The highest, average, and lowest multiples of discretionary
cash flow were 24.6x, 8.2x, and 0.8x, respectively. The highest, average, and
lowest multiples of SEC Value were 2.9x, 1.3x, and 0.3x, respectively. The
highest, average, and lowest multiples of equivalent proved reserves were
$12.50, $5.02, and $0.82 per BOE6, respectively. The highest, average, and
lowest multiples of equivalent proved reserves were $15.06, $6.90, and $1.18 per
BOE10, respectively. Petrie Parkman determined that, with respect to Global, the
appropriate benchmark multiples for gross pretax cash flow, discretionary cash
flow, SEC Value, and equivalent proved reserves were in the ranges of 10.0 to
15.0x, 10.0 to 15.0x, 1.5 to 2.5x, $6.00 to $10.00 per BOE6, and $7.00 to $11.00
per BOE10, respectively. These benchmark multiples were applied by Petrie
Parkman to Global's gross pretax cash flow, discretionary cash flow, SEC Value,
and equivalent proved reserves. For 31 of these acquisitions and offers for
control which involved publicly-traded target companies and which occurred
between June 1994 and May 1996, Petrie Parkman also performed a premium analysis
which compared the offer price per target share with the target's share price
for the periods of one day, 30 days, and 60 days prior to public announcement of
the offer. The highest, average, and lowest premiums (excess of offer price over
target price stated as a percentage above the target price) for each of these
three periods were 86.6%, 17.7%, and -15.8% for one day prior, respectively,
76.4%, 30.2%, and -24.5% for 30 days prior, respectively, and 86.6%, 29.0%, and
- -24.5% for 60 days prior, respectively. Petrie Parkman determined that, with
respect to Global, the appropriate benchmarks for premium to target price one
day prior, 30 days prior, and 60 days prior were in the ranges of 25% to 40%,
25% to 45%, and 20% to 40%, respectively. These premium benchmarks were applied
by Petrie Parkman to the corresponding stock prices of Global. Following
adjustments for Global's non-reserve assets as appropriate, Petrie Parkman
determined from the asset reference value ranges implied by these multiples a
composite asset reference value range under this method of $450 million to $600
million.
COMMON STOCK COMPARISON -- GLOBAL. Using publicly-available information,
Petrie Parkman calculated adjusted capitalization multiples of certain
historical financial criteria (such as gross pretax cash flow,
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operating cash flow, and standardized measure of discounted future net cash
flows ("SEC Value")) and of equivalent proved reserves, and market
capitalization (market value of common equity) multiples of certain historical
financial criteria (such as discretionary cash flow) for a universe of 177
publicly-traded energy companies. The adjusted capitalization of each company
was obtained by adding its long-term and short-term debt to the sum of the
market value of its common equity, the market value of its preferred stock (if
publicly-traded or liquidation or book value if not), and the book value of its
minority interest in other companies minus its cash balance. Through a serial
process of elimination, Petrie Parkman generated two categories of companies for
comparison with Global (U.S. Explorers and companies with similar reserve
locations) based on its judgments of the growth strategies and operational
characteristics of each company.
Ten of these companies -- Anadarko Petroleum Corporation, Barrett Resources
Corporation, Benton Oil and Gas Company, Cairn Energy USA, Inc., Chesapeake
Energy Corporation, Enron Oil & Gas Company, Pogo Producing Company, Tom Brown,
Inc., Triton Energy Corporation, and United Meridian Corporation -- which in
Petrie Parkman's judgment were relevant to an evaluation of Global in the
context of a U.S. explorer, were examined in greater detail. For these ten
companies, the highest, average, and lowest adjusted capitalization multiples of
gross pretax cash flow were 48.0x, 18.2x, and 10.3x, respectively. The highest,
average, and lowest adjusted capitalization multiples of operating cash flow
were 38.2x, 15.2x, and 9.3x, respectively. The highest, average, and lowest
adjusted capitalization multiples of SEC Value were 9.0x, 4.0x, and 2.3x,
respectively. The highest, average, and lowest adjusted capitalization multiples
of equivalent proved reserves were $35.49, $14.83, and $7.48 per BOE6,
respectively. The highest, average, and lowest adjusted capitalization multiples
of equivalent proved reserves were $54.57, $18.38, and $7.75 BOE10,
respectively. The highest, average, and lowest market capitalization multiples
of discretionary cash flow were 40.6x, 17.4x, and 10.2x, respectively. Petrie
Parkman determined that, with respect to Global, the appropriate benchmarks for
adjusted capitalization multiples for gross pretax cash flow, operating cash
flow, SEC Value, and equivalent proved reserves were in the ranges of 12.0 to
16.0x, 10.0 to 13.0x, 2.5 to 3.5x, $8.00 to $12.00 per BOE6, and $11.00 to
$15.00 per BOE10, respectively, and that the appropriate benchmark market
capitalization multiples for discretionary cash flow were in the range of 12.0
to 18.0x. These benchmark multiples were applied by Petrie Parkman to Global's
historical gross pretax cash flow, operating cash flow, SEC Value, discretionary
cash flow, and equivalent proved reserves, respectively. From the asset
reference value ranges implied by these multiples, Petrie Parkman determined a
composite asset reference value range under this method of $550 million to $750
million.
Eleven of these companies -- Anadarko Petroleum Corporation, Apache
Corporation, Benton Oil and Gas Company, Chieftain International, Inc., Oryx
Energy Company, Pogo Producing Company, Santa Fe Energy Resources, Inc.,
Seagull, St. Mary Land & Exploration Company, Union Texas Petroleum Holdings,
Inc., and United Meridian Corporation -- which in Petrie Parkman's judgment were
relevant to an evaluation of Global in the context of reserve location, were
examined in greater detail. For these eleven companies, the highest, average,
and lowest adjusted capitalization multiples of gross pretax cash flow were
20.3x, 11.3x, and 4.2x, respectively. The highest, average, and lowest adjusted
capitalization multiples of operating cash flow were 17.4x, 9.6x, and 4.0x,
respectively. The highest, average, and lowest adjusted capitalization multiples
of SEC Value were 3.6x, 2.2x, and 1.3x, respectively. The highest, average, and
lowest adjusted capitalization multiples of equivalent proved reserves were
$13.83, $7.99, and $4.95 per BOE6, respectively. The highest, average, and
lowest adjusted capitalization multiples of equivalent proved reserves were
$18.05, $10.31, and $5.30 per BOE10, respectively. The highest, average, and
lowest market capitalization multiples of discretionary cash flow were 18.6x,
10.0x, and 2.6x, respectively. Petrie Parkman determined that, with respect to
Global, the appropriate benchmark adjusted capitalization multiples for gross
pretax cash flow, operating cash flow, SEC Value, and equivalent proved reserves
were in the ranges of 12.0 to 16.0x, 9.0 to 15.0x, 2.0 to 3.0x, $7.00 to $11.00
per BOE6, and $8.00 to $12.00 per BOE10, respectively, and that the appropriate
benchmark market capitalization multiples for discretionary cash flow were in
the range of 12.0 to 15.0x. These benchmark multiples were applied by Petrie
Parkman to Global's historical gross pretax cash flow, operating cash flow, SEC
Value, discretionary cash flow, and equivalent proved reserves, respectively.
From the asset reference value ranges implied by these multiples, Petrie Parkman
determined a composite asset reference value range under this method of $475
million to $675 million.
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GOING CONCERN ANALYSIS -- GLOBAL. Under this method, Petrie Parkman
projected potential financial performance for Global without giving effect to
the Merger for the five year period 1996 through 2000 using the three oil and
gas pricing scenarios described above. These projections were prepared utilizing
certain information and projections prepared or provided by Global management as
well as numerous assumptions, including two success cases ("Moderate Success
Case" and "High Success Case," respectively). The two success cases differed in
the amount of gross reserve additions (to the 100% interest) from future oil and
gas discoveries. The High Success Case assumed reserve additions in (i) Egypt of
250 million equivalent barrels of oil ("BOE"); (ii) Cote d'Ivoire of 70 million
BOE; and (iii) the U.S. of 100 billion cubic feet of gas. The Moderate Success
Case assumed reserve additions in Egypt and Cote d'Ivoire of one half that of
the High Success Case and in the U.S. equal to that of the High Success Case.
The High Success Case also utilized higher realized prices for Russian domestic
use oil than current pricing which was utilized in the Moderate Success Case.
Other factors included discount rates of 15.0% to 20.0%, terminal multiples of
5.0x. 6.0x and 7.0x projected 2000 discretionary cash flow, and utilization of
Global's existing tax position.
This methodology resulted in ranges of equity reference values per share of
Global (on a primary basis) using a terminal multiple of 5.0x projected 2000
discretionary cash flow under the Moderate Success Case of $10.11 to $11.99
using Pricing Case I, $12.22 to $14.49 using Pricing Case II, and $13.82 to
$16.39 using Pricing Case III, and under the High Success Case of $14.40 to
$17.08 using Pricing Case I, $17.21 to $20.40 using Pricing Case II, and $19.30
to $22.89 using Pricing Case III. Use of a terminal multiple of 6.0x projected
2000 discretionary cash flow yielded equity reference values per share of Global
(on a primary basis) under the Moderate Success Case of $11.90 to $14.10 using
Pricing Case I, $14.31 to $16.96 using Pricing Case II, and $16.13 to $19.12
using Pricing Case III and under the High Success Case of $17.06 to $20.22 using
Pricing Case I, $20.26 to $24.02 using Pricing Case II, and $22.65 to $26.85
using Pricing Case III. Use of a terminal multiple of 7.0x projected 2000
discretionary cash flow yielded equity reference values per share of Global (on
a primary basis) under the Moderate Success Case of $13.68 to $16.22 using
Pricing Case I, $16.39 to $19.43 using Pricing Case II, and $18.43 to $21.85
using Pricing Case III and under the High Success Case of $19.71 to $23.36 using
Pricing Case I, $23.31 to $27.63 using Pricing Case II, and $25.99 to $30.82
using Pricing Case III. From these equity reference value ranges, Petrie Parkman
determined composite asset reference value ranges under this method of $463.9
million to $582.9 million for the Moderate Success Case and $687.1 million to
$806.1 million for the High Success Case.
DISCOUNTED CASH FLOW ANALYSIS -- SEAGULL. Under this method, Petrie Parkman
calculated estimates of future after-tax cash flows for the reserve assets based
on the reserve estimate referred to above and for the non-reserve assets
utilizing information provided by Seagull. Three scenarios were evaluated in
which the principal variables were the oil and gas price scenarios described
above. Other factors involved in this analysis included the use of after-tax
discount rates ranging from 10.0% to 25.0%, a carry-over of Seagull's existing
tax positions, and the evaluation of certain other assets of Seagull. This
methodology resulted in asset reference value ranges of $913.0 million to
$1,040.7 million for Pricing Case I, $999.8 million to $1,142.6 million for
Pricing Case II, and $1,054.6 million to $1,204.8 million for Pricing Case III.
COMPARABLE TRANSACTIONS ANALYSIS -- SEAGULL. Petrie Parkman reviewed
certain publicly-available information on 88 oil and gas property acquisition
transactions greater than five million dollars involving U.S. Gulf of Mexico,
U.S. Mid-Continent, U.S. East Texas Area, and Canadian assets which took place
between January 1993 and July 1996. Using publicly-available information, Petrie
Parkman calculated purchase price multiples of equivalent proved reserves for
the acquired assets in each transaction. The highest, average, and lowest
multiples of Mcfe6 for the U.S. Gulf of Mexico transactions were $1.60, $0.84,
and $0.18, respectively. The highest, average, and lowest multiples of Mcf
equivalent using a six Mcf of natural gas to one barrel of oil conversion ratio
("Mcfe6") for the U.S. Mid-Continent transactions were $1.46, $0.77, and $0.45,
respectively. The highest, average, and lowest multiples of Mcfe6 for the U.S.
East Texas Area transactions were $1.19, $0.73, and $0.37, respectively. The
highest, average, and lowest multiples of Mcfe6 for the Canadian transactions
were $1.75, $0.65, and $0.23, respectively. The highest, average, and lowest
multiples of Mcf equivalent using a ten Mcf of natural gas to one barrel of oil
conversion ratio ("Mcfe10") for the U.S. Gulf of Mexico transactions were $1.60,
$0.71, and $0.18, respectively. The highest, average, and lowest multiples of
Mcfe10 for the U.S Mid-Continent transactions were $1.06, $0.66, and $0.32,
respectively. The highest,
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average, and lowest multiples of Mcfe10 for the U.S. East Texas Area
transactions were $1.02, $0.63, and $0.37, respectively. The highest, average,
and lowest multiples of Mcfe10 for the Canadian transactions were $1.05, $0.50,
and $0.19, respectively. Petrie Parkman determined that, with respect to
Seagull, the appropriate benchmark multiples for equivalent proved reserves for
the U.S. Gulf of Mexico, U.S. Mid-Continent, U.S. East Texas Area and Canadian
assets were in the ranges of $1.00 to $1.35 per Mcfe6, $0.75 to $1.10 per Mcfe6,
$0.80 to $1.00 per Mcfe6 and $0.55 to $0.75 per Mcfe6, respectively, and in the
ranges of $0.80 to $1.20 per Mcfe10, $0.55 to $0.95 per Mcfe10, $0.70 to $0.90
per Mcfe10 and $0.45 to $0.65 per Mcfe10, respectively. These benchmarks were
applied by Petrie Parkman to Seagull's corresponding proved reserve figures for
each of the geographic regions to yield asset reference value ranges for
Seagull's reserves. Following adjustments for Seagull's non-reserve assets,
Petrie Parkman determined from the asset reference value ranges implied by these
multiples a composite asset reference value range under this method of $996
million to $1,281 million.
In addition, Petrie Parkman reviewed certain publicly-available information
on 45 company acquisition transactions and offers for control in the oil and gas
exploration and production industry which took place between March 1993 and May
1996. Using publicly-available information, Petrie Parkman calculated total
investment multiples of gross pretax cash flow for the target company in each
transaction. For these 45 transactions, the highest, average, and lowest
multiples of gross pretax cash flow were 27.3x, 7.9x, and 0.7x, respectively.
Petrie Parkman also calculated purchase price multiples of discretionary cash
flow and implied purchase price of reserves multiples of SEC Value and
equivalent proved reserves for the target company in each transaction. The
highest, average, and lowest multiples of discretionary cash flow were 24.6x,
7.5x, and 0.4x, respectively. The highest, average, and lowest multiples of SEC
Value were 2.9x, 1.3x, and 0.2x, respectively. The highest, average, and lowest
multiples of equivalent proved reserves were $2.08, $0.81, and $0.08 per Mcfe6,
respectively. The highest, average, and lowest multiples of equivalent proved
reserves were $1.51, $0.67, and $0.07 per Mcfe10, respectively. Petrie Parkman
determined that, with respect to Seagull, the appropriate benchmark multiples
for gross pretax cash flow, discretionary cash flow, SEC Value, and equivalent
proved reserves were in the ranges of 6.0 to 8.0x, 5.0 to 8.0x, 1.3 to 1.8x,
$0.85 to $1.20 per Mcfe6 and $1.20 to $1.50 per Mcfe10, respectively. These
benchmark multiples were applied by Petrie Parkman to Seagull's historical gross
pretax cash flow, discretionary cash flow, SEC Value, and equivalent proved
reserves based on the reserve estimates referred to above. For 31 of these
acquisitions and offers for control which involved publicly-traded target
companies and which occurred between June 1994 and May 1996, Petrie Parkman also
performed a premium analysis which compared the offer price per target share
with the target's share price for the periods of one day, 30 days, and 60 days
prior to announcement of the offer. The highest, average, and lowest premiums
for each of these three periods were 86.6%, 17.7%, and -15.8% for one day prior,
respectively, 76.4%, 30.2%, and -24.5% for 30 days prior, respectively, and
86.6%, 29.0%, and -24.5% for 60 days prior, respectively. Petrie Parkman
determined that, with respect to Seagull, the appropriate benchmarks for premium
to target price one day prior, 30 days prior, and 60 days prior were in the
ranges of 25% to 40%, 25% to 45%, and 20% to 40%, respectively. These premium
benchmarks were applied by Petrie Parkman to the corresponding stock price of
Seagull. Following adjustments for Seagull's non-reserve assets as appropriate,
Petrie Parkman determined from the asset reference value ranges implied by these
multiples a composite asset reference value range under this method of $1,250
million to $1,550 million.
COMMON STOCK COMPARISONS -- SEAGULL. Using publicly-available information,
Petrie Parkman calculated adjusted capitalization multiples of certain
historical financial criteria (such as gross pretax cash flow, operating cash
flow, and SEC Value) and of equivalent proved reserves, and market
capitalization multiples of certain historical financial criteria (such as
discretionary cash flow) for a universe of 33 publicly-traded U.S.-based
independent oil and gas companies with adjusted capitalizations greater than
$500 million. Thirteen of these companies, which in Petrie Parkman's judgment
were more relevant to an evaluation of Seagull, were examined in greater detail:
Anadarko Petroleum Corporation, Apache Corporation, Enron Oil & Gas Company,
Enserch Corporation, Louis Dreyfus Natural Gas Corporation, Louisiana Land and
Exploration Company, Noble Affiliates, Inc., Nuevo Energy Corporation, Parker &
Parsley Petroleum Company, Pogo Producing Company, Santa Fe Energy Resources,
Inc., Snyder Oil Corporation and Vastar Resources, Inc. For these 13 companies,
the highest, average, and lowest adjusted capitalization multiples of gross
pretax cash flow were 16.1x, 8.9x, and 4.4x, respectively. The highest, average,
and lowest adjusted capitalization multiples
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of operating cash flow were 13.1x, 7.7x, and 3.9x, respectively. The highest,
average, and lowest adjusted capitalization multiples of SEC Value were 3.8x,
2.0x, and 0.9x, respectively. The highest, average, and lowest adjusted
capitalization multiples of equivalent proved reserves were $2.38, $1.27, and
$0.45 per Mcfe6, respectively. The highest, average, and lowest adjusted
capitalization multiples of equivalent proved reserves were $1.83, $1.03, and
$0.31 per Mcfe10, respectively. The highest, average, and lowest market
capitalization multiples of discretionary cash flow were 15.1x, 8.1x, and 4.8x,
respectively. Petrie Parkman determined that, with respect to Seagull, the
appropriate benchmark adjusted capitalization multiples for gross pretax cash
flow, operating cash flow, SEC Value, and equivalent proved reserves were in the
ranges of 6.5 to 7.5x, 6.0 to 7.0x, 1.5 to 2.0x, and $1.00 to $1.40 per Mcfe6,
and $0.90 to $1.20 per Mcfe10, respectively, and that the appropriate benchmark
market capitalization multiples for discretionary cash flow were in the range of
6.0 to 7.5x. These benchmark multiples were applied by Petrie Parkman to
Seagull's historical gross pretax cash flow, operating cash flow, SEC Value,
discretionary cash flow and equivalent proved reserves based on the reserve
estimates referred to above. From the asset reference value ranges implied by
these multiples, Petrie Parkman determined a composite asset reference value
range under this method of $1,200 million to $1,450 million.
GOING CONCERN ANALYSIS -- SEAGULL. Under this method, Petrie Parkman
projected potential financial performance for Seagull without giving effect to
the Merger for the five year period 1996 through 2000 using the three oil and
gas pricing scenarios described above. These projections were prepared utilizing
certain information and projections prepared or provided by Seagull management
as well as numerous assumptions, including two success cases ("Moderate Success
Case" and "High Success Case," respectively). The Moderate Success Case assumed
reserve additions based on a finding cost of $5.00 per BOE versus the High
Success Case which assumed reserve additions based on a finding cost of $4.00
per BOE. Other factors included discount rates of 15.0% to 20.0%, terminal
multiples of 5.0x, 6.0x and 7.0x projected 2000 discretionary cash flow,
variations in growth rates of Seagull's gas transmission and pipeline and
marketing businesses, and utilization of Seagull's existing tax position.
This methodology resulted in ranges of equity reference values per share of
Seagull (on a primary basis) using a terminal multiple of 5.0x projected 2000
discretionary cash flow under the Moderate Success Case of $17.80 to $21.10
using Pricing Case I, $21.62 to $25.63 using Pricing Case II, and $24.34 to
$28.86 using Pricing Case III, and under the High Success Case of $19.84 to
$23.52 using Pricing Case I, $24.08 to $28.55 using Pricing Case II, and $26.92
to $31.92 using Pricing Case III. Use of a terminal multiple of 6.0x projected
2000 discretionary cash flow yielded equity reference values per share of
Seagull (on a primary basis) under the Moderate Success Case of $20.77 to $24.63
using Pricing Case I, $25.11 to $29.77 using Pricing Case II, and $28.15 to
$33.37 using Pricing Case III and under the High Success Case of $23.12 to
$27.41 using Pricing Case I, $27.91 to $33.09 using Pricing Case II, and $31.09
to $36.86 using Pricing Case III. Use of a terminal multiple of 7.0x projected
2000 discretionary cash flow yielded equity reference values per share of
Seagull (on a primary basis) under the Moderate Success Case of $23.75 to $28.16
using Pricing Case I, $28.59 to $33.90 using Pricing Case II, and $31.96 to
$37.89 using Pricing Case III and under the High Success Case of $26.40 to
$31.29 using Pricing Case I, $31.73 to $37.62 using Pricing Case II, and $35.25
to $41.80 using Pricing Case III. From these equity reference value ranges,
Petrie Parkman determined composite asset reference value ranges under this
method of $1,434 million to $1,616 million for the Moderate Success Case and
$1,543 million to $1,726 million for the High Success Case.
PRO FORMA MERGER ANALYSIS. Petrie Parkman analyzed certain pro forma
financial effects from the Merger for the five-year period 1996 through 2000
after considering the aforementioned information. In connection with such
analysis, Petrie Parkman assessed the past performance of the managements of
Seagull and Global, reviewed the estimates and projections prepared or provided
by the managements of Global and Seagull, and had discussions with members of
the management of Global and Seagull with respect to the current operations and
the future financial and operating performance of Seagull on a stand-alone basis
and after giving effect to the Merger, but relied only to a limited degree on
these estimates and projections in conducting its pro forma merger analysis.
Under a scenario in which the combined company significantly reduced its balance
sheet leverage during the period 1996 through 2000, Petrie Parkman's analysis
indicated that the contemplated transaction would, during such period, be
accretive to projected Seagull earnings per
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share and dilutive to discretionary cash flow per share. Petrie Parkman
concluded that, based on its analysis, the contemplated transaction would not be
dilutive to earnings per share over the period analyzed and would not result in
higher financial leverage, thus supporting its opinion.
The description set forth above constitutes a summary of the material
analyses and assumptions employed by Petrie Parkman in rendering its opinion to
the Global Board of Directors. Petrie Parkman believes that its analyses must be
considered as a whole and that selecting portions of its analyses or the factors
considered by it, without considering all analyses and factors, could create an
incomplete view of the process underlying its opinion. The preparation of a
fairness opinion is a complex process, judgmental in nature, and not necessarily
susceptible to partial analysis or summary description. In its analyses, Petrie
Parkman made numerous assumptions with respect to industry performance, capital
market conditions, general business, political, and economic conditions, and
other matters, many of which are beyond the control of Global and Seagull. Any
estimates contained therein are not necessarily indicative of actual values,
which may be significantly more or less favorable than as set forth therein. The
analyses were prepared solely for the purpose of Petrie Parkman's providing its
opinion to the Global Board of Directors as to the fairness of the Merger
Consideration to the Global stockholders. Analyses based on forecasts of future
results are not necessarily indicative of future results, which may be
significantly more or less favorable than suggested by such analyses. Estimates
of reference values of companies do not purport to be appraisals or necessarily
reflect the prices at which companies may actually be sold. Because such
estimates are inherently subject to uncertainty and based upon numerous factors
or events beyond the control of the parties or their respective advisors, no
assurances can be given that such estimates will prove to be accurate.
As described above, Petrie Parkman's opinion and presentation to the Global
Board of Directors was one of many factors taken into consideration by the
Global Board of Directors in making its determination to approve and recommend
the transaction contemplated in the Merger Agreement.
Petrie Parkman, as part of its investment banking business, is continually
engaged in the evaluation of energy-related businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements, and
valuations for corporate and other purposes. Global selected Petrie Parkman as
its financial advisor because it is a nationally recognized investment banking
firm that has substantial experience in transactions similar to the Merger.
Pursuant to the terms of the engagement letter dated July 8, 1996, Global
has agreed to pay Petrie Parkman a transaction fee of $1,500,000, contingent
upon and payable upon consummation of the Merger. Whether or not the Merger is
consummated, Global has also agreed to reimburse Petrie Parkman for its out-
of-pocket expenses, including reasonable fees and expenses of counsel, and to
indemnify Petrie Parkman and certain related persons against certain liabilities
relating to or arising out of its engagement, including certain liabilities
under the federal securities laws.
DLJ OPINION TO THE SEAGULL BOARD OF DIRECTORS. As part of its role as
financial advisor to Seagull, DLJ was asked to render an opinion to the Board of
Directors of Seagull as to the fairness to Seagull and its shareholders of the
Exchange Ratio. On July 22, 1996, DLJ delivered to the Board of Directors of
Seagull its written opinion (the "DLJ Opinion") that, based upon and subject to
the provisions set forth in such opinion, the Exchange Ratio is fair to Seagull
and its shareholders from a financial point of view.
A COPY OF THE DLJ OPINION IS ATTACHED HERETO AS APPENDIX D. HOLDERS OF
SEAGULL COMMON STOCK ARE URGED TO READ THE DLJ OPINION IN ITS ENTIRETY FOR THE
ASSUMPTIONS MADE, THE MATTERS CONSIDERED AND THE LIMITS OF THE REVIEW MADE BY
DLJ IN CONNECTION WITH SUCH OPINION.
The DLJ Opinion was prepared for the Seagull Board of Directors and is
directed only to the fairness of the Exchange Ratio, from a financial point of
view, to Seagull and its shareholders. The DLJ Opinion does not constitute a
recommendation to any holder as to how to vote on the Merger. DLJ did not make
any recommendation as to the form or amount of consideration to be paid by
Seagull pursuant to the transactions contemplated by the Merger Agreement. Such
consideration was determined by arm's length negotiations between Seagull and
Global, in which negotiations DLJ advised Seagull management. The DLJ Opinion
does
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not constitute an opinion as to the prices at which Seagull Common Stock will
actually trade at any time. No restrictions or limitations were imposed by
Seagull upon DLJ with respect to the investigations made or the procedures
followed by DLJ in rendering the DLJ Opinion.
In arriving at its opinion, DLJ reviewed a draft of the Merger Agreement,
as well as financial and other information that was publicly available or
furnished to it by Seagull and Global, including information provided during
discussions with their respective managements. Included in the information
provided to DLJ were certain financial projections of Seagull prepared by
management of Seagull, certain financial projections of Global prepared by the
management of Global and certain financial information of Seagull and Global on
a combined basis prepared by Seagull. In addition, DLJ compared certain
financial and securities data of Seagull and Global with various other companies
whose securities are traded in the public markets, reviewed historical stock
prices and trading volumes of Seagull Common Stock and Global Common Stock,
reviewed prices and premiums paid in other business combinations and conducted
such other financial studies, analyses and investigations as it deemed
appropriate for purposes of its opinion.
In rendering its opinion, DLJ relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to it from public sources, that was provided to it by Seagull and
Global and their respective representatives, or that was otherwise reviewed by
it. In particular, DLJ relied upon the estimates of the managements of Seagull
and Global of (i) the combined oil and gas reserves; (ii) projected annual
production of such reserves and (iii) exploration success and related production
in certain domestic and international areas. In evaluating the undeveloped and
exploratory properties of Global, DLJ relied on Seagull's assessment of the
likely exploratory drilling success, related annual production and resultant
economics of such operations. With respect to the financial projections supplied
to it, DLJ assumed that such projections were reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
respective managements of Seagull and Global as to the future operating and
financial performance of their respective companies. In addition, DLJ did not
assume any responsibility for making any independent evaluation of the assets or
liabilities of Seagull or Global or for independently verifying any of the
information reviewed by it.
The DLJ Opinion is necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to it
as of, the date of the DLJ Opinion. Although subsequent developments may affect
its opinion, DLJ does not have any obligation to update, revise or reaffirm its
opinion.
The following is a summary of certain factors and the principal financial
analyses and the assumptions on which such analyses were based and other factors
which were presented to the Board of Directors of Seagull by DLJ at a meeting on
July 21, 1996. This summary does not purport to be a complete description of the
analyses performed by DLJ. DLJ drew no specific conclusions from any of these
analyses but subjectively factored its observations from these analyses into its
qualitative assessment of the relevant facts and circumstances.
For purposes of DLJ's analysis of the transaction, DLJ reviewed certain
factors relating to Seagull and Global including, among others (i) historical
common stock trading ratios (price of Global Common Stock divided by price of
Seagull Common Stock) ("Historical Trading Ratios"); (ii) Seagull's trading
range for its common stock during the ten trading day period prior to the
announcement of the transaction ("Seagull Price Range"); and (iii) Global stock
consideration sensitivities to varying Seagull common stock prices and Exchange
Ratios ("Consideration Sensitivity"). The average Historical Trading Ratios for
the periods one year, six months and one month prior to July 18, 1996 were
calculated to be 0.58, 0.63 and 0.65, respectively. The Seagull Price Range was
$19.75 to $25.63. Based on an assumed Exchange Ratio range of 0.72 to 0.88 and
assumed range of Seagull common stock prices of $20.00 to $28.00 per share, the
Global Consideration Sensitivity ranged from $14.40 to $24.64 per share. For
purposes of the following analyses of the transaction DLJ assumed a Seagull
common stock price near the high end of the Seagull Price Range, $25.00 per
share, and the mid-point of the Exchange Ratio, $.80.
COMPARABLE TRANSACTION ANALYSIS: DLJ reviewed the implied valuation
multiples of Apache Corporation's acquisition of Phoenix Resource Companies,
Inc. (the "Phoenix/Apache Transaction"). DLJ believes the Phoenix/Apache
Transaction is the most comparable to the Seagull/Global transaction due to (i)
the
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<PAGE> 47
specific international focus of the targets; (ii) the size of the transactions,
and (iii) similarity of both Seagull's and Apache's reasons for the acquisition.
DLJ's review included a comparison of (i) the ratio of enterprise value
(defined as the sum of equity market capitalization, long-term debt and market
value or liquidation value of preferred stock, less cash) to proved reserves as
of December 31, 1995 ("Reserve Value"); (ii) the ratios of enterprise value to
pre-tax SEC PV10, defined as the standardized measure of discounted future net
cash flows ("PV10 Multiple"); (iii) the ratios of enterprise value to Earnings
Before Interest, Taxes, Depreciation, Amortization and Exploration expenses
("EBITDAX") for each of the 1995 fiscal year, the twelve months ended March 31,
1996 ("LTM") and projected EBITDAX for the 1996 and 1997 fiscal years ("EBITDAX
Multiples"); and (iv) the ratios of equity value (defined as equity market
capitalization) to Cash Flow From Operations before changes in working capital
("CFFO") for each of the 1995 fiscal year, the LTM and projected CFFO for the
1996 and 1997 fiscal years ("CFFO Multiples"). The implied Reserve Value was
$1.75 per Mcfe for Global compared to $2.18/mcfe for Phoenix. The implied PV10
Multiple was 1.8x for Global compared to 3.0x for Phoenix. EBITDAX Multiples
ranged from 5.8x to 15.9x for Global compared to 7.8x to 13.1x for Phoenix. The
CFFO Multiples ranged from 8.5x to 18.5x for Global compared to 13.8x to 22.5x
for Phoenix.
COMPARABLE PUBLIC COMPANY ANALYSIS: DLJ compared selected historical and
projected financial and operating data for Global to the means of the
corresponding data and ratios of three of its most comparable peers. The
companies included Pogo Producing Company, Triton Energy Corporation and United
Meridian Corporation (collectively, the "Peer Group"). The implied Reserve Value
was $1.75 for Global compared to $2.30 for the Peer Group. The implied PV10
Multiple was 1.8x for Global compared to 2.9x for the Peer Group. EBITDAX
Multiples ranged from 5.8x to 15.9x for Global compared to 11.1x to 22.3x for
the Peer Group. CFFO Multiples ranged from 8.5x to 18.5x for Global compared to
14.2x to 19.1x for the Peer Group.
DISCOUNTED CASH FLOW ANALYSIS: As a basis for projecting future oil and gas
production and resultant financial performance, management of Seagull developed
three operating cases for Global: "Most Likely Case," "Downside Case," and
"Upside Case." Each case assumed projected product prices consistent with
Seagull's internal base case, adjusted for basis and quality differentials, but
incorporated varying levels of exploratory success in Egypt, Ivory Coast and the
United States. DLJ derived a discounted cash flow analysis for Global, assuming
that existing reserves, as well as forecasted reserves added through
exploration, were produced for their respective economic lives. The resultant
after-tax, after capital expenditure cash flows were discounted at rates ranging
from 10% to 15% ("Static DCF"). The implied Global equity values per share
ranged from $17.55 to $21.38 for the Most Likely Case; $22.60 to $28.53 for the
Upside Case; and $10.61 to $12.19 for the Downside Case. As an alternative
discounted cash flow analysis, DLJ analyzed Global as a going-concern, applying
assumed multiples of 5.0x to 7.0x to projected EBITDAX in 2001 ("Going-Concern
DCF"). The implied Global equity values per share, using the same discount rates
used in the Static DCF, ranged from $21.02 to $34.81 for the Most Likely Case;
$28.29 to $46.80 for the Upside Case, and $14.34 to $22.93 for the Downside
Case.
PRO FORMA MERGER ANALYSIS: DLJ analyzed certain pro forma financial effects
of the Merger. In conducting the analysis, the financial and operating effects
of the Merger with Global were compared to Seagull's projected performance on a
stand-alone basis under the three scenarios outlined above. Assuming the Most
Likely Case over the five year period beginning January 1, 1997, and ending
December 31, 2001, (i) CFFO per share ranged from 14% dilutive to 11% accretive,
with a mean of 2% dilutive; (ii) earnings per share ranged from 78% accretive to
232% accretive, with a mean of 132% accretive; and (iii) long-term debt to
EBITDAX ratios ranged from 22% lower to 50% lower, with a mean of 36% lower than
Seagull on a stand-alone basis. Assuming the Upside Case over the five year
period beginning January 1, 1997, and ending December 31, 2001, (i) CFFO per
share ranged from 11% dilutive to 17% accretive with a mean of 7% accretive;
(ii) earnings per share ranged from 122% accretive to 319% accretive, with a
mean of 194% accretive; (iii) long-term debt to EBITDAX ratios ranged from 22%
lower to 67% lower, with a mean of 42% lower. Assuming the Downside Case over
the five year period beginning January 1, 1997, and ending December 31, 2001,
(i) CFFO per share ranged from 12% dilutive to 18% dilutive, with a mean of 14%
dilutive; (ii) earnings per share ranged from 24% accretive to 171% accretive,
with a mean of 69% accretive; and (iii) long-term debt to EBITDAX ratios ranged
from 17% lower to 50% lower, with a mean of 30% lower.
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CONTRIBUTION ANALYSIS: DLJ reviewed the relative contributions of Seagull,
as a stand-alone enterprise, and Global, as a stand-alone enterprise. DLJ
reviewed (i) estimates of proved reserves as of December 31, 1995 ("Reserves");
(ii) estimated oil and gas production in 1996 and 1999 ("Production"); (iii)
equity values ("Equity Value"); (iv) enterprise value ("Enterprise Value"); (v)
pre-tax SEC PV10 value ("PV10"), and going concern DCF value using Most Likely,
Upside and Downside Cases for Global ("DCF"). DLJ estimated that Global
contributed 24% of Reserves, 20% of 1996 Production, 37% of projected 1999
Production, 33% of Equity Value, 25% of Enterprise Value, 31% of PV10, 43% of
DCF in the Most Likely Case, 33% of PV10 in the Downside Case and 50% of DCF in
the Upside Case.
EXCHANGE RATIO SENSITIVITY: For each of the five fiscal years 1997 through
2001, DLJ reviewed the estimated effect on CFFO per share and earnings per share
("EPS") of varying the Exchange Ratio from 0.72 to 0.88. The analysis was based
on the Global Most Likely Case and was compared to Seagull on a stand-alone
basis. The effect on CFFO per share of varying the Exchange Ratio ranged from
dilution of $0.97 per share to accretion of $1.09 per share. The effect on EPS
of varying the Exchange Ratio ranged from accretion of $0.36 per share to
accretion of $1.69 per share.
OTHER QUALITATIVE ANALYSES: In addition to the analyses discussed above,
DLJ reviewed certain aspects of the transaction it deemed relevant to the
financial community. Included, among others, were (i) the value ascribed to
exploratory acreage, potential cash flow dilution and retention of key Global
management and technical personnel; (ii) potential impact of becoming a larger,
better capitalized company; (iii) potential market reaction to increased
exploratory focus and strategy; and (iv) selected pro forma operating and
financial measures and their potential impact on cash flow valuation multiples.
The summary set forth above does not purport to be a complete description
of the analyses performed and factors considered by DLJ. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Accordingly, notwithstanding the separate
factors summarized above, DLJ believes that its analyses must be considered as a
whole and that selecting portions of its analyses and the factors considered by
it, without considering all analyses and factors, could create an incomplete
view of the evaluation process underlying its opinions. Furthermore, in arriving
at its fairness opinion, DLJ did not attribute any particular weight to any
analysis, or factor considered by it, but rather made subjective and qualitative
judgments as to the significance and relevance of each analysis and factor. In
performing its analyses, DLJ made numerous assumptions with respect to industry
performance, business and economic conditions and other matters. The analyses
performed by DLJ are not necessarily indicative of actual value so future
results, which may be significantly more or less favorable than suggested by
such analyses.
Seagull selected DLJ as its exclusive financial advisor with respect to the
Merger because DLJ is a nationally recognized investment banking firm that has
substantial experience in energy related businesses and is familiar with
Seagull, Global and their respective businesses. As part of its investment
banking business, DLJ is regularly engaged in the valuation of businesses and
securities in connection with mergers, acquisitions, underwritings, sales and
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
Pursuant to the terms of the engagement letter dated July 15, 1995, Seagull
has paid DLJ $500,000 in connection with rendering its opinion. In addition,
Seagull has agreed to pay DLJ a transaction fee related to the Merger. Such
transaction fee is expected to be approximately $3,000,000 and is contingent
upon and payable following consummation of the Merger. Seagull also has agreed
to indemnify DLJ against certain liabilities relating to or arising out of its
engagement, including certain liabilities under the federal securities laws. DLJ
has, in the past, performed certain other investment banking services for
Seagull and Global.
In the ordinary course of business, DLJ actively trades debt and equity
securities of Seagull and equity securities of Global for its own account and
for the accounts of its customers and, accordingly, may at any time hold a long
or short position in such securities.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of Global's Board of Directors with
respect to the Merger, Global's shareholders should be aware that certain
members of Global's Board of Directors and officers have certain interests
respecting the Merger separate from their interests as holders of Global Common
Stock, including those referred to below.
OFFICERS AND DIRECTORS OF SEAGULL. If approved by the shareholders of
Seagull at the Seagull Special Meeting, at the Effective Time, Seagull's Board
of Directors will be increased from 11 to 14 members and the Global Designees
will fill the newly created vacancies. Global has informed Seagull that Robert
F. Vagt, R.A. Walker and Sidney R. Petersen will be the Global Designees. Each
of the Global Designees is currently a director of Global.
In addition, following the Effective Time, Barry J. Galt will continue as
Chairman and Chief Executive Officer of Seagull, and Robert F. Vagt, currently
the Chairman, President and Chief Executive Officer of Global, will become
President and Chief Operating Officer of Seagull. See "Post-Merger Profile and
Strategy -- Management."
ADOPTION OF TERMINATION POLICY. Promptly following the Effective Time,
Seagull will duly adopt a policy, in form mutually agreeable to Seagull and
Global, in their reasonable judgment, covering each employee of Global that is
employed by Global as of the Effective Time ("Retained Employee") to provide
that if at any time during the period ending on the second anniversary of the
Effective Time, the employment of such Retained Employee is terminated for any
reason (other than for cause) or such Retained Employee terminates his
employment because of a modification in his duties or responsibilities in an
adverse manner following the Effective Time, then (i) all Global Stock Options
(after giving effect to the Merger Agreement) and all options to acquire Seagull
Common Stock ("Seagull Stock Options") granted to such Retained Employee
following the Effective Time that in each case were exercisable as of the date
of termination of his employment (the "Termination Date") shall continue to be
exercisable by such Retained Employee, his estate or any person who acquired any
such Global Stock Options or Seagull Stock Options by will or the laws of
descent and distribution at any time on or before the first anniversary of the
Termination Date, and (ii) the vesting of all Global Stock Options and Seagull
Stock Options that were held by such Retained Employee but were not exercisable
as of the Termination Date shall, on and as of the Termination Date, be
accelerated and such options shall be exercisable in full by him, his estate or
any person who acquired any such Global Stock Options or Seagull Stock Options
by will or the laws of descent and distribution at any time on or before the
first anniversary of the Termination Date. The policy described above shall
contain provisions that limit its applicability to any incentive stock option
(within the meaning of the Code) if and to the extent that such applicability
would result in a "modification" (within the meaning of the Code and the rules
thereunder) of any such incentive stock option.
INDEMNIFICATION. The Merger Agreement provides that, for six years after
the Effective Time, Seagull will cause the Surviving Corporation to indemnify,
defend and hold harmless the present and former officers, directors, employees
and agents of Global and its subsidiaries (each an "Indemnified Party") against
all losses, claims, damages, liabilities, fees and expenses (including
reasonable fees and disbursements of counsel and judgments, fines, losses,
claims, liabilities and amounts paid in settlement (provided that any such
settlement is effected with the prior written consent of Seagull)) arising out
of actions or omissions in their capacity as such occurring at or prior to the
Effective Time to the full extent permitted under New Jersey law or Global's
Restated Certificate of Incorporation, Bylaws or written indemnification
agreements in effect at the date of the Merger Agreement. In addition, Seagull
shall cause the Surviving Corporation to maintain Global's existing directors'
and officers' insurance for a period of not less than six years after the
Effective Time, but only to the extent related to actions or omissions prior to
the Effective Time; provided that the Surviving Corporation may substitute
therefor policies of substantially similar coverage and amounts containing terms
no less advantageous to such former directors or officers and provided that the
Surviving Corporation is not obligated to pay more than $1,000,000 for such
insurance during such period. See "Certain Terms of the Merger
Agreement -- Indemnification of Directors and Officers."
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material federal income tax
consequences of the Merger to the holders of Global Common Stock and is based
upon current provisions of the Code, existing regulations thereunder, current
administrative rulings of the Internal Revenue Service (the "IRS") and court
decisions, all of which are subject to change. No attempt has been made to
comment on all federal income tax consequences of the Merger that may be
relevant to particular holders, including holders that are subject to special
tax rules which may modify or alter the following discussion, such as dealers in
securities, foreign persons, mutual funds, insurance companies, tax-exempt
entities and holders who do not hold their shares as capital assets. HOLDERS OF
GLOBAL COMMON STOCK ARE ADVISED AND EXPECTED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER IN LIGHT OF THEIR
PERSONAL CIRCUMSTANCES AND THE CONSEQUENCES UNDER STATE, LOCAL AND FOREIGN TAX
LAWS.
Seagull has received from its counsel, Vinson & Elkins L.L.P., an opinion
to the effect that for federal income tax purposes the Merger will constitute a
reorganization within the meaning of section 368(a) of the Code, that Seagull,
Merger Sub and Global will each be a party to that reorganization, and that
Seagull, Merger Sub and Global will not recognize any gain or loss as a result
of the Merger. Global has received from its special tax counsel, Fulbright &
Jaworski, L.L.P., an opinion to the effect that for federal income tax purposes
the Merger will constitute a reorganization within the meaning of section 368(a)
of the Code, that Seagull, Merger Sub and Global will each be a party to that
reorganization, and that the shareholders of Global will not recognize any gain
or loss upon the receipt of Seagull Common Stock in exchange for their Global
Common Stock except with respect to cash received in lieu of fractional shares
of Seagull Common Stock. Such opinions are subject to certain assumptions and
based on certain representations of Seagull, Merger Sub and Global. Shareholders
of Global should be aware that such opinions are not binding on the IRS, and no
assurance can be given that the IRS will not adopt a contrary position or that a
contrary IRS position would not be sustained by a court.
Assuming the Merger qualifies as a reorganization under section 368(a) of
the Code, the following federal income tax consequences will occur:
(a) no gain or loss will be recognized by Seagull, Merger Sub or
Global by reason of the Merger;
(b) no gain or loss will be recognized by a holder of Global Common
Stock upon the exchange of all of such holder's shares of Global Common
Stock solely for shares of Seagull Common Stock pursuant to the Merger;
(c) the aggregate basis of the shares of Seagull Common Stock received
by a holder of Global Common Stock (including any fractional share deemed
received) will be the same as the aggregate basis of the shares of Global
Common Stock surrendered in exchange therefor;
(d) the holding period of the shares of Seagull Common Stock received
by a holder of Global Common Stock (including any fractional share deemed
received) will include the holding period of the shares of Global Common
Stock surrendered in exchange therefor, provided that such shares of Global
Common Stock are held as capital assets at the Effective Time; and
(e) a holder of Global Common Stock who receives cash in lieu of a
fractional share of Seagull Common Stock will recognize gain or loss equal
to the difference, if any, between such shareholder's basis in the
fractional share (as described in paragraph (c) above) and the amount of
cash received. Such gain or loss will be eligible for long-term capital
gain or loss treatment if the Global Common Stock is held by such
shareholder as a capital asset at the Effective Time and the holding period
for the fractional share (as described in paragraph (d) above) is more than
one year.
ACCOUNTING TREATMENT
The Merger is expected to be accounted for using the "pooling of interests"
method of accounting pursuant to Opinion No. 16 of the Accounting Principles
Board. The pooling of interests method of accounting assumes that the combining
companies have been merged from inception, and the historical consolidated
financial statements for periods prior to consummation of the Merger are
restated as though the companies had been combined from inception. See
"Unaudited Pro Forma Condensed Financial Information."
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Seagull and Global have been advised by their independent public
accountants, KPMG Peat Marwick LLP, that the Merger should be treated as a
pooling of interests in accordance with generally accepted accounting
principles. Consummation of the Merger is conditioned upon the written
confirmation of such advice. Also, such advice contemplates that each person who
may be deemed an affiliate of Global or Seagull will enter into an agreement
with Seagull not to sell or otherwise transfer any shares of Global Common Stock
or Seagull Common Stock, as the case may be, within 30 days prior to the
Effective Time or any Seagull Common Stock thereafter prior to the publication
of financial results that include at least 30 days of post-Merger combined
operations of Seagull and Global. In accordance with the provisions of the
Merger Agreement, Seagull and Global have heretofore obtained executed
Affiliates' Agreements from all persons known to the managements of Seagull or
Global to be affiliates of such corporations, respectively.
GOVERNMENTAL AND REGULATORY APPROVALS
Transactions such as the Merger are reviewed by the Department of Justice
and the FTC to determine whether they comply with applicable antitrust laws.
Under the provisions of the HSR Act, the Merger may not be consummated until
such time as the specified waiting period requirements of the HSR Act have been
satisfied. Seagull and Global filed notification reports, together with requests
for early termination of the waiting period, with the Department of Justice and
the FTC under the HSR Act on , 1996. Unless earlier terminated or a
request for additional information is made, the applicable waiting period will
expire on , 1996.
At any time before or after the Effective Time, the Department of Justice,
the FTC, a state Attorney General or a private person or entity could seek under
the antitrust laws, among other things, to enjoin the Merger or to cause Seagull
to divest itself, in whole or in part, of Global or of other businesses
conducted by Seagull. There can be no assurance that a challenge to the Merger
will not be made or that, if such a challenge is made, Seagull and Global will
prevail.
Seagull and Global are aware of no other governmental or regulatory
approvals required for consummation of the Merger, other than compliance with
applicable federal and state securities laws. For a description of certain
action by the Commission that is necessary in connection with the Voting
Agreement, see "Voting Agreement."
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of Seagull Common Stock to be received by Global shareholders in
connection with the Merger have been registered under the Securities Act and,
except as set forth in this paragraph, may be traded without restriction. The
shares of Seagull Common Stock to be issued in connection with the Merger and
received by persons who are deemed to be "affiliates" (as that term is defined
in Rule 144 under the Securities Act) of Global prior to the Merger may be
resold by them only in transactions permitted by the resale provisions of Rule
145 under the Securities Act (or, in case any such person should become an
affiliate of Seagull, Rule 144 under the Securities Act) or as otherwise
permitted under the Securities Act. Under guidelines published by the
Commission, the sale or other disposition of Seagull Common Stock or Global
Common Stock by an affiliate of either Seagull or Global, as the case may be,
within 30 days prior to the Effective Time or the sale or other disposition of
Seagull Common Stock thereafter prior to the publication of financial results
that include at least 30 days of post-Merger combined operations of Seagull and
Global (the "Pooling Period") could preclude pooling of interests accounting
treatment of the Merger. Accordingly, the Merger Agreement provides that each of
Global and Seagull will use all reasonable efforts to cause its affiliates to
execute an agreement (an "Affiliates' Agreement"), in mutually agreeable form,
to the effect that such persons will not sell, transfer or otherwise dispose of
any shares of Global Common Stock or Seagull Common Stock, as the case may be,
during the Pooling Period and, with respect to affiliates of Global, that such
persons will not sell, transfer or otherwise dispose of Seagull Common Stock at
any time in violation of the Securities Act or the rules and regulations
promulgated thereunder, including Rule 145. As indicated under "-- Accounting
Treatment," Seagull and Global have heretofore obtained executed Affiliates'
Agreements from all persons known to the managements of Seagull or Global to be
affiliates of such corporations, respectively. In addition, Prudential is party
to a registration rights agreement dated August 3, 1987 (the
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"Registration Rights Agreement") with Global. Pursuant to the Merger Agreement,
Seagull has agreed to assume Global's obligations under the Registration Rights
Agreement.
GLOBAL PREFERRED SHARE PURCHASE RIGHTS PLAN
In October 1988, the Board of Directors of Global adopted a preferred share
rights plan (the "Rights Plan") pursuant to which holders of Global's Common
Stock were issued rights ("Rights") to purchase shares of a series of Global
preferred stock. Generally, the Rights are exercisable only if a person or group
acquires 20% or more of Global's outstanding voting stock. The Rights are
exercisable on the tenth business day after the Shares Acquisition Date (as
defined in the Rights Plan) or such later date as determined by the Global Board
of Directors. Each Right entitles the holder thereof to buy one one-hundredth of
a share of Series B Junior Preferred Stock ("Preferred Stock") at an exercise
price of $20.00 per Right, subject to anti-dilution provisions.
In addition to the right to purchase Preferred Stock, in the event that
Global is acquired in a merger or other business combination transaction or 50%
or more of its consolidated assets or earning power are sold, each holder of a
Right will thereafter have the right to receive, upon the exercise thereof at
the then current exercise price of the Right, that number of shares of common
stock of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Right. In the event that
Global is the surviving corporation in a merger and the Global Common Stock is
not changed or exchanged, each holder of a Right, other than Rights that are
beneficially owned by the acquiring person (the "Acquiring Person") (which will
thereafter be void), will thereafter have the right to receive upon exercise
that number of shares of Global Common Stock having a market value of two times
the exercise price of the Right.
In the event that a person or group acquires 20% or more of the outstanding
Global Common Stock, then each Right (other than Rights owned by the Acquiring
Person and its affiliates and associates and all transferees thereof) will
entitle the holder to purchase, for the exercise price, a number of shares of
Global Common Stock having a then current market value of two times the exercise
price of the Right. If this provision becomes effective and the Acquiring Person
owns less than 50% of the Global Common Stock then outstanding, the Global Board
of Directors would have the option to redeem the Rights in exchange for Global
Common Stock at the rate of one share for each two shares for which the Rights
are then exercisable.
The Rights Plan was amended as of July 22, 1996 to provide that Seagull,
Merger Sub and their affiliates or associates will not become an Acquiring
Person by virtue of the announcement, approval, execution or delivery of the
Merger Agreement or the consummation of the Merger and the other transactions
contemplated thereby and that such announcement, approval, execution, delivery
or consummation will not give rise to a Distribution Date (as defined in the
Rights Plan) or Shares Acquisition Date under the Rights Plan or otherwise
trigger the exercisability of the Rights.
FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
Certain of the information set forth under the captions "Post-Merger
Profile and Strategy -- Strategy," "-- Global's Reasons for the Merger;
Recommendation of Board of Directors of Global," "-- Seagull's Reasons for the
Merger; Recommendation of the Seagull Board of Directors" and "Opinions of
Financial Advisors" contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act, including
projections, estimates and expectations. Although Seagull and Global believe
that such projections, estimates and expectations are based on reasonable
assumptions, they can give no assurance that such projections, estimates and
expectations will be achieved. Important factors that could cause actual results
to differ materially from those in the forward-looking statements herein include
political developments in foreign countries, federal and state regulatory
developments, the timing and extent of changes in commodity prices, the extent
of success in acquiring oil and gas properties and in discovering, developing
and producing reserves and conditions of the capital markets and equity markets
during the periods covered by the forward-looking statements. See "Risk Factors
and Other Considerations" for further information with respect to certain of
such factors. In addition, certain of such projections and expectations are
based on historical results, which may not be indicative of future performance.
See "Unaudited Pro Forma Condensed Financial Information."
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CERTAIN TERMS OF THE MERGER AGREEMENT
The following description does not purport to be complete and is qualified
in its entirety by reference to the Merger Agreement, a copy of which is
attached as Appendix A to this Joint Proxy Statement/Prospectus and is
incorporated herein by reference. Capitalized terms used but not defined herein
are defined in the Merger Agreement and used herein with the same meaning as
ascribed thereto in the Merger Agreement.
EFFECTIVE TIME OF THE MERGER
The Merger Agreement provides that, as soon as practicable after the
satisfaction or waiver of the conditions to effecting the Merger, the parties
shall cause the Merger to be consummated by filing a Certificate of Merger with
the Secretary of State of the State of New Jersey in such form as required by,
and executed in accordance with, the relevant provisions of the NJBCA. It is
anticipated that, if the Merger Agreement is approved and adopted at the Global
Special Meeting and the Share Issuance is approved at the Seagull Special
Meeting and all other conditions to the Merger have been satisfied or waived,
the Effective Time will occur on the date of the Global Special Meeting and
Seagull Special Meeting, or as soon thereafter as practicable.
MANNER AND BASIS OF CONVERTING SHARES
As of the Effective Time of the Merger, without any action on the part of
the holders of Global Common Stock each share of Global Common Stock issued and
outstanding immediately prior to the Effective Time shall be converted into such
number of shares of Seagull Common Stock equal to the Common Stock Exchange
Ratio (as hereinafter defined). The Common Stock Exchange Ratio shall be
determined as follows: (i) if the Seagull Transaction Value is equal to or
greater than $27.50, then the Common Stock Exchange Ratio will be .72, if the
Seagull Transaction Value is equal to or less than $22.50, then the Common Stock
Exchange Ratio will be .88 and (iii) if the Seagull Transaction Value is less
than $27.50 and greater than $22.50, the Common Stock Exchange Ratio shall be
determined by linear interpolation between the Common Stock Exchange Ratios set
forth in clauses (i) and (ii). The term "Seagull Transaction Value" means the
closing sales price of Seagull Common Stock, rounded to four decimal places, as
reported under "NYSE Composite Transaction Reports" in The Wall Street Journal
for each of the first 20 consecutive NYSE trading days in the period commencing
25 NYSE trading days prior to the date of the Global Special Meeting. All such
Global Common Stock, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and the holder
of a certificate (a "Certificate") that, immediately prior to the Effective
Time, represented outstanding shares of Global Common stock shall cease to have
any rights with respect thereto, except the right to receive, upon the surrender
of such Certificate, the Merger Consideration. Until surrendered as contemplated
by the Merger Agreement, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Merger Consideration as contemplated by the Merger Agreement.
All shares of Seagull Common Stock issued upon the surrender of
Certificates in accordance with the terms of the Merger Agreement shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
Certificates and the Global Common Stock formerly represented thereby.
Each share of Seagull Common Stock issued and outstanding immediately prior
to the Effective Time shall remain an issued and outstanding share of Seagull
Common Stock and shall not be affected by the Merger.
TREATMENT OF GLOBAL STOCK OPTIONS
Global Stock Options are outstanding under Global's 1989 Key Employees
Stock Option Plan and 1992 Stock Option Plan. Both of such Plans permit the
Compensation Committee, which administers the Plans, to provide that, after a
Corporate Change, as defined in the Plans, including a merger, upon any exercise
of a Global Stock Option, the holder shall be entitled to purchase under such
Global Stock Option, in lieu of Global Common Stock, the number of shares of
Seagull Common Stock as to which the holder would have been entitled under the
Merger Agreement if he had been the holder of record of the number of shares of
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Global Common Stock as to which such Global Stock Option is exercisable. If the
Merger is approved by Global's shareholders, the Compensation Committee intends
to cause all outstanding Global Stock Options to be so treated.
Accordingly, at the Effective Time, outstanding Global Stock Options will
become and represent options to acquire, as and when such Global Stock Options
became exercisable in accordance with their terms, a number of shares of Seagull
Common Stock equal to the number of shares of Global Common Stock subject to
such Global Stock Options times the Common Stock Exchange Ratio at an exercise
price per share of Seagull Common Stock equal to the exercise price per share of
Global Common Stock immediately prior to the Effective Time divided by the
Common Stock Exchange Ratio.
SURRENDER AND EXCHANGE OF CERTIFICATES
Prior to the Effective Time, Seagull shall deposit with the Exchange Agent
for the benefit of the holders of Global Common Stock (other than Global,
Seagull or any subsidiary of Seagull), for exchange in accordance with the
Merger Agreement through the Exchange Agent, (i) as of the Effective Time,
certificates representing the Merger Consideration to be issued pursuant to the
Merger Agreement, and (ii) from time to time as necessary, cash to be paid in
lieu of any fractional share in accordance with the Merger Agreement (such
certificates for the Merger Consideration and such cash being hereinafter
referred to as the "Exchange Fund"). The Exchange Agent shall, pursuant to
irrevocable instructions, deliver the Merger Consideration and cash in exchange
for surrendered Certificates pursuant to the Merger Agreement out of the
Exchange Fund.
Promptly after the Effective Time, but in any event not later than five
business days thereafter, Seagull will send, or will cause the Exchange Agent to
send, to each holder of a Certificate a letter of transmittal and instructions
for use in effecting the exchange of such Certificate for certificates
representing the Merger Consideration and, if applicable, cash in lieu of any
fractional share. Provision also shall be made for holders of Certificates to
procure a letter of transmittal and instructions and deliver such letter of
transmittal and Certificates in exchange for the Merger Consideration and, if
applicable, cash in lieu of any fractional shares in person immediately after
the Effective Time.
At the Effective Time, the stock transfer books of Global shall be closed
and there shall be no further registration of transfers of Global Common Stock
outstanding prior to the Effective Time. If, at or after the Effective Time,
Certificates are presented to Global, they shall be canceled and exchanged as
provided for, and in accordance with the procedures set forth, in the Merger
Agreement.
Any Merger Consideration and any cash in the Exchange Fund that remain
unclaimed one year after the Effective Time shall be returned to Seagull, upon
demand, and any holder of Global Common Stock who has not exchanged such
holder's Certificates in accordance with the Merger Agreement prior to that time
shall thereafter look only to Seagull, as general creditors thereof, to exchange
such Certificates or to pay amounts to which they are entitled pursuant to the
Merger Agreement. If outstanding Certificates are not surrendered prior to the
sixth anniversary of the Effective Time, (or, in any particular case, prior to
such earlier date on which any Merger Consideration issuable in respect of such
Certificates or the dividends and other distributions, if any, described below
would otherwise escheat to or become the property of any governmental unit or
agency), the Merger Consideration issuable in respect of such Certificates, and
the amount of dividends and other distributions, if any, that have become
payable and that thereafter become payable on the Merger Consideration shall, to
the extent permitted by applicable law, become the property of Seagull, free and
clear of all claims or interest of any person previously entitled thereto.
Notwithstanding the foregoing, Seagull shall not be liable to any holder of
Certificates for any amount paid, or Merger Consideration, cash or dividends
delivered, to a public official pursuant to applicable abandoned property,
escheat or similar laws.
No dividends or other distributions on any Merger Consideration shall be
paid to the holder of any unsurrendered Certificate with respect to the Seagull
Common Stock represented thereby until such Certificate is surrendered as
provided in the Merger Agreement. Following such surrender, there shall be paid,
without interest, to the person in whose name the certificates representing the
Merger Consideration issued in exchange therefor are registered, (i) promptly
all dividends and other distributions paid in respect of such
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Merger Consideration with a record date on or after the Effective Time and
theretofore paid, and (ii) at the appropriate date, all dividends or other
distributions in respect of such Merger Consideration with a record date after
the Effective Time but prior to surrender and a payment date occurring after
surrender.
If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by Seagull, the posting by such
person of a bond in such reasonable amount as Seagull may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration and, if applicable, cash and unpaid
dividends and other distributions on any Merger Consideration deliverable in
respect thereof pursuant to the Merger Agreement.
TREATMENT OF FRACTIONAL INTERESTS
No fractional shares of Seagull Common Stock shall be issued in the Merger,
and fractional share interests shall not entitle the owner thereof to vote or to
any rights of a shareholder of Seagull. All holders of fractional shares of
Seagull Common Stock shall be entitled to receive, in lieu thereof, an amount in
cash determined by multiplying the fraction of share of Seagull Common Stock to
which such holder would otherwise have been entitled by the average of the
closing sales price of Seagull Common Stock, rounded to four decimal places, as
reported under "NYSE Composite Transaction Reports" in The Wall Street Journal,
for each of the first 20 consecutive Trading Days in the period commencing 25
Trading Days prior to the Effective Time.
NO DISSENTERS' OR APPRAISAL RIGHTS
Holders of Global Common Stock who vote against the Merger will not be
entitled to dissenters' or appraisal rights under the NJBCA if the Merger is
consummated. Holders of Seagull Common Stock who vote against the Merger will
not be entitled to dissenters' or appraisal rights under the TBCA if the Merger
is consummated.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties of
Global, Merger Sub and Seagull relating to, among other things, certain aspects
of the respective businesses and financial statements of the parties and certain
other matters. The representations and warranties expire at the Closing.
CONDUCT OF BUSINESS PRIOR TO THE MERGER
CONDUCT OF BUSINESS BY GLOBAL PENDING THE MERGER. From the date of the
Merger Agreement until the Effective Time, unless Seagull shall otherwise agree
in writing, or except as set forth in the Global Disclosure Schedule (as defined
in the Merger Agreement) or as otherwise contemplated by the Merger Agreement,
Global and its Subsidiaries (as defined in the Merger Agreement) shall conduct
their business in the ordinary course consistent with past practice and shall
use their reasonable efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services of their
present officers and key employees, subject to the terms of the Merger
Agreement. Except as set forth in the Global Disclosure Schedule or as otherwise
provided in the Merger Agreement, from the date of the Merger Agreement until
the Effective Time, without the prior written consent of Seagull, which consent
will not be unreasonably withheld: (a) Global will not adopt or propose any
change to its Restated Certificate of Incorporation or Bylaws; (b) Global will
not, and will not permit any of its Subsidiaries to (i) declare, set aside or
pay any dividend or other distribution with respect to any shares of capital
stock of Global or (ii) repurchase, redeem or otherwise acquire any outstanding
shares of capital stock or other securities of, or other ownership interests in,
Global or any of its Subsidiaries, other than intercompany acquisitions of
stock; (c) Global will not, and will not permit any of its Subsidiaries to,
merge or consolidate with any other person or acquire a material amount of
assets of any other person; (e) Global will not, and will not permit any of its
Subsidiaries to, sell, lease, license or otherwise surrender, relinquish or
dispose of any assets or properties with an aggregate fair market value
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exceeding $1 million; (f) Global will not settle any material Audit, make or
change any material Tax election or file any material amended Tax Return (each
as defined in the Merger Agreement); (g) except as otherwise permitted by the
Merger Agreement, Global will not issue any securities (except pursuant to
existing obligations disclosed in the Global SEC Reports or the Global
Disclosure Schedule), enter into any amendment of any term of any outstanding
security of Global or of any of its Subsidiaries, incur any indebtedness except
pursuant to existing credit facilities or arrangements, fail to make any
required contribution to any Global ERISA Plan (as defined in the Merger
Agreement), increase compensation, bonus (with certain specified exceptions) or
other benefits payable to any employee or former employee or enter into any
settlement or consent with respect to any pending litigation; (h) Global will
not change any method of accounting or accounting practice by Global or any of
its Subsidiaries, except for any such change required by GAAP; (i) Global will
not take any action that would give rise to a claim under the WARN Act or any
similar state law or regulation because of a "plant closing" or "mass layoff"
(each as defined in the WARN Act); (j) Global will not amend or otherwise change
the terms of its engagement letter with Petrie Parkman, except to the extent
that any such amendment or change would result in terms more favorable to
Global; (k) neither Global nor any of its Subsidiaries will propose any
operation, or consent to participate in any operation, with respect to any Oil
and Gas Interests (as defined in the Merger Agreement) that will individually
cost in excess of $5 million, unless the operation is an obligation of Global or
any of its Subsidiaries or necessary to extend, preserve or maintain an Oil and
Gas Interest; (1) neither Global nor any of its Subsidiaries will enter into any
futures, hedge, swap, collar, put, call, floor, cap, option or other contracts
that are intended to benefit from or reduce or eliminate the risk of
fluctuations in the price of commodities, including Hydrocarbons, or securities;
(m) Global will not, and will not permit any of its Subsidiaries to, agree or
commit to do any of the foregoing; and (n) Global will not, and will not permit
any of its Subsidiaries to (i) take, or agree or commit to take, any action that
would make any representation and warranty of Global in the Merger Agreement
inaccurate in any respect at, or as of any time prior to, the Effective Time or
(ii) omit, or agree or commit to omit, to take any action necessary to prevent
any such representation or warranty from being inaccurate in any respect at any
such time.
CONDUCT OF BUSINESS BY SEAGULL PENDING THE MERGER. From the date of the
Merger Agreement until the Effective Time, unless Global shall otherwise agree
in writing, or except as set forth in the Seagull Disclosure Schedule (as
defined in the Merger Agreement) or as otherwise contemplated by the Merger
Agreement, Seagull and its Subsidiaries shall conduct their business in the
ordinary course consistent with past practice and shall use their reasonable
efforts to preserve intact their business organizations and relationships with
third parties and to keep available the services of their present officers and
key employees, subject to the terms of the Merger Agreement. Except as set forth
in the Seagull Disclosure Schedule or as otherwise provided in the Merger
Agreement, from the date of the Merger Agreement until the Effective Time,
without the prior written consent of Global, which consent will not be
unreasonably withheld: (a) Seagull will not adopt or propose any change to its
Articles of Incorporation or Bylaws; (b) Seagull will not, and will not permit
any of its Subsidiaries to (i) declare, set aside or pay any dividend or other
distribution with respect to any shares of capital stock of Seagull or (ii)
repurchase, redeem or otherwise acquire any outstanding shares of capital stock
or other securities of, or other ownership interests in, Seagull or any of its
Subsidiaries, other than intercompany acquisitions of stock or any market
repurchase program conducted in accordance with Rule 10b-18 under the Exchange
Act (subject to applicable pooling requirements); (c) Seagull will not, and will
not permit any of its Subsidiaries to, merge or consolidate with any other
person or acquire assets having aggregate purchase prices of more than $150
million (excluding the Esso Suez Acquisition; (e) Seagull will not, and will not
permit any of its Subsidiaries to, sell, lease, license or otherwise surrender,
relinquish or dispose of any assets or properties with an aggregate fair market
value exceeding $1 million; (f) Seagull will not settle any material Audit, make
or change any material Tax Election or file any material amended Tax Return
(each as defined in the Merger Agreement); (g) except as otherwise permitted by
the Merger Agreement, Seagull will not issue any securities (except pursuant to
existing obligations disclosed in the Seagull SEC Reports or the Seagull
Disclosure Schedule), enter into any amendment of any term of any outstanding
security of Seagull or of any of its Subsidiaries, incur any indebtedness except
pursuant to existing credit facilities or arrangements, fail to make any
required contribution to any Seagull ERISA Plan (as defined in the Merger
Agreement), increase compensation, bonus (with certain specified exceptions) or
other
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benefits payable to any employee or former employee or enter into any settlement
or consent with respect to any pending litigation; (h) Seagull will not change
any method of accounting or accounting practice by Seagull or any of its
Subsidiaries, except for any such change required by GAAP; (i) Seagull will not
take any action that would give rise to a claim under the WARN Act or any
similar state law or regulation because of a "plant closing" or "mass layoff"
(each as defined in the WARN Act); (j) Seagull will not amend or otherwise
change the terms of its engagement letter with DLJ, except to the extent that
any such amendment or change would result in terms more favorable to Seagull;
(k) neither Seagull nor any of its Subsidiaries will propose any operation, or
consent to participate in any operation, with respect to any Oil and Gas
Interests (as defined in the Merger Agreement) that will individually cost in
excess of $5 million, unless the operation is an obligation of Seagull or any of
its Subsidiaries or necessary to extend, preserve or maintain an Oil and Gas
Interest; (1) neither Seagull nor any of its Subsidiaries will enter into any
futures, hedge, swap, collar, put, call, floor, cap, option or other contracts
that are intended to benefit from or reduce or eliminate the risk of
fluctuations in the price of commodities, including Hydrocarbons, or securities
other than in the ordinary course of business; (m) Seagull will not, and will
not permit any of its Subsidiaries to, agree or commit to do any of the
foregoing; and (n) Seagull will not, and will not permit any of its Subsidiaries
to (i) take, or agree or commit to take, any action that would make any
representation and warranty of Seagull or Merger Sub in the Merger Agreement
inaccurate in any respect at, or as of any time prior to, the Effective Time or
(ii) omit, or agree or commit to omit, to take any action necessary to prevent
any such representation or warranty from being inaccurate in any respect at any
such time.
NO SOLICITATION
The Merger Agreement provides that, from the date thereof until the
termination thereof, Global and its Subsidiaries will not, and will cause their
respective officers, directors, employees or other agents not to, directly or
indirectly, (i) take any action to solicit, initiate or encourage any Global
Acquisition Proposal (as hereinafter defined), or (ii) engage in negotiations
with, or disclose any nonpublic information relating to Global or its
Subsidiaries, respectively, or afford access to their respective properties,
books or records to any person that may be considering making, or has made, a
Global Acquisition Proposal. Nothing contained in the foregoing provision shall
prohibit Global and the Global Board from (i) taking and disclosing a position
with respect to a tender offer by a third party pursuant to Rules 14d-9 and
14e-2(a) promulgated by the Commission under the Exchange Act, or (ii)
furnishing information to, or entering into negotiations with, any person or
entity that has indicated its willingness to make an unsolicited bona fide
proposal to acquire Global pursuant to a merger, consolidation, share exchange,
purchase of a substantial portion of the assets, business combination or other
similar transaction, if, and only to the extent that, (A) such unsolicited bona
fide proposal relating to a Global Acquisition Proposal is made by a third party
that the Board of Directors of Global determines in good faith that the third
party has the good faith intent to proceed with negotiations to consider, and
financial capability to consummate, such Global Acquisition Proposal, (B) the
Global Board, after duly considering the written advice of outside legal counsel
to Global, determines in good faith that such action is required for the Board
of Directors of Global to comply with its fiduciary duties to shareholders
imposed by applicable law, (C) contemporaneously with furnishing such
information to, or entering into discussions or negotiations with, such person
or entity Global provides written notice to Seagull to the effect that it is
furnishing information to, or entering into discussions or negotiations with,
such person or entity and (D) Global uses all reasonable efforts to keep Seagull
informed in all material respects of the status and terms of any such
negotiations or discussions (including without limitation the identity of the
person or entity with whom such negotiations or discussions are being held) and
provides Seagull copies of such written proposals and any amendments or
revisions thereto or correspondence related thereto; provided, that Seagull will
execute a confidentiality agreement, in form reasonably acceptable to it, with
respect to any such information delivered to Seagull, which confidentiality
agreement shall be subject to Seagull's disclosure obligations arising under
applicable law or securities exchange regulations. The term "Global Acquisition
Proposal" means any offer or proposal for, or any indication of interest in, a
merger or other business combination directly or indirectly involving Global or
any of its Subsidiaries or the acquisition of a substantial equity interest in,
or a substantial portion of the assets of, any such party, other than the
transactions contemplated by the Merger Agreement.
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CERTAIN ADDITIONAL AGREEMENTS
EMPLOYEE BENEFIT MATTERS. Seagull is obligated to evaluate its personnel
needs and consider continuing the employment of certain employees of Global on a
case-by-case basis. With respect to employees of Global that are employed by
Global as of the Effective Time, Seagull has agreed, in general, that it will
(i) continue their same base salary or wages, and (ii) continue, until January
1, 1997, coverage under any Global employee benefit plan that was available to
them or, if such Retained Employee is reassigned to a position with Seagull,
continue coverage under any Seagull employee benefit plans available to
similarly-situated employees of Seagull. From and after January 1, 1997, Seagull
will provide to the Retained Employees employee plans that are comparable to
those provided to its similarly-situated employees. Seagull also has agreed (i)
to waive certain preexisting condition limitations under its medical plan with
respect to the Retained Employees, (ii) for purposes of any employee pension
benefit plan, to provide credit for participation and vesting purposes for the
period of time such Retained Employees were employed by Global, and (iii) for
purposes of any other employee benefit plan, to provide credit for the period of
time such Retained Employees were employed by Global up to the maximum period
permitted under the Seagull plans.
Any Retained Employee who is terminated after the Effective Time will be
provided benefits under the Seagull Energy Corporation Management Stability Plan
or comparable benefits under a separate severance agreement.
BOARD OF DIRECTORS. If approved by Seagull's shareholders, at the Effective
Time, Seagull's Board of Directors will be increased from 11 to 14 members, and
the three Global Designees will fill the newly created vacancies. Robert F. Vagt
will be elected to Class I of the Seagull Board (with a term expiring in 1999),
R.A. Walker will be elected to Class II of the Seagull Board (with a term
expiring in 1997) and Sidney R. Petersen will be elected to Class III of the
Seagull Board (with a term expiring in 1998). See "Election of Directors." Also
after the Effective Time, Barry J. Galt will continue as Chairman and Chief
Executive Officer of Seagull, and Robert F. Vagt, currently the Chairman,
President and Chief Executive Officer of Global, will become President and Chief
Operating Officer of Seagull. Two additional persons designated by Global will
serve on Seagull's Senior Advisory Council.
STOCK EXCHANGE LISTING. Seagull shall use all reasonable efforts to cause
the Seagull Common Stock to be issued in the Merger to be approved for listing
on the NYSE prior to the Effective Time, subject to official notice of issuance.
CERTAIN POST-MERGER MATTERS
Once the Merger is consummated, Merger Sub will cease to exist as a
corporation, and Global as the Surviving Corporation will continue in existence
as a subsidiary of Seagull and will succeed to all of the assets, rights and
obligations of Merger Sub. Pursuant to the Merger Agreement, the Restated
Certificate of Incorporation and Bylaws of Global, as in effect immediately
prior to the Effective Time, will be the Certificate of Incorporation and Bylaws
of Global until amended as provided therein and pursuant to the NJBCA.
CONDITIONS TO THE MERGER
CONDITIONS TO THE OBLIGATION OF EACH PARTY. The respective obligations of
each party to effect the Merger are subject to the fulfillment at or prior to
the Effective Time of the following conditions: (a) the Merger Agreement and the
Merger shall have been approved by the requisite vote of the shareholders of
Global and of Seagull; (b) no action, suit or proceeding instituted by any
Governmental Authority (as defined in the Merger Agreement) shall be pending and
no statute, rule or regulation and no injunction, order, decree or judgment of
any court or Governmental Authority of competent jurisdiction will be in effect
that would prohibit, restrain, enjoin or restrict the consummation of the
Merger; (c) the Registration Statement shall have become effective in accordance
with the provisions of the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall be in effect and no proceeding
for such purpose shall be pending before or threatened by the Commission; (d)
each of Global and Seagull shall have obtained such permits, authorizations,
consents, or approvals required to consummate the transactions contemplated by
the Merger
53
<PAGE> 59
Agreement; and (e) the Seagull Common Stock to be issued in the Merger shall
have been approved for listing on the NYSE, subject to official notice of
issuance.
CONDITIONS TO THE OBLIGATIONS OF SEAGULL AND MERGER SUB. The obligation of
Seagull and Merger Sub to effect the Merger is subject to the satisfaction at or
prior to the Effective Time of the following conditions: (a) Global shall have
performed in all material respects its obligations under the Merger Agreement
required to be performed by it at or prior to the Effective Time and the
representations and warranties of Global contained in the Merger Agreement to
the extent qualified with respect to materiality shall be true and correct in
all respects, and to the extent not so qualified shall be true and correct in
all material respects, in each case as of the date of the Merger Agreement and
at and as of the Effective Time as if made at and as of such time and Seagull
will have received a certificate of certain officers of Global as to the
satisfaction of this condition; (b) all proceedings to be taken by Global in
connection with the transactions contemplated by the Merger Agreement and all
documents, instruments and certificates to be delivered by Global in connection
with such transactions will be reasonably satisfactory in form and substance to
Seagull and Merger Sub and their counsel; (c) from the date of the Merger
Agreement through the Effective Time, there shall not have occurred any change
in the financial condition, business, operations or prospects of Global and its
Subsidiaries, taken as a whole, that would have or would be reasonably likely to
have a Global Material Adverse Effect (as defined in the Merger Agreement),
other than any such change that affects both Seagull and Global in a
substantially similar manner; (d) Seagull shall have received from KPMG Peat
Marwick LLP a written opinion dated the Effective Time to the effect that the
transactions contemplated by Merger Agreement, including the Merger, when
effected in accordance with the terms thereof, shall be accounted for in the
consolidated financial statements of Seagull and its subsidiaries as a pooling
of interests; and (e) Seagull shall have received an opinion from Vinson &
Elkins L.L.P. prior to the effectiveness of the Registration Statement to the
effect that the Merger will constitute a tax-free transaction under the Code.
CONDITIONS TO THE OBLIGATIONS OF GLOBAL. The obligation of Global to effect
the Merger is subject to the satisfaction at or prior to the Effective Time of
the following conditions: (a) each of Seagull and Merger Sub will have performed
in all material respects its obligations under the Merger Agreement required to
be performed by it at or prior to the Effective Time and the representations and
warranties of each of Seagull and Merger Sub contained in the Merger Agreement
to the extent qualified with respect to materiality shall be true and correct in
all respects, and to the extent not so qualified shall be true and correct in
all material respects, in each case as of the date of the Merger Agreement and
at and as of the Effective Time, and Global will have received a certificate of
certain officers of each of Seagull and Merger Sub as to the satisfaction of
this condition; (b) all proceedings to be taken by each of Seagull and Merger
Sub in connection with the transactions contemplated by the Merger Agreement and
all documents, instruments and certificates to be delivered by each of Seagull
and Merger Sub in connection with such transactions will be reasonably
satisfactory in form and substance to Global and its counsel; (c) from the date
of the Merger Agreement through the Effective Time, there will not have occurred
any change in the financial condition, business, operations or prospects of
Seagull and its Subsidiaries, taken as a whole, that would have or would be
reasonably likely to have a Seagull Material Adverse Effect (as defined in the
Merger Agreement), other than any such change that affects both Seagull and
Global in a substantially similar manner, (d) Global will have received an
opinion from Fulbright & Jaworski, L.L.P. prior to the effectiveness of the
Registration Statement and at the Effective Time to the effect that the Merger
will constitute a tax-free transaction under the Code; and (e) Global shall have
received the opinion of Petrie Parkman to the effect that, as of the date of the
definitive Joint Proxy Statement/Prospectus, the consideration to be received in
the Merger by the holders of the Global Common Stock is fair to such holders
from a financial point of view.
There can be no assurance that all of the conditions to the Merger will be
satisfied.
TERMINATION AND AMENDMENT OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the shareholders of Global: (a) by the
mutual written consent of Seagull and Global; (b) by either Seagull or Global if
the Effective Time shall not have occurred on or before January 31, 1997
(provided that the right to terminate the Merger Agreement under this clause
shall not be available to any party who at
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<PAGE> 60
the time of such termination is in material breach of any of its obligations
under the Merger Agreement); (c) by Global if there has been a material breach
by Seagull or Merger Sub of any representation, warranty, covenant or agreement
set forth in the Merger Agreement, which breach (if susceptible to cure) has not
been cured within twenty business days following receipt by Seagull of notice of
such breach; (d) by Seagull, if there has been a material breach by Global of
any representation, warranty, covenant or agreement set forth in the Merger
Agreement, which breach (if susceptible to cure) has not been cured within
twenty business days following receipt by Global of notice of such breach (a
"Global Breach"); (e) by either Global or Seagull, if there shall be any
applicable domestic law, rule or regulation that makes consummation of the
Merger illegal or if any judgment, injunction, order or decree of a court or
other Governmental Authority of competent jurisdiction shall restrain or
prohibit the consummation of the Merger, and such judgment, injunction, order or
decree shall become final and nonappealable; (f) by either Global or Seagull, if
the requisite shareholder approval shall not have been obtained by reason of the
failure to obtain the requisite vote upon a vote at a duly held meeting of
shareholders or at any adjournment(s) or postponement(s) thereof; (g) by Seagull
if (i) the Global Board withdraws, modifies or changes its recommendation of the
Merger Agreement or the Merger in a manner adverse to Seagull or shall have
resolved to do any of the foregoing or the Global Board shall have recommended
to the shareholders or Global any Global Acquisition Proposal or resolved to do
so; (ii) a tender offer or exchange offer for outstanding shares of capital
stock of Global then representing 50% or more of the combined power to vote
generally for the election of directors is commenced, and the Global Board does
not, within the applicable period required by law, recommend that shareholders
not tender their shares into such tender or exchange offer, or (iii) Global does
not receive the fairness opinion of Petrie Parkman described above under
"-- Conditions to the Merger" (unless such condition is waived by Global) within
two business days after the definitive Joint Proxy Statement/Prospectus is
otherwise ready to be printed; or (h) by Global or Seagull, if Global accepts a
Superior Proposal (as hereinafter defined) and makes the payments described
below under "-- Expenses -- Termination Expenses;" provided, however, that
Global shall not be permitted to terminate the Merger Agreement pursuant to the
foregoing provision unless it has used all reasonable efforts to provide Seagull
with two business days prior written notice of its intent to so terminate the
Merger Agreement together with a detailed summary of the terms and conditions of
such Global Acquisition Proposal and shall have negotiated in good faith with
Seagull to make such adjustments in the terms and conditions of the Merger
Agreement as would enable Global to proceed with the transactions contemplated
by the Merger Agreement. The term "'Superior Proposal" means an unsolicited bona
fide proposal made by a third party relating to a Global Acquisition Proposal on
terms that the Global Board determines it cannot reject in favor of the Merger,
based on applicable fiduciary duties and the advice of Global's outside counsel;
provided that the Global Board determines in good faith that the third party
making the proposal has the financial capability to consummate such Global
Acquisition Proposal.
EXPENSES
GENERAL. The Merger Agreement provides that, except as provided below, all
expenses incurred by the parties to the Merger Agreement shall be borne solely
and entirely by the party that has incurred such expenses; provided, however,
that if the Merger Agreement is terminated for any reason, then each party bears
its own investment banking and legal fees and the allocable shares of Seagull
and Merger Sub, on the one hand, and Global, on the other hand, for all other
expenses related to preparing, printing, filing and mailing the Registration
Statement, this Joint Proxy Statement/Prospectus and all Commission and other
regulatory filing fees incurred in connection with the Registration Statement,
this Joint Proxy Statement/Prospectus and the HSR Act shall be one-half each.
TERMINATION EXPENSES. The Merger Agreement provides that, if (i) Seagull
terminates the Merger Agreement pursuant to the provisions described in clause
(g) of the paragraph set forth above under "-- Termination and Amendment of the
Merger Agreement," (ii) Global terminates the Merger Agreement pursuant to
clause (h) of the paragraph set forth under "-- Termination and Amendment of the
Merger Agreement," or (iii) Seagull terminates the Merger Agreement pursuant to
the provisions described in clause (d) of the paragraph set forth above under
"-- Termination and Amendment of the Merger Agreement," or pursuant to the
provisions described in clause (b) of the paragraph set forth above under
"-- Termination and Amendment of the Merger Agreement" at a time that a Global
Breach exists and within
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<PAGE> 61
nine months after such termination (A) a transaction is consummated, which
transaction, if offered or proposed, would constitute a Global Acquisition
Proposal, (B) an agreement for such a transaction is entered into or (C) (x) any
person shall have acquired beneficial ownership or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under Section
13(d) of the Exchange Act), shall have been formed that beneficially owns, or
has the right to acquire beneficial ownership of, outstanding shares of capital
stock of Global then representing 50% or more of the combined power to vote
generally for the election of directors and (y) the Board of Directors of Global
has taken any action, including without limitation the redemption of the Rights
under the Global Rights Plan, or the amendment, termination of similar action
with respect to the Global Rights Plan for the benefit of such person, that
facilitates the acquisition by such person or group of such beneficial
ownership, then in any such case Global shall pay to Seagull a termination fee
of $20 million, plus the reasonably documented expenses of Seagull and Merger
Sub up to $2 million.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Merger Agreement provides that, for six years after the Effective Time,
Seagull will cause Global to indemnify, defend and hold harmless the present and
former officers, directors, employees and agents of Global and its Subsidiaries
(each an "Indemnified Party") against all losses, claims, damages, liabilities,
fees and expenses (including reasonable fees and disbursements of counsel and
judgments, fines, losses, claims, liabilities and amounts paid in settlement
(provided that any such settlement is effected with the prior written consent of
Seagull)) arising out of actions or omissions in their capacity as such
occurring at or prior to the Effective Time to the full extent permitted under
New Jersey law or Global's Restated Certificate of Incorporation, Bylaws or
written indemnification agreements in effect at the date of the Merger
Agreement. In addition, Seagull shall cause the Surviving Corporation to
maintain Global's existing directors' and officers' insurance for a period of
not less than six years after the Effective Time, but only to the extent related
to actions or omissions prior to the Effective Time; provided that the Surviving
Corporation may substitute therefor policies of substantially similar coverage
and amounts containing terms no less advantageous to such former directors or
officers and provided that the Surviving Corporation is not obligated to pay
more than $1,000,000 for such insurance during such period.
VOTING AGREEMENT
The following description does not purport to be complete and is qualified
in its entirety by reference to the Voting Agreement, a copy of which is
attached as Appendix B to this Joint Proxy Statement/Prospectus and is
incorporated herein by reference.
In order to induce Seagull to enter into the Merger Agreement, Prudential
has entered into the Voting Agreement. An aggregate of 6,311,547 shares of
Global Common Stock, owned beneficially by Prudential, are subject to the Voting
Agreement. Such shares, as of the date of the Voting Agreement, represented
approximately 21.2% of the then outstanding shares of Global Common Stock.
Pursuant to the Voting Agreement, Prudential has, among other things,
agreed to vote all shares of Global Common Stock beneficially owned by
Prudential in favor of the Merger and against any business combination proposal
or other matter that may interfere or be inconsistent with the Merger (including
a Competing Transaction). The Stockholder also has agreed, if reasonably
requested by Seagull in order to facilitate the Merger, not to attend and not to
vote any Global Common Stock beneficially owned by Prudential at, any annual or
special meeting of Global shareholders and not to execute any written consent of
shareholders, in each case relating directly or indirectly to a Competing
Transaction.
Notwithstanding the foregoing, Prudential shall not be required to vote any
of the shares of Global Common Stock in favor of the Merger Agreement and the
Merger if the value of the Seagull Common Stock is less than $17.00 per share,
which value shall be calculated based on the average closing sales price of
Seagull Common Stock for a specified twenty-day period prior to the Global
Special Meeting. In addition, Prudential shall not be required to vote any of
the shares of Global Common Stock in favor of the Merger if Prudential has not
obtained from the Commission any approval required under Section 9(a) or 2(a) of
the 1935 Act. Section 9(a)(2) of the 1935 Act prohibits a person that owns 5% or
more of the voting securities of
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<PAGE> 62
one "public utility company" within the meaning of the 1935 Act from acquiring
5% or more of the voting securities of another public utility company without
approval from the Commission. Because Seagull owns the gas utility company in
Anchorage, Alaska at the parent company level, Seagull is a public utility
company. At its current level of ownership of Global Common Stock, Prudential
would receive at least 5% of the outstanding Seagull Common Stock in the Merger
in exchange for its shares of Global Common Stock. Because Prudential could be
viewed by the Commission to already own at least 5% of another utility,
Prudential may be required to obtain either the approval contemplated by Section
9(a)(2) or an exemption from such requirement. In addition, if Prudential were
to own 10% or more of the Seagull Common Stock after the Merger (which would
likely occur based upon Prudential's current ownership of Seagull Common Stock),
Prudential may be required to seek an order under Section 2(a) so that it is not
regulated as a "holding company" within the meaning of the 1935 Act. Seagull
believes that it is unlikely that these 1935 Act issues will prevent Prudential
from ultimately complying with its obligations under the Voting Agreement.
Prudential has agreed to use all best efforts to diligently and expeditiously
obtain such approval from the Commission.
The Voting Agreement also provides that the Prudential Capital Group, an
investment unit of Prudential and the manager of the shares of Global Common
Stock beneficially owned by Prudential (the "Manager"), will not initiate,
solicit or encourage (including by way of furnishing information or assistance),
or take any other action to facilitate, any inquiries or the making of any
proposal relating to, or that may reasonably be expected to lead to, any merger,
consolidation, share exchange, business combination or similar transaction
involving Global or any of its subsidiaries or the acquisition in any manner,
directly or indirectly, of a material equity interest in any voting securities
of, or a substantial portion of the assets of, Global or any of its
subsidiaries, other than the transactions contemplated by the Voting Agreement
or the Merger Agreement, or enter into discussions or negotiate with any person
or entity in furtherance of such inquiries or to obtain such a transaction, or
agree to, or endorse, any such transaction, or authorize or permit any of its
officers, directors or employees of Prudential assigned to the Manager or any
investment banker, financial advisor, attorney, accountant or other
representative retained by Prudential pursuant to any request by or suggestion
of the Manager to take any such action.
Prudential also has agreed that it will not, directly or indirectly, (i)
sell, transfer, pledge or otherwise dispose of any shares of Global Common Stock
to any person other than Seagull or its designee unless such person shall have
agreed in writing to be bound by the terms of the Voting Agreement, or (ii)
grant a proxy with respect to any shares of Global Common Stock to any person
other than Seagull or its designee, or grant an option with respect to any of
the foregoing, or enter into any other agreement or arrangement with respect to
any of the foregoing.
The Voting Agreement will terminate on the earliest to occur of (i) January
31, 1997, (ii) the termination of the Merger Agreement and (iii) the Effective
Time.
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<PAGE> 63
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The unaudited pro forma condensed statements of earnings for the six months
ended June 30, 1996 and each of the years in the three-year period ended
December 31, 1995 give effect to (i) the Merger using the pooling of interests
method of accounting for business combinations and (ii) the Esso Suez
Acquisition, financed under the Credit Facilities, as if the acquisition had
occurred on January 1, 1995. The unaudited pro forma condensed balance sheet as
of June 30, 1996 gives effect to (i) the Merger using the pooling of interests
method of accounting for business combinations and (ii) the Esso Suez
Acquisition, financed under the Credit Facilities, as if the acquisition had
occurred on June 30, 1996. The transactions contemplated by the Merger Agreement
will be accounted for as a pooling of interests whereby the assets, liabilities
and results of operations of Seagull and Global are combined using the
historical cost-based amounts of the two separate entities.
As described in "Certain Terms of the Merger Agreement -- Manner and Basis
of Converting Shares," the Common Stock Exchange Ratio will range from .72 to
.88, depending upon the Seagull Transaction Value. As described under that
heading, if the Seagull Transaction Value is equal to or less than $22.50, the
Common Stock Exchange Ratio is fixed at .88. The sales price of Seagull Common
Stock on the NYSE has been well below $22.50 per share since the announcement of
the Merger. For example, on the date of this Joint Proxy Statement/Prospectus,
the closing price of the Seagull Common Stock on the NYSE was $ per share.
Accordingly, Seagull's management believes that it is a reasonable assumption
that the applicable Common Stock Exchange Ratio will be the maximum exchange
ratio of .88.
The unaudited pro forma information presented is based upon the respective
historical consolidated financial statements of Seagull, Global and Esso Suez
and should be read in conjunction with such financial statements and the related
notes thereto. Estimated pre-tax expenses of approximately $[7] million related
to effecting the Merger of Seagull and Global will be deducted in determining
the net income of the combined enterprise for the period in which the expenses
are incurred. The effects of such expenses are not reflected in the following
unaudited pro forma condensed financial statements. The unaudited pro forma
condensed financial information has been prepared from, and should be read in
conjunction with, the historical consolidated financial statements and notes
thereto of Seagull, Global and Esso Suez. The unaudited pro forma information
presented does not purport to be indicative of actual results, as if the
combinations had been in effect on the dates or for the periods indicated, or of
future results.
58
<PAGE> 64
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF EARNINGS
SIX MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEAGULL/ ESSO PRO FORMA
SEAGULL GLOBAL ADJUSTMENTS GLOBAL SUEZ ADJUSTMENTS COMBINED
-------- ------- ----------- -------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Gas and oil operations.............. $145,302 $55,516 $ $200,818 $26,902 $ $227,720
Alaska transmission and
distribution...................... 51,133 -- 51,133 -- 51,133
-------- ------- ------- -------- ------- -------- --------
196,435 55,516 251,951 26,902 278,853
-------- ------- ------- -------- ------- -------- --------
Costs of Operations:
Alaska transmission and distribution
cost of gas sold.................. 22,457 -- 22,457 -- 22,457
Operations and maintenance.......... 51,013 23,638 (3,723)(B) 70,928 5,114 76,042
Exploration charges................. 14,841 5,944 (600)(B) 20,185 -- 20,185
Depreciation, depletion and
amortization...................... 62,320 12,278 600(B) 75,198 11,021 (11,021)(D) 82,790
7,592 (D)
-------- ------- ------- -------- ------- -------- --------
150,631 41,860 (3,723) 188,768 16,135 (3,429) 201,474
-------- ------- ------- -------- ------- -------- --------
Operating Profit...................... 45,804 13,656 3,723 63,183 10,767 3,429 77,379
Other (Income) Expense:
General and administrative.......... 7,933 -- 3,723(B) 11,656 -- 11,656
Interest expense.................... 22,654 29 22,683 -- 2,064 (E) 24,747
Loss (Gain) on sales of property,
plant and equipment, net.......... (384) 3 (381) -- (381)
Interest income and other........... (468) (534) (1,002) (50) (1,052)
-------- ------- ------- -------- ------- -------- --------
29,735 (502) 3,723 32,956 (50) 2,064 34,970
-------- ------- ------- -------- ------- -------- --------
Earnings Before Income Taxes.......... 16,069 14,158 -- 30,227 10,817 1,365 42,409
Income Tax Expense.................... 7,130 7,012 707(C) 14,849 6,566 (722)(F) 20,693
-------- ------- ------- -------- ------- -------- --------
Net Earnings.......................... $ 8,939 $ 7,146 $ (707) $ 15,378 $ 4,251 $ 2,087 $ 21,716
======== ======= ======= ======== ======= ======== ========
Earnings Per Share.................... $ 0.24 $ 0.24 $ 0.34
======== ======== ========
Weighted Average Number of Common
Shares Outstanding (in thousands)... 37,062 26,098(A) 63,160 63,160
======== ======= ======== ========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Statements of Earnings.
59
<PAGE> 65
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF EARNINGS
YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEAGULL/ ESSO PRO FORMA
SEAGULL GLOBAL ADJUSTMENTS GLOBAL SUEZ ADJUSTMENTS COMBINED
-------- ------- ----------- -------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Gas and oil operations.............. $238,503 $78,457 $ $316,960 $76,309 $ $393,269
Alaska transmission and
distribution...................... 97,770 -- 97,770 -- 97,770
-------- ------- ------- -------- ------- -------- --------
336,273 78,457 414,730 76,309 491,039
-------- ------- ------- -------- ------- -------- --------
Costs of Operations:
Alaska transmission and distribution
cost of gas sold.................. 46,328 -- 46,328 -- 46,328
Operations and maintenance.......... 105,674 40,964 (5,556)(B) 141,082 12,196 153,278
Exploration charges................. 29,555 11,768 (1,100)(B) 40,223 -- 40,223
Depreciation, depletion and
amortization...................... 124,790 21,520 1,100(B) 147,410 32,154 (32,154)(D) 169,523
22,113 (D)
Impairment of long-lived assets..... 44,376 4,466 48,842 -- 48,842
-------- ------- ------- -------- ------- -------- --------
350,723 78,718 (5,556) 423,885 44,350 (10,041) 458,194
-------- ------- ------- -------- ------- -------- --------
Operating Profit (Loss)............... (14,450) (261) 5,556 (9,155) 31,959 10,041 32,845
Other (Income) Expense:
General and administrative.......... 19,167 -- 5,556(B) 24,723 -- 24,723
Interest expense.................... 52,814 164 52,978 -- 4,624 (E) 57,602
Loss (Gain) on sales of property,
plant and
equipment, net.................... (83,591) 203 (83,388) -- (83,388)
Interest income and other........... (1,160) (3,352) (4,512) (44) (4,556)
-------- ------- ------- -------- ------- -------- --------
(12,770) (2,985) 5,556 (10,199) (44) 4,624 (5,619)
-------- ------- ------- -------- ------- -------- --------
Earnings (Loss) Before Income Taxes... (1,680) 2,724 -- 1,044 32,003 5,417 38,464
Income Tax Expense (Benefit).......... (2,312) 9,031 (3,937)(C) 2,782 22,843 (1,618)(F) 24,007
-------- ------- ------- -------- ------- -------- --------
Net Earnings (Loss)................... $ 632 $(6,307) $ 3,937 $ (1,738) $ 9,160 $ 7,035 $ 14,457
======== ======= ======= ======== ======= ======== ========
Earnings (Loss) Per Share............. $ 0.02 $ (0.03) $ 0.23
======== ======== ========
Weighted Average Number of Common
Shares Outstanding (in thousands)... 36,717 25,957(A) 62,674 62,674
======== ======= ======== ========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Statements of Earnings.
60
<PAGE> 66
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF EARNINGS
YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
SEAGULL GLOBAL ADJUSTMENTS COMBINED
-------- ------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
Gas and oil operations....................... $302,506 $62,943 $ $365,449
Alaska transmission and distribution......... 105,598 -- 105,598
-------- ------- ----------- ----------
408,104 62,943 471,047
-------- ------- ----------- ----------
Costs of Operations:
Alaska transmission and distribution cost of
gas sold.................................. 54,465 -- 54,465
Operations and maintenance................... 119,987 36,960 (6,591)(B) 150,356
Exploration charges.......................... 26,888 19,325 (2,400)(B) 43,813
Depreciation, depletion and amortization..... 144,697 9,837 2,400 (B) 156,934
-------- ------- ----------- ----------
346,037 66,122 (6,591) 405,568
-------- ------- ----------- ----------
Operating Profit (Loss)........................ 62,067 (3,179) 6,591 65,479
Other (Income) Expense:
General and administrative................... 10,252 -- 6,591 (B) 16,843
Interest expense............................. 51,550 124 51,674
Loss (Gain) on sales of property, plant and
equipment, net............................ (413) 8 (405)
Interest income and other.................... (254) (1,714) (1,968)
-------- ------- ----------- ----------
61,135 (1,582) 6,591 66,144
-------- ------- ----------- ----------
Earnings (Loss) Before Income Taxes............ 932 (1,597) -- (665)
Income Tax Expense (Benefit)................... (2,314) 6,656 (602)(C) 3,740
-------- ------- ----------- ----------
Net Earnings (Loss)............................ $ 3,246 $(8,253) $ 602 $ (4,405)
======== ======= ========= ========
Earnings (Loss) Per Share...................... $ 0.09 $ (0.07)
======== ========
Weighted Average Number of Common Shares
Outstanding (in thousands)................... 36,904 26,102 (A) 63,006
======== ========= ========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Statements of Earnings.
61
<PAGE> 67
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF EARNINGS
YEAR ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
SEAGULL GLOBAL ADJUSTMENTS COMBINED
-------- ------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
Gas and oil operations....................... $269,921 $75,084 $ $345,005
Alaska transmission and distribution......... 107,244 -- 107,244
-------- ------- ------- ----------
377,165 75,084 452,249
-------- ------- ------- ----------
Costs of Operations:
Alaska transmission and distribution cost of
gas sold.................................. 59,898 -- 59,898
Operations and maintenance................... 107,457 54,651 (7,664)(B) 154,444
Exploration charges.......................... 17,265 6,946 (2,400)(B) 21,811
Depreciation, depletion and amortization..... 116,556 8,376 2,400 (B) 127,332
-------- ------- ------- ---------
301,176 69,973 (7,664) 363,485
-------- ------- ------- ---------
Operating Profit............................... 75,989 5,111 7,664 88,764
Other (Income) Expense:
General and administrative................... 11,666 -- 7,664 (B) 19,330
Interest expense............................. 36,753 101 36,854
Gain on sales of property, plant and
equipment, net............................ (3,929) (1,752) (5,681)
Interest income and other.................... (1,779) (4,257) (6,036)
-------- ------- ------- ---------
42,711 (5,908) 7,664 44,467
-------- ------- ------- ---------
Earnings Before Income Taxes................... 33,278 11,019 -- 44,297
Income Tax Expense............................. 6,080 6,532 3,799 (C) 16,411
-------- ------- ------- ---------
Net Earnings................................... $ 27,198 $ 4,487 $(3,799) $ 27,886
======== ======= ======= ========
Earnings Per Share............................. $ 0.76 $ 0.46
======== ========
Weighted Average Number of Common Shares
Outstanding (in thousands)................... 35,790 24,958 (A) 60,748
======== ======= ========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Statements of Earnings.
62
<PAGE> 68
NOTES TO UNAUDITED PRO FORMA
CONDENSED STATEMENTS OF EARNINGS
(A) The pro forma weighted average number of common shares outstanding has been
computed by adjusting the historical average common shares outstanding for
Global by the maximum Common Stock Exchange Ratio of .88. See "Certain
Terms of the Merger Agreement -- Manner and Basis of Converting Shares." If
the minimum Common Stock Exchange Ratio of .72 shares of Seagull Common
Stock were used, pro forma combined earnings (loss) per share would be
$0.37 for the six months ended June 30, 1996 and $0.25, $(0.08) and $0.50
for the years ended December 31, 1995, 1994 and 1993, respectively.
(B) To reclassify general and administrative costs associated with Global's
corporate staff and Global's leasehold amortization of unproved properties
to be consistent with Seagull's accounting presentation.
(C) To adjust the valuation allowance associated with the deferred tax assets
primarily related to book to tax basis differences on domestic property,
plant and equipment generated during the applicable periods. These deferred
tax assets were not utilized by Global but will more likely than not be
utilized by the pro forma combined entity.
(D) To adjust depreciation, depletion and amortization expense to give effect
to the Esso Suez Acquisition.
(E) To record interest expense to give effect to the Esso Suez Acquisition
financed under the Credit Facilities.
(F) To adjust U.S. federal income taxes for adjustments.
63
<PAGE> 69
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
JUNE 30, 1996
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
SEAGULL/ PRO FORMA
SEAGULL GLOBAL ADJUSTMENTS GLOBAL ESSO SUEZ ADJUSTMENTS COMBINED
---------- -------- ----------- ---------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents........ $ 14,404 $ 16,801 $ $ 31,205 $ 632 $ $ 31,837
Accounts receivable, net......... 107,583 13,399 120,982 96,191 (88,911)(D) 128,262
Inventories...................... 5,488 -- 5,488 7,157 12,645
Prepaid expenses and other....... 6,502 4,056 10,558 736 11,294
---------- -------- ------- ---------- -------- --------- ----------
Total Current Assets...... 133,977 34,256 168,233 104,716 (88,911) 184,038
Property, Plant and Equipment -- at
cost............................. 1,645,282 216,741 1,862,023 255,114 (255,114)(B) 1,916,370
54,347 (C)
Accumulated Depreciation, Depletion
and Amortization................. 627,612 89,707 717,319 198,619 (198,619)(B) 717,319
---------- -------- ------- ---------- -------- --------- ----------
1,017,670 127,034 1,144,704 56,495 (2,148) 1,199,051
Other Assets....................... 39,917 6,038 45,955 104 46,059
---------- -------- ------- ---------- -------- --------- ----------
Total Assets.............. $1,191,564 $167,328 $ $1,358,892 $161,315 $ (91,059) $1,429,148
========== ======== ======= ========== ======== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable................. $ 79,975 $ 10,641 $ $ 90,616 $ -- $ $ 90,616
Accrued expenses................. 33,518 11,386 44,904 1,756 46,660
Current maturities of long-term
debt........................... 1,214 1,250 2,464 -- 2,464
---------- -------- ------- ---------- -------- --------- ----------
Total Current
Liabilities............. 114,707 23,277 137,984 1,756 139,740
Long-Term Debt..................... 522,632 16,250 538,882 -- 68,000 (D) 606,882
Other Noncurrent Liabilities....... 53,581 624 54,205 500 54,705
Deferred Income Taxes.............. 41,111 -- (5,811)(A) 35,300 -- 35,300
Redeemable Bearer Shares........... -- 16,265 16,265 -- 16,265
Shareholders' Equity............... 459,533 110,912 5,811 (A) 576,256 159,059 (159,059)(E) 576,256
Commitments and Contingencies......
---------- -------- ------- ---------- -------- --------- ----------
Total Liabilities and
Shareholders' Equity.... $1,191,564 $167,328 $ $1,358,892 $161,315 $ (91,059) $1,429,148
========== ======== ======= ========== ======== ========= ==========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Balance Sheet.
64
<PAGE> 70
NOTES TO UNAUDITED PRO FORMA
CONDENSED BALANCE SHEET
(A) To adjust the valuation allowance associated with the deferred tax assets
primarily related to the book to tax basis differences on domestic
property, plant and equipment. These deferred tax assets were generated,
but not utilized, by Global but will more likely than not be utilized by
the pro forma combined entity.
(B) To eliminate the historical cost of property, plant and equipment and
accumulated depreciation, depletion and amortization of Esso Suez.
(C) To adjust the assets acquired and liabilities assumed in the Esso Suez
Acquisition to reflect the allocation of the estimated purchase price.
(D) To record the financing of the Esso Suez Acquisition through additional
borrowings under the Credit Facilities and the prompt collection of
certain receivables.
(E) To eliminate the shareholder's equity of Esso Suez.
65
<PAGE> 71
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS
OF SEAGULL AND GLOBAL
SEAGULL
The following table sets forth information with respect to shareholders of
Seagull who were believed by management of Seagull to own more than 5% of the
Seagull Common Stock outstanding as of the Record Date. The information set
forth below is based solely upon information furnished by such shareholders or
contained in filings made by such persons with the Commission as of March 31,
1996.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
-------------------------------------------------------- -------------------- --------
<S> <C> <C>
Manning & Napier Advisors, Inc.(1)...................... 2,528,835 6.8%
1100 Chase Square
Rochester, New York 14604
Merrill Lynch Asset Management(2)....................... 3,600,000 9.7%
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Wellington Management Company(3)........................ 3,712,200 10.0%
75 State Street
Boston, Massachusetts 02109
</TABLE>
- ---------------
(1) According to information provided by Manning & Napier Advisors, Inc.
("Manning"), an investment advisor registered under Section 203 of the
Investment Advisers Act of 1940, Manning is the beneficial owner of
2,528,835 shares (6.8%) of Seagull Common Stock. Manning has sole voting
power as to 2,470,685 shares and sole dispositive power as to 2,528,835
shares.
(2) According to information provided by Merrill Lynch & Co. Inc. ("Merrill
Lynch"), Merrill Lynch, through its direct and indirect wholly-owned
subsidiaries Merrill Lynch Group, Inc. ("ML Group") and Princeton Services,
Inc. ("PSI"), beneficially owns an aggregate of 3,600,000 shares (9.7%) of
Seagull Common Stock, and has shared voting and shared dispositive power
with respect to all such shares. Merrill Lynch Asset Management, L.P.
("MLAM") is a registered investment adviser under Section 203 of the
Investment Advisers Act of 1940 and acts as investment adviser to certain
private accounts and several registered investment companies, as a result of
which it beneficially owns 3,600,000 shares (9.7%) of Seagull Common Stock.
PSI, an indirect wholly-owned subsidiary of Merrill Lynch, is the general
partner of MLAM. One registered investment company advised by MLAM, Merrill
Lynch Growth Fund for Investment Retirement, is the beneficial owner of
3,450,000 shares (9.3%) of the Common Stock.
(3) According to information provided by Wellington Management Company ("WMC"),
WMC in its capacity as investment adviser, may be deemed the beneficial
owner of 3,712,200 shares (10%) of Seagull 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 2,405,000 shares and shared dispositive power as to
3,712,200 shares. Because WMC has shared voting power with respect to only
2,405,000 shares, and no voting power with respect to the remaining shares
beneficially owned by WMC, it is deemed to own or control only these
2,405,000 shares (6.5%) for purposes of the 1935 Act.
66
<PAGE> 72
GLOBAL
The following table and the notes thereto set forth certain information
with respect to the beneficial ownership of shares of Global Common Stock by
each person or group within the meaning of Section 13(d)(3) of the Exchange Act
who is known to the management of Global to be the beneficial owner of more than
five percent of the Common Stock outstanding as of the Record Date. The
information set forth below is based solely upon information furnished by such
shareholders or contained in filings made by such
persons with the Commission as of the other dates indicated in the footnotes to
such table.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
-------------------------------------------------------- -------------------- --------
<S> <C> <C>
Leon S. Gross(1)........................................ 1,517,300 5.1%
Enterprises, Inc.
River Park House
3600 Conshohocken Avenue
Philadelphia, Pennsylvania 19131
Interamerican Securities Corp.(2)....................... 1,520,048 5.1%
One Riverway, Suite 2450
Houston, Texas 77056
Metropolitan Life Insurance Company(3).................. 2,269,900 7.6%
One Madison Avenue
New York, New York 10010-3690
The Prudential Insurance Company of America(4).......... 6,311,547 21.2%
Prudential Plaza
Newark, New Jersey 07102-3777
</TABLE>
- ---------------
(1) Information on Leon S. Gross ("Mr. Gross") is from Schedule 13D dated
October 10, 1995, filed under the Exchange Act. Mr. Gross has sole voting
and investment power with respect to his shares.
(2) Information on Interamerican Securities Corp. ("Interamerican") is from
Interamerican's Schedule 13G dated February 6, 1995, filed under the
Exchange Act. Shares reported include 265,330 shares beneficially owned by
certain shareholders of Interamerican, as to which Interamerican disclaims
beneficial ownership.
(3) Information on Metropolitan Life Insurance Company ("Met Life") is from Met
Life's Schedule 13G dated February 9, 1996, filed under the Exchange Act.
The shares were acquired by a subsidiary of Met Life, State Street Research
and Management Company, Inc. ("State Street"). State Street has the sole
power to vote or to direct the vote of 2,081,300 of the shares. State
Street disclaims any beneficial interest in all of the securities as the
shares are owned by various clients.
(4) Information on Prudential is from Prudential's Schedule 13G dated February
10, 1995, filed under the Exchange Act. Prudential has sole voting and
investment power with respect to its shares.
67
<PAGE> 73
DESCRIPTION OF SEAGULL CAPITAL STOCK
Seagull's authorized capital stock consists of 100,000,000 shares of
Seagull Common Stock and 5,000,000 shares of Preferred Stock, par value $1.00
per share ("Seagull Preferred Stock"), each of which is described below. The
summary description of the capital stock of Seagull contained herein is
necessarily general and reference should be made in each case to Seagull's
Articles of Incorporation, Bylaws and Rights Agreement described below, which
are exhibits to the Registration Statement of which this Joint Proxy
Statement/Prospectus is a part.
SEAGULL COMMON STOCK
GENERAL. As of July 22, 1996, an aggregate of 36,464,066 shares of Seagull
Common Stock were issued and outstanding, excluding shares held in treasury and
4,392,740 shares that had been reserved for issuance under Seagull's employee
stock option plans. Subject to any prior rights of the Seagull Preferred Stock
then outstanding, holders of Seagull Common Stock are entitled to receive such
dividends as are declared by the Seagull Board of Directors out of funds legally
available therefor. For additional information on restrictions on the payment of
dividends on and repurchases of Seagull Common Stock, see "Market Prices of
Seagull and Global Common Stock and Dividend Information." Subject to the voting
rights, if any, of the Seagull Preferred Stock, all voting rights are vested in
the holders of shares of Seagull Common Stock, each share being entitled to one
vote. The holders of Seagull Common Stock are not entitled to cumulative voting
rights in the election of directors. In the event of the liquidation,
dissolution or winding up of Seagull, holders of Seagull Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities
and any preferential amount to which the holders of Seagull Preferred Stock are
entitled. The holders of Seagull Common Stock have no preemptive or conversion
rights and are not subject to further calls or assessments by Seagull. The
Seagull Common Stock currently outstanding is, and the Seagull Common Stock to
be issued hereunder will be, fully paid and nonassessable.
CLASSIFIED BOARD; REMOVAL OF DIRECTORS. The Bylaws of Seagull provide that
the members of Seagull's Board of Directors are divided into three classes as
nearly equal as possible. Each class is elected for a three-year term. At each
annual meeting of shareholders, approximately one-third of the members of the
Seagull Board of Directors are elected for a three-year term and the other
directors remain in office until their three-year terms expire. Furthermore, the
Bylaws of Seagull provide that neither any director nor the Seagull Board of
Directors may be removed without cause, and that any removal for cause would
require the affirmative vote of the holders of at least a majority of the voting
power of the outstanding capital stock entitled to vote for the election of
directors. Thus, control of the Board of Directors cannot be changed in one year
without removing the directors for cause as described above; rather, at least
two annual meetings must be held before a majority of the members of the Seagull
Board of Directors could be changed. The Bylaws of Seagull provide that the
Bylaw provisions related to the classified board and removal of directors cannot
be altered, amended or repealed without the approval of the holders of at least
two-thirds of the outstanding shares entitled to vote thereon. See "Election of
Directors."
SEAGULL PREFERRED STOCK PURCHASE RIGHTS. In order to protect Seagull's
shareholders from coercive or unfair takeover tactics, Seagull's Board of
Directors on March 1, 1989 adopted a Share Purchase Rights Plan (the "Share
Purchase Rights Plan"). Pursuant to the Share Purchase Rights Plan, Seagull's
Board of Directors declared a distribution of one right ("Right") to purchase,
until March 22, 1999 (or, if earlier, the redemption of the Rights), a unit
consisting of 1/100th of one share of Series B Preferred Stock (the "Unit") at
an exercise price of $65.50 per Unit, subject to certain antidilution
adjustments, for each outstanding share of Seagull Common Stock, and approved
the further issuance of Rights for all shares of Seagull Common Stock that are
subsequently issued. See "Seagull Preferred Stock -- Series B Preferred Stock"
below. Accordingly, a Right will be issued for each share of Seagull Common
Stock issued hereunder to Global shareholders. Until certain specified
conditions described below exist, the Rights will be represented by the
certificates for the Seagull Common Stock and will not be exercisable or
transferable apart from the certificates for the Seagull Common Stock.
68
<PAGE> 74
Generally, in the event that Seagull is acquired in a merger or other
business combination transaction or 50% or more of Seagull's consolidated assets
or earning power is sold, proper provision will be made so that each holder of a
Right will thereafter have the right to receive, upon the exercise thereof at
the then current exercise price of the Right, the number of shares of common
stock of the acquiring company that at the time of such transaction will have a
market value of two times the exercise price of the Right. Because Seagull is
not being acquired in the Merger, the Rights are not applicable to the Merger.
After the tenth day following the date on which any person or group of
affiliated or associated persons (other than certain excepted persons) acquires
beneficial ownership of 20% or more of the outstanding shares of Seagull Common
Stock (unless such person first acquires 20% or more of the outstanding shares
of Seagull Common Stock pursuant to a cash tender offer for all of the Seagull
Common Stock, which purchase increases such person's beneficial ownership to 85%
or more of the outstanding Seagull Common Stock) (an "Acquiring Person") or
during such time as there is an Acquiring Person, there shall be any
reclassification of securities or recapitalization or reorganization of Seagull
or other transaction or series of transactions that has the effect of increasing
by more than 1% the proportionate share of the outstanding shares of any class
of equity securities of Seagull or any of its subsidiaries beneficially owned by
the Acquiring Person, proper provision shall be made so that each holder of a
Right, other than Rights beneficially owned by the Acquiring Person (which will
thereafter be void), will thereafter have the right to receive upon exercise
that number of shares of Seagull Common Stock having a market value of two times
the exercise price of the Right.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire Seagull
without conditioning the offer on a substantial number of Rights being acquired
or approval of the Seagull Board of Directors. The Rights should not interfere
with any merger or other business combination approved by the Board of Directors
of Seagull since, among other things, the Seagull Board of Directors may, at its
option, at any time until 10 days (subject to extension) following the date on
which a person or group (other than certain excepted persons) acquires 20% or
more of the outstanding Seagull Common Stock, redeem all but not less than all
the then outstanding Rights at $.01 per Right.
A Rights Agreement dated as of March 17, 1989, as amended, between Seagull
and The First National Bank of Boston, as Rights Agent (as amended, the "Rights
Agreement"), specifies the terms of the Rights and the foregoing description of
the Rights is qualified in its entirety by reference to the Rights Agreement, a
copy of which is available upon written request to Investor Relations, Seagull
Energy Corporation, 1001 Fannin, Suite 1700, Houston, Texas 77002-6714,
telephone (713) 951-4700.
The transfer agent and registrar for the Seagull Common Stock is The First
National Bank of Boston.
SEAGULL PREFERRED STOCK
GENERAL. Under Seagull's Articles of Incorporation, the Board of Directors
is authorized, without further shareholder action, to provide for the issuance
of up to 5,000,000 shares of Seagull Preferred Stock in one or more series, with
such voting powers, or without voting powers, and with such designations and
relative rights and preferences as shall be set forth in resolutions providing
for the issuance thereof adopted by the Seagull Board of Directors. At present,
500,000 shares of Seagull Preferred Stock are designated as Series B Junior
Participating Seagull Preferred Stock (the "Series B Preferred Stock") in
connection with the Share Purchase Rights Plan described above, although no such
shares of Series B Preferred Stock are issued and outstanding. No other shares
of Seagull Preferred Stock are issued, outstanding or designated as to series.
It is not possible to state the actual effect of the authorization and issuance
of a new series of Seagull Preferred Stock upon the rights of holders of the
Seagull Common Stock and other series of Seagull Preferred Stock unless and
until the Seagull Board of Directors determines the attributes of such new
series of Seagull Preferred Stock and the specific rights of its holders. Such
effects might include, however, (i) restrictions on dividends on Seagull Common
Stock and other series of Seagull Preferred Stock if dividends on such new
series of Seagull Preferred Stock have not been paid; (ii) dilution of the
voting power of Seagull Common Stock and other series of Seagull Preferred Stock
to the extent that such new series of Seagull Preferred Stock has voting rights,
or to the extent that any such new series of Seagull Preferred Stock is
convertible into
69
<PAGE> 75
Seagull Common Stock; (iii) dilution of the equity interest of Seagull Common
Stock and other series of Seagull Preferred Stock; and (iv) limitation on the
right of holders of Seagull Common Stock and other series of Seagull Preferred
Stock to share in Seagull's assets upon liquidation until satisfaction of any
liquidation preference attributable to such new series of Seagull Preferred
Stock. While the ability of Seagull to issue Seagull Preferred Stock provides
flexibility in connection with possible acquisitions and other corporate
purposes, its issuance could be used to impede an attempt by a third party to
acquire a majority of the outstanding voting stock of Seagull.
The Seagull Preferred Stock will have the dividend, liquidation, redemption
and voting rights set forth below unless otherwise provided in the Prospectus
Supplement relating to a particular series of the Seagull Preferred Stock. A
series designation relating to a series of Seagull Preferred Stock may include
the following specific terms: (i) the designation of such Seagull Preferred
Stock, the number of shares offered and the liquidation value thereof; (ii) the
price at which such Seagull Preferred Stock will be issued; (iii) the dividend
rate (or method of calculation), the dates on which dividends shall be payable,
whether such dividends shall be cumulative or noncumulative and, if cumulative,
the dates from which dividends shall commence to accumulate; (iv) the
liquidation preference thereof; (v) any redemption or sinking fund provisions;
(vi) any conversion or exchange provisions of such Seagull Preferred Stock; and
(vii) any additional dividend, liquidation, redemption, sinking fund and other
rights, preferences, limitations and restrictions of such Seagull Preferred
Stock.
The Seagull Preferred Stock will, when issued, be fully paid and
nonassessable. Unless otherwise specified in the series designation relating to
a particular series of the Seagull Preferred Stock, each series of the Seagull
Preferred Stock will rank on a parity as to dividends and distributions in the
event of a liquidation with each other series of the Seagull Preferred Stock, if
any, and senior to the Series B Preferred Stock. Holders of Seagull Preferred
Stock will have no preemptive rights to subscribe for or purchase shares of
capital stock.
DIVIDEND RIGHTS. Holders of the Seagull Preferred Stock of each series will
be entitled to receive, when, as and if declared by the Seagull Board of
Directors, out of assets of Seagull legally available therefor, cash dividends
at such rates and on such dates as are set forth in the series designation
relating to such series of the Seagull Preferred Stock. Such rate may be fixed
or variable or both. Each such dividend will be payable to the holders of record
as they appear on the stock books of Seagull on such record dates as will be
fixed by the Seagull Board of Directors or a duly authorized committee thereof.
Dividends on any series of the Seagull Preferred Stock may be cumulative or
noncumulative, as provided in the series designation relating thereto. If the
Seagull Board of Directors fails to declare a dividend payable on a dividend
payment date on any series of Seagull Preferred Stock for which dividends are
noncumulative, then the right to receive a dividend in respect of the dividend
period ending on such dividend payment date will be lost, and Seagull shall have
no obligation to pay the dividend accrued for that period, whether or not
dividends are declared for any future period.
No full dividends will be declared or paid or set apart for payment on
Seagull Preferred Stock of any series ranking, as to dividends, on a parity with
or junior to any series of Seagull Preferred Stock for any period unless full
dividends have been or contemporaneously are declared and paid, or declared and
a sum sufficient for the payment thereof set apart for such payment on such
series of Seagull Preferred Stock for the then-current dividend period and, if
such Seagull Preferred Stock is cumulative, all other dividend periods
terminating on or before the date of payment of such full dividends. When
dividends are not paid in full upon any series of the Seagull Preferred Stock
and any other Seagull Preferred Stock ranking on a parity as to dividends with
such series of the Seagull Preferred Stock, all dividends declared upon such
series of the Seagull Preferred Stock and any other Seagull Preferred Stock
ranking on a parity as to dividends will be declared pro rata so that the amount
of dividends declared per share on such series of the Seagull Preferred Stock
and such other Seagull Preferred Stock will in all cases bear to each other the
same ratio that accrued dividends, including, in the case of cumulative Seagull
Preferred Stock, accumulations, if any, in respect of prior dividend periods,
per share on such series of the Seagull Preferred Stock and such other Seagull
Preferred Stock bear to each other. Except as provided in the preceding
sentence, unless full dividends, including, in the case of cumulative Seagull
Preferred Stock, accumulations, if any, in respect of prior dividend periods, on
all outstanding shares of any series of the Seagull Preferred Stock have been
paid or declared and
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<PAGE> 76
set aside for payment, no dividends (other than a dividend or distribution paid
in shares of, or warrants, rights or options exercisable for or convertible
into, Seagull Common Stock or another stock ranking junior to such series of the
Seagull Preferred Stock as to dividends and upon liquidation) will be declared
or paid or set aside for payment or other distributions made upon the Seagull
Common Stock or any other stock of Seagull ranking junior to or on a parity with
the Seagull Preferred Stock as to dividends or upon liquidation, nor will any
Seagull Common Stock or any other stock of Seagull ranking junior to or on a
parity with such series of the Seagull Preferred Stock as to dividends or upon
liquidation be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund for the
redemption of any shares of any such stock) by Seagull (except by conversion
into or exchange for stock of Seagull ranking junior to such series of the
Seagull Preferred Stock as to dividends and upon liquidation). No interest, or
sum of money in lieu of interest, shall be payable in respect of any dividend
payment or payments which may be in arrears.
The amount of dividends payable for each dividend period will be computed
by annualizing the applicable dividend rate and dividing by the number of
dividend periods in a year, except that the amount of dividends payable for the
initial dividend period or any period longer or short other than a full dividend
period shall be computed on the basis of 30-day months and a 360-day year.
Each series of Seagull Preferred Stock will be entitled to dividends as
described in the series designation relating to such series, which may be based
upon one or more methods of determination. Different series of the Seagull
Preferred Stock may be entitled to dividends at different dividend rates or
based upon different methods of determination.
RIGHTS UPON LIQUIDATION. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of Seagull, the holders of each series of
Seagull Preferred Stock will be entitled to receive out of assets of Seagull
available for distribution to stockholders, before any distribution of assets is
made to holders of Seagull Common Stock or any other class of stock ranking
junior to such series of the Seagull Preferred Stock upon liquidation,
liquidating distributions in the amount set forth in the series designation
relating to such series of the Seagull Preferred Stock plus an amount equal to
accrued and unpaid dividends for the then-current dividend period and, if such
series of the Seagull Preferred Stock is cumulative, for all dividend periods
prior thereto. If, upon any voluntary or involuntary liquidation, dissolution or
winding up of Seagull, the amounts payable with respect to the Seagull Preferred
Stock of any series and any other shares of stock of Seagull ranking as to any
such distribution on a parity with such series of the Seagull Preferred Stock
are not paid in full, the holders of the Seagull Preferred Stock of such series
and of such other shares will share ratably in any such distribution of assets
of Seagull in proportion to the full respective preferential amounts to which
they are entitled. After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of such series of Seagull
Preferred Stock will have no right or claim to any of the remaining assets of
Seagull. Neither the sale of all or substantially all the property or business
of Seagull nor the merger or consolidation of Seagull into or with any other
corporation shall be deemed to be a dissolution, liquidation or winding up,
voluntary or involuntary, of Seagull.
REDEMPTION. A series of the Seagull Preferred Stock may be redeemable, in
whole or in part, at the option of Seagull, and may be subject to mandatory
redemption pursuant to a sinking fund, in each case upon terms, at the times and
at the redemption prices set forth in the series designation relating to such
series.
The series designation relating to a series of Seagull Preferred Stock that
is subject to mandatory redemption will specify the number of shares of such
series of Seagull Preferred Stock that will be redeemed by Seagull in each year
commencing after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to any accrued and unpaid dividends
thereon to the date of redemption. The redemption price may be payable in cash,
capital stock or in cash received from the net proceeds of the issuance of
capital stock of Seagull, as specified in the series designation relating to
such series of Seagull Preferred Stock.
If fewer than all the outstanding shares of any series of the Seagull
Preferred Stock are to be redeemed, whether by mandatory or optional redemption,
the selection of the shares to be redeemed will be determined by lot or pro rata
as may be determined by the Seagull Board of Directors or a duly authorized
committee
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thereof, or by any other method which may be determined by the Seagull Board of
Directors or such committee to be equitable. From and after the date of
redemption (unless default shall be made by Seagull in providing for the payment
of the redemption price), dividends shall cease to accrue on the shares of
Seagull Preferred Stock called for redemption and all rights of the holders
thereof (except the right to receive the redemption price) shall cease.
In the event that full dividends, including accumulations in the case of
cumulative Seagull Preferred Stock, on any series of the Seagull Preferred Stock
have not been paid, such series of the Seagull Preferred Stock may not be
redeemed in part and Seagull may not purchase or acquire any shares of such
series of the Seagull Preferred Stock otherwise than pursuant to a purchase or
exchange offer made on the same terms to all holders of such series of the
Seagull Preferred Stock.
CONVERSION OR EXCHANGE RIGHTS. The series designation for any series of the
Seagull Preferred Stock will state the terms, if any, on which shares of such
series are convertible into, or exchangeable for, securities of Seagull or
another person.
VOTING RIGHTS. Unless otherwise determined by the Seagull Board of
Directors and indicated in the series designation relating to a particular
series of Seagull Preferred Stock, the holders of the Seagull Preferred Stock
will not be entitled to vote, except as set forth below or except as expressly
required by applicable law. In the event Seagull issues share of any series of
Seagull Preferred Stock with voting rights, including any voting rights in the
case of dividend arrearages, unless otherwise specified in the series
designation relating to a particular series of Seagull Preferred Stock, each
such share will be entitled to one vote on matters on which holders of such
series of the Seagull Preferred Stock are entitled to vote. In the case of any
series of Seagull Preferred Stock having one vote per share on matters on which
holders of such series are entitled to vote, the voting power of such series, on
matters on which holders of such series and holders of other series of Seagull
Preferred Stock are entitled to vote as a single class, will depend on the
number of shares in such series, not on the aggregate liquidation preference or
initial offering price of the shares of such series of Seagull Preferred Stock.
Except as set forth in the series designation relating to a series of
Seagull Preferred Stock, if at any time dividends on any series of Seagull
Preferred Stock shall be in arrears in an amount equal to six quarterly
dividends thereon, (which, with respect to any series of Seagull Preferred Stock
whose dividend periods are other than quarterly, shall be deemed to be a number
of dividend periods containing not less than 540 days), all holders of Seagull
Preferred Stock on which dividends are in arrears and as to which similar voting
rights have been conferred, voting as a class, irrespective of series, shall
have the right to elect two directors. Directors so elected by such holders of
Seagull Preferred Stock shall continue in office until their successors shall
have been elected or until such time as all accrued and unpaid dividends for all
previous dividend periods and for any current dividend period on all shares of
such Seagull Preferred Stock then outstanding shall have been declared and paid
or set apart for payment.
The affirmative vote or consent of the holders of at least two-thirds of
the outstanding shares of any series of Seagull Preferred Stock, voting as a
separate class, will be required for any amendment, alteration or repeal,
whether by merger, consolidation or otherwise, of the Articles of Incorporation
that will (i) increase or decrease the aggregate number of authorized shares of
such series or of Seagull Preferred Stock, (ii) increase or decrease the par
value of the Seagull Preferred Stock, (iii) effect an exchange, reclassification
or cancellation of all or part of the shares of such series or of the Seagull
Preferred Stock, (iv) effect an exchange, or create a right of exchange, of all
or any part of the shares of another class into the shares of such series or of
Seagull Preferred Stock, (v) change the designations, preferences, limitations
or relative rights of the shares of such series or the Seagull Preferred Stock,
(vi) change the shares of such series or the Seagull Preferred Stock into the
same or a different number of shares of the same class or series or another
class or series, (vii) create a new class or series of shares having rights and
preferences equal, prior or superior to the shares of such series or the Seagull
Preferred Stock, or increase the rights and preferences of any class or series
having rights and preferences equal, prior or superior to the shares of such
series or the Seagull Preferred Stock, or increase the rights and preferences of
any class or series having rights or preferences later or inferior to the shares
of such series or the Seagull Preferred Stock in such a manner as to become
equal, prior or
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superior to the shares of such class or series, (viii) divide the shares of
Seagull Preferred Stock into series and fix and determine the designation of
such series and the variations in the relative rights and preferences between
the shares of such series, (ix) limit or deny the existing preemptive rights of
the shares of such series or of the Seagull Preferred Stock, (x) cancel or
otherwise affect dividends on the shares of such series or the Seagull Preferred
Stock that had accrued but had not been declared or (xi) include in or delete
from the Articles of Incorporation any provisions required or permitted to be
included in the Articles of Incorporation of a close corporation within the
meaning of the TBCA. The foregoing provisions are not applicable to the
designation of series by the Seagull Board of Directors in the manner described
under the heading "General" above. If the holders of the outstanding shares of
Seagull Preferred Stock are entitled to vote as a class on a proposed amendment
and the amendment would affect all series of such class (other than any series
of which no shares are outstanding or any series that is not affected by the
amendment) equally, then the holders of the separate series shall not be
entitled to separate class votes, but shall instead vote together as one class.
Notwithstanding the foregoing, the approval of a proposed amendment to the
Articles of Incorporation that would solely effect changes in the designations,
preferences, limitations and relative rights, including voting rights, of one or
more series of shares that have been established by the Seagull Board of
Directors as described above under the heading "General," shall not require the
approval of the holders of the outstanding shares of any class or series other
than such series if the preferences, limitations and relative rights of such
series after giving effect to such amendment and of any series that may be
established as a result of a reclassification of such series are, in each case,
within those permitted to be fixed and determined by the Seagull Board of
Directors with respect to the establishment of any new series of shares pursuant
to the authority granted the Seagull Board of Directors as described above under
the heading "General."
SERIES B PREFERRED STOCK. In connection with the adoption of the Share
Purchase Rights Plan described above, on March 1, 1989, Seagull's Board of
Directors designated 500,000 shares of Seagull's authorized but unissued Seagull
Preferred Stock as the Series B Preferred Stock. The terms of Series B Preferred
Stock are such that one share of Series B Preferred Stock will be approximately
equivalent to 100 shares of Seagull Common Stock. Each 1/100th of one share of
Series B Preferred Stock has the same dividend and voting rights as one full
share of Seagull Common Stock. In addition, each 1/100th of one share of Series
B Preferred Stock has a minimum quarterly dividend of $.01, a liquidation
preference and certain other rights preferential to Seagull Common Stock.
Pursuant to the Share Purchase Rights Plan, Rights have been issued to the
holders of the Seagull Common Stock, but such Rights have not yet become
exercisable or transferable apart from the certificate for the Seagull Common
Stock, and no shares of Series B Preferred Stock have been issued.
COMPARATIVE RIGHTS OF SEAGULL AND GLOBAL SHAREHOLDERS
If the Merger is consummated, the shareholders of Global will become
shareholders of Seagull. The rights and obligations of the holders of Seagull
Common Stock are governed by Texas law, pursuant to the TBCA, and by Seagull's
Articles of Incorporation and Bylaws. Those of the holders of Global Common
Stock are currently governed by New Jersey law, pursuant to the NJBCA, and by
Global's Restated Certificate of Incorporation and Bylaws. The following is a
brief summary of certain differences between the rights and obligations of the
holders of Seagull Common Stock and those of the holders of Global Common Stock
and is qualified in its entirety by reference to the relevant provisions of the
TBCA, the NJBCA, Seagull's Articles of Incorporation and Bylaws, and Global's
Articles of Incorporation and Bylaws.
VOTING OF SHARES OF COMMON STOCK
Each share of Seagull Common Stock and each share of Global Common Stock is
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. Cumulative voting rights are not provided for the shareholders of
either company.
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DIVIDEND RIGHTS
The rights of the shareholders of Seagull Common Stock and Global Common
Stock to the receipt of dividends are limited by the TBCA and the NJBCA,
respectively. Under the TBCA, a corporation may not declare a dividend if, after
giving effect to the dividend, (i) the corporation would be unable to pay its
debts as they become due in the usual course of business or (ii) the dividend
would be greater than the excess of the corporation's net assets over its stated
capital. Under the NJBCA, a corporation may not declare a dividend if, after
giving effect to the dividend, (i) the corporation would be unable to pay its
debts as they become due in the usual course of business or (ii) the
corporation's total assets would be less than its total liabilities. The holders
of Seagull Common Stock and the holders of Global Common Stock are entitled to
receive ratably from funds legally available for the payments thereof, dividends
when and as declared by resolution of their respective boards of directors.
SHAREHOLDER APPROVAL
Under the TBCA, amendments to a corporation's articles of incorporation and
the approval of plans of merger, sales of substantially all assets and similar
transactions generally require the approval of holders of at least two-thirds of
the outstanding shares of capital stock entitled to vote thereon. The TBCA,
however, provides that the board of directors of a Texas corporation not a party
to a merger need not submit the plan of merger to its shareholders for approval.
Seagull has been advised by outside legal counsel that Seagull is not a party to
the Merger for purposes of the TBCA and, therefore, is not required by law to
submit the Merger Agreement to the holders of Seagull Common Stock for their
approval.
Under New Jersey law applicable to corporations which were incorporated
after January 1, 1969, including Global, the affirmative vote of a majority of
the votes cast by the holders of shares of capital stock entitled to vote
thereon is required for approval of such matters. Pursuant to Global's Restated
Certificate of Incorporation, however, a vote of at least two-thirds of the
votes cast by the holders of shares entitled to vote thereon is required for
amendments to certain provisions of Global's Restated Certificate of
Incorporation, which amendments include, but are not limited to, shareholder
voting rights, procedures for shareholder actions, number, election and removal
of directors, related-party transactions, and requirements for amendments to
Global's Restated Certificate of Incorporation and Bylaws.
Amendments to Global's Bylaws require the approval of either a majority of
shares of Global Common Stock voting at a meeting of shareholders (except an
amendment to the provision in Global's Bylaws establishing the size of its Board
of Directors and the filling of any vacancies thereof, which requires a 75%
vote) or a majority of the entire Board of Directors; provided, however, that
the amendment of any bylaw adopted by the shareholders of Global may be
expressly reserved to such shareholders by resolution thereof. Amendments to
Seagull's Bylaws require the approval of either a majority of the outstanding
shares of Seagull Common Stock entitled to vote thereon or the Board of
Directors, except that a vote of the holders of at least two-thirds of the
shares entitled to vote thereon is required for amendments relating to the
powers, number, term of office (including classified board provisions),
vacancies and removals of the Board of Directors or the provisions authorizing
amendments to Seagull's Bylaws.
DISSENTERS' OR APPRAISAL RIGHTS
Subject to certain specified exceptions, dissenters' rights are authorized
under both the NJBCA and the TBCA for plans of merger to which a corporation is
a party, sales of substantially all of its assets, and similar transactions.
Under the NJBCA, however, a shareholder does not have the right to dissent from
any plan of merger or consolidation with respect to shares of a class or series
listed on a national securities exchange or held of record by at least 1,000
holders and also denies such rights to shareholders who will receive cash and/or
such securities in the proposed transaction.
The TBCA contains a similar provision. Specifically, the TBCA denies
dissenters' rights to shareholders with respect to shares listed on a national
securities exchange or held of record by at least 2,000 holders, provided such
shareholders are not required by the terms of the plan of merger or the plan of
exchange to accept any considerations other than (i) shares of a corporation
that, immediately after the merger or
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exchange, will be part of a class or series listed or authorized for listing on
a national securities exchange or held of record by not less than 2,000 holders,
and (ii) cash in lieu of fractional shares otherwise entitled to be received.
ACTION BY SHAREHOLDERS WITHOUT A MEETING
Under New Jersey law, shareholders may take any action without a meeting
upon the written consent of all shareholders entitled to vote thereon, except
for actions involving mergers, consolidations and other similar transactions
which require the written consent of (i) all shareholders or (ii) only those
shareholders entitled to vote thereon if the remaining shareholders are provided
the statutorily required notice. Global's Restated Certificate of Incorporation
expressly prohibits its shareholders from taking any action without a meeting
except as provided above.
Texas law permits the shareholders of a Texas corporation to take action
without a meeting, without prior notice and without a vote upon the written
consent of all shareholders entitled to vote thereon. Seagull's Bylaws reiterate
this right.
SHAREHOLDERS PROPOSALS
Global's Restated Certificate of Incorporation provides, in general, that a
proposal for action at a meeting off its shareholders may be made by a
shareholder only at a meeting of shareholders at which the election of directors
is to be considered and only if (i) the person making the proposal is the record
or beneficial owner of a security entitled to be voted on such matters at such
meeting, and (ii) not less than ninety (90) days in advance of the first
anniversary of the date of the proxy statement or information issued by Global
in connection with the last meeting of shareholders at which directors were
elected, the person making the proposal shall have notified the Secretary of
Global of his or her intention to be present at the meeting and present such
proposal at such meeting.
For a description of the provisions contained in Seagull's Bylaws related
to nominating directors or submitting shareholder proposals, see "Shareholder
Proposals--Seagull."
SPECIAL MEETINGS
Global's Restated Certificate of Incorporation and Bylaws provide that a
special meeting of its shareholders may be called at any time by the Chairman of
the Board, the Board of Directors, or the holders of at least 10% of all the
shares entitled to vote at the proposed special meeting.
Seagull's Bylaws similarly provide that a special meeting of its
shareholders may be called at any time by the Chairman of the Board, the
President, the Board of Directors, or the holders of at least 10% of all the
shares entitled to vote at the proposed special meeting.
CLASSIFICATIONS OF BOARD OF DIRECTORS
Both Global's Restated Certificate of Incorporation and Seagull's Bylaws
provide for the classification of their respective Boards of Directors into
three classes, with directors serving staggered three-year terms. As a result,
one-third of both Global's and Seagull's Board of Directors will be elected each
year. The classified board provision could increase the likelihood that, in the
event of an attempted takeover of Global or Seagull, incumbent directors would
retain their positions and, consequently, may have the effect of discouraging,
delaying or preventing a change of control.
VACANCIES AND INCREASES IN THE BOARD OF DIRECTORS
Global's Bylaws provide for no fewer than three nor more than 12 directors,
the exact number to be determined from time to time by the Global Board of
Directors, provided that no increase or decrease in the number of directors may
shorten the term of any incumbent director. The Global Board of Directors may,
by resolution adopted by 75% of the directors then in office, fill any vacancy
resulting from an increase in the Global Board of Directors or otherwise.
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Seagull's Bylaws authorize no fewer than eight nor more than 15 directors,
the exact number to be determined from time to time by the Seagull Board of
Directors, provided that no decrease in the number of directors that would have
the effect of shortening the term of an incumbent director may be made by the
Seagull Board of Directors.
Seagull's Bylaws provide that any vacancy occurring in the Seagull Board of
Directors by reason of an increase in the number of directors or otherwise may
be filled by (i) election at an annual or special meeting of the Seagull
shareholders called for that purpose or (ii) the Seagull Board of Directors.
However, the TBCA imposes certain limitations on the ability of a corporation's
board of directors to fill a directorship resulting from an increase in the size
of the board, as opposed to a vacancy resulting from the removal, resignation or
death of a director. Because of these TBCA limitations, any directorship
resulting from an increase in the size of the Seagull Board may be filled by the
Seagull Board only if (A) such directorship is for a term of office that expires
at the next election of directors by the Seagull shareholders and (B) the number
of such directorships filled by the Seagull Board between any two successive
annual meetings of Seagull shareholders is not greater than two directors. Any
vacancy occurring in the Seagull Board of Directors for a reason other than an
increase in the number of directors may be filled as provided above in (i) or
(ii) or by the affirmative vote of a majority of the remaining directors,
regardless of whether less than a quorum.
REMOVAL OF DIRECTORS
The NJBCA provides, subject to certain qualifications, for the removal of
directors for cause or, unless otherwise provided in the certificate of
incorporation, without cause by the shareholders by the affirmative vote of the
majority of the votes cast by the holders of shares entitled to vote for the
election of directors. One such qualification is that shareholders of a
corporation whose board of directors is classified, as is Global's, cannot
remove a director without cause unless the certificate of incorporation provides
otherwise. New Jersey law also provides that a certificate of incorporation or
bylaws may provide that the board of directors shall have power to remove a
director for cause. Global's Restated Certificate of Incorporation provides that
a director may be removed by (i) the Board of Directors for cause and (ii) the
shareholders with or without cause by the affirmative vote of a majority of the
votes entitled to vote thereon. The ability of shareholders to remove a director
without cause is limited if a Majority Shareholder (as defined in Global's
Restated Certificate of Incorporation) has held such status for fewer than
twenty-four consecutive months.
The TBCA provides that (if authorized by a corporation's articles of
incorporation or bylaws) at any meeting of shareholders called expressly for
that purpose, a director may be removed, with or without cause, by a vote of the
holders of a specified portion, but not less than a majority, of the shares then
entitled to vote at an election of directors. Seagull's Bylaws provide, however,
that directors may be removed only for cause, at a shareholder meeting called
expressly for the purpose, by a vote of a majority of the shares entitled to
vote for the election of directors.
INDEMNIFICATION OF DIRECTORS; DIRECTOR'S LIABILITY
Seagull's Bylaws provide that, to the fullest extent permitted by Texas
law, a present or former director of Seagull will be indemnified by Seagull
against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by such director, only if the director: (i) conducted himself
in good faith; (ii) reasonably believed (A) in the case of conduct in his
official capacity as a director that his conduct was in Seagull's best
interests, and (B) in all other cases, that his conduct was at least not opposed
to Seagull's best interests; and (iii) in the case of any criminal proceeding,
had no reasonable cause to believe his conduct was unlawful.
Notwithstanding the foregoing, if the director is found liable to Seagull
or is found liable on the basis that a personal benefit was improperly received
by the director, the TBCA (i) limits indemnification to reasonable expenses
actually incurred by the director in connection with the relevant proceeding,
and (ii) prohibits indemnification with respect to any proceeding in which the
director is found liable for willful or intentional misconduct in the
performance of his duty to Seagull.
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As authorized by the NJBCA, Global's Restated Certificate of Incorporation
provides that none of its directors will be personally liable to Global for
damages for breach of any duty owed to Global or its shareholders. Under the
NJBCA, a corporation has the power to indemnify a director against his expenses
and liabilities in connection with any proceeding involving the director by
reason of his being or having been such a director, other than a proceeding by
or in the right of the corporation, if (i) such director acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the corporation; and (ii) with respect to any criminal proceeding, such
director had no reasonable cause to believe his conduct was unlawful.
In connection with a proceeding by or in the right of the corporation,
indemnification for expenses generally is permitted by the NJBCA if the director
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation. The NJBCA requires a
corporation to indemnify a director against expenses to the extent the director
has been successful on the merits or otherwise.
Notwithstanding the foregoing, the NJBCA prohibits indemnification to or on
behalf of a director if a judgment or other final adjudication adverse to the
director establishes that his acts or omissions (i) were in breach of his duty
of loyalty, (ii) were not in good faith or involved a knowing violation of law,
or (iii) resulted in the receipt by the director of an improper personal
benefit. As with Seagull's Bylaws, Global's Bylaws also provide indemnification
to its present and former directors to the fullest extent permitted by state
law.
For additional information, see "Description of Seagull Capital Stock."
ELECTION OF DIRECTORS
Seagull's Bylaws provide for a classified Board of Directors. Thus, the
Seagull 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
Seagull's Annual Meetings of Shareholders in 1999, 1997 and 1998. Pursuant to
the terms of the Merger Agreement, at the Effective Time, the size of the Board
of Directors of Seagull will be increased from 11 directors to 14 directors, and
the three Global Designees will fill the newly created vacancies. Robert F. Vagt
will be elected to Class I of the Seagull Board (with a term expiring in 1999),
R.A. Walker will be elected to Class II of the Seagull Board (with a term
expiring in 1997) and Sidney R. Petersen will be elected to Class III of the
Seagull Board (with a term expiring in 1998). The terms of the Global Designees
will expire at the Seagull annual meeting in the year indicated above and until
their respective successors shall have been elected and qualified.
Each of the Global Designees currently serves as a director of Global. The
eleven directors currently serving on the Seagull Board of Directors named below
will not be required to stand for election at the Seagull Special Meeting.
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
Seagull'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.
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Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted FOR the election of the nominees listed in the
table below. Although the Seagull Board of Directors does not contemplate that
any of the nominees will be unable to serve, if such a situation arises prior to
the Seagull Special Meeting, the persons named in the enclosed proxy will vote
for the election of such other person(s) as may be designated by Global in
accordance with the terms of the Merger Agreement.
The following table and the notes thereto set forth certain information
with respect to the beneficial ownership of shares of Global Common Stock and
Seagull Common Stock (on an as-converted basis), as of June 30, 1996 by each of
the Designated Directors and by the Designated Directors as a group:
<TABLE>
<CAPTION>
TOTAL PRO FORMA
SHARES OF PRO FORMA PERCENTAGE OF
SHARES OF SEAGULL SHARES OF SHARES OF SEAGULL
GLOBAL COMMON STOCK SEAGULL SEAGULL COMMON STOCK OWNED
COMMON STOCK TO BE COMMON STOCK COMMON STOCK (AFTER
BENEFICIALLY RECEIVED IN BENEFICIALLY BENEFICIALLY GIVING EFFECT TO
NAME OF NOMINEE OWNED(1) THE MERGER(2) OWNED OWNED THE MERGER)(3)
--------------- ------------ ------------- ------------ ------------ -----------------
<S> <C> <C> <C> <C> <C>
Sidney R. Petersen....... 22,000(4)(5) 19,360 -- -- *%
Robert F. Vagt........... 467,158(6)(7) 411,099 -- -- *
R. A. Walker............. 6,311,547(8) 5,554,161 1,020,200(9) 6,574,361(9) 10.4
--------- --------- --------- --------- ----
Nominees as a group...... 6,800,705 7,004,820 1,020,200 6,574,361 11.0
</TABLE>
- ---------------
* Less than 1%.
(1) Except as indicated, (i) the persons named in the table have sole voting and
investment power with respect to all shares shown as beneficially owned by
them, and (ii) none of the shares shown in the table or referred to in the
footnotes hereto are shares of which the persons named in the table have the
right to acquire beneficial ownership within 60 days as specified in Rule
13d-3(d)(1) under the Exchange Act.
(2) Assumes the maximum Common Stock Exchange Ratio of .88.
(3) Assumes 62,969,249 shares of Seagull Common Stock are outstanding at the
Effective Time.
(4) Includes 2,000 shares for Global Common Stock held in The Petersen Family
Trust, as to which Mr. Petersen is one of two trustees.
(5) Includes options to acquire 20,000 shares of Global Common Stock, all which
are fully vested as of the date of this Joint Proxy Statement/Prospectus.
(6) Includes 2,158 shares of Global Common Stock arising from participation in
the Global Natural Resources Inc. Employees 401(k) Savings Plan.
(7) Includes options to acquire 450,000 shares of Global Common Stock, all which
are fully vested as of the date of this Joint Proxy Statement/Prospectus.
(8) All of such shares of Global Common Stock are held by Prudential or by
mutual funds managed by Prudential Mutual Fund Investment Managers or
Prudential Diversified Investors (hereinafter, the "Prudential Entities").
Mr. Walker does not own any of these shares directly, and any beneficial
ownership results solely from Mr. Walker's relationship with the Prudential
Entities. The Prudential Entities have sole voting and investment power with
respect to such shares. Mr. Walker, who is a Vice President of Prudential,
disclaims beneficial ownership of such shares.
(9) Includes 1,020,200 shares of Seagull Common Stock presently held by the
Prudential Entities. Mr. Walker does not own any of these shares directly,
and any beneficial ownership results solely from Mr. Walker's relationship
with the Prudential Entities. The Prudential Entities have sole voting and
investment power with respect to such shares. Mr. Walker disclaims
beneficial ownership of such shares.
INDEPENDENT PUBLIC ACCOUNTANTS
It is expected that representatives of KPMG Peat Marwick LLP will be
present at the Seagull Special Meeting and the Global Special Meeting to respond
to appropriate questions of shareholders and to make a statement if they so
desire.
LEGAL MATTERS
The validity of the Seagull Common Stock to be issued in the Merger has
been passed upon for Seagull by Vinson & Elkins L.L.P., Houston, Texas. Certain
tax consequences of the Merger have been passed upon for Seagull by Vinson &
Elkins L.L.P., Houston, Texas, and for Global by Fulbright & Jaworski, L.L.P.,
Houston, Texas.
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EXPERTS
The consolidated financial statements included in Seagull's Report on Form
10-K for the year ended December 31, 1995, have been incorporated by reference
herein and in the Registration Statement in reliance upon the reports of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing. The report of KPMG Peat Marwick LLP covering Seagull's December
31, 1995 consolidated financial statements refers to a change in the method of
accounting for the impairment of long-lived assets and long-lived assets to be
disposed of.
The consolidated financial statements included in Global's Report on Form
10-K for the year ended December 31, 1995, have been incorporated by reference
herein in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. The report of KPMG
Peat Marwick LLP covering Global's December 31, 1995 consolidated financial
statements refers to a change in 1995 in the method of accounting for the
impairment of long-lived assets and long-lived assets to be disposed of, and a
change in 1994 in the method of accounting for certain debt and equity
securities.
Certain information with respect to the gas and oil reserves associated
with Seagull's gas and oil properties at December 31, 1995, gas and oil reserves
owned by Novalta Resources Inc. for the year ended December 31, 1994 and the gas
and oil reserves associated with Seagull's properties located in the Mid-
Continent region at December 31, 1995 and December 31, 1994 derived from the
reports of DeGolyer and MacNaughton, independent consulting petroleum engineers,
has been included and incorporated by reference herein upon the authority of
said firm as experts with respect to the matters covered by such report and in
giving such report.
Certain information with respect to the gas and oil reserves owned by
Seagull Mid-South Inc. at December 31, 1994 and December 31, 1993 derived from
the reports of Netherland, Sewell & Associates, Inc., independent petroleum
engineers, has been included and incorporated by reference herein in reliance
upon such firm as experts with respect to the matters contained therein.
Certain information with respect to Seagull's other gas and oil reserves at
December 31, 1994 and December 31, 1993 derived from the reports of Ryder Scott
Company, independent petroleum engineers, has been included and incorporated by
reference herein in reliance upon such firm as experts with respect to the
matters contained therein.
Certain information with respect to the gas and oil reserves owned by
Global and its subsidiaries derived from the reports of Netherland, Sewell &
Associates, Inc. and Ryder Scott Company Petroleum Engineers, independent
petroleum engineers, has been included and incorporated by reference herein in
reliance upon such firms as experts with respect to the matters contained
therein.
CERTAIN DEFINITIONS
As used in this Joint Proxy Statement/Prospectus:
With respect to volumes, "Bcf" means billion cubic feet, "mcf" means
thousand cubic feet, "MMbbls" means million barrels, one "Bcfe" equals the
energy equivalent of one bcf of natural gas, "MMcf/d" means million cubic feet
per day, "Mbbls/d" means thousand barrels per day, "Bbls/d" means barrels per
day, one "MMcfe/d" means the energy equivalent of one million cubic feet of
natural gas per day and "MMbtu" means million British thermal units. Unless
otherwise indicated in this Joint Proxy Statement/Prospectus, gas volumes are
stated at the legal pressure base of the state or area in which the reserves are
located and at 60(++) Fahrenheit. Unless otherwise indicated, where crude oil,
condensate and natural gas liquids volumes are converted into natural gas
equivalents, a ratio of six mcf to one barrel is used, which approximates the
relative energy content of crude oil, condensate and natural gas liquids as
compared to natural gas.
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When used in describing acreage on drilling locations, the term "net"
refers to the total acres on drilling locations in which a person has a working
interest, multiplied by the percentage working interest owned by such person.
When used in describing production, the term "net" refers to the sum of (i) the
total production in which a person has a working interest, multiplied by the
percentage of net revenue interest owned by such person and (ii) the total
production that is attributable to royalty interests held by such person.
"Proved" reserves refer to net proved developed and undeveloped reserves of
crude oil, condensate, natural gas and natural gas liquids that geological and
engineering data demonstrate with reasonable certainty to be economically
recoverable in the future from known reservoirs under existing conditions.
Proved "developed" reserves are those proved reserves reasonably expected to be
recovered with existing equipment and operating methods, while proved
"undeveloped" reserves are those proved reserves reasonably expected to be
recovered from new wells on undrilled acreage, from existing wells where a
relatively large expenditure is required and from acreage where an application
of fluid injection or other improved recovery technique is contemplated (where
such technique has been proved effective by actual tests in the area in the same
reservoir or one with similar rock and fluid properties). The reserve volumes
provided in and incorporated by reference in this Joint Proxy
Statement/Prospectus are estimates only and should not be construed as being
exact quantities. They may or may not be actually recovered. Moreover, estimates
of proved reserves may increase or decrease as a result of future operations and
changes in market conditions.
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SHAREHOLDER PROPOSALS
SEAGULL
Seagull 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 1997 ANNUAL MEETING. Pursuant to various rules promulgated by
the Commission, any proposals of holders of Seagull Common Stock intended to be
presented to the annual meeting of shareholders of Seagull to be held in 1997
must be received by Seagull, addressed to Sylvia Sanchez, Corporate Secretary,
1001 Fannin, Suite 1700, Houston, Texas 77002, no later than November 29, 1996,
to be included in Seagull proxy statement and form of proxy relating to that
meeting. With respect to business to be brought before the 1997 Annual Meeting,
Seagull has not received any notices from its shareholders.
In addition to the Commission rules described in the preceding paragraph,
Seagull's Bylaws provide that for business to be properly brought before
Seagull's annual meetings of shareholders beginning with the 1997 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 Seagull Board of
Directors, (b) otherwise brought before the meeting by or at the direction of
the Seagull Board of Directors or (c) otherwise properly brought before the
meeting by a shareholder of Seagull 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 Seagull, the shareholder must have given
timely notice in writing of the business to be brought before an annual meeting
of shareholders of Seagull to the Secretary of Seagull. To be timely, a
shareholder's notice must be delivered to or mailed and received at Seagull's
principal executive offices, 1001 Fannin, Suite 1700, Houston, Texas 77002-6714,
on or before February 12, 1997. 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 Seagull's books, of the
shareholder proposing such business, (iii) the acquisition date, the class and
the number of shares of Seagull 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 forth in the foregoing
bylaw provisions. Notwithstanding anything in Seagull's Bylaws to the contrary,
no business shall be conducted at the annual meeting except in accordance with
the procedures outlined above.
NOMINATIONS FOR 1997 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
Seagull's Board of Directors may be made at a meeting of shareholders (a) by or
at the direction of the Seagull Board of Directors or (b) by any shareholder of
Seagull 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 Seagull
Board of Directors, shall be made pursuant to timely notice in writing to the
Secretary of Seagull. To be timely, a shareholder's notice shall be delivered to
or mailed and received at Seagull's principal executive offices, 1001 Fannin,
Suite 1700, Houston, Texas 77002-6714 (i) with respect to an election to be held
at the annual meeting of shareholders of Seagull, on or before February 12,
1997, and (ii) with respect to an election to be held at a special meeting of
shareholders of Seagull 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
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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 Seagull's books, of such shareholder, and (ii) the
class and number of shares of capital stock of Seagull which are beneficially
owned by the shareholder. In the event a person is validly designated as a
nominee to the Seagull Board and shall thereafter become unable or unwilling to
stand for election to the Seagull Board of Directors, the Seagull 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.
GLOBAL
If the Merger is not consummated, any proposals of shareholders of Global
intended to be presented at the Annual Meeting of Shareholders of Global to be
held in 1997 must be received by Global, addressed to the Secretary of Global at
5300 Memorial Drive, Suite 800, Houston, Texas 77007-8295, no later than
November 29, 1996, to be considered for inclusion in the proxy statement and
form of proxy relating to that meeting. Global's Nominating Committee designates
the nominees for election as directors at the Annual Meeting of Shareholders and
will consider written recommendations by shareholders for nominees for director
at any meetings of shareholders called for the election of directors delivered
to the Nominating Committee c/o E. Lynn Hill, Secretary, Global Natural
Resources Inc., 5300 Memorial Drive, Suite 800, Houston, Texas 77007 not fewer
than fourteen (14) days nor more than fifty (50) days prior to such meeting.
Each such notice shall set forth (i) the name, business address, if any, and
residence address of the nominator, (ii) the name, age, business address and, if
known, resident address of each nominee proposed in such notice, (iii) the
principal occupation or employment of each such nominee, (iv) the number of
shares of Global which are owned beneficially and the number of shares which are
owned of record by each such nominee, and (v) the number of shares of Global
which are owned beneficially and the number of shares which are owned of record
by the nominator.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SEAGULL ENERGY CORPORATION,
GNR MERGER CORPORATION
AND
GLOBAL NATURAL RESOURCES INC.
Dated as of July 22, 1996
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
THE MERGER
Section 1.1 The Merger.............................................................. A-1
Section 1.2 Effective Time of the Merger............................................ A-1
Section 1.3 Tax Treatment........................................................... A-1
Section 1.4 Accounting Treatment.................................................... A-1
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation............................................ A-1
Section 2.2 Bylaws.................................................................. A-1
Section 2.3 Directors and Officers.................................................. A-2
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Conversion of Capital Stock............................................. A-2
Section 3.2 Surrender and Payment................................................... A-3
Section 3.3 Global Stock Options.................................................... A-5
Section 3.4 No Fractional Shares.................................................... A-5
Section 3.5 Closing................................................................. A-6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GLOBAL
Section 4.1 Organization and Qualification.......................................... A-6
Section 4.2 Capitalization.......................................................... A-7
Section 4.3 Authority............................................................... A-7
Section 4.4 Consents and Approvals; No Violation.................................... A-8
Section 4.5 Global SEC Reports...................................................... A-8
Section 4.6 Financial Statements.................................................... A-9
Section 4.7 Absence of Undisclosed Liabilities...................................... A-9
Section 4.8 Absence of Certain Changes.............................................. A-9
Section 4.9 Taxes................................................................... A-9
Section 4.10 Litigation.............................................................. A-10
Section 4.11 Employee Benefit Plans; ERISA........................................... A-10
Section 4.12 Environmental Liability................................................. A-11
Section 4.13 Compliance with Applicable Laws......................................... A-12
Section 4.14 Insurance............................................................... A-12
Section 4.15 Labor Matters; Employees................................................ A-13
Section 4.16 Reserve Reports......................................................... A-13
Section 4.17 Oil and Gas Reserves; Equipment......................................... A-14
Section 4.18 Title to Oil and Gas Interests.......................................... A-15
Section 4.19 Title to Other Properties............................................... A-16
Section 4.20 Permits................................................................. A-16
Section 4.21 Material Contracts...................................................... A-17
Section 4.22 Required Stockholder Vote or Consent.................................... A-17
Section 4.23 Proxy Statement/Prospectus; Registration Statement...................... A-17
Section 4.24 Intellectual Property................................................... A-18
Section 4.25 Hedging................................................................. A-18
</TABLE>
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<TABLE>
<S> <C> <C>
Section 4.26 Brokers................................................................. A-18
Section 4.27 Tax-Free Reorganization and Pooling..................................... A-18
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SEAGULL AND MERGER SUB
Section 5.1 Organization and Qualification.......................................... A-19
Section 5.2 Capitalization.......................................................... A-19
Section 5.3 Authority............................................................... A-20
Section 5.4 Consents and Approvals; No Violation.................................... A-20
Section 5.5 Seagull Financial Statements............................................ A-21
Section 5.6 Absence of Undisclosed Liabilities...................................... A-21
Section 5.7 Absence of Certain Changes.............................................. A-21
Section 5.8 Seagull SEC Reports..................................................... A-22
Section 5.9 Taxes................................................................... A-22
Section 5.10 Litigation.............................................................. A-22
Section 5.11 Employee Benefit Plans; ERISA........................................... A-23
Section 5.12 Environmental Liability................................................. A-24
Section 5.13 Compliance with Applicable Laws......................................... A-24
Section 5.14 Insurance............................................................... A-25
Section 5.15 Labor Matters........................................................... A-25
Section 5.16 Reserve Reports......................................................... A-25
Section 5.17 Oil and Gas Reserves; Equipment......................................... A-26
Section 5.18 Title to Oil and Gas Interests.......................................... A-27
Section 5.19 Title to Other Properties............................................... A-28
Section 5.20 Material Contracts...................................................... A-28
Section 5.21 Permits................................................................. A-29
Section 5.22 Required Shareholder Vote or Consent.................................... A-29
Section 5.23 Proxy Statement/Prospectus; Registration Statement...................... A-29
Section 5.24 Intellectual Property................................................... A-29
Section 5.25 Hedging................................................................. A-30
Section 5.26 Brokers................................................................. A-30
Section 5.27 Merger Sub's Operations................................................. A-30
Section 5.28 Pooling; Tax Matters.................................................... A-30
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by Global Pending the Merger........................ A-31
Section 6.2 Conduct of Business by Seagull Pending the Merger....................... A-32
Section 6.3 Conduct of Business of Merger Sub....................................... A-34
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information.................................................. A-34
Section 7.2 Acquisition Proposals................................................... A-34
Section 7.3 Directors' and Officers' Indemnification and Insurance.................. A-35
Section 7.4 Further Assurances...................................................... A-36
Section 7.5 Expenses................................................................ A-36
Section 7.6 Cooperation............................................................. A-36
Section 7.7 Publicity............................................................... A-37
Section 7.8 Additional Actions...................................................... A-37
Section 7.9 Filings................................................................. A-37
</TABLE>
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<TABLE>
<S> <C> <C>
Section 7.10 Consents................................................................ A-37
Section 7.11 Employee Matters; Benefit Plans......................................... A-37
Section 7.12 Seagull Board........................................................... A-37
Section 7.13 Stockholders Meetings................................................... A-38
Section 7.14 Preparation of the Proxy Statement/Prospectus and Registration
Statement............................................................... A-38
Section 7.15 Stock Exchange Listing.................................................. A-39
Section 7.16 Notice of Certain Events................................................ A-39
Section 7.17 Site Inspections........................................................ A-40
Section 7.18 Affiliate Agreements; Tax Treatment; Pooling............................ A-40
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to the Obligation of Each Party.............................. A-40
Section 8.2 Conditions to the Obligations of Seagull and Merger Sub................. A-41
Section 8.3 Conditions to the Obligations of Global................................. A-41
ARTICLE IX
SURVIVAL
Section 9.1 Survival of Representations and Warranties.............................. A-42
Section 9.2 Survival of Covenants and Agreements.................................... A-42
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination............................................................. A-42
Section 10.2 Effect of Termination................................................... A-43
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices................................................................. A-44
Section 11.2 Separability............................................................ A-44
Section 11.3 Assignment.............................................................. A-44
Section 11.4 Interpretation.......................................................... A-44
Section 11.5 Counterparts............................................................ A-45
Section 11.6 Entire Agreement........................................................ A-45
Section 11.7 Governing Law........................................................... A-45
Section 11.8 Attorneys' Fees......................................................... A-45
Section 11.9 No Third Party Beneficiaries............................................ A-45
Section 11.10 Disclosure Schedules.................................................... A-45
</TABLE>
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") dated as of July 22,
1996, by and among Seagull Energy Corporation, a Texas corporation ("Seagull"),
GNR Merger Corporation, a New Jersey corporation and a wholly owned subsidiary
of Seagull ("Merger Sub"), and Global Natural Resources Inc., a New Jersey
corporation ("Global").
WHEREAS, the respective Boards of Directors of Seagull, Merger Sub and
Global deem it advisable and in the best interests of their respective
stockholders that Merger Sub merge (the "Merger") with and into Global upon the
terms and subject to the conditions set forth herein, and such Boards of
Directors have approved the Merger; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
will qualify as a reorganization under the provisions of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Merger is intended to be treated as a "pooling of interests"
(a "Pooling Transaction") in accordance with United States generally accepted
accounting principles ("GAAP") and the rules, regulations and interpretations of
the Securities and Exchange Commission (the "SEC");
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof, at the Effective Time (as defined in Section 1.2 hereof), Merger Sub
shall be merged with and into Global and the separate corporate existence of
Merger Sub shall thereupon cease, and Global shall be the surviving corporation
in the Merger (sometimes referred to herein as the "Surviving Corporation"). The
Merger shall have the effects set forth in Section 14A:10-6 of the New Jersey
Business Corporation Act (the "NJBCA"), including without limitation, the
Surviving Corporation's succession to and assumption of all rights and
obligations of Global.
Section 1.2 Effective Time of the Merger. The Merger shall become
effective (the "Effective Time") when a properly executed Certificate of Merger
is duly filed with the Secretary of State of the State of New Jersey, which
filing shall be made as soon as practicable after the satisfaction or waiver of
the conditions set forth in Article VIII hereof.
Section 1.3 Tax Treatment. It is intended that the Merger shall constitute
a reorganization under section 368(a) of the Code.
Section 1.4 Accounting Treatment. It is intended that the Merger shall be
accounted for as a "pooling of interests" for financial accounting purposes.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation. The Certificate of Incorporation
of Global as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation at and after the
Effective Time.
Section 2.2 Bylaws. The Bylaws of Global as in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation at and after
the Effective Time, and thereafter may be amended in accordance with their terms
and as provided by the Certificate of Incorporation of the Surviving Corporation
and the NJBCA.
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Section 2.3 Directors and Officers. At and after the Effective Time, (a)
the Board of Directors of the Surviving Corporation shall be comprised of the
persons set forth on Schedule A and (b) the officers of Global immediately prior
to the Effective Time shall be the officers of the Surviving Corporation, in the
case of both clause (a) and (b) until their respective successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Certificate of
Incorporation and Bylaws.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of
Global's common stock, par value $1.00 per share (the "Global Common Stock"):
(a) Each share of Global Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into such number
of shares of fully paid and nonassessable voting common stock, par value
$0.10 per share, of Seagull ("Seagull Common Stock") equal to the Common
Stock Exchange Ratio (as hereinafter defined). The "Common Stock Exchange
Ratio" shall be determined as follows: (i) if the Seagull Transaction Value
(as hereinafter defined) is equal to or greater than $27.50, then the
Common Stock Exchange Ratio shall be equal to .72, if the Seagull
Transaction Value is equal to or less than $22.50, then the Common Stock
Exchange Ratio shall be equal to .88 and (iii) if the Seagull Transaction
Value is less than $27.50 and greater than $22.50, the Common Stock
Exchange Ratio shall be determined by linear interpolation between the
Common Stock Exchange Ratios set forth in clauses (i) and (ii). The term
"Seagull Transaction Value" shall mean the average of the closing sales
price of Seagull Common Stock, rounded to four decimal places, as reported
under "NYSE Composite Transaction Reports" in The Wall Street Journal for
each of the first 20 consecutive Trading Days in the period commencing 25
Trading Days prior to the date of the Global Special Meeting (as
hereinafter defined). For purposes of this Agreement, "Trading Day" shall
mean a day on which the New York Stock Exchange (the "NYSE") is open for
trading. All such Global Common Stock, when so converted, shall no longer
be outstanding and shall automatically be canceled and retired and shall
cease to exist, and the holder of a certificate ("Common Stock
Certificate") that, immediately prior to the Effective Time, represented
outstanding shares of Global Common Stock shall cease to have any rights
with respect thereto, except the right to receive, upon the surrender of
such Common Stock Certificate, the Seagull Common Stock (the "Merger
Consideration") to which such holder is entitled pursuant to this Section
3.1(a), without interest. Until surrendered as contemplated by this Section
3.1, each Common Stock Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender
the Merger Consideration as contemplated by this Section 3.1.
Notwithstanding the foregoing, if between the date of this Agreement and
the Effective Time the outstanding shares of Seagull Common Stock or Global
Common Stock shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares, the Common Stock Exchange Ratio shall be correspondingly adjusted
to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
(b) Each share of common stock, par value $.01 per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one share of common stock of the Surviving
Corporation.
(c) Each share of Seagull Common Stock, issued and outstanding
immediately prior to the Effective Time shall remain an issued and
outstanding share of Seagull Common Stock, and shall not be affected by the
Merger.
(d) No dividends or other distributions declared or made after the
Effective Time with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Common Stock Certificate
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with respect to the Merger Consideration represented thereby until the
holder of record of such Common Stock Certificate shall surrender such
Common Stock Certificate. Subject to the effect of applicable laws
(including, without limitation, escheat and abandoned property laws),
following surrender of any such Common Stock Certificate there shall be
paid to the record holder of the certificate or certificates representing
the Merger Consideration issued in exchange therefor, without interest, (i)
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such Merger Consideration,
and (ii) if the payment date for any dividend or distribution payable with
respect to such Merger Consideration has not occurred prior to the
surrender of such Common Stock Certificate, at the appropriate payment date
therefor, the amount of dividends or other distributions with a record date
after the Effective Time but prior to the surrender of such Common Stock
Certificate and a payment date subsequent to the surrender of such Common
Stock Certificate.
(e) All Seagull Common Stock issued upon the surrender of Common Stock
Certificates in accordance with the terms hereof shall be deemed to have
been issued in full satisfaction of all rights pertaining to such Common
Stock Certificates and the Global Common Stock formerly represented
thereby, and from and after the Effective Time there shall be no further
registration of transfers effected on the stock transfer books of the
Surviving Corporation of shares of Global Common Stock which were
outstanding immediately prior to the Effective Time. If, after the
Effective Time, Common Stock Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as
provided in this Article III.
Section 3.2 Surrender and Payment.
(a) Prior to the Effective Time, Seagull shall appoint an agent
reasonably acceptable to Global (the "Exchange Agent") for the purpose of
exchanging Common Stock Certificates formerly representing Global Common
Stock. At or prior to the Effective Time, Seagull shall deposit with the
Exchange Agent for the benefit of the holders of Global Common Stock (other
than Global, Seagull or any Subsidiary of Seagull), for exchange in
accordance with this Section 3.2 through the Exchange Agent, (i) as of the
Effective Time, certificates representing the Merger Consideration to be
issued pursuant to Section 3.1(a) and (ii) from time to time as necessary,
cash to be paid in lieu of fractional shares pursuant to Section 3.4 (such
certificates for the Merger Consideration and such cash being hereinafter
referred to as the "Exchange Fund"). The Exchange Agent shall, pursuant to
irrevocable instructions, deliver the Merger Consideration and cash in
exchange for surrendered Common Stock Certificates formerly representing
Global Common Stock pursuant to Section 3.1 out of the Exchange Fund.
Except as contemplated by Section 3.2(f), the Exchange Fund shall not be
used for any other purpose.
(b) Promptly after the Effective Time, but in any event not later than
five business days thereafter, Seagull will send, or will cause the
Exchange Agent to send, to each holder of a Common Stock Certificate or
Certificates that immediately prior to the Effective Time represented
outstanding Global Common Stock a letter of transmittal and instructions
for use in effecting the exchange of such Common Stock Certificates for
certificates representing the Merger Consideration and, if applicable, cash
in lieu of a fractional share. Provision also shall be made for holders of
Common Stock Certificates to procure in person immediately after the
Effective Time a letter of transmittal and instructions and to deliver in
person immediately after the Effective Time such letter of transmittal and
Common Stock Certificates in exchange for the Merger Consideration and, if
applicable, cash.
(c) After the Effective Time, Common Stock Certificates shall
represent the right, upon surrender thereof to the Exchange Agent, together
with a duly executed and properly completed letter of transmittal relating
thereto, to receive in exchange therefor that number of whole shares of
Seagull Common Stock, and, if applicable, cash that such holder has the
right to receive pursuant to Sections 3.1 and 3.4 after giving effect to
any required tax withholding, and the Common Stock Certificate or
Certificates so surrendered shall be canceled. No interest will be paid or
will accrue on any cash amount payable upon the surrender of any such
Common Stock Certificates. Until so surrendered, each such Common Stock
Certificate shall, after the Effective Time, represent for all purposes
only the right to
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receive, upon such surrender, Seagull Common Stock and, if applicable, cash
as contemplated by this Article III.
(d) If any shares of Seagull Common Stock are to be issued and/or cash
to be paid to a Person other than the registered holder of the Common Stock
Certificate or Certificates surrendered in exchange therefor, it shall be a
condition to such issuance that the Common Stock Certificate or
Certificates so surrendered shall be properly endorsed or otherwise be in
proper form for transfer and that the Person requesting such issuance shall
pay to the Exchange Agent any transfer or other taxes required as a result
of such issuance to a Person other than the registered holder or establish
to the satisfaction of the Exchange Agent that such tax has been paid or is
not applicable. For purposes of this Agreement, "Person" means an
individual, a corporation, a limited liability company, a partnership, an
association, a trust or any other entity or organization, including a
governmental or political subdivision or any agency or instrumentality
thereof.
(e) After the Effective Time, the stock transfer books of Global shall
be closed and there shall be no further registration of transfers of Global
Common Stock outstanding prior to the Effective Time. If, at or after the
Effective Time, Common Stock Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged as provided for, and in
accordance with the procedures set forth, in this Article III.
(f) Any Merger Consideration and any cash in the Exchange Fund that
remain unclaimed by the holders of Global Common Stock one year after the
Effective Time shall be returned to Seagull, upon demand, and any such
holder who has not exchanged such holder's Common Stock Certificates in
accordance with this Section 3.2 prior to that time shall thereafter look
only to Seagull, as general creditors thereof, to exchange such Common
Stock Certificates or to pay amounts to which they are entitled pursuant to
Section 3.1. If outstanding Common Stock Certificates are not surrendered
prior to six years after the Effective Time (or, in any particular case,
prior to such earlier date on which any Merger Consideration issuable in
respect of such Common Stock Certificates or the dividends and other
distributions, if any, described below would otherwise escheat to or become
the property of any governmental unit or agency), the Merger Consideration
issuable in respect of such Common Stock Certificates, and the amount of
dividends and other distributions, if any, which have become payable and
which thereafter become payable on the Merger Consideration evidenced by
such Common Stock Certificates as provided herein shall, to the extent
permitted by applicable law, become the property of Seagull, free and clear
of all claims or interest of any Person previously entitled thereto.
Notwithstanding the foregoing, none of Seagull, Global or the Surviving
Corporation shall be liable to any holder of Common Stock Certificates for
any amount paid, or Merger Consideration, cash or dividends delivered, to a
public official pursuant to applicable abandoned property, escheat or
similar laws.
(g) No dividends or other distributions on any Merger Consideration
shall be paid to the holder of any unsurrendered Common Stock Certificates
with respect to the Seagull Common Stock represented thereby until such
Common Stock Certificates are surrendered as provided in this Section 3.2.
Following such surrender, there shall be paid, without interest, to the
Person in whose name the certificates representing the Merger Consideration
issued in exchange therefor are registered, (i) promptly all dividends and
other distributions paid in respect of such Merger Consideration with a
record date on or after the Effective Time and theretofore paid, and (ii)
at the appropriate date, all dividends or other distributions in respect of
such Merger Consideration with a record date after the Effective Time but
prior to surrender and a payment date occurring after surrender.
(h) If any Common Stock Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person
claiming such Common Stock Certificate to be lost, stolen or destroyed and,
if required by the Surviving Corporation, the posting by such Person of a
bond in such reasonable amount as Seagull may direct as indemnity against
any claim that may be made against it with respect to such Common Stock
Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Common Stock Certificate the Merger Consideration and,
if applicable, cash and
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unpaid dividends and other distributions on any Merger Consideration
deliverable in respect thereof pursuant to this Agreement.
Section 3.3 Global Stock Options.
(a) At the Effective Time, automatically and without any action on the
part of the holder thereof, each outstanding employee or director stock
option of Global outstanding at the Effective Time (the "Global Stock
Options") shall be assumed by Seagull and become an option to purchase that
number of shares of Seagull Common Stock obtained by multiplying the number
of shares of Global Common Stock issuable upon the exercise of such option
by the Common Stock Exchange Ratio at an exercise price per share equal to
the per share exercise price of such option divided by the Common Stock
Exchange Ratio and otherwise upon the same terms and conditions as such
outstanding options to purchase Global Common Stock; provided, however,
that in the case of any option to which Section 421 of the Code applies by
reason of the qualifications under Section 422 or 423 of such Code, the
exercise price, the number of shares purchasable pursuant to such option
and the terms and conditions of exercise of such option shall comply with
Section 424(a) of the Code.
(b) At the Effective Time, subject to any requirements or restrictions
necessary in order for the Merger to constitute a Pooling Transaction,
automatically and without any action by any person, each outstanding Global
Stock Option then held by an employee of Global or any of its Subsidiaries
shall become immediately exercisable.
(c) Seagull shall take all corporate actions necessary to reserve for
issuance a sufficient number of shares of Seagull Common Stock for delivery
upon exercise of Global Stock Options assumed by Seagull pursuant to
Section 3.3(a) above.
(d) As promptly as practicable after the Effective Time, Seagull shall
file a Registration Statement on Form S-8, as the case may be (or any
successor or other appropriate forms) with respect to the shares of Seagull
Common Stock subject to Global Stock Options and shall use all reasonable
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus
or prospectuses contained therein) for so long as such options remain
outstanding.
(e) Except as provided herein or as otherwise agreed to by the
parties, each of the Global stock option plans providing for the issuance
or grant of options in respect to the stock of Global shall be assumed as
of the Effective Time by Seagull with such amendments thereto as may be
required to reflect the Merger.
(f) In connection with the submission of the Proxy
Statement/Prospectus to its shareholders, Seagull shall seek such
shareholder approval as may be necessary so that grants of options and
issuances of securities pursuant to the exercise of such options under the
Global stock option plans assumed by it hereunder, as amended, and all
other Global stock option plans as in effect on the date hereof shall
qualify for the exemption for such issuances provided by Rule 16b-3 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Section 3.4 No Fractional Shares. No fractional shares of Seagull Common
Stock shall be issued in the Merger and fractional share interests shall not
entitle the owner thereof to vote or to any rights of a shareholder of Seagull.
All holders of fractional shares of Seagull Common Stock shall be entitled to
receive, in lieu thereof, an amount in cash determined by multiplying the
fraction of a share of Seagull Common Stock to which such holder would otherwise
have been entitled by the Closing Sales Price of Seagull Common Stock on the
NYSE. For purposes of this Agreement, (i) "Closing Sales Price" shall mean the
average of the closing sales price of Seagull Common Stock, rounded to four
decimal places, as reported under "NYSE Composite Transaction Reports" in The
Wall Street Journal for each of the first 20 consecutive Trading Days in the
period commencing 25 Trading Days prior to the Effective Time.
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Section 3.5 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at a location mutually acceptable to
Global and Seagull, at 10:00 a.m., local time, on the day (the "Closing Date")
on which all of the conditions set forth in Article VIII hereof are satisfied or
waived, or at such other date and time as Seagull and Global shall agree in
writing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GLOBAL
Global represents and warrants to Seagull and Merger Sub as follows:
Section 4.1 Organization and Qualification.
(a) Global is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey, is duly qualified
to do business as a foreign corporation and is in good standing in the
jurisdictions set forth in Section 4.1(a) of the disclosure letter
delivered to Seagull and Merger Sub contemporaneously with the execution
hereof (the "Global Disclosure Schedule"), which include each jurisdiction
in which the character of Global's properties or the nature of its business
makes such qualification necessary, except in jurisdictions, if any, where
the failure to be so qualified would not result in a Global Material
Adverse Effect (as defined below). Global has all requisite corporate or
other power and authority to own, use or lease its properties and to carry
on its business as it is now being conducted and as it is now proposed to
be conducted. Global has made available to Seagull and Merger Sub a
complete and correct copy of its certificate of incorporation and bylaws,
each as amended to date, and Global's certificate of incorporation and
bylaws as so delivered are in full force and effect. Global is not in
default in any respect in the performance, observation or fulfillment of
any provision of its certificate of incorporation or bylaws.
(b) Section 4.1(b) of the Global Disclosure Schedule lists the name
and jurisdiction of organization of each Subsidiary of Global and the
jurisdictions in which each such Subsidiary is qualified or holds licenses
to do business as a foreign corporation or other organization as of the
date hereof. Each of Global's Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business as a foreign corporation
and is in good standing in the jurisdictions listed in Section 4.1(b) of
the Global Disclosure Schedule, which includes each jurisdiction in which
the character of such Subsidiary's properties or the nature of its business
makes such qualification necessary, except in jurisdictions, if any, where
the failure to be so qualified would not result in a Global Material
Adverse Effect. Each of Global's Subsidiaries has the requisite corporate
or other power and authority to own, use or lease its properties and to
carry on its business as it is now being conducted and as it is now
proposed to be conducted. Global has made available to Seagull and Merger
Sub a complete and correct copy of the certificate of incorporation and
bylaws (or similar organizational documents) of each of Global's
Subsidiaries, each as amended to date, and the certificate of incorporation
and bylaws (or similar charter documents) as so delivered are in full force
and effect. No Subsidiary of Global is in default in any respect in the
performance, observation or fulfillment of any provision of its articles of
incorporation or bylaws (or similar organizational documents). Other than
Global's Subsidiaries, Global does not beneficially own or control,
directly or indirectly, 5% or more of any class of equity or similar
securities of any corporation or other organization, whether incorporated
or unincorporated.
(c) For purposes of this Agreement, (i) a "Global Material Adverse
Effect" shall mean any event, circumstance, condition, development or
occurrence causing, resulting in or having (or with the passage of time
likely to cause, result in or have) a material adverse effect on the
financial condition, business, assets, properties, prospects or results of
operations of Global and its Subsidiaries taken as a whole; provided, that
such term shall not include effects that are not applicable primarily to
Global resulting from market conditions generally in the oil and gas
industry; and (ii) "Subsidiary" shall mean, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated,
of which (x) at least a majority of the securities or other interests
having by their terms voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to such
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corporation or other organization is directly or indirectly beneficially
owned or controlled by such party or by any one or more of its
subsidiaries, or by such party and one or more of its subsidiaries, or (y)
such party or any Subsidiary of such party is a general partner of a
partnership or a manager of a limited liability company.
Section 4.2 Capitalization.
(a) The authorized capital stock of Global consists of 100,000,000
shares of Global Common Stock and 750,000 shares of preferred stock, par
value $1.00 per share, all of which have been designated as Series B Junior
Preferred Stock. As of June 30, 1996, (i) 29,766,500 shares of Global
Common Stock were issued and outstanding, (ii) no shares of preferred stock
were issued and outstanding, and (iii) stock options to acquire 1,564,850
shares of Global Common Stock were outstanding under all stock option plans
and agreements of Global. All of the outstanding shares of Global Common
Stock are validly issued, fully paid and nonassessable, and free of
preemptive rights. Except as set forth above and the Rights Agreement dated
as of October 5, 1988 between Global and Registrar and Transfer Company (as
amended, the "Global Rights Plan"), there are no outstanding subscriptions,
options, rights, warrants, convertible securities, stock appreciation
rights, phantom equity, or other agreements or commitments obligating
Global to issue, transfer, sell, redeem, repurchase or otherwise acquire
any shares of its capital stock of any class. Except for any amendments
filed with the Global SEC Reports (as defined below), the Global Rights
Plan has not been amended except to provide that the Global Rights Plan is
inapplicable to the execution and delivery of this Agreement and the
transactions contemplated hereby (including the Voting Agreement referred
to below) and any other agreement executed and delivered in connection
herewith. No "Distribution Date" has occurred within the meaning of the
Global Rights Plan, and the consummation of the transactions contemplated
hereby will not result in the occurrence of a Distribution Date. Global has
taken all action required to render the Global Rights Plan (and the
"Rights" thereunder) inapplicable to this Agreement and the transactions
contemplated hereby (including without limitation the execution, delivery
or performance of that certain Voting Agreement (the "Voting Agreement")
dated of even date herewith between Seagull and The Prudential Life
Insurance Company of America (the "Stockholder") and any other agreement
executed and delivered in connection herewith).
(b) Except as set forth on Schedule 4.2(b), Global is, directly or
indirectly, the record and beneficial owner of all of the outstanding
shares of capital stock of each Global Subsidiary, there are no irrevocable
proxies with respect to any such shares, and no equity securities of any
Global Subsidiary are or may become required to be issued by reason of any
options, warrants, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into
or exchangeable or exercisable for, shares of any capital stock of any
Global Subsidiary, and there are no contracts, commitments, understandings
or arrangements by which Global or any Global Subsidiary is or may be bound
to issue additional shares of capital stock of any Global Subsidiary or
securities convertible into or exchangeable or exercisable for any such
shares. All of such shares so owned by Global are validly issued, fully
paid and nonassessable and are owned by it free and clear of all Liens (as
hereinafter defined).
Section 4.3 Authority. Global has full corporate power and authority to
execute and deliver this Agreement and the other agreements contemplated hereby
(the "Ancillary Agreements") to which Global is or will be a party and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Ancillary Agreements to which
Global is or will be a party and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by
Global's Board of Directors, and no other corporate proceedings on the part of
Global are necessary to authorize this Agreement and the Ancillary Agreements to
which Global is or will be a party or to consummate the transactions
contemplated hereby or thereby, other than the approval of this Agreement and
the Merger by its stockholders as contemplated by Section 7.13 hereof. This
Agreement has been, and the Ancillary Agreements to which Global is or will be a
party are, or upon execution will be, duly and validly executed and delivered by
Global and, assuming the due authorization, execution and delivery hereof and
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thereof by the other parties hereto and thereto, constitutes, or upon execution
will constitute, valid and binding obligations of Global enforceable against
Global in accordance with their respective terms, except as such enforceability
may be subject to the effects of bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting the rights of creditors and
of general principles of equity (the "Enforceability Exception").
Section 4.4 Consents and Approvals; No Violation. The execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby and the performance by Global of its obligations hereunder will not:
(a) subject to the obtaining of any requisite approvals of Global's
stockholders as contemplated by Section 7.13 hereof, conflict with any
provision of Global's certificate of incorporation or bylaws or the
certificates of incorporation or bylaws (or other similar organizational
documents) of any of its Subsidiaries;
(b) require any consent, waiver, approval, order, authorization or
permit of, or registration, filing with or notification to, (i) any
governmental or regulatory authority or agency (a "Governmental
Authority"), except for applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the
Securities Act of 1933, as amended (the "Securities Act"), the Exchange
Act, state laws relating to takeovers, if applicable, state securities or
blue sky laws and Customary Post-Closing Consents (as defined in Section
4.18) or (ii) except as set forth in Section 4.4(b) of the Global
Disclosure Schedule, any third party other than a Governmental Authority,
other than such non-Governmental Authority third party consents, waivers,
approvals, orders, authorizations and permits that would not (i) result in
a Global Material Adverse Effect, (ii) materially impair the ability of
Global or any of its Subsidiaries, as the case may be, to perform its
obligations under this Agreement or any Ancillary Agreement or (iii)
prevent the consummation of any of the transactions contemplated by this
Agreement;
(c) except as set forth in Section 4.4(c) of the Global Disclosure
Schedule, result in any violation of or the breach of or constitute a
default (with notice or lapse of time or both) under, or give rise to any
right of termination, cancellation or acceleration or guaranteed payments
or a loss of a material benefit under, any of the terms, conditions or
provisions of any note, lease, mortgage, license, agreement or other
instrument or obligation to which Global or any of its Subsidiaries is a
party or by which Global or any of its Subsidiaries or any of their
respective properties or assets may be bound, except for such violations,
breaches, defaults, or rights of termination, cancellation or acceleration,
or losses as to which requisite waivers or consents have been obtained or
which, individually or in the aggregate, would not (i) result in a Global
Material Adverse Effect, (ii) materially impair the ability of Global or
any of its Subsidiaries to perform its obligations under this Agreement or
any Ancillary Agreement or (iii) prevent the consummation of any of the
transactions contemplated by this Agreement;
(d) violate the provisions of any order, writ, injunction, judgment,
decree, statute, rule or regulation applicable to Global or any Subsidiary
of Global;
(e) result in the creation of any Lien upon any shares of capital
stock, properties or assets of Global or any of its Subsidiaries under any
agreement or instrument to which Global or any of its Subsidiaries is a
party or by which Global or any of its Subsidiaries or any of their
properties or assets is bound; or
(f) result in any holder of any securities of Global being entitled to
appraisal, dissenters' or similar rights.
Section 4.5 Global SEC Reports. Global has filed with the SEC, and has
heretofore made available to Seagull and Merger Sub true and complete copies of,
each form, registration statement, report, schedule, proxy or information
statement and other document (including exhibits and amendments thereto),
including without limitation its Annual Reports to Stockholders incorporated by
reference in certain of such reports, required to be filed with the SEC since
December 31, 1992 under the Securities Act or the Exchange Act (collectively,
the "Global SEC Reports"). As of the respective dates such Global SEC Reports
were filed or,
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if any such Global SEC Reports were amended, as of the date such amendment was
filed, each of the Global SEC Reports, including without limitation any
financial statements or schedules included therein, (a) complied in all material
respects with all applicable requirements of the Securities Act and the Exchange
Act, as the case may be, and the applicable rules and regulations promulgated
thereunder, and (b) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
Section 4.6 Financial Statements. Each of the audited consolidated
financial statements and unaudited consolidated interim financial statements of
Global (including any related notes and schedules) included (or incorporated by
reference) in its Annual Reports on Form 10-K for each of the three fiscal years
ended December 31, 1993, 1994 and 1995 and its Quarterly Report on Form 10-Q for
its fiscal quarter ended March 31, 1996 (collectively, the "Financial
Statements") have been prepared from, and are in accordance with, the books and
records of Global and its consolidated Subsidiaries, comply in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis (except as may be indicated
in the notes thereto and subject, in the case of quarterly financial statements,
to normal and recurring year-end adjustments) and fairly present, in conformity
with GAAP applied on a consistent basis (except as may be indicated in the notes
thereto), the consolidated financial position of Global and its Subsidiaries as
of the date thereof and the consolidated results of operations and cash flows
(and changes in financial position, if any) of Global and its Subsidiaries for
the periods presented therein (subject to normal year-end adjustments and the
absence of financial footnotes in the case of any unaudited interim financial
statements).
Section 4.7 Absence of Undisclosed Liabilities. Except (a) as specifically
disclosed in the Global SEC Reports and (b) for liabilities and obligations
incurred in the ordinary course of business and consistent with past practice
since December 31, 1995, neither Global nor any of its Subsidiaries has incurred
any liabilities or obligations of any nature (contingent or otherwise) that
would have a Global Material Adverse Effect or would be required by GAAP to be
reflected on a consolidated balance sheet of Global and its Subsidiaries or the
notes thereto which is not so reflected.
Section 4.8 Absence of Certain Changes. Except as disclosed in the Global
SEC Reports or as contemplated by this Agreement, since December 31, 1995 (a)
Global and its Subsidiaries have conducted their business in all material
respects in the ordinary course consistent with past practices, (b) there has
not been any change or development, or combination of changes or developments
that, individually or in the aggregate, would have a Global Material Adverse
Effect, (c) there has not been any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital stock of
Global, or any repurchase, redemption or other acquisition by Global or any of
its Subsidiaries of any outstanding shares of capital stock or other securities
of, or other ownership interests in, Global or any of its Subsidiaries, (d)
there has not been any amendment of any term of any outstanding security of
Global or any of its Subsidiaries, and (e) there has not been any change in any
method of accounting or accounting practice by Global or any of its
Subsidiaries, except for any such change required by reason of a concurrent
change in generally accepted accounting principles or to conform a Subsidiary's
accounting policies and practices to those of Global.
Section 4.9 Taxes. Except as otherwise disclosed in Section 4.9 of the
Global Disclosure Schedule (and for matters that would have no adverse effect on
Global):
(a) Global and each of its Subsidiaries have timely filed (or have had
timely filed on their behalf) or will file or cause to be timely filed, all
material Tax Returns (as defined below) required by applicable law to be
filed by any of them prior to or as of the Closing Date. All such Tax
Returns and amendments thereto are or will be true, complete and correct in
all material respects.
(b) Global and each of its Subsidiaries have paid (or have had paid on
their behalf), or where payment is not yet due, have established (or have
had established on their behalf and for their sole benefit and recourse),
or will establish or cause to be established on or before the Closing Date,
an adequate
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accrual for the payment of all material Taxes (as defined below) due with
respect to any period ending prior to or as of the Closing Date.
(c) No Audit (as defined below) by a Tax Authority (as defined below)
is pending or threatened with respect to any Tax Returns filed by, or Taxes
due from, Global or any Subsidiary. No issue has been raised by any Tax
Authority in any Audit of Global or any of its Subsidiaries that if raised
with respect to any other period not so audited could be expected to result
in a material proposed deficiency for any period not so audited. No
material deficiency or adjustment for any Taxes has been threatened,
proposed, asserted or assessed against Global or any of its Subsidiaries.
There are no liens for Taxes upon the assets of Global or any of its
Subsidiaries, except liens for current Taxes not yet delinquent.
(d) Neither Global nor any of its Subsidiaries has given or been
requested to give any waiver of statutes of limitations relating to the
payment of Taxes or have executed powers of attorney with respect to Tax
matters, which will be outstanding as of the Closing Date.
(e) Prior to the date hereof, Global and its Subsidiaries have
disclosed, and provided or made available true and complete copies to
Seagull of, all material Tax sharing, Tax indemnity, or similar agreements
to which Global or any of its Subsidiaries are a party to, is bound by, or
has any obligation or liability for Taxes.
(f) As used in this Agreement, (i) "Audit" shall mean any audit,
assessment of Taxes, other examination by any Tax Authority, proceeding or
appeal of such proceeding relating to Taxes; (ii) "Taxes" shall mean all
Federal, state, local and foreign taxes, and other assessments of a similar
nature (whether imposed directly or through withholding), including any
interest, additions to tax, or penalties applicable thereto; (iii) "Tax
Authority" shall mean the Internal Revenue Service and any other domestic
or foreign Governmental Authority responsible for the administration of any
Taxes; and (iv) "Tax Returns" shall mean all Federal, state, local and
foreign tax returns, declarations, statements, reports, schedules, forms
and information returns and any amended Tax Return relating to Taxes.
Section 4.10 Litigation. Except as disclosed in the Global SEC Reports or
Section 4.10 of the Global Disclosure Schedule, there is no suit, claim, action,
proceeding or investigation pending or, to Global's knowledge, threatened
against or directly affecting Global, any Subsidiaries of Global or any of the
directors or officers of Global or any of its Subsidiaries in their capacity as
such, nor is there any reasonable basis therefor that could reasonably be
expected to have a Global Material Adverse Effect, if adversely determined.
Neither Global nor any of its Subsidiaries, nor any officer, director or
employee of Global or any of its Subsidiaries, has been permanently or
temporarily enjoined by any order, judgment or decree of any court or any other
Governmental Authority from engaging in or continuing any conduct or practice in
connection with the business, assets or properties of Global or such Subsidiary
nor, to the knowledge of Global, is Global, any Subsidiary or any officer,
director or employee of Global or its Subsidiaries under investigation by any
Governmental Authority. Except as disclosed in the Global SEC Reports or Section
4.10 of the Global Disclosure Schedule, there is not in existence any order,
judgment or decree of any court or other tribunal or other agency enjoining or
requiring Global or any of its Subsidiaries to take any action of any kind with
respect to its business, assets or properties. Notwithstanding the foregoing, no
representation or warranty in this Section 4.10 is made with respect to
Environmental Laws, which are covered exclusively by the provisions set forth in
Section 4.12.
Section 4.11 Employee Benefit Plans; ERISA.
(a) Section 4.11(a) of the Global Disclosure Schedule contains a true
and complete list of the employee benefit plans or arrangements of any type
(including but not limited to plans described in section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
sponsored, maintained or contributed to by Global or any trade or business,
whether or not incorporated, which together with Global would be deemed a
"single employer" within the meaning of Section 414(b), (c) or (m) of the
Code or section 4001(b)(1) of ERISA (an "Global ERISA Affiliate") within
six years prior to the Effective Time, which provide benefits to Global's
employees ("Global Benefit Plans").
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(b) With respect to each Global Benefit Plan: (i) if intended to
qualify under section 401(a) or 401(k) of the Code, such plan satisfies the
requirements of such sections, has received a favorable determination
letter from the Internal Revenue Service with respect to its qualification,
and its related trust has been determined to be exempt from tax under
section 501(a) of the Code and, to the knowledge of Global, nothing has
occurred since the date of such letter to adversely affect such
qualification or exemption; (ii) each such plan has been administered in
substantial compliance with its terms and applicable law; (iii) neither
Global nor any Global ERISA Affiliate has engaged in, and Global and each
Global ERISA Affiliate do not have any knowledge of any person that has
engaged in, any transaction or acted or failed to act in any manner that
would subject Global or any Global ERISA Affiliate to any liability for a
breach of fiduciary duty under ERISA that could reasonably be expected to
result in a Global Material Adverse Effect; (iv) no disputes are pending
or, to the knowledge of Global or any Global ERISA Affiliate, threatened;
(v) neither Global nor any Global ERISA Affiliate has engaged in, and
Global and each Global ERISA Affiliate do not have any knowledge of any
person that has engaged in, any transaction in violation of Section 406(a)
or (b) of ERISA for which no exemption exists under Section 4975(c)(1) of
the Code or Section 4975(d) of the Code that could reasonably be expected
to result in a Global Material Adverse Effect; (vi) there have been no
"reportable events" within the meaning of Section 4043 of ERISA for which
the 30 day notice requirement of ERISA has not been waived by the Pension
Benefit Guaranty Corporation (the "PBGC"); (vii) all contributions due have
been made on a timely basis (within, where applicable, the time limit
established under section 302 of ERISA or Code section 412); (viii) no
notice of intent to terminate such plan has been given under section 4041
of ERISA and no proceeding has been instituted under section 4042 of ERISA
to terminate such plan; and (ix) except for defined benefit plans, such
plan may be terminated on a prospective basis without any continuing
liability for benefits other than benefits accrued to the date of such
termination. All contributions made or required to be made under any Global
Benefit Plan meet the requirements for deductibility under the Code, and
all contributions which are required and which have not been made have been
properly recorded on the books of Global or a Global ERISA Affiliate.
(c) No Global Benefit Plan is a "multiemployer plan" (as defined in
section 4001(a)(3) of ERISA) or a "multiple employer plan" (within the
meaning of section 413(c) of the Code). No event has occurred with respect
to Global or a Global ERISA Affiliate in connection with which Global could
be subject to any liability, lien or encumbrance with respect to any Global
Benefit Plan or any employee benefit plan described in section 3(3) of
ERISA maintained, sponsored or contributed to by a Global ERISA Affiliate
under ERISA or the Code.
(d) Except as set forth in Section 4.11(d) of the Global Disclosure
Schedule, no employees of Global or any of its Subsidiaries are covered by
any severance plan or similar arrangement.
Section 4.12 Environmental Liability. Except as set forth in Section 4.12
of the Global Disclosure Schedule:
(a) The businesses of Global and its Subsidiaries have been and are
operated in material compliance with all federal, state and local
environmental protection, health and safety or similar laws, statutes,
ordinances, restrictions, licenses, rules, regulations, permit conditions
and legal requirements, including without limitation the Federal Clean
Water Act, Safe Drinking Water Act, Resource Conservation & Recovery Act,
Clean Air Act, Comprehensive Environmental Response, Compensation and
Liability Act, and Emergency Planning and Community Right to Know, each as
amended and currently in effect (together, "Environmental Laws").
(b) Neither Global nor any of its Subsidiaries has caused or allowed
the generation, treatment, manufacture, processing, distribution, use,
storage, discharge, release, disposal, transport or handling of any
chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum, petroleum products or any substance regulated under
any Environmental Law ("Hazardous Substances") at any of its properties or
facilities, except in material compliance with all Environmental Laws, and,
to Global's knowledge, no generation, manufacture, processing,
distribution, use, treatment, handling, storage, discharge, release,
disposal, transport or handling of any Hazardous Substances has
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occurred at any property or facility owned, leased or operated by Global or
any of its Subsidiaries except in material compliance with all
Environmental Laws.
(c) Neither Global nor any of its Subsidiaries has received any
written notice from any Governmental Authority or, to the knowledge of
Global, any other communication alleging or concerning any material
violation by Global or any of its Subsidiaries of, or responsibility or
liability of Global or any of its Subsidiaries under, any Environmental
Law. There are no pending, or to the knowledge of Global, threatened,
claims, suits, actions, proceedings or investigations with respect to the
businesses or operations of Global or any of its Subsidiaries alleging or
concerning any material violation of or responsibility or liability under
any Environmental Law that, if adversely determined, could reasonably be
expected to have a Global Material Adverse Effect, nor does Global have any
knowledge of any fact or condition that could give rise to such a claim,
suit, action, proceeding or investigation.
(d) Global and its Subsidiaries are in possession of all material
approvals, permits, licenses, registrations and similar type authorizations
from all Governmental Authorities under all Environmental Laws with respect
to the operation of the businesses of Global and its Subsidiaries; there
are no pending or, to the knowledge of Global, threatened, actions,
proceedings or investigations seeking to modify, revoke or deny renewal of
any of such approvals, permits, licenses, registrations and authorizations;
and Global does not have knowledge of any fact or condition that is
reasonably likely to give rise to any action, proceeding or investigation
to modify, revoke or deny renewal of any of such approvals, permits,
licenses, registrations and authorizations.
(e) Without in any way limiting the generality of the foregoing, (i)
all off-site locations where Global or any of its Subsidiaries has
transported, released, discharged, stored, disposed or arranged for the
disposal of pollutants, contaminants, hazardous wastes or toxic substances
required by law to be disposed at a licensed disposal site are identified
in Section 4.12 of the Global Disclosure Schedule, (ii) to Global's
knowledge, all underground storage tanks, and the operating status,
capacity and contents of such tanks, located on any property owned, leased
or operated by Global or any of its Subsidiaries are identified in Section
4.12 of the Global Disclosure Schedule, (iii) to the knowledge of Global,
there is no asbestos contained in or forming part of any building, building
component, structure or office space owned or leased by Global, and (iv) no
polychlorinated biphenyls ("PCBs") or PCB-containing items are used or
stored at any property owned, leased or operated by Global or any of its
Subsidiaries.
Section 4.13 Compliance with Applicable Laws. Global and each of its
Subsidiaries hold all material approvals, licenses, permits, registrations and
similar type authorizations necessary for the lawful conduct of its respective
businesses, as now conducted, and such businesses are not being, and neither
Global nor any of its Subsidiaries has received any notice from any Governmental
Authority or person that any such business has been or is being conducted in
violation of any law, ordinance or regulation, including without limitation any
law, ordinance or regulation relating to occupational health and safety, except
for possible violations which either individually or in the aggregate have not
resulted and would not result in a Global Material Adverse Effect; provided,
however, notwithstanding the foregoing, no representation or warranty in this
Section 4.13 is made with respect to Environmental Laws, which are covered
exclusively by the provisions set forth in Section 4.12.
Section 4.14 Insurance. Section 4.14 of the Global Disclosure Schedule
lists each of the insurance policies relating to Global or its Subsidiaries
which are currently in effect. Global has provided Seagull with a true, complete
and correct copy of each such policy or the binder therefor. With respect to
each such insurance policy or binder none of Global, any of its Subsidiaries or
any other party to the policy is in breach or default thereunder (including with
respect to the payment of premiums or the giving of notices), and Global does
not know of any occurrence or any event which (with notice or the lapse of time
or both) would constitute such a breach or default or permit termination,
modification or acceleration under the policy, except for such breaches or
defaults which, individually or in the aggregate, would not result in a Global
Material Adverse Effect. Section 4.14 of the Global Disclosure Schedule
describes any self-insurance arrangements affecting Global or its Subsidiaries.
The insurance policies listed in Section 4.14 of the Global Disclosure Schedule
include all policies which are required in connection with the operation of the
businesses of Global
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and its Subsidiaries as currently conducted by applicable laws and all
agreements relating to Global and its Subsidiaries.
Section 4.15 Labor Matters; Employees.
(a) Except as set forth in Section 4.15 of the Global Disclosure
Schedule, (i) there is no labor strike, dispute, slowdown, work stoppage or
lockout actually pending or, to the knowledge of Global, threatened against
or affecting Global or any of its Subsidiaries and, during the past five
years, there has not been any such action, (ii) none of Global or any of
its Subsidiaries is a party to or bound by any collective bargaining or
similar agreement with any labor organization, or work rules or practices
agreed to with any labor organization or employee association applicable to
employees of Global or any of its Subsidiaries, (iii) none of the employees
of Global or any of its Subsidiaries are represented by any labor
organization and none of Global or any of its Subsidiaries have any
knowledge of any current union organizing activities among the employees of
Global or any of its Subsidiaries nor does any question concerning
representation exist concerning such employees, (iv) Global and its
Subsidiaries have each at all times been in material compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work and occupational safety and
health, and are not engaged in any unfair labor practices as defined in the
National Labor Relations Act or other applicable law, ordinance or
regulation, (v) there is no unfair labor practice charge or complaint
against any of Global or any of its Subsidiaries pending or, to the
knowledge of Global, threatened before the National Labor Relations Board
or any similar state or foreign agency, (vi) there is no grievance or
arbitration proceeding arising out of any collective bargaining agreement
or other grievance procedure relating to Global or any of its Subsidiaries,
and (vii) neither the Occupational Safety and Health Administration nor any
corresponding state agency has threatened to file any citation, and there
are no pending citations, relating to Global or any of its Subsidiaries.
(b) Since the enactment of the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN Act"), none of Global or any of its
Subsidiaries has effectuated (i) a "plant closing" (as defined in the WARN
Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of any of Global
or any of its Subsidiaries, or (ii) a "mass layoff" (as defined in the WARN
Act) affecting any site of employment or facility of Global or any of its
Subsidiaries, nor has Global or any of its Subsidiaries been affected by
any transaction or engaged in layoffs or employment terminations sufficient
in number to trigger application of any similar state or local law, in each
case that could reasonably be expected to have a Global Material Adverse
Effect.
Section 4.16 Reserve Reports.
(a) All information supplied to Netherland, Sewell & Associates, Inc.
and Ryder Scott Company Petroleum Engineers by or on behalf of Global and
its Subsidiaries that was material to each such firm's estimates of proved
oil and gas reserves attributable to the Oil and Gas Interests (as
hereinafter defined) of Global and its Subsidiaries in connection with the
preparation of the proved oil and gas reserve reports concerning the Oil
and Gas Interests of Global and its Subsidiaries as of December 31, 1995
and prepared by Netherland, Sewell & Associates, Inc. and Ryder Scott
Company Petroleum Engineers, respectively (such reserve reports, together
with the reserve report concerning the Indonesian properties of Global and
its Subsidiaries as of December 31, 1995, the "Global Reserve Report") was
(at the time supplied or as modified or amended prior to the issuance of
the Global Reserve Report) true and correct in all material respects and
Global has no knowledge of any material errors in such information that
existed at the time of such issuance. For purposes of this Agreement "Oil
and Gas Interests" means direct and indirect interests in and rights with
respect to oil, gas, mineral, and related properties and assets of any kind
and nature, direct or indirect, including working, leasehold and mineral
interests and operating rights and royalties, overriding royalties,
production payments, net profit interests and other nonworking interests
and nonoperating interests; all interests in rights with respect to oil,
condensate, gas, casinghead gas and other liquid or gaseous hydrocarbons
(collectively, "Hydrocarbons") and other minerals or revenues therefrom,
all contracts in connection therewith and claims and rights thereto
(including all oil and gas leases, operating agreements, unitization and
pooling agreements and orders,
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division orders, transfer orders, mineral deeds, royalty deeds, oil and gas
sales, exchange and processing contracts and agreements, and in each case,
interests thereunder), surface interests, fee interests, reversionary
interests, reservations, and concessions; all easements, rights of way,
licenses, permits, leases, and other interests associated with, appurtenant
to, or necessary for the operation of any of the foregoing; and all
interests in equipment and machinery (including wells, well equipment and
machinery), oil and gas production, gathering, transmission, treating,
processing, and storage facilities (including tanks, tank batteries,
pipelines, and gathering systems), pumps, water plants, electric plants,
gasoline and gas processing plants, refineries, and other tangible personal
property and fixtures associated with, appurtenant to, or necessary for the
operation of any of the foregoing. Except for changes (including changes in
commodity prices) generally affecting the oil and gas industry, there has
been no change in respect of the matters addressed in the Global Reserve
Report that would have a Global Material Adverse Effect.
(b) Set forth in Section 4.16(b) of the Global Disclosure Schedule is
a list of all material Oil and Gas Interests that were included in the
Global Reserve Report that have been disposed of prior to the date of this
Agreement.
Section 4.17 Oil and Gas Reserves; Equipment. Except as otherwise set
forth in Section 4.17 of the Global Disclosure Schedule:
(a) None of the wells included in the Oil and Gas Interests of Global
and its Subsidiaries has been overproduced, except where such
overproduction individually, or in the aggregate with all other such
overproduction, would not have a Global Material Adverse Effect;
(b) There have been no material changes proposed in the production
allowables for any wells included in the Oil and Gas Interests of Global
and its Subsidiaries;
(c) All wells included in the Oil and Gas Interests of Global and its
Subsidiaries have been drilled and (if completed) completed, operated, and
produced in accordance with good oil and gas field practices and in
compliance in all respects with applicable oil and gas leases and
applicable laws, rules, and regulations, except where any failure or
violation would not have a Global Material Adverse Effect;
(d) Except as set forth in Section 4.17(d) of the Global Disclosure
Schedule, there are no wells included in the Oil and Gas Interests of
Global and its Subsidiaries that:
(i) Global or any of its Subsidiaries is currently obligated by law
or contract to plug and abandon or will be obligated by law or contract
to plug and abandon with the lapse of time or notice or both because the
well is not currently capable of producing in commercial quantities,
except for such wells that will not individually, or in the aggregate
with all other such wells, result in Global and its Subsidiaries
incurring plugging and abandonment costs (net of salvage value) in an
amount in excess of $500,000;
(ii) are subject to exceptions to a requirement to plug and abandon
issued by a Governmental Authority having jurisdiction over the wells;
or
(iii) have been plugged and abandoned but have not been plugged or
reclaimed in accordance with all applicable requirements of each
Governmental Authority having jurisdiction over such wells;
(e) Proceeds from the sale of Hydrocarbons produced from the Oil and
Gas Interests of Global and its Subsidiaries are being received by Global
and its Subsidiaries in a timely manner and are not being held by third
parties in suspense for any reason (except for amounts, individually or in
the aggregate, not in excess of $500,000 and held in suspense in the
ordinary course of business);
(f) No person has any call on, option to purchase, or similar rights
with respect to the production of Hydrocarbons attributable to the Oil and
Gas Interests of Global and its Subsidiaries, except where any call, option
or similar right would not have a Global Material Adverse Effect and except
for any such call, option or similar right at market prices, and upon
consummation of the transactions contemplated by this Agreement, Global or
its Subsidiaries will have the right to market production from the Oil and
Gas
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Interests of Global and its Subsidiaries on terms no less favorable than
the terms upon which such production is currently being marketed;
(g) Except for gas imbalances between Global or any of its
Subsidiaries and any third party working interest owners or pipelines
relative to the Oil and Gas Interests of Global or any of its Subsidiaries,
which are described in Section 4.17(g) of the Global Disclosure Schedule,
neither Global nor any of its Subsidiaries is obligated by any gas
prepayment arrangement or by any "take-or-pay" requirement to deliver any
gas at a future time without then or thereafter receiving payment therefor;
and
(h) To the knowledge of Global, all equipment and machinery currently
in use and material to the operation of the Oil and Gas Interests of Global
or any of its Subsidiaries as conducted prior to the date hereof are in
reasonable working condition, ordinary wear and tear excepted.
Section 4.18 Title to Oil and Gas Interests.
(a) Except as set forth in Section 4.18 of the Global Disclosure
Schedule, Global or its Subsidiaries has defensible title to all of the Oil
and Gas Interests classified as proved developed producing, proved
developed nonproducing and proved undeveloped in the Global Reserve Report
(each, a "Global Classified Property") except to the extent that such
interests have thereafter been disposed of in the ordinary course of
business consistent with past practice. For the purposes of this Agreement,
"defensible title" means, with respect to any Global Classified Property,
such record and beneficial title that (x) entitles the party named to
receive, from its ownership of such interest, a percentage of all
Hydrocarbons produced, saved, and marketed from each well or property
included in the Oil and Gas Interests of Global and its Subsidiaries, not
less than the net revenue interest set forth in the Global Reserve Report
for such well or property, without reduction, suspension, or termination
for the productive life of such well or property, except as a result of
elections not to participate in an operation under an applicable operating,
unit or other agreement, or readjustments of interest provided for under
the terms of the applicable operating, unit or other agreement, in each
case, after the date hereof; (y) obligates the party named to bear a
percentage of the costs and expenses relating to operations on, and the
maintenance and production of, such well or property, not greater than the
working or operating interest set forth in the Global Reserve Report
without increase for the productive life of such well or property, except
as a result of an election of other parties not to participate in an
operation under an applicable operating, unit or other agreement,
contribution requirements with respect to defaulting co-owners, or
readjustments of interest provided for under the terms of the applicable
operating or unit agreement, in each case, after the date hereof; and (z)
is free and clear of any liens, mortgages, pledges, security interests,
encumbrances, claims or charges of any kind (collectively, "Liens") except
the Global Permitted Encumbrances. For the purposes of this Agreement,
"Global Permitted Encumbrances" means (i) royalties, overriding royalties,
reversionary interests and similar burdens if the cumulative effect of such
burdens does not and will not reduce the net revenue interest with respect
to a well or property below the net revenue interest shown therefor in the
Global Reserve Report or increase the working interest with respect to such
well or property above the working interest shown therefor in the Global
Reserve Report; (ii) the terms and conditions of all leases, servitudes,
production sales contracts, division orders, contracts for sale, purchase,
exchange, refining or processing of Hydrocarbons, unitization and pooling
designations, declarations, orders and agreements, operating agreements,
agreements of development, area of mutual interest agreements, farmout
agreements, gas balancing or deferred production agreements, processing
agreements, plant agreements, pipeline, gathering and transportation
agreements, injection, repressuring and recycling agreements, salt water or
other disposal agreements, seismic or geophysical permits or agreements,
and other agreements including, without limitation, the terms and
conditions of any and all contracts and agreements set forth in the Global
Reserve Report covering production sales contracts and all other contracts
and agreements disclosed in such Disclosure Schedule, to the extent that
such contracts and agreements do not and will not reduce the net revenue
interest of any well or property included in the Oil and Gas Interests of
Global or any of its Subsidiaries below the net revenue interest shown
therefor in the Global Reserve Report or increase the working interest with
respect to such well or property above the working interest shown therefor
in the Global
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Reserve Report without a proportionate increase in the net revenue interest
with respect to such well or property; (iii) easements, rights of way,
servitudes, permits, surface leases and other rights with respect to
surface obligations, pipelines, grazing, canals, ditches, reservoirs, or
the like, conditions, covenants or other restrictions, and easements of
streets, alleys, highways, pipelines, telephone lines, power lines,
railways and other easements and rights of way on, over or in respect of
any of the Oil and Gas Interests of Global and its Subsidiaries, so long as
they are not such that would have a Global Material Adverse Effect; (iv)
any preferential purchase rights, required third party consents to
assignment and similar agreements and obligations applicable to the
transactions contemplated hereby with respect to which prior to the
Effective Time (A) waivers or consents have been obtained from the
appropriate person, or (B) the applicable period of time for asserting such
rights has expired without any exercise of such rights; (v) liens for Taxes
or assessments not yet delinquent; (vi) materialmen's mechanic's,
repairman's, employee's, contractor's, operator's, and other similar liens
or charges arising in the ordinary course of business (A) if they have not
been filed pursuant to law, (B) if filed, they have not yet become due and
payable or payment is being withheld as provided by law or (C) if their
validity is being contested in good faith in the ordinary course of
business by appropriate action; (vii) approvals that are ministerial in
nature and are customarily obtained from Governmental Authorities after the
Effective Time in connection with transactions of the same nature as are
contemplated hereby ("Customary Post-Closing Consents"); (viii)
conventional rights of reassignment arising in respect of abandonment,
cessation of production or expiration of leases; (ix) all rights reserved
to or vested in any Governmental Authority to control or regulate any of
the Global Oil and Gas Interests in any manner, and all applicable laws,
rules and orders of Governmental Authorities; and (x) any other liens,
charges, encumbrances, contracts, agreements, instruments, obligations,
defects or irregularities of any kind whatsoever that would not have a
Global Material Adverse Effect. Notwithstanding the foregoing, title to the
Global Classified Properties is of a type and nature customarily acceptable
to the reasonably prudent oil and gas operator of oil and gas interests.
(b) Except as set forth in Section 4.18(b) of the Global Disclosure
Schedule, (i) each oil and gas lease included in the Oil and Gas Interests
of Global and its Subsidiaries is valid, binding and enforceable in
accordance with its terms, except for the Enforceability Exception, and
(ii) neither Global nor the Global Subsidiary that is party to each such
lease, nor, to the knowledge of Global, any other party to any such lease,
is in breach or default thereunder in any material respect, no notice of
default or termination thereunder has been given or received by Global or
any of its Subsidiaries, and no event has occurred which would, with the
giving of notice or passage of time or both, constitute a breach or default
thereunder or permit termination, modification or acceleration thereunder
that could reasonably be expected to result in a Global Material Adverse
Effect.
Section 4.19 Title to Other Properties. Except as set forth in Section
4.19 of the Global Disclosure Schedule, Global or its Subsidiaries owns, of
record (to the extent applicable) and beneficially, all material personal
property and all real property (other than real property included in the Oil and
Gas Interests of Global and its Subsidiaries), in each case, as reflected on the
consolidated financial statements of Global included in the Global SEC Documents
as being owned by it or any of its Subsidiaries and all such property thereafter
acquired by it or any of its Subsidiaries (except to the extent that such
properties have thereafter been disposed of in the ordinary course of business
consistent with past practice or after the date hereof in compliance with
Section 6.1(d)), free and clear of any Liens except Global Permitted
Encumbrances.
Section 4.20 Permits. Global holds all of the permits, licenses,
certificates, consents, approvals, entitlements, plans, surveys, relocation
plans, environmental impact reports and other authorizations of Governmental
Authorities ("Permits") required or necessary to construct, own, operate, use
and/or maintain its properties and conduct its operations as presently
conducted, except for such Permits, the lack of which, individually or in the
aggregate, would not have a Global Material Adverse Effect; provided, however,
that notwithstanding the foregoing, no representation or warranty in this
Section 4.20 is made with respect to Permits issued pursuant to Environmental
Laws, which are covered exclusively by the provisions set forth in Section 4.12.
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Section 4.21 Material Contracts.
(a) Set forth in Section 4.21(a) of the Global Disclosure Schedule is
a list of each contract, lease, indenture, agreement, arrangement or
understanding to which Global or any of its Subsidiaries is a party or to
which any of the assets or operations of the Global or any of its
Subsidiaries is subject that is of a type that would be required to be
included as an exhibit to a Form S-1 Registration Statement pursuant to the
rules and regulations of the SEC if such a registration statement was filed
by Global (collectively, the "Global Material Contracts").
(b) Except as set forth in Section 4.21(a) or 4.21(b) of the Global
Disclosure Schedule, the Global Oil and Gas Interests are not subject to
(i) any instrument or agreement evidencing or related to indebtedness for
borrowed money, whether directly or indirectly, or (ii) any agreement not
entered into in the ordinary course of business in which the amount
involved is in excess of $250,000. With respect to the Global Oil and Gas
Interests, (A) all Global Material Contracts are in full force and effect
and are the valid and legally binding obligations of the parties thereto
and are enforceable in accordance with their respective terms; (B) no party
to any Global Material Contract is in material breach or default with
respect to its obligations thereunder, including with respect to payments
or otherwise; (C) no party to any Global Material Contract has given notice
of any action to terminate, cancel, rescind or procure a judicial
reformation thereof; and (D) no Global Material Contract contains any
provision that prevents Global or any of its Subsidiaries from owning,
managing and operating the Global Oil and Gas Interests in accordance with
historical practices.
(c) As of the date of this Agreement, except as set forth in Section
4.21(c) of the Global Disclosure Schedule, with respect to authorizations
for expenditure executed on or after January 1, 1996, (i) there are no
material outstanding calls for payments that are due or that Global or its
Subsidiaries are committed to make that have not been made; (ii) there are
no material operations with respect to which Global or its Subsidiaries
have become a non-consenting party; and (iii) there are no commitments for
the material expenditure of funds for drilling or other capital projects
other than projects with respect to which the operator is not required
under the applicable operating agreement to seek consent.
(d) Except as set forth in Section 4.21(d) of the Global Disclosure
Schedule, (i) there are no express contractual obligations to engage in
continuous development operations in order to maintain any producing Global
Oil and Gas Interest in force and effect; (ii) there are no provisions
applicable to the Global Oil and Gas Interests which increase the royalty
percentage of the lessor thereunder; and (iii) none of the Global Oil and
Gas Interests are limited by terms fixed by a certain number of years
(other than primary terms under oil and gas leases).
Section 4.22 Required Stockholder Vote or Consent. The only vote of the
holders of any class or series of Global's capital stock that will be necessary
to consummate the Merger and the other transactions contemplated by this
Agreement is the approval of the Merger by the holders of a majority of the
outstanding shares of Global Common Stock (the "Global Shareholders' Approval").
Section 4.23 Proxy Statement/Prospectus; Registration Statement. None of
the information to be supplied by Global for inclusion in (a) the joint proxy
statement relating to the Global Special Meeting and the Seagull Special Meeting
(in each case, as defined below) (also constituting the prospectus in respect of
Seagull Common Stock into which shares of Global Common Stock will be converted)
(the "Proxy Statement/Prospectus"), to be filed by Global and Seagull with the
SEC, and any amendments or supplements thereto, or (b) the Registration
Statement on Form S-4 (the "Registration Statement") to be filed by Seagull with
the SEC in connection with the Merger, and any amendments or supplements
thereto, will, at the respective times such documents are filed, and, in the
case of the Proxy Statement/Prospectus, at the time the Proxy
Statement/Prospectus or any amendment or supplement thereto is first mailed to
stockholders of Global, at the time such stockholders vote on approval and
adoption of this Agreement and at the Effective Time, and, in the case of the
Registration Statement, when it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be
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made therein or necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
Section 4.24 Intellectual Property. Global and its Subsidiaries own, or
are licensed or otherwise have the right to use, all patents, patent rights,
trademarks, rights, trade names, trade name rights, service marks, service mark
rights, copyrights, technology, know-how, processes and other proprietary
intellectual property rights and computer programs ("Intellectual Property")
currently used in the conduct of the business and operations of Global and its
Subsidiaries, except where the failure to so own or otherwise have the right to
use such intellectual property would not, individually or in the aggregate, have
a Global Material Adverse Effect. No person has notified either Global or any of
its Subsidiaries that their use of the Intellectual Property infringes on the
rights of any person, subject to such claims and infringements as do not,
individually or in the aggregate, give rise to any liability on the part of
Global and its Subsidiaries that could have a Global Material Adverse Effect,
and, to Global's knowledge, no person is infringing on any right of Global or
any of its Subsidiaries with respect to any such Intellectual Property. No
claims are pending or, to Global's knowledge, threatened that Global or any of
its Subsidiaries is infringing or otherwise adversely affecting the rights of
any person with regard to any Intellectual Property.
Section 4.25 Hedging. Section 4.25 of the Global Disclosure Schedule sets
forth for the periods shown obligations of Global and each of its Subsidiaries
for the delivery of Hydrocarbons attributable to any of the properties of Global
or any of its Subsidiaries in the future on account of prepayment, advance
payment, take-or-pay or similar obligations without then or thereafter being
entitled to receive full value therefor. Except as set forth in Section 4.25 of
the Global Disclosure Schedule, as of the date of this Agreement, neither Global
nor any of its Subsidiaries is bound by futures, hedge, swap, collar, put, call,
floor, cap, option or other contracts that are intended to benefit from or
reduce or eliminate the risk of fluctuations in the price of commodities,
including Hydrocarbons, or securities.
Section 4.26 Brokers. No broker, finder or investment banker (other than
Petrie Parkman & Co., Inc. the fees and expenses of which will be paid by
Global) is entitled to any brokerage, finder's fee or other fee or commission
payable by Global or any of its Subsidiaries in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
Global or any of its Subsidiaries. True and correct copies of all agreements and
engagement letters currently in effect with Petrie Parkman & Co., Inc. (the
"Global Engagement Letters") have been provided to Seagull.
Section 4.27 Tax-Free Reorganization and Pooling. Neither Global nor, to
the knowledge of Global, any of its affiliates has taken or agreed to take any
action that would prevent the Merger from (a) being treated for financial
accounting purposes as a Pooling Transaction or (b) constituting a
reorganization within the meaning of section 368(a) of the Code. Specifically:
(a) To the knowledge of Global, there is no plan or intention by any
shareholder of Global who owns five percent or more of the Global Common
Stock, and to the best of the knowledge of the management of Global there
is no plan or intention on the part of any of the remaining shareholders of
Global, to sell, exchange or otherwise dispose of a number of shares of
Seagull Common Stock to be received in the Merger that would reduce the
Global shareholders' ownership of Seagull Common Stock to a number of
shares having a value, as of the Effective Time, of less than 50 percent of
the value of all of the Global Common Stock (including shares of Global
Common Stock exchanged for cash in lieu of fractional shares of Seagull
Common Stock) outstanding immediately prior to the Effective Time.
(b) Global and the shareholders of Global will each pay their
respective expenses, if any, incurred in connection with the Merger.
(c) There is no intercorporate indebtedness existing between Global
and Seagull or between Global and Merger Sub that was issued, acquired, or
will be settled at a discount.
(d) Global is not an investment company as defined in section
368(a)(2)(F)(iii) and (iv) of the Code.
(e) Global is not under the jurisdiction of a court in a title 11 or
similar case within the meaning of section 368(a)(1)(A) of the Code.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF SEAGULL AND MERGER SUB
Seagull and Merger Sub jointly and severally represent and warrant to
Global as follows:
Section 5.1 Organization and Qualification.
(a) Seagull is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas, is duly qualified to do
business as a foreign corporation and is in good standing in the
jurisdictions set forth in Section 5.1(a) of the disclosure letter
delivered to Global contemporaneously with the execution hereof (the
"Seagull Disclosure Schedule"), which include each jurisdiction in which
the character of Seagull's properties or the nature of its business makes
such qualification necessary, except in jurisdictions, if any, where the
failure to be so qualified would not result in a Seagull Material Adverse
Effect (as defined below). Seagull has all requisite corporate or other
power and authority to own, use or lease its properties and to carry on its
business as it is now being conducted. Seagull has made available to Global
a complete and correct copy of its articles of incorporation and bylaws,
each as amended to date, and Seagull's articles of incorporation and bylaws
as so delivered are in full force and effect. Seagull is not in default in
any respect in the performance, observation or fulfillment of any provision
of its articles of incorporation or bylaws.
(b) Section 5.1(b) of the Seagull Disclosure Schedule lists the name
and jurisdiction of organization of each Subsidiary of Seagull and the
jurisdictions in which each such Subsidiary is qualified or holds licenses
to do business as a foreign corporation or other organization as of the
date hereof. Each of Seagull's Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, is duly qualified to do business as a
foreign corporation and is in good standing in the jurisdictions set forth
in Section 5.1(b) of the Seagull Disclosure Schedule, which includes each
jurisdiction in which the character of such Subsidiary's properties or the
nature of its business makes such qualification necessary, except in
jurisdictions, if any, where the failure to be so qualified would not
result in a Seagull Material Adverse Effect. Each of Seagull's Subsidiaries
has all requisite corporate or other power and authority to own, use or
lease its properties and to carry on its business as it is now being
conducted and as it is now proposed to be conducted. Seagull has made
available to Global a complete and correct copy of the certificate of
incorporation and bylaws (or similar organizational documents) of each of
Seagull's Subsidiaries, each as amended to date, and the certificate of
incorporation and bylaws (or similar charter documents) as so delivered are
in full force and effect. No Subsidiary of Seagull is in default in any
respect in the performance, observation or fulfillment of any provision of
its certificate of incorporation or bylaws (or similar organizational
documents). Other than Seagull's Subsidiaries, Seagull does not
beneficially own or control, directly or indirectly, 5% or more of any
class of equity or similar securities of any corporation or other
organization, whether incorporated or unincorporated.
(c) Merger Sub has no Subsidiaries.
(d) For purposes of this Agreement, a "Seagull Material Adverse
Effect" shall mean any event, circumstance, condition, development or
occurrence causing, resulting in or having (or with the passage of time
likely to cause, result in or have) a material adverse effect on the
financial condition, business, assets, properties, prospects or results of
operations of Seagull and its Subsidiaries, taken as a whole; provided,
that such term shall not include effects that are not applicable primarily
to Seagull resulting from market conditions generally in the oil and gas
industry.
Section 5.2 Capitalization.
(a) The authorized capital stock of Seagull consists of 100,000,000
shares of Seagull Common Stock, and 5,000,000 shares of preferred stock of
Seagull, par value $1.00 per share, of which 500,000 shares have been
designated as Series B Junior Participating Preferred Stock. As of the date
of this Agreement, Seagull has 36,462,866 shares of Seagull Common Stock
issued and outstanding, and no
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shares of preferred stock outstanding. All such shares have been validly
issued, fully paid and nonassessable, and free of preemptive rights. Other
than this Agreement and other than the Preferred Stock Purchase Rights set
forth in the Rights Agreement dated March 21, 1989, by and between Seagull
and NCNB Texas National Bank, as Rights Agent (as amended, the "Seagull
Rights Plan"), there are no outstanding subscriptions, options, rights,
warrants, convertible securities, stock appreciation rights, phantom
equity, or other agreements or commitments obligating Seagull to issue,
transfer, sell, redeem, repurchase or otherwise acquire any shares of its
capital stock of any class. Except for any amendments filed with the
Seagull SEC Reports (as defined below), the Seagull Rights Plan has not
been amended, and no amendment thereof is proposed. No "Distribution Date"
has occurred within the meaning of the Seagull Rights Plan, and the
consummation of the transactions contemplated hereby will not result in the
occurrence of a Distribution Date.
(b) Except as set forth in Section 5.1(b) of the Seagull Disclosure
Schedule, Seagull is, directly or indirectly, the record and beneficial
owner of all of the outstanding shares of capital stock of each Seagull
Subsidiary, there are no irrevocable proxies with respect to any such
shares, and no equity securities of any Seagull Subsidiary are or may
become required to be issued by reason of any options, warrants, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into or exchangeable or exercisable
for, shares of any capital stock of any Seagull Subsidiary, and there are
no contracts, commitments, understandings or arrangements by which Seagull
or any Seagull Subsidiary is or may be bound to issue additional shares of
capital stock of any Seagull Subsidiary or securities convertible into or
exchangeable or exercisable for any such shares. All of such shares so
owned by Seagull are validly issued, fully paid and nonassessable and are
owned by it free and clear of all Liens.
Section 5.3 Authority. Each of Seagull and Merger Sub has full corporate
power and authority to execute and deliver this Agreement and the Ancillary
Agreements to which it is or will be a party and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the Ancillary Agreements to which it is or will be a party and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by the Board of Directors of each of Seagull and Merger
Sub, and no other corporate proceedings on the part of Seagull or Merger Sub are
necessary to authorize this Agreement or the Ancillary Agreements to which any
of them are or will be a party or to consummate the transactions contemplated
hereby or thereby, other than the approval of this Agreement and the Merger by
Seagull's stockholders as contemplated by Section 7.13 hereof. This Agreement
has been, and the Ancillary Agreements to which Seagull or Merger Sub are or
will be a party are, or upon execution will be, duly and validly executed and
delivered by each of Seagull and Merger Sub and, assuming the due authorization,
execution and delivery hereof and thereof by the other parties hereto and
thereto, constitutes or upon execution will constitute, valid and binding
obligations of each of Seagull and Merger Sub enforceable against each of
Seagull and Merger Sub in accordance with their respective terms, except for the
Enforceability Exception.
Section 5.4 Consents and Approvals; No Violation. The execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby and the performance by each of Seagull and Merger Sub of its obligations
hereunder will not:
(a) subject to the obtaining of any requisite approvals of Seagull's
stockholders as contemplated by Section 7.13 hereof, conflict with any
provision of the articles of incorporation or bylaws of either Seagull or
Merger Sub;
(b) subject to obtaining of any requisite approvals of Seagull's
shareholders as contemplated by Section 7.13 hereof, require any consent,
waiver, approval, order, authorization or permit of, or registration,
filing with or notification to, (i) any Governmental Authority, except for
applicable requirements of the HSR Act, the Securities Act, the Exchange
Act, state laws relating to takeovers, if applicable, state securities or
blue sky laws and Customary Post-Closing Consents or (ii) except as set
forth in Section 5.4(b) of the Seagull Disclosure Schedule, any third party
other than a Governmental Authority, other than such non-Governmental
Authority third party consents, waivers, approvals, orders,
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authorizations and permits that would not (i) result in a Seagull Material
Adverse Effect, (ii) materially impair the ability of Seagull or Merger Sub
or any other Subsidiaries to perform its obligations under this Agreement
or any Ancillary Agreement or (iii) prevent the consummation of any of the
transactions contemplated by this Agreement;
(c) except as set forth in Section 5.4(c) of the Seagull Disclosure
Schedule, result in any violation of or the breach of or constitute a
default (with notice or lapse of time or both) under, or give rise to any
right of termination, cancellation or acceleration or guaranteed payments
or a loss of a material benefit under, any of the terms, conditions or
provisions of any note, lease, mortgage, license, agreement or other
instrument or obligation to which Seagull or any of its Subsidiaries is a
party or by which Seagull or any of its Subsidiaries or any of their
respective properties or assets may be bound, except for such violations,
breaches, defaults, or rights of termination, cancellation or acceleration,
or losses as to which requisite waivers or consents have been obtained or
which, individually or in the aggregate, would not (i) result in a Seagull
Material Adverse Effect, (ii) materially impair the ability of Seagull or
Merger Sub or any other Subsidiaries to perform its obligations under this
Agreement or any Ancillary Agreement or (iii) prevent the consummation of
any of the transactions contemplated by this Agreement;
(d) violate the provisions of any order, writ, injunction, judgment,
decree, statute, rule or regulation applicable to Seagull or any Subsidiary
of Seagull.
(e) result in the creation of any Lien upon any material assets or on
any shares of capital stock, properties or assets of Seagull or its
Subsidiaries under any agreement or instrument to which Seagull or any of
its Subsidiaries is a party or by which Seagull or any of its Subsidiaries
or any of their properties or assets is bound.
Section 5.5 Seagull Financial Statements. Each of the audited consolidated
financial statements and unaudited consolidated interim financial statements of
Seagull (including any related notes and schedules) included (or incorporated by
reference) in its Annual Reports on Form 10-K for each of the three fiscal years
ended December 31, 1993, 1994 and 1995 and its Quarterly Report on Form 10-Q for
its fiscal quarter ended March 31, 1996 (collectively, the "Financial
Statements") have been prepared from, and are in accordance with, the books and
records of Seagull and its consolidated Subsidiaries, comply in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis (except as may be indicated
in the notes thereto and subject, in the case of quarterly financial statements,
to normal and recurring year-end adjustments) and fairly present, in conformity
with GAAP applied on a consistent basis (except as may be indicated in the notes
thereto), the consolidated financial position of Seagull and its Subsidiaries as
of the date thereof and the consolidated results of operations and cash flows
(and changes in financial position, if any) of Seagull and its Subsidiaries for
the periods presented therein (subject to normal year-end adjustments and the
absence of financial footnotes in the case of any unaudited interim financial
statements).
Section 5.6 Absence of Undisclosed Liabilities. Except (a) as specifically
disclosed in the Seagull SEC Reports and (b) for liabilities and obligations
incurred in the ordinary course of business and consistent with past practice
since December 31, 1995, neither Seagull nor any of its Subsidiaries has
incurred any liabilities or obligations of any nature (contingent or otherwise)
that would have a Seagull Material Adverse Effect or would be required by GAAP
to be reflected on a consolidated balance sheet of Seagull and its Subsidiaries
or the notes thereto which is not so reflected.
Section 5.7 Absence of Certain Changes. Except as contemplated by this
Agreement, as set forth in Section 5.7 of the Seagull Disclosure Schedule or
disclosed in the Seagull Balance Sheet, since December 31, 1995 (a) Seagull and
its Subsidiaries have conducted their business in all material respects in the
ordinary course consistent with past practices, (b) there has not been any
change or development, or combination of changes or developments that,
individually or in the aggregate, would have a Seagull Material Adverse Effect,
(c) there has not been any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of Seagull or
Merger Sub or any repurchase, redemption or other
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acquisition by Seagull or any of its Subsidiaries of any outstanding shares of
capital stock or other securities of, or other ownership interests in, Seagull
or Merger Sub, (d) there has not been any amendment of any term of any
outstanding security of Seagull or Merger Sub, and (e) there has not been any
change in any method of accounting or accounting practice by Seagull or Merger
Sub, except for any such change required by reason of a concurrent change in
GAAP or to conform a such accounting policies and practices to those of Seagull.
Section 5.8 Seagull SEC Reports. Seagull has filed with the SEC, and has
heretofore made available to Global true and complete copies of, each form,
registration statement, report, schedule, proxy or information statement and
other document (including exhibits and amendments thereto), including without
limitation its Annual Reports to Shareholders incorporated by reference in
certain of such reports, required to be filed with the SEC since December 31,
1992 under the Securities Act or the Exchange Act (collectively, the "Seagull
SEC Reports"). As of the respective dates such Seagull SEC Reports were filed
or, if any such Seagull SEC Reports were amended, as of the date such amendment
was filed, each of the Seagull SEC Reports, including without limitation any
financial statements or schedules included therein, (a) complied in all material
respects with all applicable requirements of the Securities Act and the Exchange
Act, as the case may be, and the applicable rules and regulations promulgated
thereunder, and (b) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
Section 5.9 Taxes. Except as otherwise disclosed in Section 5.9 of the
Seagull Disclosure Schedule and for matters that would have no adverse effect on
Seagull or Merger Sub:
(a) Seagull and each of its Subsidiaries have timely filed (or have
had timely filed on their behalf) or will file or cause to be timely filed,
all material Tax Returns required by applicable law to be filed by any of
them prior to or as of the Closing Date. All such Tax Returns and
amendments thereto are or will be true, complete and correct in all
material respects.
(b) Seagull and each of its Subsidiaries have paid (or have had paid
on their behalf), or where payment is not yet due, have established (or
have had established on their behalf and for their sole benefit and
recourse), or will establish or cause to be established on or before the
Closing Date, an adequate accrual for the payment of all material Taxes due
with respect to any period ending prior to or as of the Closing Date.
(c) No Audit by a Tax Authority is pending or threatened with respect
to any Tax Returns filed by, or Taxes due from, Seagull or any Subsidiary.
No issue has been raised by any Tax Authority in any Audit of Seagull or
any of its Subsidiaries that if raised with respect to any other period not
so audited could be expected to result in a material proposed deficiency
for any period not so audited. No material deficiency or adjustment for any
Taxes has been threatened, proposed, asserted or assessed against Seagull
or any of its Subsidiaries. There are no liens for Taxes upon the assets of
Seagull or any of its Subsidiaries, except liens for current Taxes not yet
delinquent.
(d) Neither Seagull nor any of its Subsidiaries has given or been
requested to give any waiver of statutes of limitations relating to the
payment of Taxes or have executed powers of attorney with respect to Tax
matters, which will be outstanding as of the Closing Date.
(e) Prior to the date hereof, Seagull and its Subsidiaries have
disclosed, and provided or made available true and complete copies to
Global of, all material Tax sharing, Tax indemnity, or similar agreements
to which Seagull or any of its Subsidiaries is a party to, is bound by, or
has any obligation or liability for Taxes.
Section 5.10 Litigation. Except as disclosed in the Seagull SEC Reports or
Section 5.10 of the Seagull Disclosure Schedule and for matters that would not
have a Seagull Material Adverse Effect, there is no suit, claim, action,
proceeding or investigation pending or, to Seagull's knowledge, threatened
against or directly affecting Seagull, any Subsidiaries of Seagull or any of the
directors or officers of Seagull or any of its Subsidiaries in their capacity as
such, nor is there any reasonable basis therefor that could reasonably be
expected to have a Seagull Material Adverse Effect, if adversely determined.
Neither Seagull nor any of its
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Subsidiaries, nor any officer, director or employee of Seagull or any of its
Subsidiaries, has been permanently or temporarily enjoined by any order,
judgment or decree of any court or any other Governmental Authority from
engaging in or continuing any conduct or practice in connection with the
business, assets or properties of Seagull or such Subsidiary, nor, to the
knowledge of Seagull, is Seagull, any Subsidiary or any officer, director or
employee of Seagull or its Subsidiaries under investigation by any Governmental
Authority. Except as disclosed in the Seagull SEC Reports or Section 5.10 of the
Seagull Disclosure Schedule, there is not in existence any order, judgment or
decree of any court or other tribunal or other agency enjoining or requiring
Seagull or any of its Subsidiaries to take any action of any kind with respect
to its business, assets or properties. Notwithstanding the foregoing, no
representation or warranty in this Section 5.10 is made with respect to
Environmental Laws, which are covered exclusively by the provisions set forth in
Section 5.12.
Section 5.11 Employee Benefit Plans; ERISA.
(a) Section 5.11(a) of the Seagull Disclosure Schedule contains a true
and complete list of the employee benefit plans or arrangements of any type
(including but not limited to plans described in section 3(3) of ERISA),
sponsored, maintained or contributed to by Seagull or any trade or
business, whether or not incorporated, which together with Seagull would be
deemed a "single employer" within the meaning of Section 414(b), (c) or (m)
of the Code or section 4001(b)(1) of ERISA (a "Seagull ERISA Affiliate")
within six years prior to the Effective Time, which provide benefits to
Seagull's employees ("Seagull Benefit Plans").
(b) With respect to each Seagull Benefit Plan: (i) if intended to
qualify under section 401(a) or 401(k) of the Code, such plan satisfies the
requirements of such sections, has received a favorable determination
letter from the Internal Revenue Service with respect to its qualification,
and its related trust has been determined to be exempt from tax under
section 501(a) of the Code and, to the knowledge of Seagull, nothing has
occurred since the date of such letter to adversely affect such
qualification or exemption; (ii) each such plan has been administered in
substantial compliance with its terms and applicable law; (iii) neither
Seagull nor any Seagull ERISA Affiliate has engaged in, and Seagull and
each Seagull ERISA Affiliate do not have any knowledge of any person that
has engaged in, any transaction or acted or failed to act in any manner
that would subject Seagull or any Seagull ERISA Affiliate to any liability
for a breach of fiduciary duty under ERISA that could reasonably be
expected to result in a Seagull Material Adverse Effect; (iv) no disputes
are pending, or, to the knowledge of Seagull or any Seagull ERISA
Affiliate, threatened; (v) neither Seagull nor any Seagull ERISA Affiliate
has engaged in, and Seagull and each Seagull ERISA Affiliate do not have
any knowledge of any person that has engaged in, any transaction in
violation of Section 406(a) or (b) of ERISA for which no exemption exists
under Section 4975(c)(1) of the Code or Section 4975(d) of the Code that
could reasonably be expected to result in a Seagull Material Adverse
Effect; (vi) there have been no "reportable events" within the meaning of
Section 4043 of ERISA for which the 30 day notice requirement of ERISA has
not been waived by the PBGC; (vii) all contributions due have been made on
a timely basis (within, where applicable, the time limit established under
section 302 of ERISA or Code section 412); (viii) no notice of intent to
terminate such plan has been given under Section 4041 of ERISA and no
proceeding has been instituted under section 4042 of ERISA to terminate
such plan; and (ix) such plan may be terminated on a prospective basis
without any continuing liability for benefits other than benefits accrued
to the date of such termination. All contributions made or required to be
made under any Seagull Benefit Plan meet the requirements for deductibility
under the Code, and all contributions which are required and which have not
been made have been properly recorded on the books of Seagull or a Seagull
ERISA Affiliate.
(c) No Seagull Benefit Plan is a "multiemployer plan" (as defined in
section 4001(a)(3) of ERISA) or a "multiple employer plan" (within the
meaning of section 413(c) of the Code). No event has occurred with respect
to Seagull or a Seagull ERISA Affiliate in connection with which Seagull
could be subject to any liability, lien or encumbrance with respect to any
Seagull Benefit Plan or any employee benefit plan described in Section 3(3)
of ERISA maintained, sponsored or contributed to by a Seagull ERISA
Affiliate under ERISA or the Code.
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Section 5.12 Environmental Liability. Except as set forth in Section 5.12
of the Seagull Disclosure Schedule:
(a) The businesses of Seagull and its Subsidiaries have been and is
operated in material compliance with all Environmental Laws.
(b) Neither Seagull nor any of its Subsidiaries has caused or allowed
the generation, treatment, manufacture, processing, distribution, use,
storage, discharge, release, disposal, transport or handling of any
Hazardous Substances at any of its properties or facilities except in
material compliance with all Environmental Laws, and, to Seagull's
knowledge, no generation, manufacture, processing, distribution, use,
treatment, handling, storage, discharge, release, disposal, transport or
handling of any Hazardous Substances has occurred at any property or
facility owned, leased or operated by Seagull or any of its Subsidiaries
except in material compliance with all Environmental Laws.
(c) Neither Seagull nor any of its Subsidiaries has received any
written notice from any Governmental Authority or, to the knowledge of
Seagull, any other communication alleging or concerning any material
violation by Seagull or any of its Subsidiaries of, or responsibility or
liability of Seagull or any of its Subsidiaries under, any Environmental
Law. There are no pending, or to the knowledge of Seagull, threatened,
claims, suits, actions, proceedings or investigations with respect to the
businesses or operations of Seagull or any of its Subsidiaries alleging or
concerning any material violation of or responsibility or liability under
any Environmental Law that, if adversely determined, could reasonably be
expected to have a Seagull Material Adverse Effect, nor does Seagull have
any knowledge of any fact or condition that could give rise to such a
claim, suit, action, proceeding or investigation.
(d) Seagull and its Subsidiaries are in possession of all material
approvals, permits, licenses, registrations and similar type authorizations
from all Governmental Authorities under all Environmental Laws with respect
to the operation of the businesses of Seagull and its Subsidiaries; there
are no pending or, to the knowledge of Seagull, threatened, actions,
proceedings or investigations seeking to modify, revoke or deny renewal of
any of such approvals, permits, licenses registrations and authorizations;
and Seagull does not have knowledge of any fact or condition that is
reasonably likely to give rise to any action, proceeding or investigation
to modify, revoke or deny renewal of any of such approvals, permits,
licenses, registrations and authorizations.
(e) Without in any way limiting the generality of the foregoing, (i)
all off-site locations where Seagull or any of its Subsidiaries has
transported, released, discharged, stored, disposed or arranged for the
disposal of pollutants, contaminants, hazardous wastes or toxic substances
required by law to be disposed at a licensed disposal site are identified
in Section 5.12 of Seagull Disclosure Schedule, (ii) to Seagull's
knowledge, all underground storage tanks, and the operating status,
capacity and contents of such tanks, located on any property owned, leased
or operated by Seagull or any of its Subsidiaries are identified in Section
5.12 of the Seagull Disclosure Schedule, (iii) to the knowledge of Seagull,
there is no asbestos contained in or forming part of any building, building
component, structure or office space owned or leased by Seagull and (iv) no
PCBs or PCB-containing items are used or stored at any property owned,
leased or operated by Seagull or any of its Subsidiaries.
Section 5.13 Compliance with Applicable Laws. Seagull and each of its
Subsidiaries hold all material approvals, licenses, permits, registrations and
similar type authorizations necessary for the lawful conduct of its respective
businesses, as now conducted, and such businesses are not being, and neither
Seagull nor any of its Subsidiaries has received any notice from any
Governmental Authority or person that any such business has been or is being,
conducted in violation of any law, ordinance or regulation, including without
limitation any law, ordinance or regulation relating to occupational health and
safety, except for possible violations which either individually or in the
aggregate have not resulted and would not result in a Seagull Material Adverse
Effect; provided, however, notwithstanding the foregoing, no representation or
warranty in this Section 5.13 is made with respect to Environmental Laws, which
are covered exclusively by the provisions set forth in Section 5.12.
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Section 5.14 Insurance. Section 5.14 of the Seagull Disclosure Schedule
lists each of the insurance policies relating to Seagull or its Subsidiaries
which are currently in effect. Seagull has provided Global with a true, complete
and correct copy of each such policy or the binder therefor. With respect to
each such insurance policy or binder none of Seagull, any of its Subsidiaries or
any other party to the policy is in breach or default thereunder (including with
respect to the payment of premiums or the giving of notices), and Seagull does
not know of any occurrence or any event which (with notice or the lapse of time
or both) would constitute such a breach or default or permit termination,
modification or acceleration under the policy, except for such breaches or
defaults which, individually or in the aggregate, would not result in a Seagull
Material Adverse Effect. Section 5.14 of the Seagull Disclosure Schedule
describes any self-insurance arrangements affecting Seagull or its Subsidiaries.
The insurance policies listed in Section 5.14 of the Seagull Disclosure Schedule
include all policies which are required in connection with the operation of the
businesses of Seagull and its Subsidiaries as currently conducted by applicable
laws and all agreements relating to Seagull and its Subsidiaries.
Section 5.15 Labor Matters; Employees.
(a) Except as set forth in Section 5.15(a) of the Seagull Disclosure
Schedule, (i) there is no labor strike, dispute, slowdown, work stoppage or
lockout actually pending or, to the knowledge of Seagull, threatened
against or affecting Seagull or any of its Subsidiaries and, during the
past five years, there has not been any such action, (ii) none of Seagull
or any of its Subsidiaries is a party to or bound by any collective
bargaining or similar agreement with any labor organization, or work rules
or practices agreed to with any labor organization or employee association
applicable to employees of Seagull or any of its Subsidiaries, (iii) none
of the employees of Seagull or any of its Subsidiaries are represented by
any labor organization and none of Seagull or any of its Subsidiaries have
any knowledge of any current union organizing activities among the
employees of Seagull or any of its Subsidiaries nor does any question
concerning representation exist concerning such employees, (iv) Seagull and
its Subsidiaries have each at all times been in material compliance with
all applicable laws respecting employment and employment practices, terms
and conditions of employment, wages, hours of work and occupational safety
and health, and are not engaged in any unfair labor practices as defined in
the National Labor Relations Act or other applicable law, ordinance or
regulation, (v) there is no unfair labor practice charge or complaint
against any of Seagull or any of its Subsidiaries pending or, to the
knowledge of Seagull, threatened before the National Labor Relations Board
or any similar state or foreign agency, (vi) there is no grievance or
arbitration proceeding arising out of any collective bargaining agreement
or other grievance procedure relating to Seagull or any of its
Subsidiaries, and (vii) neither the Occupational Safety and Health
Administration nor any corresponding state agency has threatened to file
any citation, and there are no pending citations, relating to Seagull or
any of its Subsidiaries.
(b) Except as set forth in Section 5.15(b) of the Seagull Disclosure
Schedule, since the enactment of the WARN Act, none of Seagull or any of
its Subsidiaries has effectuated (i) a "plant closing" (as defined in the
WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of any of Seagull
or any of its Subsidiaries, or (ii) a "mass layoff" (as defined in the WARN
Act) affecting any site of employment or facility of Seagull or any of its
Subsidiaries, nor has Seagull or any of its Subsidiaries been affected by
any transaction or engaged in layoffs or employment terminations sufficient
in number to trigger application of any similar state or local law, in each
case that could reasonably be expected to have a Seagull Material Adverse
Effect.
Section 5.16 Reserve Reports.
(a) All information supplied to DeGolyer and McNaughton by or on
behalf of Seagull and its Subsidiaries that was material to such firm's
estimates of proved oil and gas reserves attributable to the Oil and Gas
Interests of Seagull and its Subsidiaries in connection with the
preparation of the proved oil and gas reserve report concerning the Oil and
Gas Interests of Seagull and its Subsidiaries as of December 31, 1995 by
DeGolyer and McNaughton (the "Seagull Reserve Report") was (at the time
supplied or as modified or amended prior to the issuance of the Seagull
Reserve Report) true and correct in all material respects and Seagull has
no knowledge of any material errors in such information that
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existed at the time of such issuance. Except for changes (including changes
in commodity prices) generally affecting the oil and gas industry, there
has been no change in respect of the matters addressed in the Seagull
Reserve Report that would have a Seagull Material Adverse Effect.
(b) Set forth in Section 5.16(b) of the Seagull Disclosure Schedule is
a list of all material Oil and Gas Interests that were included in the
Seagull Reserve Report that have been disposed of prior to the date of this
Agreement.
Section 5.17 Oil and Gas Reserves; Equipment. Except as otherwise set
forth in Section 5.17 of the Seagull Disclosure Schedule:
(a) None of the wells included in the Oil and Gas Interests of Seagull
and its Subsidiaries has been overproduced, except where such
overproduction individually, or in the aggregate with all other such
overproduction, would not have a Seagull Material Adverse Effect;
(b) There have been no material changes proposed in the production
allowables for any wells included in the Oil and Gas Interests of Seagull
and its Subsidiaries;
(c) All wells included in the Oil and Gas Interests of Seagull and its
Subsidiaries have been drilled and (if completed) completed, operated, and
produced in accordance with good oil and gas field practices and in
compliance in all respects with applicable oil and gas leases and
applicable laws, rules, and regulations, except where any failure or
violation would not have a Seagull Material Adverse Effect;
(d) Except as set forth in Section 5.17(d) of the Seagull Disclosure
Schedule, there are no wells included in the Oil and Gas Interests of
Seagull and its Subsidiaries that:
(i) Seagull or any of its Subsidiaries is currently obligated by
law or contract to plug and abandon or will be obligated by law or
contract to plug and abandon with the lapse of time or notice or both
because the well is not currently capable of producing in commercial
quantities, except for such wells that will not individually, or in the
aggregate with all other such wells, result in Seagull and its
Subsidiaries incurring plugging and abandonment costs (net of salvage
value) in an amount in excess of $500,000;
(ii) are subject to exceptions to a requirement to plug and abandon
issued by a Governmental Authority having jurisdiction over the wells;
or
(iii) have been plugged and abandoned but have not been plugged or
reclaimed in accordance with all applicable requirements of each
Governmental Authority having jurisdiction over such wells;
(e) Proceeds from the sale of Hydrocarbons produced from the Oil and
Gas Interests of Seagull and its Subsidiaries are being received by Seagull
and its Subsidiaries in a timely manner and are not being held by third
parties in suspense for any reason (except for amounts, individually or in
the aggregate, not in excess of $500,000 and held in suspense in the
ordinary course of business);
(f) No person has any call on, option to purchase, or similar rights
with respect to the production of Hydrocarbons attributable to the Oil and
Gas Interests of Seagull and its Subsidiaries, except where any call,
option or similar right would not have a Seagull Material Adverse Effect
and except for any such call, option or similar right at market prices, and
upon consummation of the transactions contemplated by this Agreement,
Seagull or its Subsidiaries will have the right to market production from
the Oil and Gas Interests of Seagull and its Subsidiaries on terms no less
favorable than the terms upon which such production is currently being
marketed;
(g) Except for gas imbalances between Seagull or any of its
Subsidiaries and any third party working interest owners or pipelines
relative to the Oil and Gas Interests of Seagull or any of its
Subsidiaries, which gas imbalances (to the extent constituting
overproduction of the wells of Global or its Subsidiaries) are described in
Section 5.17(g) of the Seagull Disclosure Schedule, neither Seagull nor any
of its Subsidiaries is obligated by any gas prepayment arrangement or by
any "take-or-pay" requirement to deliver any gas at a future time without
then or thereafter receiving payment therefor; and
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(h) To the knowledge of Seagull, all equipment and machinery currently
in use and material to the operation of the Oil and Gas Interests of
Seagull or any of its Subsidiaries as conducted prior to the date hereof
are in reasonable working condition, ordinary wear and tear excepted.
Section 5.18 Title to Oil and Gas Interests.
(a) Except as set forth in Section 5.18 of the Seagull Disclosure
Schedule, Seagull or its Subsidiaries has defensible title to all of the
real property included in the Oil and Gas Interests classified as proved
developed producing, proved developed nonproducing and proved undeveloped
in the Seagull Reserve Report (each, a "Seagull Classified Property")
except to the extent that such interests have thereafter been disposed of
in the ordinary course of business consistent with past practice. For the
purposes of this Agreement, "defensible title" means, with respect to any
Seagull Classified Property, such record and beneficial title that (x)
entitles the party named to receive, from its ownership of such interest, a
percentage of all Hydrocarbons produced, saved, and marketed from each well
or property included in the Oil and Gas Interests of Seagull and its
Subsidiaries, not less than the net revenue interest set forth in the
Seagull Reserve Report for such well or property, without reduction,
suspension, or termination for the productive life of such well or
property, except as a result of elections not to participate in an
operation under an applicable operating, unit or other agreement, or
readjustments of interest provided for under the terms of the applicable
operating, unit or other agreement, in each case, after the date hereof;
(y) obligates the party named to bear a percentage of the costs and
expenses relating to operations on, and the maintenance and production of,
such well or property, not greater than the working or operating interest
set forth in the Seagull Reserve Report without increase for the productive
life of such well or property, except as a result of an election of other
parties not to participate in an operation under an applicable operating,
unit or other agreement, contribution requirements with respect to
defaulting co-owners, or readjustments of interest provided for under the
terms of the applicable operating or unit agreement, in each case, after
the date hereof; and (z) is free and clear of any Liens except the Seagull
Permitted Encumbrances. For the purposes of this Agreement, "Seagull
Permitted Encumbrances" means (i) royalties, overriding royalties,
reversionary interests and similar burdens if the cumulative effect of such
burdens does not and will not reduce the net revenue interest with respect
to a well or property below the net revenue interest shown therefor in the
Seagull Reserve Report or increase the working interest with respect to
such well or property above the working interest shown therefor in the
Seagull Reserve Report; (ii) the terms and conditions of all leases,
servitudes, production sales contracts, division orders, contracts for
sale, purchase, exchange, refining or processing of Hydrocarbons,
unitization and pooling designations, declarations, orders and agreements,
operating agreements, agreements of development, area of mutual interest
agreements, farmout agreements, gas balancing or deferred production
agreements, processing agreements, plant agreements, pipeline, gathering
and transportation agreements, injection, repressuring and recycling
agreements, salt water or other disposal agreements, seismic or geophysical
permits or agreements, and other agreements including, without limitation,
the terms and conditions of any and all contracts and agreements set forth
in the Seagull Reserve Report covering production sales contracts and all
other contracts and agreements disclosed in such Disclosure Schedule, to
the extent that such contracts and agreements do not and will not reduce
the net revenue interest of any well or property included in the Oil and
Gas Interests of Seagull and its Subsidiaries below the net revenue
interest shown therefor in the Seagull Reserve Report or increase the
working interest of such well above the working interest shown therefor in
the Seagull Reserve Report without a proportionate increase in the net
revenue interest of such well or property; (iii) easements, rights of way,
servitudes, permits, surface leases and other rights with respect to
surface obligations, pipelines, grazing, canals, ditches, reservoirs, or
the like, conditions, covenants or other restrictions, and easements of
streets, alleys, highways, pipelines, telephone lines, power lines,
railways and other easements and rights of way on, over or in respect of
any of the Oil and Gas Interests of Seagull and its Subsidiaries, so long
as they are not such that would have a Seagull Material Adverse Effect;
(iv) any preferential purchase rights, required third party consents to
assignment and similar agreements and obligations applicable to the
transactions contemplated hereby with respect to which prior to the
Effective Time (A) waivers or consents have been obtained from the
appropriate person, or (B) the
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applicable period of time for asserting such rights has expired without any
exercise of such rights; (v) liens for Taxes or assessments not yet
delinquent; (vi) materialmen's mechanic's, repairman's, employee's,
contractor's, operator's, and other similar liens or charges arising in the
ordinary course of business (A) if they have not been filed pursuant to
law, (B) if filed, they have not yet become due and payable or payment is
being withheld as provided by law or (C) if their validity is being
contested in good faith in the ordinary course of business by appropriate
action; (vii) Customary Post-Closing Consents; (viii) conventional rights
of reassignment arising in respect of abandonment, cessation of production
or expiration of leases; (ix) all rights reserved to or vested in any
Governmental Authority to control or regulate any of the Oil and Gas
Interests of Seagull and its Subsidiaries in any manner, and all applicable
laws, rules and orders of Governmental Authorities; (x) any other liens,
charges, encumbrances, contracts, agreements, instruments, obligations,
defects or irregularities of any kind whatsoever that would not have a
Seagull Material Adverse Effect or that are set forth in Section 5.18 of
the Seagull Disclosure Schedule. Notwithstanding the foregoing, title to
the Seagull Classified Properties is of a type and nature customarily
acceptable to the reasonably prudent oil and gas operator of oil and gas
interests.
(b) Except as set forth in Section 5.18(b) of the Seagull Disclosure
Schedule, (i) each oil and gas lease included in the Oil and Gas Interests
of Seagull and its Subsidiaries is valid, binding and enforceable in
accordance with its terms, except for the Enforceability Exception (to the
extent applicable), and (ii) neither Seagull nor the Seagull Subsidiary
that is party to each such lease, nor, to the knowledge of Seagull, any
other party to any such lease, is in breach or default thereunder in any
material respect, no notice of default or termination thereunder has been
given or received by Seagull or any of its Subsidiaries, and no event has
occurred which would, with the giving of notice or passage of time or both,
constitute a breach or default thereunder or permit termination,
modification or acceleration thereunder that could reasonably be expected
to result in a Seagull Material Adverse Effect.
Section 5.19 Title to Other Properties. Except as set forth in Section
5.19 of the Seagull Disclosure Schedule, Seagull or its Subsidiaries owns, of
record (to the extent applicable) and beneficially, all material personal
property and all real property (other than real property included in the Oil and
Gas Interests of Seagull and its Subsidiaries), purported to be owned by Seagull
or its Subsidiaries (except to the extent that such properties have thereafter
been disposed of in the ordinary course of business consistent with past
practice or after the date hereof in compliance with Section 6.2(d)), free and
clear of any Liens except Seagull Permitted Encumbrances.
Section 5.20 Material Contracts.
(a) Set forth in Section 5.20(a) of the Seagull Disclosure Schedule is
a list of each contract, lease, indenture, agreement, arrangement or
understanding to which Seagull or any of its Subsidiaries is subject that
is of a type that would be required to be included as an exhibit to a Form
S-1 Registration Statement pursuant to the rules and regulations of the SEC
if such a registration was filed by Seagull (the "Seagull Material
Contracts").
(b) Except as set forth in Section 5.20(a) or 5.20(b) of the Seagull
Disclosure Schedule, the Oil and Gas Interests of Seagull and its
Subsidiaries are not subject to (i) any instrument or agreement evidencing
or related to indebtedness for borrowed money, whether directly or
indirectly, or (ii) any agreement not entered into in the ordinary course
of business in which the amount involved is in excess of $250,000. With
respect to the Oil and Gas Interests of Seagull and its Subsidiaries, (A)
all Seagull Material Contracts are in full force and effect and are the
valid and legally binding obligations of the parties thereto and are
enforceable in accordance with their respective terms; (B) no party to any
Seagull Material Contract is in material breach or default with respect to
its obligations thereunder, including with respect to payments or
otherwise; (C) no party to any Seagull Material Contract has given notice
of any action to terminate, cancel, rescind or procure a judicial
reformation thereof; and (D) no Seagull Material Contract contains any
provision that prevents Seagull or any of its Subsidiaries from owning,
managing and operating the Oil and Gas Interests of Seagull and its
Subsidiaries in accordance with historical practices.
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(c) As of the date of this Agreement, except as set forth in Section
5.20(c) of the Seagull Disclosure Schedule, with respect to authorizations
for expenditure executed on or after January 1, 1996, (i) there are no
material outstanding calls for payments that are due or which Seagull or
its Subsidiaries are committed to make that have not been made; (ii) there
are no material operations with respect to which Seagull or its
Subsidiaries have become a non-consenting party; and (iii) there are no
commitments for the material expenditure of funds for drilling or other
capital projects other than projects with respect to which the operator is
not required under the applicable operating agreement to seek consent.
(d) Except as set forth in Section 5.20(d) of the Seagull Disclosure
Schedule, (i) there are no express contractual obligations to engage in
continuous development operations in order to maintain any producing Oil
and Gas Interest of the Seagull in force and effect; (ii) there are no
provisions applicable to the Oil and Gas Interests of Seagull and its
Subsidiaries which increase the royalty percentage of the lessor
thereunder; and (iii) none of the Oil and Gas Interests of Seagull and its
Subsidiaries are limited by terms fixed by a certain number of years (other
than primary terms under oil and gas leases).
Section 5.21 Permits. Immediately prior to the Effective Time and except
for Customary Post-Closing Consents, Seagull or its Subsidiaries will hold all
of the Permits required or necessary to construct, run, operate, use and/or
maintain their properties and conduct the their operations as presently
conducted, except for such Permits, the lack of which, individually or in the
aggregate, would not have a Seagull Material Adverse Effect; provided, however,
that notwithstanding the foregoing, no representation or warranty in this
Section 5.21 is made with respect to Permits issued pursuant to Environmental
Laws, which are covered exclusively by the provisions set forth in Section 5.12.
Section 5.22 Required Shareholder Vote or Consent. The only vote of the
holders of any class or series of Seagull's capital stock that will be necessary
to consummate the Merger and the other transactions contemplated by this
Agreement is (a) the approval of the Merger by the holders of a majority of the
shares represented in person or by proxy and voting with respect thereto and (b)
the election of the directors contemplated by Section 7.12 by the holders of a
plurality of shares of Seagull Common Stock represented in person or by proxy
and voting with respect thereto (the "Seagull Shareholders' Approval").
Section 5.23 Proxy Statement/Prospectus; Registration Statement. None of
the information to be supplied by Seagull or Merger Sub for inclusion in (a) the
Proxy Statement/Prospectus to be filed by Global and Seagull with the SEC, and
any amendments or supplements thereto, or (b) the Registration Statement to be
filed by Seagull with the SEC in connection with the Merger, and any amendments
or supplements thereto, will, at the respective times such documents are filed,
and, in the case of the Proxy Statement/Prospectus, at the time the Proxy
Statement/Prospectus or any amendment or supplement thereto is first mailed to
stockholders of Global and Seagull, at the time such stockholders vote on
approval and adoption of this Agreement and at the Effective Time, and, in the
case of the Registration Statement, when it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be made therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
Section 5.24 Intellectual Property. Seagull or its Subsidiaries own, or
are licensed or otherwise have the right to use, and Seagull or its
Subsidiaries, after the Contribution, will own or be licensed or otherwise have
the right to use, all Intellectual Property currently used in the conduct of the
business of Seagull and its Subsidiaries, except where the failure to so own or
otherwise have the right to use such intellectual property would not,
individually or in the aggregate, have a Seagull Material Adverse Effect. No
person has notified either Seagull or any of its Subsidiaries that their use of
the Intellectual Property infringes on the rights of any person, subject to such
claims and infringements as do not, individually or in the aggregate, give rise
to any liability on the part of Seagull and its Subsidiaries that could have a
Seagull Material Adverse Effect, and, to Seagull's knowledge, no person is
infringing on any right of Seagull or any of its Subsidiaries with respect to
any such Intellectual Property. No claims are pending or, to Seagull's
knowledge, threatened that Seagull or any of its Subsidiaries is infringing or
otherwise adversely affecting the rights of any person with regard to any
Intellectual Property.
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Section 5.25 Hedging. Section 5.25 of the Seagull Disclosure Schedule sets
forth for the periods shown obligations of Seagull and each of its Subsidiaries
for the delivery of Hydrocarbons attributable to any of the properties of
Seagull or any of its Subsidiaries in the future on account of prepayment,
advance payment, take-or-pay or similar obligations without then or thereafter
being entitled to receive full value therefor. Except as set forth in Section
5.25 of the Seagull Disclosure Schedule, as of the date of this Agreement,
neither Seagull nor any of its Subsidiaries is bound by futures, hedge, swap,
collar, put, call, floor, cap, option or other contracts that are intended to
benefit from or reduce or eliminate the risk of fluctuations in the price of
commodities, including Hydrocarbons or securities.
Section 5.26 Brokers. No broker, finder or investment banker (other than
Donaldson, Lufkin & Jenrette Securities Corporation, the fees and expenses of
which will be paid by Seagull) is entitled to any brokerage, finder's fee or
other fee or commission payable by Seagull or any of its Subsidiaries in
connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of Seagull or any of its Subsidiaries. True
and correct copies of all agreements and engagement letters currently in effect
with Donaldson, Lufkin & Jenrette Securities Corporation (the "Seagull
Engagement Letters") have been provided to Global.
Section 5.27 Merger Sub's Operations. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby and has not engaged
in any business activities or conducted any operations other than in connection
with the transactions contemplated hereby.
Section 5.28 Pooling; Tax Matters. Neither Seagull nor, to the knowledge
of Seagull, any of its affiliates has taken or agreed to take any action that
would prevent the Merger from (a) being treated for financial accounting
purposes as a Pooling Transaction or (b) constituting a reorganization within
the meaning of section 368(a) of the Code. Specifically:
(a) Following the Merger, Global will hold at least 90 percent of the
fair market value of its net assets and at least 70 percent of the fair
market value of its gross assets and at least 90 percent of the fair market
value of Merger Sub's net assets and at least 70 percent of the fair market
value of Merger Sub's gross assets, held immediately prior to the Merger,
taking into account amounts used to pay merger expenses and any
distributions other than regular dividends.
(b) Seagull has no plan or intention to (i) liquidate Global, (ii)
merge Global with or into another corporation, (iii) sell or otherwise
dispose of the stock of Global except for transfers of stock to
corporations controlled (within the meaning of section 368(c) of the Code)
by Seagull, (iv) cause or permit Global to issue additional shares of its
capital stock that would result in Seagull's losing control (within the
meaning of section 368(c) of the Code) of Global, (v) cause or permit
Global to sell or otherwise dispose of any of its assets or of any of the
assets acquired from Merger Sub except for dispositions made in the
ordinary course of business or transfers of assets to a corporation
controlled by Global, or (vi) reacquire any of Seagull Common Stock issued
to the holders of Global Common Stock pursuant to the Merger.
(c) Merger Sub will have no liabilities assumed by Global and will not
transfer to Global any assets subject to liabilities in the Merger.
(d) Following the Merger, Global will continue its historic business
or use a significant portion of its historic assets in a business.
(e) There is no intercorporate indebtedness existing between Seagull
and Global or between Merger Sub and Global that was issued, acquired, or
will be settled at a discount.
(f) Seagull is not an investment company as defined in section
368(a)(2)(F)(iii) and (iv) of the Code.
(g) Seagull does not own, nor has it owned during the past five years,
any shares of the capital stock of Global.
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(h) None of the compensation to be received by any
shareholder-employees of Global will be separate consideration for, or
allocable to, any of their shares of Global Common Stock; none of the
shares of Seagull Common Stock to be received by any shareholder-employees
will be separate consideration for, or allocable to, any employment
agreement; and the compensation paid to any shareholder-employees will be
for services actually rendered and will be commensurate with amounts paid
to third parties bargaining at arm's length for similar services.
(i) The payment of cash in lieu of fractional shares of Seagull Common
Stock is solely for the purpose of avoiding the expense and inconvenience
to Seagull of issuing fractional shares and does not represent separately
bargained-for consideration. The total cash consideration that will be paid
instead of issuing fractional shares of Seagull Common Stock will not
exceed one percent (1%) of the total consideration that will be issued
pursuant to the Merger to the Global shareholders in exchange for their
Global Common Stock. The fractional share interests will be aggregated, and
no Global shareholder will receive cash in an amount greater than the value
of one full share of Seagull Common Stock.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by Global Pending the Merger. From the
date hereof until the Effective Time, unless Seagull shall otherwise agree in
writing, or except as set forth in the Global Disclosure Schedule or as
otherwise contemplated by this Agreement, Global and its Subsidiaries shall
conduct their business in the ordinary course consistent with past practice and
shall use all reasonable efforts to preserve intact their business organizations
and relationships with third parties and to keep available the services of their
present officers and key employees, subject to the terms of this Agreement.
Except as set forth in the Global Disclosure Schedule or as otherwise provided
in this Agreement, and without limiting the generality of the foregoing, from
the date hereof until the Effective Time, without the written consent of
Seagull, which consent shall not be unreasonably withheld:
(a) Neither Global nor its Subsidiaries will adopt or propose any
change to its Certificate of Incorporation or By-Laws;
(b) Global will not, and will not permit any of its Subsidiaries to
(i) declare, set aside or pay any dividend or other distribution with
respect to any shares of capital stock of Global or its Subsidiaries or
(ii) repurchase, redeem or otherwise acquire any outstanding shares of
capital stock or other securities of, or other ownership interests in,
Global or any of its Subsidiaries, other than intercompany acquisitions of
stock;
(c) Global will not, and will not permit any of its Subsidiaries to,
merge or consolidate with any other person or acquire a material amount of
assets of any other person;
(d) Except as set forth in Section 6.1(d) of the Global Disclosure
Schedule, Global will not, and will not permit any of its Subsidiaries to,
sell, lease, license or otherwise surrender, relinquish or dispose of any
assets or properties with an aggregate fair market value exceeding
$1,000,000;
(e) Global will not settle any material Audit, make or change any
material Tax election or file any material amended Tax Return;
(f) Except as otherwise permitted by this Agreement, Global will not
issue any securities (except pursuant to existing obligations disclosed in
the Global SEC Reports or the Global Disclosure Schedule), enter into any
amendment of any term of any outstanding security of Global or of any of
its Subsidiaries, incur any indebtedness except trade debt in the ordinary
course of business or pursuant to existing credit facilities or
arrangements, fail to make any required contribution to any Global ERISA
Plan, increase compensation, bonus (except as set forth in Section 6.1(f)
of the Global Disclosure Schedule) or other benefits payable to any
executive officer or former employee or enter into any settlement or
consent with respect to any pending litigation;
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(g) Global will not change any method of accounting or accounting
practice by Global or any of its Subsidiaries, except for any such change
required by GAAP;
(h) Global will not take any action that would give rise to a claim
under the WARN Act or any similar state law or regulation because of a
"plant closing" or "mass layoff" (each as defined in the WARN Act);
(i) Global will not amend or otherwise change the terms of the Global
Engagement Letters, except to the extent that any such amendment or change
would result in terms more favorable to Global;
(j) Neither Global nor any of its Subsidiaries will become bound or
obligated to participate in any operation, or consent to participate in any
operation, with respect to any Oil and Gas Interests that will individually
cost in excess of $5 million unless the operation is a currently existing
obligation of Global or any of its Subsidiaries or necessary to extend,
preserve or maintain an Oil and Gas Interest;
(k) Neither Global nor any of its Subsidiaries will enter into any
futures, hedge, swap, collar, put, call, floor, cap, option or other
contracts that are intended to benefit from or reduce or eliminate the risk
of fluctuations in the price of commodities, including Hydrocarbons, or
securities, other than in the ordinary course of business in accordance
with Global's current policies;
(l) Global will not, and will not permit any of its Subsidiaries to,
agree or commit to do any of the foregoing;
(m) Global will not, and will not permit any of its Subsidiaries to
(i) take, or agree or commit to take, any action that would make any
representation and warranty of Global hereunder inaccurate in any respect
at, or as of any time prior to, the Effective Time or (ii) omit, or agree
or commit to omit, to take any action necessary to prevent any such
representation or warranty from being inaccurate in any respect at any such
time; and
(n) Neither Global nor any of its Subsidiaries shall (A) adopt, amend
(other than amendments that reduce the amounts payable by Global or any
Subsidiary, or amendments required by law to preserve the qualified status
of a Global Benefit Plan) or assume an obligation to contribute to any
employee benefit plan or arrangement of any type or collective bargaining
agreement or enter into any employment, severance or similar contract with
any person (including, without limitation, contracts with management of
Global or any Subsidiaries that might require that payments be made upon
the consummation of the transactions contemplated hereby) or amend any such
existing contracts to increase any amounts payable thereunder or benefits
provided thereunder, (B) engage in any transaction (either acting alone or
in conjunction with any Global Benefit Plan or trust created thereunder) in
connection with which Global or any Subsidiary could be subjected (directly
or indirectly) to either a civil penalty assessed pursuant to subsections
(c), (i) or (l) of Section 502 of ERISA or a tax imposed pursuant to
Chapter 43 of Subtitle D of the Code, (C) terminate any Global Benefit Plan
in a manner, or take any other action with respect to any Global Benefit
Plan, that could result in the liability of Global or any Subsidiary to any
person, (D) take any action that could adversely affect the qualification
of any Global Benefit Plan or its compliance with the applicable
requirements of ERISA, (E) fail to make full payment when due of all
amounts which, under the provisions of any Global Benefit Plan, any
agreement relating thereto or applicable law, Global or any Subsidiary are
required to pay as contributions thereto or (F) fail to file, on a timely
basis, all reports and forms required by federal regulations with respect
to any Global Benefit Plan.
Section 6.2 Conduct of Business by Seagull Pending the Merger. From the
date hereof until the Effective Time, unless Global shall otherwise agree in
writing, or except as set forth in the Seagull Disclosure Schedule or as
otherwise contemplated by this Agreement, Seagull shall conduct, and shall cause
its Subsidiaries to conduct, its business in the ordinary course consistent with
past practice and shall use, and shall cause its each of its Subsidiaries to
use, all reasonable efforts to preserve intact its business organizations and
relationships with third parties and to keep available the services of its key
employees, subject to the terms of this Agreement. Except as set forth in the
Seagull Disclosure Schedule or as otherwise provided in this
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Agreement, and without limiting the generality of the foregoing, from the date
hereof until the Effective Time, without the written consent of Global, which
consent shall not be unreasonably withheld:
(a) Neither Seagull nor Merger Sub will adopt or propose any change to
its Certificate of Incorporation or By-Laws;
(b) Seagull will not, and will not permit any of its Subsidiaries to
(i) declare, set aside or pay any dividend or other distribution with
respect to any shares of capital stock of Seagull or (ii) repurchase,
redeem or otherwise acquire any outstanding shares of capital stock or
other securities of, or other ownership interests in, Seagull or any of its
Subsidiaries, other than intercompany acquisitions of stock or, subject to
the provisions of Section 7.18(b) market purchases conducted in accordance
with Rules 10b-18 under the Exchange Act.
(c) Neither Seagull nor Merger Sub will merge or consolidate with any
other person or acquire assets having aggregate purchase prices of more
than $150 million (excluding the acquisition of Esso Suez, Inc. and certain
assets of Esso Egypt Limited);
(d) Except as set forth in Section 6.2(d) of the Seagull Disclosure
Schedule, neither Seagull nor any of its Subsidiaries will sell, lease,
license or otherwise surrender, relinquish or dispose of any assets or
properties with an aggregate fair market value exceeding $1,000,000;
(e) Seagull will not settle any material Audit, make or change any
material Tax election or file any material amended Tax Return;
(f) Except as otherwise permitted by this Agreement, Seagull will not
issue any securities (except pursuant to existing obligations disclosed in
the Seagull SEC Reports or the Seagull Disclosure Schedule), enter into any
amendment of any term of any outstanding security of Seagull or of any of
its Subsidiaries, incur any indebtedness except trade debt in the ordinary
course of business or pursuant to existing credit facilities or
arrangements, fail to make any required contribution to any Seagull ERISA
Plan, increase compensation, bonus (except as set forth in Section 6.2(e)
of the Seagull Disclosure Schedule) or other benefits payable to any
executive officer or former employee or enter into any settlement or
consent with respect to any pending litigation;
(g) Seagull will not change any method of accounting or accounting
practice, except for any such change required by GAAP;
(h) Seagull will not amend or otherwise change the terms of the
Seagull Engagement Letters, except to the extent that any such amendment or
change would result in terms more favorable to Seagull;
(i) Neither Seagull nor any of its Subsidiaries will become bound or
obligated to participate in any operation, or consent to participate in any
operation, with respect to any Oil and Gas Interest that will individually
cost in excess of $5 million unless the operation is a currently existing
obligation of Seagull or any of its Subsidiaries or necessary to extend,
preserve or maintain an Oil and Gas Interest;
(j) Neither Seagull nor any of its Subsidiaries will enter into any
futures, hedge, swap, collar, put, call, floor, cap, option or other
contracts that are intended to benefit from or reduce or eliminate the risk
of fluctuations in the price of commodities, including Hydrocarbons other
than in the ordinary course of business in accordance with Seagull's
current policies;
(k) Seagull will not, and will not permit any of its Subsidiaries to,
agree or commit to do any of the foregoing;
(l) Seagull will not, and will not permit any of its Subsidiaries to
(i) take, or agree or commit to take, any action that would make any
representation and warranty of Seagull or Merger Sub hereunder inaccurate
in any respect at, or as of any time prior to, the Effective Time or (ii)
omit, or agree or commit to omit, to take any action necessary to prevent
any such representation or warranty from being inaccurate in any respect at
any such time; and
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(m) Neither Seagull nor any of its Subsidiaries shall (A) adopt, amend
(other than amendments that reduce the amounts payable by Seagull or any
Subsidiary, or amendments required by law to preserve the qualified status
of a Seagull Benefit Plan) or assume an obligation to contribute to any
employee benefit plan or arrangement of any type or collective bargaining
agreement or enter into any employment, severance or similar contract with
any person (including, without limitation, contracts with management of
Seagull or any Subsidiaries that might require that payments be made upon
consummation of the transactions contemplated hereby) or amend any such
existing contracts to increase any amounts payable thereunder or benefits
provided thereunder, (B) engage in any transaction (either acting alone or
in conjunction with any Seagull Benefit Plan or trust created thereunder)
in connection with which Seagull or any Subsidiary could be subjected
(directly or indirectly) to either a civil penalty assessed pursuant to
subsections (c), (i) or (l) of Section 502 of ERISA or a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code, (C) terminate any Seagull
Benefit Plan in a manner, or take any other action with respect to any
Seagull Benefit Plan, that could result in the liability of Seagull or any
Subsidiary to any person, (D) take any action that could adversely affect
the qualification of any Seagull Benefit Plan or its compliance with the
applicable requirements or ERISA, (E) fail to make full payment when due of
all amounts which, under the provisions of any Seagull Benefit Plan, any
agreement relating thereto or applicable law, Seagull or any Subsidiary are
required to pay as contributions thereto or (F) fail to file, on a timely
basis, all reports and forms required by federal regulations with respect
to any Seagull Benefit Plan.
Section 6.3 Conduct of Business of Merger Sub. From the date hereof to the
Effective Time, Merger Sub shall not engage in any activities of any nature
except as provided in or contemplated by this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information. The parties shall each afford to the
other and to the other's financial advisors, legal counsel, accountants,
consultants, financing sources, and other authorized representatives access
during normal business hours throughout the period prior to the Effective Time
to all of its books, records, properties, contracts, leases, plants and
personnel and, during such period, each shall furnish promptly to the other (a)
a copy of each report, schedule and other document filed or received by it
pursuant to the requirements of federal or state securities laws, and (b) all
other information as such other party reasonably may request, provided that no
investigation pursuant to this Section 7.1 shall affect any representations or
warranties made herein or the conditions to the obligations of the respective
parties to consummate the Merger. Each party shall hold in confidence all
nonpublic information until such time as such information is otherwise publicly
available and, if this Agreement is terminated, each party will deliver to the
other all documents, work papers and other materials (including copies) obtained
by such party or on its behalf from the other party as a result of this
Agreement or in connection herewith, whether so obtained before or after the
execution hereof. Notwithstanding the foregoing, the Confidentiality Agreement
dated July 8, 1996 between Seagull and Global shall survive the execution and
delivery of this Agreement.
Section 7.2 Acquisition Proposals.
(a) From the date hereof until the termination hereof, Global and its
Subsidiaries will not, and will cause their respective officers, directors,
employees or other agents not to, directly or indirectly, (i) take any
action to solicit, initiate or encourage any Global Acquisition Proposal
(as hereinafter defined) or (ii) engage in negotiations with, or disclose
any nonpublic information relating to Global or its Subsidiaries,
respectively, or afford access to their respective properties, books or
records to any person that may be considering making, or has made, a Global
Acquisition Proposal. Nothing contained in this Section 7.2 shall prohibit
Global and its Board of Directors from (i) taking and disclosing a position
with respect to a tender offer by a third party pursuant to Rules 14d-9 and
14e-2(a) promulgated by the SEC under the Exchange Act, or (ii) furnishing
information, including without limitation nonpublic information to, or
entering into negotiations with, any person or entity that has indicated
its willingness to make an unsolicited bona fide proposal to acquire Global
pursuant to a merger, consolidation, share exchange,
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purchase of a substantial portion of the assets, business combination or
other similar transaction, if, and only to the extent that, (A) such
unsolicited bona fide proposal relating to a Global Acquisition Proposal is
made by a third party that the Board of Directors of Global determines in
good faith that the third party has the good faith intent to proceed with
negotiations to consider, and financial capability to consummate, such
Global Acquisition Proposal, (B) the Board of Directors of Global, after
duly considering the written advice of outside legal counsel to Global,
determines in good faith that such action is required for the Board of
Directors of Global to comply with its fiduciary duties to stockholders
imposed by applicable law, (C) contemporaneously with furnishing such
information to, or entering into discussions or negotiations with, such
person or entity Global provides written notice to Seagull to the effect
that it is furnishing information to, or entering into discussions or
negotiations with, such person or entity and (D) Global uses all reasonable
efforts to keep Seagull informed in all material respects of the status and
terms of any such negotiations or discussions (including without limitation
the identity of the person or entity with whom such negotiations or
discussions are being held) and provides Seagull copies of such written
proposals and any amendments or revisions thereto or correspondence related
thereto; provided, that Seagull agrees to execute a confidentiality
agreement, in form reasonably acceptable to it, with respect to any such
information delivered to Seagull pursuant to this clause (D), which
confidentiality agreement shall be subject to Seagull's disclosure
obligations arising under applicable law or securities exchange
regulations.
(b) The term "Global Acquisition Proposal" as used herein means any
offer or proposal for, or any indication of interest in, a merger or other
business combination directly or indirectly involving Global or any Global
Subsidiary or the acquisition of a substantial equity interest in, or a
substantial portion of the assets of, any such party, other than the
transactions contemplated by this Agreement.
Section 7.3 Directors' and Officers' Indemnification and Insurance.
(a) For six years after the Effective Time, Seagull shall cause the
Surviving Corporation to indemnify, defend and hold harmless the present
and former officers, directors, employees and agents of Global and its
Subsidiaries (each an "Indemnified Party") against all losses, claims,
damages, liabilities, fees and expenses (including reasonable fees and
disbursements of counsel and judgments, fines, losses, claims, liabilities
and amounts paid in settlement (provided that any such settlement is
effected with the prior written consent of Seagull)) arising out of actions
or omissions in their capacity as such occurring at or prior to the
Effective Time to the full extent permitted under New Jersey law or
Global's Certificate of Incorporation, Bylaws or written indemnification
agreements in effect at the date hereof, including provisions therein
relating to the advancement of expenses incurred in the defense of any
action or suit; provided, that in the event any claim or claims are
asserted or made within such six-year period, all rights to indemnification
in respect of any such claim or claims shall continue until disposition of
any and all such claims; and provided, further, that any determination
required to be made with respect to whether an Indemnified Party's conduct
complies with the standards set forth under New Jersey law, Global's
Certificate of Incorporation or Bylaws or such agreements, as the case may
be, shall be made by independent counsel mutually acceptable to Seagull and
the Indemnified Party; and provided, further, that nothing herein shall
impair any rights or obligations of any present or former directors or
officers of Global. In the event that any claim or claims are brought
against any Indemnified Party (whether arising before or after the
Effective Time), such Indemnified Party may select counsel for the defense
of such claim, which counsel shall be reasonably acceptable to Global (if
selected prior to the Effective Time) and the Surviving Corporation (if
selected after the Effective Time).
(b) Seagull shall cause the Surviving Corporation to maintain Global's
existing officers' and directors' liability insurance policy ("D&O
Insurance") for a period of not less than six years after the Effective
Time, but only to the extent related to actions or omissions prior to the
Effective Time; provided, that the Surviving Corporation may substitute
therefor policies of substantially similar coverage and amounts containing
terms no less advantageous to such former directors or officers; provided
further, that the aggregate amount of premiums to be paid with respect to
the maintenance of such D&O Insurance for such six year period shall not
exceed $1,000,000.
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Section 7.4 Further Assurances. Each party hereto agrees to use all
reasonable efforts to obtain all consents and approvals and to do all other
things necessary for the consummation of the transactions contemplated by this
Agreement. The parties agree to take such further action to deliver or cause to
be delivered to each other at the Closing and at such other times thereafter as
shall be reasonably agreed by such additional agreements or instruments as any
of them may reasonably request for the purpose of carrying out this Agreement
and agreements and transactions contemplated hereby and thereby. The parties
shall afford each other access to all information, documents, records and
personnel who may be necessary for any party to comply with laws or regulations
(including without limitation the filing and payment of taxes and handling tax
audits), to fulfill its obligations with respect to indemnification hereunder or
to defend itself against suits or claims of others. Seagull and Global shall
duly preserve all files, records or any similar items of Seagull or Global
received or obtained as a result of the Merger with the same care and for the
same period of time as it would preserve its own similar assets.
Section 7.5 Expenses.
(a) Except as provided in paragraph (c), all Expenses (as defined
below) incurred by the parties hereto shall be borne solely and entirely by
the party that has incurred such Expenses; provided, however, that if this
Agreement is terminated for any reason, then the allocable share of Seagull
and Merger Sub, as a group, and Global for all Expenses (including any fees
and expenses of accountants, experts, and consultants, but excluding the
fees and expenses of legal counsel and investment bankers) related to
preparing, printing, filing and mailing the Registration Statement, the
Proxy Statement/Prospectus and all SEC and other regulatory filing fees
incurred in connection with the Registration Statement, Proxy
Statement/Prospectus and HSR, shall be allocated one-half each.
(b) "Expenses" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including, without limitation, all reasonable fees
and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by a party or on
its behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement, the preparation,
printing, filing and mailing of the Registration Statement, the Proxy
Statement/Prospectus, the solicitation of stockholder approvals, requisite
HSR filings and all other matters related to the consummation of the
transactions contemplated hereby.
(c) Global agrees that, if (i) Seagull terminates this Agreement
pursuant to Section 10.1(g) or (ii) Global terminates this Agreement
pursuant to Section 10.1(h) or (iii) Seagull terminates this Agreement
pursuant to Section 10.1(d) or Seagull terminates this Agreement pursuant
to Section 10.1(b) at a time that a Global Breach (as hereinafter defined)
exists and in each case described in clauses (i), (ii) and (iii) within
nine months after the termination of this Agreement (A) a transaction is
consummated, which transaction, if offered or proposed, would constitute a
Global Acquisition Proposal, (B) a definitive agreement (the execution and
delivery of which has been authorized by the boards of directors, or
comparable bodies, that would if consummated constitute a Global
Acquisition Proposal) for such a transaction is entered into or (C)(X) any
person shall have acquired beneficial ownership or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under
Section 13(d) of the Exchange Act and the rules and regulations promulgated
hereunder), shall have been formed that beneficially owns, or has the right
to acquire beneficial ownership of, outstanding shares of capital stock of
Global then representing 50% or more of the combined power to vote
generally for the election of directors and (Y) the Board of Directors of
Global has taken any action, including without limitation the redemption of
the Rights under the Global Rights Plan, or the amendment, termination of
similar action with respect to the Global Rights Plan for the benefit of
such person, that facilitates the acquisition by such person or group of
such beneficial ownership, then in any such case Global shall pay to
Seagull a Termination Fee of $20 million, plus the reasonably documented
Expenses of Seagull and Merger Sub up to $2 million. In no event shall any
such Termination Fee be payable in the event that the Seagull Board of
Directors withdraws, modifies or changes its recommendation of this
Agreement or the Merger.
Section 7.6 Cooperation. Subject to compliance with applicable law, from
the date hereof until the Effective Time, each of the parties hereto shall
confer on a regular and frequent basis with one or more
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representatives of the other parties to report operational matters of
materiality and the general status of ongoing operations and shall promptly
provide the other party or its counsel with copies of all filings made by such
party with any Governmental Authority in connection with this Agreement and the
transactions contemplated hereby.
Section 7.7 Publicity. Neither Global, Seagull nor any of their respective
affiliates shall issue or cause the publication of any press release or other
announcement with respect to the Merger, this Agreement or the other
transactions contemplated hereby without the prior consultation of the other
party, except as may be required by law or by any listing agreement with a
national securities exchange.
Section 7.8 Additional Actions. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations, or
to remove any injunctions or other impediments or delays, to consummate and make
effective the Merger and the other transactions contemplated by this Agreement,
subject, however, to the appropriate vote of stockholders of Global and Seagull
required so to vote.
Section 7.9 Filings. Each party hereto shall make all filings required to
be made by such party in connection herewith or desirable to achieve the
purposes contemplated hereby, and shall cooperate as needed with respect to any
such filing by any other party hereto.
Section 7.10 Consents. Each of Seagull, Merger Sub and Global shall use
all reasonable efforts to obtain all consents necessary or advisable in
connection with its obligations hereunder.
Section 7.11 Employee Matters; Benefit Plans. Seagull will evaluate its
personnel needs and consider continuing the employment of certain employees of
Global on a case-by-case basis. After the Effective Time, Seagull will provide
to any employees of Global who are employed by Global as of the Effective Time
(the "Retained Employees") the same base salary or wages provided to such
employees prior to the Effective Time. From and after the Effective Time until
January 1, 1997, any Global Benefit Plan shall be continued separately without
change, except for (i) changes required by applicable law, and (ii) changes not
adverse to the Retained Employees, for the benefit of, and participation therein
shall continue to be made available to, the Retained Employees. From and after
the Effective Time until January 1, 1997, in the event that a Retained Employee
is transferred or reassigned from Global to a position with Seagull and is no
longer covered under any Global Benefit Plan, such individual shall be afforded
coverage under the Seagull employee plans that are available to similarly
situated employees of Seagull. Any Retained Employee who is terminated after the
Effective Time shall be provided benefits under the Seagull Energy Corporation
Management Stability Plan (or, at the election of Seagull, one or more such
Retained Employees shall receive comparable benefits under a separate severance
agreement). From and after January 1, 1997, Seagull will provide, or cause to be
provided to, the Retained Employees employee plans that are comparable to the
employee plans that Seagull provides to its similarly situated employees or
provide coverage under existing Seagull benefit plans provided to similarly
situated employees. Further, Seagull shall (i) waive, or cause to be waived, any
preexisting condition limitations applicable to the Retained Employees under any
group medical plan to the extent that a Retained Employee's condition would not
have operated as a preexisting condition limitation under Global's group medical
plan, (ii) cause any employee pension benefit plan (as such term is defined in
Section 3(2) of ERISA) which is intended to be qualified under Section 401 of
the Code to be amended to provide that the Retained Employees shall receive
credit for participation and vesting purposes under such plan for their period
of employment with Global and its predecessors to the extent such predecessor
employment was recognized by Global, and (iii) credit the Retained Employees
under each other employee benefit plan or policy which is not described in
clause (ii) above for their period of employment with Global or its predecessors
to the extent such predecessor employment was recognized by Global, but not in
excess of the maximum credit available to Seagull's employees under such plan or
policy.
Section 7.12 Seagull Board. Seagull shall take action to cause the number
of directors on the Seagull Board at the Effective Time to be increased by three
directors and shall use all reasonable efforts to have three individuals
designated by Global prior to the Effective Time (the "Global Designees") to be
elected by Seagull's shareholders at the Seagull Special Meeting (as defined
below) to fill such number of additional
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directors. The Global Designees shall be elected to serve in the board classes,
with the corresponding terms, set forth on Schedule 7.12.
Section 7.13 Stockholders Meetings.
(a) Approval of Global Shareholders. Global shall, as promptly as
reasonably practicable after the date hereof (i) take all steps reasonably
necessary to call, give notice of, convene and hold a special meeting of
its shareholders (the "Global Special Meeting") for the purpose of securing
the Global Shareholders' Approval, (ii) distribute to its shareholders the
Proxy Statement/Prospectus in accordance with applicable federal and state
law and with its articles of incorporation and bylaws, which Proxy
Statement/Prospectus shall contain the recommendation of the Board of
Directors of Global that its shareholders approve the Global Merger, this
Agreement and the transactions contemplated hereby, (iii) use all
reasonable efforts to solicit from its shareholders proxies in favor of the
approval and adoption of the Global Merger, this Agreement and the
transactions contemplated hereby and to secure the Global Shareholders'
Approval, and (iv) cooperate and consult with Seagull with respect to each
of the foregoing matters; provided, that nothing contained in this Section
7.4(a) shall prohibit the Global Board of Directors from failing to make or
from withdrawing or modifying its recommendation to the Global shareholders
hereunder if the Board of Directors of Global, after consultation with and
based upon the written advice of independent legal counsel, determines in
good faith that such action is necessary for such Board of Directors to
comply with its fiduciary duties to its shareholders under applicable law.
(b) Approval of Seagull Shareholders. Seagull shall, as promptly as
reasonably practicable after the date hereof (i) take all steps reasonably
necessary to call, give notice of, convene and hold a special meeting of
its shareholders (the "Seagull Special Meeting") for the purpose of
securing the Seagull Shareholders' Approval, (ii) distribute to its
shareholders the Proxy Statement/Prospectus in accordance with applicable
federal and state law and its articles of incorporation and bylaws, which
Proxy Statement/Prospectus shall contain the recommendation of the Seagull
Board of Directors that its shareholders approve the Reincorporation
Merger, this Agreement and the transactions contemplated hereby and (iii)
use all reasonable efforts to solicit from its shareholders proxies in
favor of the approval and adoption of the Reincorporation Merger, this
Agreement and the transactions contemplated hereby and to secure the
Seagull Shareholders' Approval, and (iv) cooperate and consult with Global
with respect to each of the foregoing matters; provided, that nothing
contained in this Section 7.4(b) shall prohibit the Seagull Board of
Directors from failing to make or from withdrawing or modifying its
recommendation to the Seagull shareholders hereunder if the Board of
Directors of Seagull, after consultation with and based upon the written
advice of independent legal counsel, determines in good faith that such
action is necessary for such Board of Directors to comply with its
fiduciary duties to its shareholders under applicable law.
(c) Meeting Date. The Seagull Special Meeting and the Global Special
Meeting shall be held on the same day unless otherwise agreed by Seagull
and Global.
Section 7.14 Preparation of the Proxy Statement/Prospectus and
Registration Statement.
(a) Seagull and Global shall promptly prepare and file with the SEC a
preliminary version of the Proxy Statement/Prospectus and will use all
reasonable efforts to respond to the comments of the SEC in connection
therewith and to furnish all information required to prepare the definitive
Proxy Statement/ Prospectus. At any time from (and including) the initial
filing with the SEC of the Proxy Statement/ Prospectus until the date that
is five business days after the receipt from the SEC of comments on the
Proxy Statement/Prospectus, Seagull shall file with the SEC the
Registration Statement containing the Proxy Statement/Prospectus so long as
Seagull shall have provided to Global a copy of the Registration Statement
containing the Proxy Statement/Prospectus at least ten days prior to any
filing thereof and any supplement or amendment at least two days prior to
any filing thereof. Subject to the foregoing sentence, the date that the
Registration Statement is filed with the SEC shall be determined by Seagull
in its reasonable judgment. Each of Seagull and Global shall use all
reasonable efforts to have the Registration Statement declared effective
under the Securities Act as promptly as practicable after such filing.
Seagull
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shall also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified or filing a general
consent to service of process in any jurisdiction) required to be taken
under any applicable state securities laws in connection with the issuance
of Seagull Common Stock in the Merger and Global shall furnish all
information concerning Global and the holders of shares of Global capital
stock as may be reasonably requested in connection with any such action.
Promptly after the effectiveness of the Registration Statement, each of
Seagull and Global shall cause the Proxy Statement/ Prospectus to be mailed
to its respective stockholders, and if necessary, after the definitive
Proxy Statement/Prospectus shall have been mailed, promptly circulate
amended, supplemented or supplemental proxy materials and, if required in
connection therewith, resolicit proxies. Seagull shall advise Global and
Global shall advise Seagull, as applicable, promptly after it receives
notice thereof, of the time when the Registration Statement shall become
effective or any supplement or amendment has been filed, the issuance of
any stop order, the suspension of the qualification of the Seagull Common
Stock for offering or sale in any jurisdiction, or any request by the SEC
for amendment of the Proxy Statement/Prospectus or the Registration
Statement or comments thereon and responses thereto or requests by the SEC
for additional information.
(b) Letter of Seagull's Accountants. Following receipt by KPMG Peat
Marwick LLP, Seagull's independent auditors, of an appropriate request from
Global pursuant to SAS No. 72, Seagull shall use all reasonable efforts to
cause to be delivered to Global a letter of KPMG Peat Marwick LLP, dated a
date within two business days before the effective date of the Registration
Statement, and addressed to Global, in form and substance reasonably
satisfactory to Global and customary in scope and substance for "cold
comfort" letters delivered by independent public accountants in connection
with registration statements and proxy statements similar to the Proxy
Statement/Prospectus.
(c) Letter of Global's Accountants. Following receipt by KPMG Peat
Marwick LLP, Global's independent auditors, of an appropriate request from
Seagull pursuant to SAS No. 72, Global shall use all reasonable efforts to
cause to be delivered to Seagull a letter of KPMG Peat Marwick LLP, dated a
date within two business days before the effective date of the Registration
Statement, and addressed to Seagull, in form and substance satisfactory to
Seagull and customary in scope and substance for "cold comfort" letters
delivered by independent public accountants in connection with registration
statements and proxy statements similar to the Proxy Statement/Prospectus.
(d) Fairness Opinions. Prior to mailing the Proxy Statement/Prospectus
to the shareholders of Global and Seagull (i) Seagull shall have received
an opinion from Donaldson, Lufkin & Jenrette Securities Corporation, dated
the date of the Proxy Statement/Prospectus, to the effect that, as of the
date thereof, the Common Stock Exchange Ratio is fair to the holders of
Seagull Common Stock from a financial point of view, and (ii) Global shall
have received an opinion from Petrie Parkman & Co., Inc. dated the date of
the Proxy Statement/Prospectus, to the effect that, as of the date thereof,
the consideration to be received by holders of Global Common Stock pursuant
to the Merger is fair to such holders from a financial point of view.
Section 7.15 Stock Exchange Listing. Seagull shall use all reasonable
efforts to cause the Seagull Common Stock to be issued in the Merger to be
approved for listing on the NYSE prior to the Effective Time, in each case,
subject to official notice of issuance.
Section 7.16 Notice of Certain Events. Each party to this Agreement shall
promptly as reasonably practicable notify the other parties hereto of:
(i) any notice or other communication from any Person alleging that
the consent of such Person (or other Person) is or may be required in
connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental Authority
in connection with the transactions contemplated by this Agreement;
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge, threatened against, relating to
or involving or otherwise affecting it or any of its Subsidiaries
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which, if pending on the date of this Agreement, would have been required
to have been disclosed pursuant to Sections 4.11, 4.12, 5.11 or 5.12 or
which relate to the consummation of the transactions contemplated by this
Agreement;
(iv) any notice of, or other communication relating to, a default or
event that, with notice or lapse of time or both, would become a default,
received by it or any of its Subsidiaries subsequent to the date of this
Agreement, under any material agreement; and
(v) any Global Material Adverse Effect or Seagull Material Adverse
Effect or the occurrence of any event which is reasonably likely to result
in a Global Material Adverse Effect or a Seagull Material Adverse Effect,
as the case may be.
Section 7.17 Site Inspections. Subject to compliance with applicable law
(including applicable Environmental Laws), from the date hereof until the
Effective Time, each of the parties hereto may undertake (at that party's sole
cost and expense) an environmental assessment or assessments (an "Assessment")
of any other party's operations, business and/or properties that are the subject
of this Agreement. An Assessment may include, but not be limited to, a review of
permits, files and records, as well as visual and physical inspections and
testing. Before conducting an Assessment, the party intending to conduct such
Assessment (the "Inspecting Party") shall confer with the party whose
operations, business or property is the subject of such Assessment (the
"Inspected Party") regarding the nature, scope and scheduling of such
Assessment, and shall comply with such conditions as the Inspected Party may
reasonably impose to avoid interference with the Inspected Party's operations or
business. The Inspected Party shall cooperate in good faith with the Inspecting
Party's effort to conduct an Assessment.
Section 7.18 Affiliate Agreements; Tax Treatment; Pooling.
(a) Global shall use all reasonable efforts to obtain and deliver to
Seagull on or prior to the Effective Time an executed letter agreement, in
form mutually acceptable to the parties, from (i) each person who is an
affiliate of Global on the date hereof, (ii) any person who may be deemed
to have become an affiliate of Global after the date of this Agreement and
(iii) any person whose agreement thereto may be deemed reasonably necessary
by Seagull to sustain the Merger's status as a Pooling Transaction.
(b) Seagull shall use all reasonable efforts to obtain and deliver to
Global an executed letter agreement, in form mutually acceptable to the
parties, from (i) each person who is an affiliate of Seagull on the date
hereof, (ii) any person who may be deemed to have become an affiliate of
Seagull after the date of this Agreement and (iii) any person whose
agreement thereto may be deemed reasonably necessary by Seagull to sustain
the Merger's status as a Pooling Transaction.
(c) Each party hereto shall use all reasonable efforts to cause the
Merger to qualify, and shall not take, and shall use all reasonable efforts
to prevent any subsidiary of such party from taking, any actions which
could prevent the Merger from qualifying, as a reorganization under the
provisions of Section 368(a) of the Code.
(d) Seagull shall assume the obligations of Global under that certain
Registration Rights Agreement dated August 3, 1987 between the Stockholder
and Global.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to the Obligation of Each Party. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions:
(a) The Global Shareholders' Approval and the Seagull Shareholders'
Approval shall have been obtained.
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(b) No action, suit or proceeding instituted by any Governmental
Authority shall be pending and no statute, rule or regulation and no
injunction, order, decree or judgment of any court or Governmental
Authority of competent jurisdiction shall be in effect which would
prohibit, restrain, enjoin or restrict the consummation of the Merger.
(c) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act and no stop order
suspending the effectiveness of the Registration Statement shall be in
effect and no proceeding for such purpose shall be pending before or
threatened by the SEC.
(d) Each of Global and Seagull shall have obtained such permits,
authorizations, consents, or approvals required to consummate the
transactions contemplated hereby.
(e) The shares of Seagull Common Stock to be issued in the Merger
shall have been approved for listing on the NYSE, in each case, subject to
official notice of issuance.
Section 8.2 Conditions to the Obligations of Seagull and Merger Sub. The
obligation of Seagull and Merger Sub to effect the Merger is subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Global shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior
to the Effective Time and the representations and warranties of Global
contained in this Agreement, to the extent qualified with respect to
materiality shall be true and correct in all respects, and to the extent
not so qualified shall be true and correct in all material respects, in
each case as of the date of this Agreement and at and as of the Effective
Time as if made at and as of such time, except as expressly contemplated by
the Global Disclosure Letter or this Agreement, and Seagull shall have
received a certificate of the Chief Executive Officer, Chief Operating
Officer, Corporate Counsel and Vice President -- Finance of Global as to
the satisfaction of this condition.
(b) All proceedings to be taken by Global in connection with the
transactions contemplated by this Agreement and all documents, instruments
and certificates to be delivered by Global in connection with the
transactions contemplated by this Agreement shall be reasonably
satisfactory in form and substance to Seagull and Merger Sub and their
counsel.
(c) From the date of this Agreement through the Effective Time, there
shall not have occurred any change in the financial condition, business,
operations or prospects of Global and its Subsidiaries, taken as a whole,
that would have or would be reasonably likely to have a Global Material
Adverse Effect, other than any such change that affects both Seagull and
Global in a substantially similar manner.
(d) Seagull shall have received from KPMG Peat Marwick LLP a written
opinion dated the Effective Time to the effect that the transactions
contemplated by this Agreement, including the Merger, when effected in
accordance with the terms thereof, shall be accounted for in the
consolidated financial statements of Seagull and its subsidiaries as a
Pooling Transaction, and a copy of such opinion shall have been delivered
to Global.
(e) Seagull shall have received an opinion from Vinson & Elkins L.L.P.
prior to the effectiveness of the Registration Statement to the effect that
(i) the Merger will constitute a reorganization under section 368(a) of the
Code, (ii) Seagull, Merger Sub and Global will each be a party to that
reorganization, and (iii) no gain or loss will be recognized by Seagull,
Merger Sub or Global by reason of the Merger.
Section 8.3 Conditions to the Obligations of Global. The obligation of
Global to effect the Merger is subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) Each of Seagull and Merger Sub shall have performed in all
material respects its obligations under this Agreement required to be
performed by it at or prior to the Effective Time and the representations
and warranties of each of Seagull and Merger Sub contained in this
Agreement, to the extent qualified with respect to materiality shall be
true and correct in all respects, and to the extent not so qualified shall
be true and correct in all material respects, in each case as of the date
of this Agreement
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and at and as of the Effective Time as if made at and as of such time,
except as expressly contemplated by the Seagull Disclosure Letter or this
Agreement, and Global shall have received a certificate of the Chief
Executive Officer, President, Chief Counsel and Chief Financial Officer of
Seagull and an executive officer and the chief financial officer of Merger
Sub as to the satisfaction of this condition.
(b) All proceedings to be taken by each of Seagull and Merger Sub in
connection with the transactions contemplated by this Agreement and all
documents, instruments and certificates to be delivered by each of Seagull
and Merger Sub in connection with the transactions contemplated by this
Agreement shall be reasonably satisfactory in form and substance to Global
and its counsel.
(c) From the date of this Agreement through the Effective Time, there
shall not have occurred any change in the financial condition, business,
operations or prospects of Seagull and its Subsidiaries, taken as a whole,
that would have or would be reasonably likely to have a Seagull Material
Adverse Effect, other than any such change that affects both Seagull and
Global in a substantially similar manner.
(d) Global shall have received an opinion from Fulbright & Jaworski,
L.L.P. prior to the effectiveness of the Registration Statement to the
effect that (i) the Merger will constitute a reorganization under section
368(a) of the Code, (ii) Global, Seagull and Merger Sub will each be a
party to that reorganization, and (iii) no gain or loss will be recognized
by the stockholders of Global upon the receipt of shares of Seagull Common
Stock in exchange for shares of Global Common Stock pursuant to the Merger
except with respect to any cash received in lieu of fractional share
interests.
(e) Global shall have received the opinion of Petrie Parkman, Global's
financial advisor, to the effect that, as of the date of the definitive
Proxy Statement/Prospectus, the consideration to be received in the Merger
by the holders of the Global Common Stock is fair to such holders from a
financial point of view.
ARTICLE IX
SURVIVAL
Section 9.1 Survival of Representations and Warranties. The
representations and warranties of the parties contained in this Agreement shall
not survive the Closing.
Section 9.2 Survival of Covenants and Agreements. The covenants and
agreements of the parties to be performed after the Closing contained in this
Agreement shall survive the Closing.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of Global:
(a) by the mutual written consent of Seagull and Global;
(b) by either Seagull or Global if the Effective Time shall not have
occurred on or before January 31, 1997 (provided that the right to
terminate this Agreement under this subsection (b) shall not be available
to any party who at the time of the proposed termination is in material
breach of any of its obligations under this Agreement);
(c) by Global if there has been a material breach by Seagull or Merger
Sub of any representation, warranty, covenant or agreement set forth in
this Agreement or the Voting Agreement which breach (if susceptible to
cure) has not been cured in all material respects within twenty business
days following receipt by Seagull of notice of such breach;
(d) by Seagull, if there has been a material breach by Global or the
Shareholder of any representation, warranty, covenant or agreement set
forth in this Agreement or the Voting Agreement
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which breach (if susceptible to cure) has not been cured in all material
respects within twenty business days following receipt by Global of notice
of such breach ("Global Breach");
(e) by either Global or Seagull, if there shall be any applicable
domestic law, rule or regulation that makes consummation of the Merger
illegal or if any judgment, injunction, order or decree of a court or other
Governmental Authority of competent jurisdiction shall restrain or prohibit
the consummation of the Merger, and such judgment, injunction, order or
decree shall become final and nonappealable;
(f) by either Global or Seagull, if the stockholder approvals referred
to in Section 7.13 shall not have been obtained by reason of the failure to
obtain the requisite vote upon a vote at a duly held meeting of
stockholders or at any adjournment or postponement thereof;
(g) by Seagull, if (i) the Board of Directors of Global withdraws,
modifies or changes its recommendation of this Agreement or the Merger in a
manner adverse to Seagull or shall have resolved to do any of the foregoing
or the Board of Directors of Global shall have recommended to the
stockholders of Global any Global Acquisition Proposal or resolved to do
so; (ii) a tender offer or exchange offer for outstanding shares of capital
stock of Global then representing 50% or more of the combined power to vote
generally for the election of directors is commenced, and the Board of
Directors of Global does not, within the applicable period required by law,
recommend that stockholders not tender their shares into such tender or
exchange offer; or (iii) Global does not receive the opinion contemplated
by Section 8.3(e) (unless such condition is waived by Global) within two
business days after the definitive Proxy Statement/Prospectus is otherwise
ready to printed.
(h) by Global or Seagull, if Global accepts a Superior Proposal and
makes payment as required pursuant to Section 7.5 of this Agreement and of
the Expenses for which Global is responsible under Section 7.5 of this
Agreement. For purposes of this Agreement, "Superior Proposal" means an
unsolicited bona fide proposal made by a third party relating to a Global
Acquisition Proposal on terms that the Board of Directors of Global
determines it cannot reject in favor of the Merger, based on applicable
fiduciary duties and the advice of Global's outside counsel; provided,
however,that Global shall not be permitted to terminate this Agreement
pursuant to this Section 10.1(h) unless it has used all reasonable efforts
to provide Seagull with two business days prior written notice of its
intent to so terminate this Agreement together with a detailed summary of
the terms and conditions of such Global Acquisition Proposal; provided
further, that prior to any such termination, Global shall, and shall cause
its respective financial and legal advisors to, negotiate in good faith
with Seagull to make such adjustments in the terms and conditions of this
Agreement as would enable Global to proceed with the transactions
contemplated herein, and it is acknowledged by Seagull that such
negotiations with Seagull shall be conducted in a manner consistent with
the fiduciary duties of the Global Board of Directors;
Section 10.2 Effect of Termination. In the event of termination of the
Agreement and the abandonment of the Merger pursuant to this Article X, all
obligations of the parties shall terminate, except the obligations of the
parties pursuant to this Section 10.2 and except for the provisions of Sections
7.5, 7.7, 11.8 and the last two sentences of Section 7.1, provided that nothing
herein shall relieve any party from liability for any breaches hereof.
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ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices. All notices or communications hereunder shall be in
writing (including facsimile or similar writing) addressed as follows:
To Seagull or Merger Sub:
Seagull Energy Corporation
1001 Fannin, Suite 1700
Houston, Texas 77002
Attention: Chairman
Facsimile No.: (713) 951-4733
With a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Attention: J. Mark Metts
Facsimile No.: (713) 615-5605
To Global:
Global Natural Resources Inc.
5300 Memorial Drive, Suite 800
Houston, Texas 77077
Attention: Chairman
Facsimile No.: (713) 865-4386
With a copy to:
Piliero Goldstein Jenkins & Hall, LLP
292 Madison Avenue
New York, New York 10017
Attention: Jon M. Jenkins
Facsimile No.: (212) 685-2028
Any such notice or communication shall be deemed given (i) when made, if made by
hand delivery, and upon confirmation of receipt, if made by facsimile, (ii) one
business day after being deposited with a next-day courier, postage prepaid, or
(iii) three business days after being sent certified or registered mail, return
receipt requested, postage prepaid, in each case addressed as above (or to such
other address as such party may designate in writing from time to time).
Section 11.2 Separability. If any provision of this Agreement shall be
declared to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
Section 11.3 Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, successors, and assigns; provided, however, that neither this
Agreement nor any rights hereunder shall be assignable or otherwise subject to
hypothecation and any assignment in violation hereof shall be null and void.
Section 11.4 Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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Section 11.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same Agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to each party.
Section 11.6 Entire Agreement. This Agreement represents the entire
Agreement of the parties with respect to the subject matter hereof and shall
supersede any and all previous contracts, arrangements or understandings between
the parties hereto with respect to the subject matter hereof.
Section 11.7 Governing Law. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of Texas, without
reference to rules relating to conflicts of law.
Section 11.8 Attorneys' Fees. If any action at law or equity, including an
action for declaratory relief, is brought to enforce or interpret any provision
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and expenses from the other party, which fees and expenses shall
be in addition to any other relief which may be awarded.
Section 11.9 No Third Party Beneficiaries. Except as provided in Section
7.3, no person or entity other than the parties hereto is an intended
beneficiary of this Agreement or any portion hereof.
Section 11.10 Disclosure Schedules. The disclosures made on any disclosure
schedule, including the Global Disclosure Schedule and the Seagull Disclosure
Schedule, with respect to any representation or warranty shall be deemed to be
made with respect to any other representation or warranty requiring the same or
similar disclosure to the extent that the relevance of such disclosure to other
representations and warranties is evident from the face of the disclosure
schedule. The inclusion of any matter on any disclosure schedule will not be
deemed an admission by any party that such listed matter is material or that
such listed matter has or would have a Global Material Adverse Effect or a
Seagull Material Adverse Effect, as applicable.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
SEAGULL ENERGY CORPORATION
By: /s/ BARRY J. GALT
------------------------------------
Barry J. Galt
Chairman of the Board, President
and Chief Executive Officer
GNR MERGER CORPORATION
By: /s/ BARRY J. GALT
------------------------------------
Barry J. Galt
Chairman of the Board
GLOBAL NATURAL RESOURCES INC.
By: /s/ ROBERT F. VAGT
------------------------------------
Robert F. Vagt
Chairman of the Board, President
and Chief Executive Officer
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APPENDIX B
VOTING AGREEMENT
VOTING AGREEMENT ("Agreement") dated as of July 22, 1996 between Seagull
Energy Corporation ("Seagull"), and The Prudential Insurance Company of America
(the "Stockholder").
WITNESSETH:
WHEREAS, the Stockholder beneficially owns an aggregate of 6,311,537 shares
(the "Company Shares") of Common Stock, par value $1.00 per share ("Company
Common Stock"), of Global Natural Resources Inc., a New Jersey corporation (the
"Company").
WHEREAS, the Company Shares are managed by Prudential Capital Group, an
investment unit of the Stockholder (together with representatives, employees and
agents of the Stockholder assigned thereto, the "Manager").
WHEREAS, Seagull is prepared to enter into an Agreement and Plan of Merger
with the Company (as amended from time to time, the "Merger Agreement")
providing for the merger of a wholly owned subsidiary of Seagull into the
Company and the conversion in such merger of each share of Company Common Stock
into the number of shares of the Common Stock, par value $.10 per share
("Seagull Common Stock"), of Seagull set forth in the Merger Agreement (the
"Merger");
WHEREAS, in order to encourage Seagull to enter into the Merger Agreement
with the Company, the Stockholder is willing to enter into certain arrangements
with respect to the Company Shares;
NOW, THEREFORE, in consideration of the premises set forth above, the
mutual promises set forth below, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Stockholder's Support of the Merger. From the date hereof until the
earliest to occur of (i) the termination of the Merger Agreement, (ii) January
31, 1997 and (iii) the consummation of the Merger:
(a) The Stockholder beneficially owns the Company Shares and will not,
directly or indirectly, (i) sell, transfer, pledge or otherwise dispose of
any Company Shares to any person other than Seagull or its designee unless
such person shall have agreed in writing to be bound by the terms of this
Agreement, or (ii) grant a proxy with respect to any Company Shares to any
person other than Seagull or its designee, or grant an option with respect
to any of the foregoing, or enter into any other agreement or arrangement
with respect to any of the foregoing.
(b) The Manager will not initiate, solicit or encourage (including by
way of furnishing information or assistance), or take any other action to
facilitate, any inquiries or the making of any proposal relating to, or
that may reasonably be expected to lead to, any merger, consolidation,
share exchange, business combination or similar transaction involving the
Company or any of its subsidiaries or the acquisition in any manner,
directly or indirectly, of a material equity interest in any voting
securities of, or a substantial portion of the assets of, the Company or
any of its Subsidiaries, other than the transactions contemplated by this
Agreement or the Merger Agreement (a "Competing Transaction"), or enter
into discussions or negotiate with any person or entity in furtherance of
such inquiries or to obtain a Competing Transaction, or agree to, or
endorse, any Competing Transaction, or authorize or permit any of its
officers, directors or employees of the Stockholder assigned to the Manager
or any investment banker, financial advisor, attorney, accountant or other
representative retained by the Stockholder pursuant to any request by or
suggestion of the Manager to take any such action. The Manager shall
promptly notify Seagull of all relevant terms of any such inquiries or
proposals received by the Manager or by any such officer, director,
employee, investment banker, financial advisor, attorney, accountant or
other representative relating to any of such matters and if such inquiry or
proposal is in writing, the Manager shall deliver or cause to be delivered
to Seagull a copy of such inquiry or proposal. For purposes of
clarification, the foregoing shall
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not be deemed to restrict (i) the ability of the Stockholder and its
Affiliates to engage in their investment operations (including trading and
arbitrage), including those conducted by or through the Manager or (ii)
Prudential Securities, Inc. or any division, unit, or direct or indirect
subsidiary thereof in any manner.
(c) The Stockholder agrees that it will vote all Company Shares (i) in
favor of the Merger Agreement and the Merger and (ii) subject to the
provisions of paragraph (d) below, against any combination proposal or
other matter that may interfere or be inconsistent with the Merger
(including without limitation a Competing Transaction); provided, however,
that the Stockholder shall not be required to vote any of the Company
Shares in favor of the Merger Agreement and the Merger pursuant to clause
(i) above in the event that the value of Seagull Common Stock shall be less
than $17.00 per share, which value shall be calculated based on the average
closing sales price of Seagull Common Stock, rounded to four decimal
places, as reported under "NYSE Composite Transaction Reports" in The Wall
Street Journal for each of the first 20 consecutive Trading Days in the
period commencing 25 Trading Days prior to the date of the Global Special
Meeting (as defined in the Merger Agreement); provided further, that the
Stockholder shall not be required to vote any of the Company Shares in
favor of the Merger pursuant to clause (i) above in the event that the
Stockholder has not obtained from the Securities and Exchange Commission
("SEC") any approval required under Section 9(a) of the Public Utility
Holding Company Act of 1935, as amended. The Stockholder agrees to use all
best efforts to diligently and expeditiously obtain such approval from the
SEC, and agrees to keep Seagull informed of the status of such approval
process and, upon the request of Seagull, to furnish copies of any filings
or correspondence to the SEC or its staff in connection, as well as any
orders, notices, correspondence or other communications from the SEC or its
staff. In this regard, the Stockholder acknowledges that Seagull and the
Company currently intend to hold the stockholder meetings related to the
Merger in October 1996. For purposes of this Agreement, "Trading Day" shall
mean a day on which the New York Stock Exchange (the "NYSE") is open for
trading.
(d) The Stockholder agrees that, if requested by Seagull, the Manager
will not attend and the Stockholder will not vote any Company Shares
beneficially owned by the Stockholder at any annual or special meeting of
stockholders at which a Competing Transaction is being considered, or
execute any written consent of stockholders relating directly or indirectly
to a Competing Transaction, during such period.
(e) The Stockholder hereby consents to the release by the inclusion in
Seagull's press release of the following language:
The Prudential Insurance Company of America, which holds slightly in
excess of 21 percent of Global Natural's common stock, has agreed to
support the proposed merger by its willingness to vote for the
transaction.
(f) The Stockholder acknowledges that the terms of this Agreement will
be required to be described, and this Agreement will be required to be
filed, in certain securities law filings relating to the Merger. Seagull
agrees to provide the Stockholder with a reasonable opportunity to review
any such description of the terms of this Agreement in any such filings.
(g) To the extent inconsistent with the provisions of this Section 1,
the Stockholder hereby revokes any and all proxies with respect to the
Stockholder's Company Shares or any other voting securities of the Company.
Notwithstanding anything to the contrary set forth herein, this Agreement
shall not restrict any representative, employee or agent of the Stockholder from
acting in accordance with such person's fiduciary duties as an officer or
director of the Company.
2. Miscellaneous
(a) The Stockholder, on the one hand, and Seagull, on the other,
acknowledge and agree that irreparable damage would occur if any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that
the parties
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shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state thereof
having jurisdiction, in addition to any other stockholder to which they may
be entitled at law or equity.
(b) Descriptive headings are for convenience only and shall not
control or affect the meaning or construction of any provision of this
Agreement.
(c) All notices, consents, requests, instructions, approvals and other
communications provided for herein shall be validly given, made or served,
if in writing and delivered personally, by telecopier or sent by registered
mail, postage prepaid:
If to Seagull:
Seagull Energy Corporation
1001 Fannin, Suite 1700
Houston, Texas 77002
Attention: Chairman
Facsimile No.: (713) 951-4733
With copies to:
Global Natural Resources Inc.
5300 Memorial Drive, Suite 800
Houston, Texas 77007
Attention: Chairman
Facsimile No.: (713) 865-4386
Piliero Goldstein Jenkins & Hall, LLP
292 Madison Avenue
New York, New York 10017
Attention: Jon M. Jenkins
Facsimile No.: (212) 685-2028
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Attention: J. Mark Metts
Facsimile No.: (713) 615-5605
If to the Stockholder:
The Prudential Insurance Company of America
c/o Prudential Capital Group
2200 Ross Avenue, Suite 4200E
Dallas, Texas 75201
Attention: Managing Director
Facsimile No.: (214) 720-6299
or to such other address or telecopier number as any party may, from time
to time, designate in a written notice given in a like manner. Notice given
by telecopier shall be deemed delivered on the day the sender receives
telecopier confirmation that such notice was received at the telecopier
number of the addressee. Notice given by mail as set out above shall be
deemed delivered three days after the date the same is postmarked.
(d) From and after the termination of this Agreement, the covenants of
the parties set forth herein shall be of no further force or effect and the
parties shall be under no further obligation with respect thereto.
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(e) Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(i) Affiliate. "Affiliate" shall have the meaning ascribed to it in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act,
as in effect on the date hereof.
(ii) Beneficial Owner. A person shall be deemed a "beneficial
owner" of or to have "beneficial ownership" of Company Shares in
accordance with the interpretation of the term "beneficial ownership" as
defined in Rule 13-d(3) under the Exchange Act, as in effect on the date
hereof, provided that a person shall be deemed to be the beneficial
owner of, and to have beneficial ownership of, Company Shares that such
person or any Affiliate of such person has the right to acquire (whether
such right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrant or options, or
otherwise.
(iii) Merger. "Merger" shall mean the transaction referred to in
the second whereas clause of this Agreement, or any amendment to or
modification does not reduce the value of the financial consideration to
be received by Stockholder pursuant to the transaction set forth in the
Merger Agreement.
(iv) Person. A "person" shall mean any individual, firm,
corporation, partnership, trust, limited liability company or other
entity.
(f) Due Authorization; No Conflicts. The Stockholder hereby represents
and warrants to Seagull as follows: the Stockholder has full power and
authority to enter into this Agreement. Neither the execution or delivery
of this Agreement nor the consummation of the transactions contemplated
herein will (a) conflict with or result in a breach, default or violation
of (i) any of the terms, provisions or conditions of the Certificate of
Incorporation or Bylaws of any member of the Stockholder Group or (ii) any
agreement, proxy, document, instrument, judgment, decree, order,
governmental permit, certificate, license, law, statute, rule or regulation
to which the Stockholder is a party or to which it is subject, (b) result
in the creation of any lien, charge or other encumbrance on any shares of
Company Common Stock or (c) require the Stockholder to obtain the consent
of any private nongovernmental third party. Except with respect to
consents, actions, approvals and authorizations of, and filings with, the
SEC under Sections 2(a) and/or 9(a) to the Public Utility Holding Company
Act of 1935, as amended, no consent, action, approval or authorization of,
or registration, declaration or filing with, any governmental department,
commission, agency or other instrumentality or any other person or entity
is required to authorize, or is otherwise required in connection with, the
execution and delivery of this Agreement or any Stockholder's performance
of the terms of this Agreement or the validity or enforceability of this
Agreement.
(g) Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective heirs,
personal representatives, successors and assigns, but, except as
contemplated pursuant to paragraph 1(a), shall not be assignable by any
party hereto without the prior written consent of the other parties hereto.
(h) Waiver. No party may waive any of the terms or conditions of this
Agreement except by a duly signed writing referring to the specific
provision to be waived.
(i) Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York.
(j) Entire Agreement. This Agreement constitutes the entire agreement,
and supersedes all other and prior agreements and understandings, both
written and oral, among the parties hereto and their Affiliates.
(k) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
B-4
<PAGE> 141
(l) 1935 Act. Seagull hereby represents and warrants that neither
Seagull nor any subsidiary thereof is a "holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
IN WITNESS WHEREOF, the Stockholder and Seagull have each caused this
Agreement to be duly executed by their respective officers, each of whom is duly
authorized, all as of the day and year first above written.
SEAGULL ENERGY CORPORATION
By: /s/ BARRY J. GALT
------------------------------------
Barry J. Galt
Chairman of the Board, President
and Chief Executive Officer
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ R. A. WALKER
------------------------------------
R. A. Walker
Vice President
B-5
<PAGE> 142
APPENDIX C
[FORM OF PROPOSED PETRIE PARKMAN & CO., INC. OPINION]
, 1996
The Board of Directors
Global Natural Resources Inc.
5300 Memorial Drive
Suite 800
Houston, Texas 77007-8295
Dear Directors:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the shareholders of Global Natural Resources Inc.
("Global") of the merger consideration (the "Merger Consideration") consisting
of a fraction of a share of Seagull Energy Corporation ("Seagull") common stock,
par value $0.10 per share ("Seagull Common Stock"), equal to the Common Stock
Exchange Ratio (as defined in the Merger Agreement described below) in exchange
for each share of outstanding Global common stock, par value $1.00 per share
("Global Common Stock"), pursuant to the terms of the draft merger agreement
dated as of July 21, 1996 (the "Merger Agreement"), among Global, Seagull, and a
wholly-owned subsidiary of Seagull ("Sub"). The Merger Agreement provides for
the merger (the "Merger") of Sub with and into Global pursuant to which Global
will become a wholly-owned subsidiary of Seagull and each issued and outstanding
share of Global Common Stock will be converted into a fraction of a share of
Seagull Common Stock.
In arriving at our opinion, we have, among other things:
(i) reviewed certain publicly available business and financial
information relating to Global and Seagull, including the audited financial
statements on Form 10-K for Global and Seagull as of December 31, 1995, and
the unaudited financial statements on Form 10-Q for Global and Seagull as
of March 31, 1996;
(ii) reviewed draft financial statements for Global and Seagull as of
June 30, 1996;
(iii) reviewed certain estimates of reserves including: (i) estimates
of proved, probable, and possible oil and gas reserves of Global in Egypt
and estimates of proved oil and gas reserves of Global in Cote d'Ivoire,
all as prepared by Netherland, Sewell & Associates, Inc. as of January 1,
1996 (Egypt) and December 31, 1995 (Cote d'Ivoire), (ii) estimates of
proved oil and gas reserves of Global in the United States and proved oil
reserves of Global in Russia all as prepared by Ryder Scott Company
Petroleum Engineers as of December 31, 1995, (iii) estimates of proved oil
and gas reserves of Global in Indonesia based upon publicly available
information as provided by the management and staff of Global as of
December 31, 1995, and (iv) estimates of proved and probable oil and gas
reserves of Seagull in the United States and Canada all as prepared by
DeGolyer and MacNaughton as of December 31, 1995;
(iv) reviewed certain other estimates of oil and gas reserves of
Global and Seagull as prepared by their respective managements and staffs;
(v) analyzed certain internal financial and operating forecasts and
financial and operating data and budgets concerning Global and Seagull, all
of which were prepared or provided by the management of Global or Seagull,
as the case may be;
(vi) discussed the current operations and prospects of Global and
Seagull with the management and operating staff of Global and Seagull, as
the case may be;
(vii) discussed with the management and operating staff of Global the
expected operations and prospects of the combined company, giving pro forma
effect to the Merger;
C-1
<PAGE> 143
(viii) reviewed the historical stock market prices of the shares of
Seagull Common Stock and Global Common Stock;
(ix) compared the financial terms of the Merger with the financial
terms of certain other transactions which we deemed to be relevant;
(x) reviewed the Merger Agreement and we have assumed that the final
form will not vary in any respect material to our analysis;
(xi) reviewed the principal terms of the Voting Agreement (as defined
in the Merger Agreement) and we have assumed that the final form will not
vary in any respect material to our analysis; and
(xii) made such other analyses and examinations as we have deemed
necessary or appropriate.
We have assumed and relied upon, without assuming any responsibility for
verification, the accuracy and completeness of such information, including
without limitation, the statements made in the discussions referred to above. We
have further relied upon the assurances of the managements of both Global and
Seagull that they are unaware of any facts that would make the information
provided to us incomplete or misleading in any material respect. With respect to
financial and operating forecasts, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments relating to the future financial and operational performance of
Global and Seagull. With respect to the estimates of oil and gas reserves, we
have assumed that they have been reasonably prepared on bases reflecting the
best available estimates and judgments relating to Global's and Seagull's oil
and gas properties. In addition, we have not made an independent evaluation or
appraisal of the assets or liabilities of Global or Seagull nor, except for the
estimates of oil and gas reserves referred to above, have we been furnished with
such an evaluation or appraisal. Consistent with the Merger Agreement, we have
assumed that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended, and will be treated as a "pooling of interests" for accounting
purposes.
Our opinion relates solely to the fairness from a financial point of view
to the holders of Global Common Stock of the Merger Consideration pursuant to
the Merger. We have not been requested to, and do not, express any opinion
regarding the fairness of the Merger Consideration to Seagull, or any
stockholder of Seagull. Our engagement and the opinion expressed herein are
solely for the benefit of the Global Board of Directors and are not on behalf
of, and are not intended to confer rights or remedies upon, Seagull, any holder
of Global Common Stock or Seagull Common Stock, or any person other than the
Global Board of Directors. This letter may not be used for any other purpose
without our prior written consent; provided, however, that this letter may be
reproduced in full in a proxy statement/prospectus relating to the Merger. As
you are aware, we will receive a fee that is contingent upon the consummation of
the Merger.
Our opinion is rendered on the basis of conditions in the securities
markets and the oil and gas markets prevailing as of the date hereof and the
condition and prospects, financial and otherwise, of Global and Seagull as they
have been represented to us as of the date hereof or as they were reflected in
the materials and discussions described above.
Based upon and subject to the foregoing, and based upon such other matters
as we consider relevant, it is our opinion that, as of the date hereof, the
Merger Consideration is fair from a financial point of view to the holders of
Global Common Stock.
Very truly yours,
C-2
<PAGE> 144
APPENDIX D
[FORM OF PROPOSED DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION OPINION]
, 1996
Board of Directors
Seagull Energy Corporation
1001 Fannin
Suite 1700
Houston, Texas 77002
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to Seagull Energy Corporation ("Seagull" or the "Company") and its
shareholders of the Exchange Ratio (as defined below) provided for in the
Agreement and Plan of Merger, dated as of July 22, 1996 (the "Agreement"), by
and among Seagull, a wholly-owned subsidiary of Seagull ("Merger Sub") and
Global Natural Resources Inc. ("Global") pursuant to which Merger Sub will be
merged with and into Global (the "Merger"), whereby Global will become a wholly
owned subsidiary of Seagull.
Pursuant to the Agreement, each share of common stock of Global will be
converted into Seagull common stock, $0.10 par value per share ("Company Common
Stock"), based upon a ratio (the "Exchange Ratio") to be set between 0.720 and
0.880 shares of Company Common Stock, based upon the average closing price of
Company Common Stock for a period of 20 trading days preceding the Global
special shareholders meeting with respect to the Merger.
In arriving at our opinion, we have reviewed the draft of the Agreement as
well as financial and other information that was publicly available or furnished
to us by the Company and Global including information provided during
discussions with their respective managements. Included in the information
provided during discussions with the respective managements were certain
financial projections of the Company prepared by the management of the Company,
certain financial projections of Global prepared by the management of Global and
certain financial information of the Company and Global on a combined basis
prepared by the Company. In addition, we have compared certain financial and
securities data of the Company and Global with various other companies whose
securities are traded in public markets, reviewed the historical stock prices
and trading volumes of the common stock of the Company and Global, reviewed
prices and premiums paid in other business combinations and conducted such other
financial studies, analyses and investigations as we deemed appropriate for
purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to us from public sources, that was provided to us by the Company, and
Global and their respective representatives, or that was otherwise reviewed by
us. In particular, we have relied upon the estimates of the managements of the
Company and Global of (i) the combined oil and gas reserves; (ii) projected
annual production of such reserves; and (iii) exploration success and related
production in certain domestic and international areas. In evaluating the
undeveloped and exploratory properties of Global we relied on the Company's
assessment of the likely exploratory drilling success, related annual production
and resultant economics of such operations. With respect to the financial
projections supplied to us, we have assumed that they have been reasonably
prepared on the basis reflecting the best currently available estimates and
judgments of the management of the Company and Global as to the future operating
and financial performance of the Company and Global. We have not assumed any
responsibility for making any independent evaluation of assets or liabilities of
the Company or Global or for independently verifying any of the information
reviewed by us.
D-1
<PAGE> 145
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter and does not represent an opinion as to the price at
which shares of the Company will trade following the consummation of the
Agreement. It should be understood that, although subsequent developments may
affect this opinion, we do not have any obligation to update, revise or reaffirm
this opinion. We are expressing no opinion as to the prices at which the
Company's Common Stock will actually trade at any time. Our opinion does not
constitute a recommendation to any shareholder as to how such shareholder should
vote on the proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. DLJ has performed
investment banking and other services for the Company and Global in the past and
has been compensated for such services.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Exchange Ratio is fair to the Company and its
shareholders from a financial point of view.
Very truly yours,
D-2
<PAGE> 146
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 2.02-1 of the Texas Business Corporation Act provides that any
director or officer of a Texas corporation may be indemnified against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by him
in connection with or in defending any action, suit or proceeding in which he is
a party by reason of his position. With respect to any proceeding arising from
actions taken in his official capacity, as a director or officer, he may be
indemnified so long as it shall be determined that he conducted himself in good
faith and that he reasonably believed that such conduct was in the corporation's
best interest. In cases not concerning conduct in his official capacity as a
director or officer, a director or officer may be indemnified so long as it
shall be determined that he conducted himself in good faith and that he
reasonably believed that his conduct was not opposed to the corporation's best
interest. In the case of any criminal proceeding, a director or officer may be
indemnified if he had no reasonable cause to believe his conduct was unlawful.
If a director or officer is wholly successful, on the merits or otherwise, in
connection with such a proceeding, such indemnification is mandatory.
Article VI of Seagull's Bylaws requires the indemnification of officers and
directors to the fullest extent permitted by the Texas Business Corporation Act.
Seagull also has policies insuring its officers and directors against certain
liabilities for actions taken in such capacities, including liabilities under
the Securities Act of 1933.
Reference is made to Article Eleven of the Articles of Incorporation of the
Registrant, which was adopted by Seagull's shareholders on May 11, 1988 and
which provides as follows:
"ARTICLE ELEVEN
A director of the corporation shall not be liable to the corporation or its
shareholders for monetary damages for an act or omission in the director's
capacity as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its shareholders; (ii) for
acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law; (iii) for any transaction from which the
director received an improper benefit, whether or not the benefit resulted
from an action taken within the scope of the director's office; (iv) for
acts or omissions for which the liability of a director is expressly
provided for by statute; or (v) for acts related to an unlawful stock
repurchase or dividend payment. Any repeal or amendment of this Article by
the shareholders of the corporation shall be prospective only, and shall
not adversely affect any limitation on the liability of a director of the
corporation existing at the time of such repeal or amendment. In addition
to the circumstances in which a director of the corporation is not liable
as set forth in the preceding sentences, a director shall not be liable to
the fullest extent permitted by any provision of the statutes of Texas
hereafter enacted that further limits the liability of a director."
Effective as of August 28, 1989, Article 7.06.B of the Texas Miscellaneous
Corporation Laws Act was amended to read in its entirety as follows:
"B. The articles of incorporation of a corporation may provide that a
director of the corporation shall not be liable, or shall be liable only to
the extent provided in the articles of incorporation, to the corporation or
its shareholders or members for monetary damages for an act or omission in
the director's capacity as a director, except that this article does not
authorize the elimination or limitation of the liability of a director to
the extent the director is found liable for:
(1) a breach of the director's duty of loyalty to the corporation
or its shareholders or members;
(2) an act or omission not in good faith that constitutes a breach
of duty of the director to the corporation or an act or omission that
involves intentional misconduct or a knowing violation of the law;
II-1
<PAGE> 147
(3) a transaction from which the director received an improper
benefit, whether or not the benefit resulted from an action taken within
the scope of the director's office; or
(4) an act or omission for which the liability of a director is
expressly provided for by an applicable statute."
The Merger Agreement provides that Seagull will maintain certain
indemnification and limitation of liability provisions in Global's Restated
Certificate of Incorporation and By-Laws for a period of six years after the
Effective Time of the Merger (as such terms are defined in the Merger Agreement)
and will continue for six years Global's directors and officers liability
insurance, subject to certain limitations.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<S> <C>
2.1 -- Agreement and Plan of Merger dated as of July 22, 1996 by and among
Seagull Energy Corporation, GNR Merger Corporation and Global Natural
Resources Inc. (included as Appendix A to the Joint Proxy
Statement/Prospectus).
2.2 -- Voting Agreement dated as of July 22, 1996 among Seagull Energy
Corporation and The Prudential Life Insurance Company (included as
Appendix B to the Joint Proxy Statement/Prospectus).
2.3 -- Letter agreement regarding adoption of termination policy by and
between Seagull Energy Corporation and Global Natural Resources Inc.
3.1 -- Articles of Incorporation of Seagull, as amended, including Articles
of Amendment filed May 12, 1988, May 21, 1991, and May 21, 1993 with
the Secretary of State of the State of Texas, that certain Statement
of Relative Rights and Preferences related to the designation and
issuance of Seagull's $2.25 Convertible Exchangeable Preferred Stock,
Series A, filed August 6, 1986 with the Secretary of State of the
State of Texas and that certain Statement of Resolution Establishing
Series of Shares of Series B Junior Participating Preferred Stock of
Seagull Energy Corporation filed March 21, 1989 with the Secretary of
State of the State of Texas (incorporated by reference to Exhibit 3.1
to Quarterly Report on Form 10-Q for the quarter ended June 30,
1993).
3.2 -- Bylaws of Seagull, as amended through March 17, 1995 (incorporated by
reference to Exhibit 3.1 to Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995).
3.3 -- Rights Agreement dated as of March 17, 1989 between Seagull and NCNB
Texas National Bank, as Rights Agent, which includes the form of
Statement of Resolution setting forth the terms of the Series B
Junior Participating Preferred Stock, par value $1.00 per share, as
Exhibit A, the form of Right Certificate as Exhibit B and the Summary
of Rights to Purchase Preferred Shares as Exhibit C (incorporated by
reference to Exhibit 4.8 to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993).
3.4 -- First Amendment to Rights Agreement by and between Seagull and
NationsBank of Texas, N.A. (formerly NCNB Texas National Bank) dated
as of June 18, 1992 (incorporated by reference to Exhibit 3.4 to
Registration Statement on Form S-3 (File No. 33-55426)).
*5.1 -- Opinion of Vinson & Elkins L.L.P. regarding the legality of the
securities.
*8.1 -- Opinion of Fulbright & Jaworski, L.L.P. regarding tax matters.
*23.1 -- Consent of Vinson & Elkins L.L.P. (set forth in Exhibit 5.1).
*23.2 -- Consent of Fulbright & Jaworski, L.L.P. (set forth in Exhibit 8.1).
</TABLE>
II-2
<PAGE> 148
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<S> <C>
23.3 -- Consent of KPMG Peat Marwick LLP (Seagull).
23.4 -- Consent of KPMG Peat Marwick LLP (Global).
23.5 -- [Intentionally left blank]
23.6 -- Consent of Ryder Scott Company, independent petroleum engineers
(Seagull)
23.7 -- Consent of Ryder Scott Company, independent petroleum engineers
(Global)
23.8 -- Consent of DeGolyer and MacNaughton, independent consulting petroleum
engineers (Seagull)
23.9 -- Consent of Netherland, Sewell & Associates, Inc., independent
consulting petroleum engineers (Seagull)
23.10 -- Consent of Netherland, Sewell & Associates, Inc., independent
consulting petroleum engineers (Global)
23.11 -- Consent of Petrie Parkman & Co. Incorporated
23.12 -- Consent of Donaldson, Lufkin & Jenrette Securities Corporation
23.13 -- Consent of Robert F. Vagt as a person to be named as a director
23.14 -- Consent of Sidney R. Petersen as a person to be named as a director
23.15 -- Consent of R. A. Walker as a person to be named as a director
24.1 -- Powers of Attorney (set forth on signature page).
*99.1 -- Form of Seagull Proxy.
*99.2 -- Form of Global Proxy.
</TABLE>
- ---------------
* To be filed by amendment.
Financial Statement Schedules:
Any required Financial Statement Schedules have previously been filed as
part of Seagull's Form 10-K for the fiscal year ended December 31, 1995.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required in Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement;
II-3
<PAGE> 149
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof;
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding
to the request;
(6) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form;
(7) That every prospectus (i) that is filed pursuant to paragraph (6)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and Seagull being acquired involved therein, that
was not the subject of and included in the Registration Statement when it
became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE> 150
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 9th day of August, 1996.
SEAGULL ENERGY CORPORATION
By: /s/ BARRY J. GALT
------------------------------------
Barry J. Galt
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
POWER OF ATTORNEY
Each person whose signature appears below appoints Barry J. Galt and
William L. Transier, and both of them, either of whom may act without the
joinder of the other, as his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him, and in his name, place
and stead, in any and all capacities to sign any and all amendments (including
post-effective amendments) to this registration statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J. EVANS ATTWELL Director August 9, 1996
- ------------------------------------------
(J. Evans Attwell)
/s/ RODNEY W. BRIDGES Vice President and Controller August 9, 1996
- ------------------------------------------ (Principal Accounting
(Rodney W. Bridges) Officer)
Director
- ------------------------------------------
(Richard J. Burgess)
Director
- ------------------------------------------
(Thomas H. Cruikshank)
/s/ JOHN W. ELIAS Executive Vice President and August 9, 1996
- ------------------------------------------ Director
(John W. Elias)
/s/ PETER J. FLUOR Director August 9, 1996
- ------------------------------------------
(Peter J. Fluor)
/s/ BARRY J. GALT Chairman of the Board, August 9, 1996
- ------------------------------------------ President, Chief Executive
(Barry J. Galt) Officer and Director
(Principal Executive
Officer)
</TABLE>
II-5
<PAGE> 151
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ -----------------
<S> <C> <C>
/s/ WILLIAM R. GRANT Director August 9, 1996
- ------------------------------------------
William R. Grant
/s/ DEAN P. GUERIN Director August 9, 1996
- ------------------------------------------
(Dean P. Guerin)
Director
- ------------------------------------------
(Richard M. Morrow)
/s/ DEE S. OSBORNE Director August 9, 1996
- ------------------------------------------
(Dee S. Osborne)
/s/ SAM F. SEGNAR Director August 9, 1996
- ------------------------------------------
(Sam F. Segnar)
/s/ WILLIAM L. TRANSIER Senior Vice President and August 9, 1996
- ------------------------------------------ Chief Financial Officer
(William L. Transier) (Principal Financial
Officer)
</TABLE>
II-6
<PAGE> 152
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<S> <C>
2.1 -- Agreement and Plan of Merger dated as of July 22, 1996 by and among Seagull
Energy Corporation, GNR Merger Corporation and Global Natural Resources Inc.
(included as Appendix A to the Joint Proxy Statement/Prospectus).
2.2 -- Voting Agreement dated as of July 22, 1996 among Seagull Energy Corporation and
The Prudential Life Insurance Company (included as Appendix B to the Joint
Proxy Statement/Prospectus).
2.3 -- Letter Agreement regarding adoption of termination policy by and between
Seagull Energy Corporation and Global Natural Resources Inc.
3.1 -- Articles of Incorporation of Seagull, as amended, including Articles of
Amendment filed May 12, 1988, May 21, 1991, and May 21, 1993 with the Secretary
of State of the State of Texas, that certain Statement of Relative Rights and
Preferences related to the designation and issuance of Seagull's $2.25
Convertible Exchangeable Preferred Stock, Series A, filed August 6, 1986 with
the Secretary of State of the State of Texas and that certain Statement of
Resolution Establishing Series of Shares of Series B Junior Participating
Preferred Stock of Seagull Energy Corporation filed March 21, 1989 with the
Secretary of State of the State of Texas (incorporated by reference to Exhibit
3.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1993).
3.2 -- Bylaws of Seagull, as amended through March 17, 1995 (incorporated by reference
to Exhibit 3.1 to Quarterly Report on Form 10-Q for the quarter ended March 31,
1995).
3.3 -- Rights Agreement dated as of March 17, 1989 between Seagull and NCNB Texas
National Bank, as Rights Agent, which includes the form of Statement of
Resolution setting forth the terms of the Series B Junior Participating
Preferred Stock, par value $1.00 per share, as Exhibit A, the form of Right
Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares
as Exhibit C (incorporated by reference to Exhibit 4.8 to Quarterly Report on
Form 10-Q for the quarter ended June 30, 1993).
3.4 -- First Amendment to Rights Agreement by and between Seagull and NationsBank of
Texas, N.A. (formerly NCNB Texas National Bank) dated as of June 18, 1992
(incorporated by reference to Exhibit 3.4 to Registration Statement on Form S-3
(File No. 33-55426)).
*5.1 -- Opinion of Vinson & Elkins L.L.P. regarding the legality of the securities.
*8.1 -- Opinion of Fulbright & Jaworski, L.L.P. regarding tax matters.
*23.1 -- Consent of Vinson & Elkins L.L.P. (set forth in Exhibit 5.1).
*23.2 -- Consent of Fulbright & Jaworski, L.L.P. (set forth in Exhibit 8.1).
23.3 -- Consent of KPMG Peat Marwick LLP (Seagull).
23.4 -- Consent of KPMG Peat Marwick LLP (Global).
23.5 -- [Intentionally left blank.]
23.6 -- Consent of Ryder Scott Company, independent petroleum engineers (Seagull)
23.7 -- Consent of Ryder Scott Company, independent petroleum engineers (Global)
23.8 -- Consent of DeGolyer and MacNaughton, independent consulting petroleum engineers
(Seagull)
23.9 -- Consent of Netherland, Sewell & Associates, Inc., independent consulting
petroleum engineers (Seagull)
23.10 -- Consent of Netherland, Sewell & Associates, Inc., independent consulting
petroleum engineers (Global)
23.11 -- Consent of Petrie Parkman & Co. Incorporated
</TABLE>
<PAGE> 153
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<S> <C>
23.12 -- Consent of Donaldson, Lufkin & Jenrette Securities Corporation
23.13 -- Consent of Robert F. Vagt as a person to be named as a director
23.14 -- Consent of Sidney R. Petersen as a person to be named as a director
23.15 -- Consent of R. A. Walker as a person to be named as a director
24.1 -- Powers of Attorney (set forth on signature page).
*99.1 -- Form of Seagull Proxy.
*99.2 -- Form of Global Proxy.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 2.3
SEAGULL ENERGY CORPORATION
1001 Fannin, Suite 1700
Houston, Texas 77002-6714
August 8, 1996
Global Natural Resources Inc.
5300 Memorial, Suite 800
Houston, Texas 77007
Ladies and Gentlemen:
Seagull Energy Corporation ("Seagull") hereby agrees to cause the due
adoption of the policy described in the attached Exhibit A. Seagull acknowledges
that such adoption is an essential term of the proposed Merger, as defined in
the Agreement and Plan of Merger (the "Merger Agreement") dated as of July 22,
1996 among Seagull, GNR Merger Corporation and Global Natural Resources Inc.
("Global"). Capitalized terms used herein or in Exhibit A without definition
shall have the respective meanings set forth in the Merger Agreement. The
parties hereto acknowledge that this letter agreement is for the benefit of
Global and that there are no third party beneficiaries to this letter agreement.
Please sign below to acknowledge the terms of this letter agreement.
Sincerely,
SEAGULL ENERGY CORPORATION
By: /s/ William L. Transier
___________________________________
William L. Transier
Senior Vice President and
Chief Financial Officer
ACKNOWLEDGED:
GLOBAL NATURAL RESOURCES INC.
By: /s/ E. Lynn Hill
___________________________________
E. Lynn Hill
Senior Vice President - Finance
<PAGE> 2
EXHIBIT A
Promptly following the Effective Time, Seagull will duly adopt a policy, in
form mutually agreeable to Seagull and Global, in their reasonable judgment,
covering each Retained Employee to provide that if at any time during the
period ending on the second anniversary of the Effective Time, the employment
of such Retained Employee is terminated for any reason (other than for cause)
or such Retained Employee terminates his employment because of a modification
in his duties or responsibilities in an adverse manner following the Effective
Time, then (i) all Global Stock Options (after giving effect to the Merger
Agreement) and all options to acquire Seagull Common Stock ("Seagull Stock
Options") granted to such Retained Employee following the Effective Time that
in each case were exercisable as of the date of termination of his employment
(the "Termination Date") shall continue to be exercisable by such Retained
Employee, his estate or any person who acquired any such Global Stock Options
or Seagull Stock Options by will or the laws of descent and distribution at any
time on or before the first anniversary of the Termination Date, and (ii) the
vesting of all Global Stock Options and Seagull Stock Options that were held by
such Retained Employee but were not exercisable as of the Termination Date
shall, on and as of the Termination Date, be accelerated and such options shall
be exercisable in full by him, his estate or any person who acquired any such
Global Stock Options or Seagull Stock Options by will or the laws of descent
and distribution at any time on or before the first anniversary of the
Termination Date. The policy described above shall contain provisions that
limit its applicability to any incentive stock option (within the meaning of
the Internal Revenue Code of 1986, as amended (the "Code")) if and to the
extent that such applicability would result in a "modification" (within the
meaning of the Code and the rules thereunder) of any such incentive stock
option.
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Seagull Energy Corporation:
We consent to the incorporation by reference in the registration statement
to be filed on Form S-4 of Seagull Energy Corporation of our report dated
January 23, 1996, relating to the consolidated balance sheets of Seagull Energy
Corporation and Subsidiaries as of December 31, 1995 and 1994 and the related
consolidated statements of earnings, shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1995, which report
appears or is incorporated by reference in the December 31, 1995 Annual Report
on Form 10-K of Seagull Energy Corporation and to the reference to our firm
under the heading "Experts" in the joint proxy statement/prospectus.
Our report refers to a change in accounting principle for the adoption of
the Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of."
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
August 8, 1996
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Global Natural Resources Inc.:
We consent to the incorporation by reference in the registration statement
to be filed on Form S-4 of Seagull Energy Corporation of our report dated
February 27, 1996, relating to the consolidated balance sheets of Global Natural
Resources Inc. and subsidiaries as of December 31, 1995 and 1994 and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1995, which report
appears in the December 31, 1995 Annual Report on Form 10-K of Global Natural
Resources Inc. and to the reference to our firm under the heading "Experts" in
the joint proxy statement/prospectus.
Our report refers to changes in accounting principles for the adoption of
the Financial Accounting Standards Board ("FASB") Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," and FASB Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Debt and Equity
Securities."
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
August 8, 1996
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
We hereby consent to the incorporation by reference of our name in the
Annual Report on Form 10-K of Seagull Energy Corporation and subsidiaries (the
"Company") for the year ended December 31, 1995 into the Company's Registration
Statement on Form S-4, to which this consent is an exhibit.
We hereby consent to the references to our firm under the heading "Experts"
in the joint proxy statement/prospectus included in the Registration Statement.
/s/ RYDER SCOTT COMPANY PETROLEUM ENGINEERS
-------------------------------------------------------
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
August 7, 1996
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
We hereby consent to the incorporation by reference of our name in the
Annual Report on Form 10-K of Global Natural Resources Inc. and subsidiaries
(the "Company") for the year ended December 31, 1995 into the Registration
Statement on Form S-4 Seagull Energy Corporation, to which this consent is an
exhibit.
We hereby consent to the references to our firm under the heading "Experts"
in the joint proxy statement/prospectus included in the Registration Statement.
/s/ RYDER SCOTT COMPANY PETROLEUM ENGINEERS
-------------------------------------------------------
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
August 7, 1996
<PAGE> 1
EXHIBIT 23.8
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
We hereby consent to the use of our name in the Annual Report to
Shareholders of Seagull Energy Corporation and Subsidiaries (the Company) for
the year ended December 31, 1995 (the Annual Report), in Note 7, Supplemental
Gas and Oil Producing Activities, of Notes to Consolidated Financial Statements.
The Company's Annual Report on Form 10-K for the year ended December 31, 1995
(the Form 10-K) incorporates by references the Annual Report. We further consent
to the use of our name under the heading "Exploration and Production" of Item 1
in the Form 10-K and the incorporation by reference of our name in the Form 10-K
into the Company's Registration Statement on Form S-4, to which this consent is
an exhibit.
We further consent to the references to our firm under the heading
"Experts" in any joint proxy statement/prospectus included in the Registration
Statement.
/s/ DeGOLYER and MacNAUGHTON
--------------------------------------
DeGOLYER and MacNAUGHTON
Dallas, Texas
August 6, 1996
<PAGE> 1
EXHIBIT 23.9
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
We hereby consent to use of our name in the Annual Report on Form 10-K of
Seagull Energy Corporation and Subsidiaries (the "Company") for the year ended
December 31, 1995, and the incorporation by reference thereof into the Company's
Registration Statement on Form S-4 filed in August 1996.
We hereby consent to the references to our firm under the heading "Experts"
in any joint proxy statement/prospectus included in the Registration Statement
on Form S-4.
NETHERLAND, SEWELL & ASSOCIATES, INC.
By: /s/ FREDERIC D. SEWELL
----------------------------------------
Frederic D. Sewell
President
Dallas, Texas
August 8, 1996
<PAGE> 1
EXHIBIT 23.10
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
We hereby consent to use of our name in the Annual Report on Form 10-K of
Global Natural Resources, Inc. for the year ended December 31, 1995, and the
incorporation by reference thereof into the Registration Statement on Form S-4
of Seagull Energy Corporation and Subsidiaries filed in August 1996.
We hereby consent to the references to our firm under the heading "Experts"
in any joint proxy statement/prospectus included in the Registration Statement
on Form S-4.
NETHERLAND, SEWELL & ASSOCIATES, INC.
By: /s/ FREDERIC D. SEWELL
----------------------------------------
Frederic D. Sewell
President
Dallas, Texas
August 8, 1996
<PAGE> 1
EXHIBIT 23.11
CONSENT OF PETRIE PARKMAN
The undersigned hereby consents to the use of its opinion letter dated July
21, 1996 to the Board of Directors of Global Natural Resources Inc. in the Joint
Proxy Statement/Prospectus forming a part of this Registration Statement on Form
S-4 and to the references to such opinion in this Registration Statement on Form
S-4. In giving such consent, we do not admit and we hereby disclaim that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we hereby admit and we
hereby disclaim that we are experts with respect to any part of the Registration
Statement within the meaning of the term "expert" as used in the Securities Act
of 1933, as amended, or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
/s/ PETRIE PARKMAN & CO.
Petrie Parkman & Co.
August 9, 1996
<PAGE> 1
EXHIBIT 23.12
CONSENT
The undersigned hereby consents to the use of its opinion letter dated July
22, 1996 to the Board of Directors of Seagull Energy Corporation in the Joint
Proxy Statement/Prospectus forming a part of this Registration Statement on Form
S-4 (this "Registration Statement") and to the references to such opinion and
the undersigned in this Registration Statement. In giving such consent, the
undersigned does not admit and it hereby disclaims that it comes within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended (the "Securities Act"), or the rules and regulations of
the Securities and Exchange Commission promulgated thereunder (the "Rules and
Regulations"), nor does the undersigned hereby admit and it hereby disclaims
that it is an expert with respect to any part of this Registration Statement
within the meaning of the term "expert" as used in the Securities Act or the
Rules and Regulations.
August 9, 1996 Donaldson, Lufkin & Jenrette
Securities Corporation
By: /s/ GEOFFREY STERN
--------------------------------------
Name: Geoffrey Stern
Title: Managing Director
<PAGE> 1
EXHIBIT 23.13
CONSENT
I anticipate becoming a director of Seagull Energy Corporation ("Seagull")
upon consummation of the proposed merger of Global Natural Resources Inc. with a
subsidiary of Seagull, and hereby consent to the reference to me and my becoming
a director of Seagull which is included in the Registration Statement on Form
S-4 relating to such merger and in the related Joint Proxy Statement/Prospectus
included therein, and further consent to the filing of this consent as an
exhibit to such Registration Statement.
/s/ ROBERT F. VAGT
--------------------------------------
August 4, 1996
<PAGE> 1
EXHIBIT 23.14
CONSENT
I anticipate becoming a director of Seagull Energy Corporation ("Seagull")
upon consummation of the proposed merger of Global Natural Resources Inc. with a
subsidiary of Seagull, and hereby consent to the reference to me and my becoming
a director of Seagull which is included in the Registration Statement on Form
S-4 relating to such merger and in the related Joint Proxy Statement/Prospectus
included therein, and further consent to the filing of this consent as an
exhibit to such Registration Statement.
/s/ SIDNEY R. PETERSEN
August 5, 1996
<PAGE> 1
EXHIBIT 23.15
CONSENT
I anticipate becoming a director of Seagull Energy Corporation ("Seagull")
upon consummation of the proposed merger of Global Natural Resources Inc. with a
subsidiary of Seagull, and hereby consent to the reference to me and my becoming
a director of Seagull which is included in the Registration Statement on Form
S-4 relating to such merger and in the related Joint Proxy Statement/Prospectus
included therein, and further consent to the filing of this consent as an
exhibit to such Registration Statement.
/s/ R. A. WALKER
--------------------------------------
August 6, 1996
