<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
SEAGULL ENERGY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[LOGO]
SEAGULL ENERGY CORPORATION
HOUSTON, TEXAS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, MAY 14, 1996
To the Shareholders:
The 1996 Annual Meeting of Shareholders (the "Annual Meeting") of Seagull
Energy Corporation (the "Company") will be held on Tuesday, May 14, 1996 at
10:00 a.m., local time, in the Grand Ballroom of the Four Seasons Hotel, 1300
Lamar Street, Houston, Texas, for the following purposes:
1. To elect three directors to serve until the 1999 Annual Meeting of
Shareholders;
2. To ratify the selection of KPMG Peat Marwick LLP as independent auditors
of the Company for the fiscal year ending December 31, 1996; and
3. To transact such other business as may properly come before such meeting
or any adjournment(s) or postponement(s) thereof.
The close of business on March 20, 1996, has been fixed as the record date
for the determination of shareholders entitled to receive notice of and to vote
at the Annual Meeting or any adjournment(s) or postponement(s) thereof.
You are cordially invited to attend the Annual Meeting. WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING, WE ASK THAT YOU SIGN AND RETURN THE ENCLOSED
PROXY AS PROMPTLY AS POSSIBLE. A SELF-ADDRESSED, POSTPAID ENVELOPE IS ENCLOSED
FOR YOUR CONVENIENCE.
By Order of the Board of Directors,
/s/ Sylvia Sanchez
Sylvia Sanchez
Secretary
March 29, 1996
<PAGE> 3
SEAGULL ENERGY CORPORATION
1001 FANNIN, SUITE 1700
HOUSTON, TEXAS 77002
(713) 951-4700
-------------------------------
PROXY STATEMENT
-------------------------------
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of Directors
(the "Board of Directors" or the "Board") of Seagull Energy Corporation (the
"Company") for use at the 1996 Annual Meeting of Shareholders (the "Annual
Meeting") to be held on Tuesday, May 14, 1996 at 10:00 a.m., local time, in the
Grand Ballroom of the Four Seasons Hotel, 1300 Lamar Street, Houston, Texas, or
at any adjournment(s) or postponement(s) thereof. The solicitation of proxies by
the Board of Directors will be conducted primarily by mail. Georgeson & Company
Inc. has been retained to assist the Company in the solicitation of proxies in
connection with the Annual Meeting for a fee of $10,000, plus out-of-pocket
expenses. In addition, officers, directors and employees of the Company may
solicit proxies personally or by telephone, telegram or other forms of wire or
facsimile communication. The Company will reimburse brokers, custodians,
nominees and fiduciaries for reasonable expenses incurred by them in forwarding
proxy material to beneficial owners of common stock of the Company ("Common
Stock"). The costs of the solicitation will be borne by the Company. This proxy
statement and the form of proxy were first mailed to shareholders of the Company
on or about March 29, 1996.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to the voting of the proxy (a) by the execution and submission of
a revised proxy, (b) by written notice to the Secretary of the Company or (c) by
voting in person at the Annual Meeting. In the absence of such revocation,
shares represented by the proxies will be voted at the Annual Meeting.
At the close of business on March 20, 1996, the record date for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting, there were outstanding 36,354,466 shares of Common Stock, each share of
which is entitled to one vote. Common Stock is the only class of outstanding
securities of the Company entitled to notice of and to vote at the Annual
Meeting.
Seagull's annual report to shareholders for the year ended December 31,
1995, including financial statements, is being mailed herewith to all
shareholders entitled to vote at the Annual Meeting. The annual report does not
constitute a part of the proxy soliciting material.
ELECTION OF DIRECTORS
Three directors are to be elected at the Annual Meeting. The Company's
Bylaws provide for a classified Board of Directors. Thus, the Board of Directors
is divided into Classes I, II and III, the terms of office of which are
currently scheduled to expire, respectively, on the dates of the Company's
Annual Meetings of Shareholders in 1996, 1997 and 1998. Thomas H. Cruikshank,
John W. Elias and Sam F. Segnar have been nominated to serve in Class I and, if
elected, will serve until the Company's 1999 Annual Meeting of Shareholders and
until their respective successors shall have been elected and qualified. Each of
the nominees for director currently serves as a director of the Company. The
remaining eight directors named below will not be required to stand for election
at the Annual Meeting because their present terms expire in either 1997 or 1998.
A plurality of the votes cast in person or by proxy by the holders of Common
Stock is required to elect a director. Accordingly, under Texas law and the
Company's Articles of Incorporation and Bylaws, abstentions and broker non-votes
would have no effect on the election of directors. A broker non-vote occurs if a
broker or other nominee does not have discretionary authority and has not
received instructions with respect to a particular item. Shareholders may not
cumulate their votes in the election of directors.
<PAGE> 4
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted FOR the election of the nominees listed below.
Although the Board of Directors does not contemplate that any of the nominees
will be unable to serve, if such a situation arises prior to the Annual Meeting,
the persons named in the enclosed proxy will vote for the election of such other
person(s) as may be nominated by the Board of Directors.
The following table sets forth information regarding the names, ages and
principal occupations of the nominees and directors, directorships in other
companies held by them and the length of continuous service as a director of the
Company:
<TABLE>
<CAPTION>
NOMINEES AND DIRECTOR
DIRECTORS PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE SINCE
- ----------------------------- ---------------------------------------------- --- --------
<S> <C> <C> <C>
CLASS I NOMINEES
- -------------------
Thomas H. Cruikshank......... Retired Chairman and Chief Executive Officer 64 1996
of Halliburton Company; Director, Central
and Southwest Corporation, The Goodyear Tire
& Rubber Company and The Williams
Companies, Inc.
John W. Elias................ Executive Vice President and Chief Operating 55 1993
Officer of the Company
Sam F. Segnar................ Retired Chairman of the Board and Chief 68 1986
Executive Officer, Enron Corp.; Director,
Hartmarx Corporation, MAPCO, Inc. and Textron,
Inc.; Advisory Director, Gulf States Utilities
Company
CLASS II DIRECTORS
- -------------------
Peter J. Fluor............... President and Chief Executive Officer, Texas 48 1980
Crude Energy, Inc. (independent oil and gas
company); Director, Fluor Corporation
Barry J. Galt................ Chairman of the Board, President and Chief 62 1983
Executive Officer of the Company; Director,
Standard Insurance Company and Trinity
Industries, Inc.
Dean P. Guerin............... Retired Chairman, Eppler, Guerin and Turner 74 1982
and Berry-Barnett Food Distribution Co., Inc.;
Director, Lone Star Technologies and Trinity
Industries, Inc.
Robert W. Shower............. Executive Vice President and Chief Financial 58 1992
Officer of the Company; Director, Highlands
Insurance Group, Inc. and Lear Corporation
CLASS III DIRECTORS
- --------------------
J. Evans Attwell............. Vinson & Elkins L.L.P.; Director, American 65 1974
General Corporation
William R. Grant............. Chairman, Galen Associates (venture capital 71 1986
health care); Director, Allergan, Inc., Fluor
Corporation, MiniMed, Inc., New York Life
Insurance Company, SmithKline Beecham, p.l.c.
and Witco Corporation
Richard M. Morrow............ Retired Chairman of the Board and Chief 70 1992
Executive Officer, Amoco Corporation;
Director, Marsh & McLennan Companies, Inc.,
Potlatch Corporation and Westinghouse Electric
Corporation
Dee S. Osborne............... President, Finial Investment Corporation 65 1983
(investments); Director, EOTT Energy Corp.
(the general partner of EOTT Energy Partners,
L.P.); and Chairman and Director, People's
Choice TV of Houston, Inc.
</TABLE>
Each of the nominees and directors named above has been engaged in the
principal occupation set forth opposite his name for the past five years except
as follows:
2
<PAGE> 5
Mr. Cruikshank served as an officer of Halliburton Company since 1969, a
Director since 1977, its Chief Executive Officer since 1983 and its Chairman
since 1989. Mr. Cruikshank retired from Halliburton in January 1996.
Mr. Elias served for 30 years with Amoco Production Company and its parent,
Amoco Corporation, in a variety of operational and management positions. Most
recently, he served as Executive Vice President of Natural Gas for Amoco
Production from November 1988 to January 1993. Mr. Elias was elected Executive
Vice President of the Company in March 1993 and was appointed Chief Operating
Officer as of January 1, 1995.
Mr. Segnar served as Chairman of the Board and Chief Executive Officer of
HNG/InterNorth, Inc. (now Enron Corp.) from 1984 until his retirement in early
1986. He served as Chairman of the Board of Vista Chemical, Inc. from October
1986 to October 1988 and as Chairman of the Board of Collecting Bank, National
Association from April 1988 to February 1993.
Mr. Guerin served as Chairman of the Board of Eppler, Guerin & Turner, Inc.
(an investment banking firm) from 1951 until his retirement in December 1987. He
served as Chairman of the Board of Berry-Barnett Food Distribution Co., Inc.
from 1990 until 1994.
Mr. Shower served for 22 years with The Williams Companies, Inc., most
recently as Executive Vice President, Finance and Administration and a director
until 1986. He served as Managing Director, Corporate Finance, for Lehman
Brothers Inc. (formerly Shearson Lehman Hutton) from 1986 to 1990. He served as
Vice President and Chief Financial Officer with AmeriServ Food Company from 1990
to 1991. He served as Senior Vice President, Corporate Development for Albert
Fisher, Inc. from 1991 to 1992. Mr. Shower joined the Company as Senior Vice
President and Chief Financial Officer in March 1992 and was named to his present
position in December 1993. Mr. Shower will resign as an executive officer and
employee of the Company prior to the Annual Meeting.
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth Common Stock beneficially owned by (i) each
nonemployee director, (ii) the CEO and each of the other four most highly
compensated executive officers (the "Named Officers") and (iii) the directors,
Named Officers and other executive officers of the Company as a group:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(1)
----------------------------------
NUMBER PERCENT
OF SHARES OF CLASS
--------- --------
<S> <C> <C>
NONEMPLOYEE DIRECTORS:
J. Evans Attwell.......................... 36,000(2) *
Thomas H. Cruikshank...................... 5,000 *
Peter J. Fluor............................ 27,998(2)(3) *
William R. Grant.......................... 7,600(2) *
Dean P. Guerin............................ 46,000(2) *
Richard M. Morrow......................... 12,000(2) *
Dee S. Osborne............................ 42,800(2) *
Sam F. Segnar............................. 7,400(2) *
George M. Sullivan(4)..................... 7,000(2) *
NAMED OFFICERS:
Barry J. Galt............................. 695,294(2)(5)(6)(7) 1.9%
John W. Elias............................. 25,925(2)(5)(6)(7) *
Robert W. Shower.......................... 44,270(2)(5)(6)(7) *
Richard F. Barnes......................... 73,420(2)(8) *
Thomas P. McConn.......................... 86,675(2)(5)(6)(7) *
DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP
(18 PERSONS).............................. 1,232,772(8) 3.3%
</TABLE>
- ---------------
* Less than 1%.
3
<PAGE> 6
(1) Unless otherwise indicated, beneficial owners have sole voting and
investment power with respect to the shares listed. Amounts shown are as of
March 20, 1996, except for amounts held by the trustee of the Company's
Thrift Plan and Employee Stock Ownership Plan, which are as of December 31,
1995.
(2) Includes a portion of the 781,020 shares that the nonemployee directors and
the above Named Officers have a right to purchase within 60 days pursuant
to stock options ("Options") granted under the Company's stock option
plans. Such shares are allocated as follows: each nonemployee director,
except Mr. Cruikshank, -- 6,000, Mr. Galt -- 550,000, Mr. Elias -- 20,000,
Mr. Shower -- 30,000, Mr. Barnes -- 61,420 and Mr. McConn -- 71,600. Prior
to exercising these Options, the directors and officers will have no voting
or investment power with respect to said shares.
(3) Includes 4,000 shares held by certain trusts with respect to which Mr. Fluor
is the sole trustee but for which he disclaims any beneficial ownership.
(4) Mr. Sullivan will not stand for re-election pursuant to the Board of
Directors' Retirement Policy.
(5) Includes a portion of the 24,878 shares held by the trustee of the Company's
Thrift Plan for which the above Named Officers have sole voting power and no
investment power. Shares held are as follows: Mr. Galt -- 12,816, Mr.
Elias -- 1,526, Mr. Shower -- 2,821 and Mr. McConn -- 7,715.
(6) Includes a portion of the 15,486 shares held by the trustee of the Company's
Employee Stock Ownership Plan for which the above Named Officers have sole
voting power and no investment power. Shares held are as follows: Mr.
Galt -- 6,478, Mr. Elias -- 1,399, Mr. Shower -- 2,249 and Mr.
McConn -- 5,360.
(7) Includes a portion of the 16,000 total aggregate shares of Restricted Stock
held by the Company for which the above Named Officers have sole voting
power and no investment power. Shares held are as follows: Mr.
Galt -- 6,000, Mr. Elias -- 3,000, Mr. Shower -- 3,000, Mr. Barnes -- 2,000
and Mr. McConn -- 2,000.
(8) Includes 89,594 shares held for directors and executive officers as a group
in the Company's Thrift Plan, Employee Stock Ownership Plan and in
Restricted Stock for which such persons have sole voting power and no
investment power. Also, includes 857,420 shares for directors and executive
officers as a group that said persons have the right to purchase within 60
days pursuant to Options granted under the Company's stock option plans.
Prior to exercising these Options, said persons will have no voting or
investment power with respect to said shares.
DIRECTORS' MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held eleven meetings during 1995. Each director
attended at least 75% of the aggregate total meetings of the Board of Directors
and any committee on which such director served.
The Company has the following standing committees:
Audit Committee. The Audit Committee, which currently consists of
Messrs. Grant, Guerin, Morrow and Segnar, met three times during 1995. Its
principal functions are to confirm the existence of effective accounting
and internal control systems and to oversee the entire audit function, both
independent and internal.
Compensation Committee. The Compensation Committee, which currently
consists of Messrs. Fluor, Osborne and Segnar, met eight times during 1995.
The Committee's principal functions are to study, advise and consult with
the Company's management respecting the compensation of officers and other
key employees of the Company. Members of the Compensation Committee are not
eligible to participate in any of the plans or programs they administer.
Executive Committee. The Executive Committee, which currently
consists of Messrs. Attwell, Galt, Osborne and Segnar, met one time during
1995. Its principal function is to aid and assist the Company's management
in the day-to-day operation of the Company.
4
<PAGE> 7
Nominating Committee. The Nominating Committee, which currently
consists of Messrs. Attwell, Grant, Morrow and Sullivan, met one time
during 1995. Its principal function is to make proposals to the full Board
of Directors for candidates to be nominated by the Board to fill vacancies
or for new directorship positions, if any, which may be created from time
to time. The Nominating Committee will consider suggestions from any
source, particularly shareholders, regarding possible candidates for
director. With respect to the procedures that must be followed in order for
nominations from shareholders to be considered, see "Shareholder Proposals
and Director Nominations." Mr. Sullivan will retire from the Board of
Directors and the Nominating Committee on May 13, 1996 pursuant to the
Board of Directors' Retirement Policy.
COMPENSATION OF DIRECTORS
During 1995, each director of the Company who is not a full-time employee
was paid an annual director's fee of $24,000 plus $1,000 for each Board of
Directors and Committee meeting attended. A nonemployee director who attends a
meeting of a committee of which he is not a member is entitled to an attendance
fee of $1,000. Each nonemployee director who serves as a committee chairman
receives an additional $1,000 per year.
Stock Options. The Nonemployee Directors Stock Option Plan (the "Directors
Option Plan") provides for the grant of options to acquire Common Stock to each
director who is not and never has been an employee of the Company (an "Eligible
Director"). On the date of any Annual Meeting of Shareholders prior to the
termination of the Directors Option Plan, each Eligible Director who is
continuing in office will automatically receive an option to purchase an
additional 6,000 shares of Common Stock at an exercise price equal to the fair
market value of the Common Stock on the date of grant. In addition, each
Eligible Director who is elected or appointed to the Board of Directors for the
first time will receive on the date of such director's election or appointment
an option to purchase 6,000 shares of Common Stock at an exercise price equal to
the fair market value of the Common Stock on the date of grant. All outstanding
options have terms of ten years and vest 20% per year over the initial five
years of their terms.
Deferred Fee Plan. The Company has an Outside Directors Deferred Fee Plan
(the "Deferred Fee Plan"), a non-qualified plan. The Deferred Fee Plan requires
the automatic deferral of one-half of the annual retainer fee for all directors
who are not employees of the Company ("Outside Directors"). In addition, Outside
Directors may elect to defer all or a portion of their remaining directors' fees
under the Deferred Fee Plan. Amounts automatically deferred under the Deferred
Fee Plan are credited based upon "phantom stock" units, which have the same
value as Common Stock, which increase or decrease in value to the full extent of
any increase or decrease in the value of Common Stock and which receive credit
for any cash or stock dividends paid with respect to Common Stock. With respect
to fees deferred by Outside Directors prior to January 1, 1991, or fees deferred
in excess of the one-half automatic deferral, Outside Directors are permitted to
make quarterly elections regarding the method of income crediting for these
deferrals, which may be credited either based upon "phantom stock" units or with
interest equivalents based upon the prime rate of interest as published in The
Wall Street Journal on the last day of the quarter, plus a bonus rate of
interest of up to 2% depending on the number of years the Outside Director has
served on the Board. All "phantom stock" units credited to Outside Directors'
accounts must remain so credited until distribution or, if distribution is to be
in a form other than lump sum, the effective date of a final income crediting
election made after Board of Directors membership has ceased. Subject to certain
restrictions, Outside Directors may elect the timing and mode of their
distributions from the Deferred Fee Plan, except on the occurrence of events
such as death, plan termination or change of control. Distributions under the
Deferred Fee Plan can be made only in cash. Benefits under the Deferred Fee Plan
constitute unfunded, unsecured obligations of the Company. As of March 20, 1996,
all Outside Directors were participants in the Deferred Fee Plan.
5
<PAGE> 8
The following table sets forth Common Stock "phantom stock" units credited
to each participant's account during 1995 and total units credited as of March
20, 1996:
<TABLE>
<CAPTION>
PHANTOM STOCK UNITS
CREDITED
----------------------------
IN FISCAL AS OF
1995 MARCH 20, 1996
--------- --------------
<S> <C> <C>
J. Evans Attwell..................................... 2,499 28,724
Peter J. Fluor....................................... 2,456 25,869
William R. Grant..................................... 2,233 19,822
Dean P. Guerin....................................... 2,399 21,242
Richard M. Morrow.................................... 2,174 7,297
Dee S. Osborne....................................... 2,447 24,861
Sam F. Segnar........................................ 672 2,846
George M. Sullivan................................... 1,763 5,141
</TABLE>
CERTAIN TRANSACTIONS
During 1995, the Company retained the law firm of Vinson & Elkins L.L.P.,
of which Mr. Attwell is an attorney, to perform various legal services for the
Company. Vinson & Elkins L.L.P. has been retained to perform similar services in
1996.
During 1995, the Company retained the law firm of Moyers, Martin, Santee,
Imel & Tetrick ("Moyers, Martin"), of Tulsa, Oklahoma, with respect to matters
of Oklahoma law. Moyers, Martin has been retained to perform similar services
with respect to matters of Oklahoma law in 1996. Mr. D. Stanley Tacker, Mr.
Galt's son-in-law, is a partner in Moyers, Martin. Mr. Galt is Chairman,
President and Chief Executive Officer of the Company.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth annual and long-term compensation for
services in all capacities to the Company for the fiscal years ended December
31, 1993, 1994 and 1995, of those persons who were, at December 31, 1995, the
Chief Executive Officer and the other four most highly compensated executive
officers of the Company (the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------------
AWARDS
ANNUAL COMPENSATION ---------------------------
-------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME & PRINCIPAL BONUS COMPENSATION RESTRICTED OPTIONS/SARS COMPENSATION
POSITION YEAR SALARY($) ($)(1)(2) ($)(3) STOCK(1)(4) (SHS.)(5) ($)(6)
- ------------------------- ---- --------- ---------- ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Barry J. Galt............ 1995 $496,650 $167,000 $ 0 6,000 100,000 $ 60,063
Chairman of the Board, 1994 $496,000 $ 0 $ 0 0 100,000 $ 55,332
President and Chief 1993 $465,000 $298,000 $ 0 0 100,000 $ 55,240
Executive Officer
John W. Elias............ 1995 $283,704 $ 76,000 $ 0 3,000 40,000 $ 31,268
Executive Vice 1994 $270,000 $ 0 $ 0 0 40,000 $ 27,982
President 1993(7) $187,500 $ 80,000 $110,431(8) 0 100,000 $ 20,464
and Chief Operating
Officer
Robert W. Shower(9)...... 1995 $246,270 $ 76,000 $ 0 3,000 30,000 $ 26,206
Executive Vice 1994 $234,000 $ 0 $ 0 0 30,000 $ 23,625
President 1993 $204,000 $ 86,000 $ 0 0 30,000 $ 18,391
and Chief Financial
Officer
Richard F. Barnes........ 1995 $242,400 $ 22,500 $ 0 2,000 15,000 $ 10,848
President, ENSTAR 1994 $232,000 $ 0 $ 0 0 16,000 $ 10,846
Natural Gas Company 1993 $222,000 $ 17,500 $ 0 0 16,000 $ 13,413
Thomas P. McConn......... 1995 $236,385 $ 55,000 $ 0 2,000 22,000 $ 24,869
President, Seagull 1994 $222,000 $ 0 $ 0 0 24,000 $ 22,173
Energy
E&P Inc. 1993 $204,000 $ 84,000 $ 0 0 24,000 $ 18,391
</TABLE>
- ---------------
(1) The Named Officers did not receive any bonuses under the Company's 1994
Executive Incentive Plan. In lieu thereof the Named Officers received grants
of restricted stock in early 1995.
(2) Amounts shown are cash compensation earned by the Named Officers under the
Executive Incentive Plan or, in the case of Mr. Barnes, as a discretionary
bonus for the respective fiscal years.
(3) No amounts are included for perquisites and personal benefits unless they
exceed the lesser of $50,000 or 10% of annual salary and bonus.
(4) The following is the market value of the restricted stock held by the Named
Officers at December 31, 1995: Mr. Galt -- $133,500, Mr. Elias -- $66,750,
Mr. Shower -- $66,750, Mr. Barnes -- $44,500, and Mr. McConn -- $44,500. The
Company does not currently pay dividends on Common Stock, however, it would
pay dividends on the restricted stock should the Company change its dividend
policy.
(5) No grants of stock appreciation rights have been made.
(6) Amounts reported under "All Other Compensation" represent contributions by
the Company to defined contribution plans.
(7) Mr. Elias joined the Company as an employee on March 8, 1993.
(8) Includes a one-time payment of $100,000 given at the time of Mr. Elias's
employment in lieu of reimbursement for relocation expenses.
(9) Pursuant to a decision by Mr. Shower to take early retirement, he will
resign as an executive officer and employee of the Company prior to the
Annual Meeting. Mr. William L. Transier will succeed Mr. Shower as Chief
Financial Officer no later than May 1, 1996. Mr. Transier has been with KPMG
Peat Marwick LLP for 20 years, most recently as Partner and National
Director of the firm's energy practice. Mr. Shower has agreed to remain
available to the Company for at least two years on a consulting
7
<PAGE> 10
basis. See "Compensation Arrangements" for a description of certain payments
and benefits to be received by Mr. Shower in connection with his termination
of employment.
COMPENSATION ARRANGEMENTS
Employment Agreement. In December 1983, Mr. Galt entered into an
employment agreement with the Company with an initial term of three years.
Pursuant to the employment agreement, the term is automatically extended for an
additional year on each anniversary of the agreement, unless terminated prior to
such renewal by either Mr. Galt or the Company, so that the remaining term of
the agreement has ranged from two to three years. If, however, the Company
terminates Mr. Galt's employment because of gross negligence or willful
misconduct in the performance of his duties, the employment agreement will
terminate. Similarly, if Mr. Galt terminates his employment agreement
voluntarily other than in connection with a "change of control" of the Company
or other than because he is not re-elected to his current positions (including
as a director) or is assigned materially inconsistent duties, the employment
agreement will terminate.
Mr. Galt's annual salary is subject to review and possible increase by the
Compensation Committee on an annual basis. Mr. Galt received a 3.9% salary
increase from his effective annual salary of $496,650 in 1995 to $516,000 for
1996.
During the term of his employment, Mr. Galt will also receive the use of an
automobile, various club memberships and certain other personal and business
related benefits.
Executive Severance Agreements. Effective March 17, 1995, Messrs. Galt,
Elias, Shower, Barnes and McConn entered into agreements with the Company (the
"Agreements") that provide certain severance benefits in the event their
employment is subject to an involuntary termination (as defined) within two
years following a change of control (as defined) of the Company. The initial
term of the Agreements is two years and the Company may extend the Agreements
for successive two-year terms following the initial term; however, if a change
of control occurs during the term of the Agreements, the Agreements cannot
terminate until two years after the change of control. The Agreements generally
provide for (a) the payment of 2.99 times the sum of annual salary and targeted
incentive bonus at the time of the change of control or the involuntary
termination, whichever is greater, and, where applicable, reduced by the present
value of any salary continuation or severance payments payable under any other
Company plan, policy or agreement, other than a plan within the meaning of
section 3(3) of the Employee Retirement Income Security Act of 1974, as amended,
(b) the payment of the remaining portion of prior year's incentive bonuses and,
if the involuntary termination occurs after an incentive bonus is earned but
before it is paid, 2 times the objective portion of the incentive bonus, (c) the
continuation of welfare benefit coverage at active employee cost for up to
thirty-six months, and (d) outplacement services up to a maximum cost of $6,000.
If the severance benefits under an Agreement, in conjunction with any other
amounts paid to the applicable executive by the Company constitute a "parachute
payment" within the meaning of section 280G of the Internal Revenue Code of
1996, as amended, (the "Code"), amounts payable under that Agreement will either
be reduced or paid in full, whichever produces the better net after-tax position
for the executive.
Consulting Agreement. Robert W. Shower has informed the Company that he is
taking retirement and therefore will resign as Executive Vice President and
Chief Financial Officer and as an employee of the Company prior to the Annual
Meeting. In connection with his termination of employment, Mr. Shower will enter
into a consulting agreement effective upon his termination of employment.
Pursuant to that agreement, Mr. Shower's Restricted Stock Agreement dated March
17, 1995, will be amended to provide that the forfeiture restrictions thereunder
will lapse as of March 17, 1998 if Mr. Shower performs substantial services
pursuant to the consulting agreement or, if earlier, the date Mr. Shower dies or
becomes disabled or the date the Compensation Committee in its sole discretion
waives such forfeiture restrictions. The terms of the stock option granted to
Mr. Shower on March 20, 1992 will be amended so that it will be fully
exercisable until January 31, 1998.
8
<PAGE> 11
Mr. Shower has agreed to provide consulting services to the Company until
March 31, 1998. Mr. Shower will receive an aggregate of $120,000 during the term
of the consulting arrangement, subject to reduction if he ceases to be a
consultant (other than for reason of death or disability).
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following is information with respect to the unexercised Options to
purchase Common Stock under the Company's stock option plans granted to the
Named Officers and held by them at December 31, 1995.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
NUMBER SECURITIES UNDERLYING IN-THE-MONEY
OF UNEXERCISED OPTIONS/SARS OPTIONS/SARS
SHARES AT DECEMBER 31, 1995 AT DECEMBER 31,
ACQUIRED (SHARES) 1995($)(1)
ON VALUE --------------------------- ---------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Barry J. Galt................... 0 0 480,000 360,000 $ 5,757,375 $ 1,106,250
John W. Elias................... 0 0 13,333 166,667 $ 0 $ 195,000
Robert W. Shower(2)............. 0 0 54,000 126,000 $ 556,875 $ 517,500
Richard F. Barnes............... 0 0 50,020 57,000 $ 550,381 $ 176,250
Thomas P. McConn................ 0 0 77,000 86,000 $ 798,438 $ 272,250
</TABLE>
- ---------------
(1) Value based on the closing price on the NYSE Composite Tape for Common Stock
on December 31, 1995 ($22.25 per share).
(2) Mr. Shower will resign as an executive officer and employee of the Company
prior to the Annual Meeting.
OPTION GRANTS
The following is information with respect to grants of Options in fiscal
1995 pursuant to the Company's stock option plans to the Named Officers
reflected in the Summary Compensation Table on page 7. No stock appreciation
rights were granted under those plans in fiscal 1995.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------- ANNUAL RATE OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED (SHS.)(1) FISCAL 1995 ($/SH.) DATE 5% 10%
- --------------------- ----------------- ----------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Barry J. Galt........ 100,000 18% $ 17.375 7/10/2005 $1,092,704 $2,769,128
John W. Elias........ 40,000 7% $ 17.375 7/10/2005 $ 437,082 $1,107,651
Robert W. Shower..... 30,000 5% $ 17.375 7/10/2005 $ 327,811 $ 830,738
Richard F. Barnes.... 15,000 3% $ 17.375 7/10/2005 $ 163,906 $ 415,369
Thomas P. McConn..... 22,000 4% $ 17.375 7/10/2005 $ 240,395 $ 609,208
</TABLE>
- ---------------
(1) Options were granted to the Named Officers on July 10, 1995. The exercise
price per share is equal to the closing price of Common Stock on the NYSE
Composite Tape on the date of grant. Options granted vest incrementally in
three years beginning three years from the date of grant and will not begin
to become exercisable until July 10, 1998. The Compensation Committee has
the authority to accelerate the vesting of outstanding Options including
upon the occurrence of a "change of control".
(2) The dollar amounts under these columns represent the potential realizable
value of each grant of Options assuming that the market price of Common
Stock appreciates in value from the date of grant at the 5% and 10% annual
rates of return prescribed by the Securities and Exchange Commission
("SEC"). These calculations are not intended to forecast possible future
appreciation, if any, of the price of Common Stock.
9
<PAGE> 12
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is designed to help the
Company attract, motivate and retain the executive resources that the Company
needs in order to maximize its return to shareholders. The fundamental
philosophy is to relate the amount of compensation "at risk" for an executive
directly to his or her contribution to the Company's success in achieving
superior performance objectives. The Company's executive compensation program,
as structured and implemented by the Compensation Committee (the "Committee"),
consists of three main components: (1) base salary; (2) potential for an annual
bonus based on overall Company performance as well as individual performance;
and (3) the opportunity to earn long-term stock-based incentives that are
intended to encourage the achievement of superior results over time and to align
executive officer and shareholder interests. The compensation program is
structured to provide senior management with a total compensation package
that -- at expected levels of performance -- is competitive with those provided
to executives who hold comparable positions or have similar qualifications in
other organizations of the Company's size. The peer companies (the "Peer Group")
named under the heading "Shareholder Return Performance Presentation" are the
only group of companies specifically utilized by the Compensation Committee in
evaluating executive compensation levels of the executive officers named in the
Summary Compensation Table; however, the Committee receives advice regarding
compensation levels from William M. Mercer, Inc. ("Mercer"), an outside
compensation consultant, which utilizes a number of other sources, including
information from other companies depending upon the job content of the executive
officer whose salary is being reviewed.
Base Salary Program. The Company's base salary program is designed to
provide base salaries for senior management that are generally more conservative
than those provided by other companies in the Peer Group. The base salaries for
the Company's senior management group are generally targeted by the Committee to
fall just below the 50th percentile for the Peer Group, although salaries for
certain key managers may be above the 50th percentile. The Committee believes
that the Company's ability to provide salaries that are competitive with market
alternatives, which vary depending upon the nature and level of the position in
question, is critical to attracting and maintaining talented senior managers.
The Committee reviews information obtained from proxy statements, special
surveys and other sources and employs the services of Mercer to analyze the
competitive level of senior management compensation. Based upon this review, the
Committee believes that the percentile target described above has been met.
The Committee reviews and adjusts executive base salaries annually based on
each individual employee's performance over time (assessed using discretion),
general competitive market salary levels and the Company's market capitalization
and cash flow generated from operations. No specific weight or emphasis is
placed on any one of these factors.
Under the terms of Mr. Galt's employment agreement with the Company, Mr.
Galt's salary is subject to review by the Committee for possible increases each
year. Because of difficult conditions in the gas and oil industry, primarily
related to a significant downturn in the price of natural gas, the Company's
financial performance and stock price performance for 1994 fell below levels
realized in previous years. Specifically, the Company had a decline in market
capitalization and did not meet targeted actual cash flow generated from
operations. In determining whether to increase Mr. Galt's base annual salary at
the end of 1994, no specific weight or emphasis was placed on any one of the
factors described above. Mr. Galt initially received a 4% salary increase from
$496,000 to $516,000 for 1995. However, in keeping with the Company's philosophy
of tying compensation to the Company's performance, Mr. Galt voluntarily reduced
his base annual rate of pay effective as of March 31, 1995 by 5% from $516,000
to $490,200, resulting in an effective annual salary for 1995 of $496,650, which
was substantially the same as 1994.
In late 1995, the Committee again reviewed Mr. Galt's salary, and increased
it to $516,000 for 1996, which is an increase of 5.26% of $490,200 and 3.9% of
the 1995 effective annual salary of $496,650, in order to recognize the
Company's progress toward achieving the Company's operating plan and overall
business strategy.
10
<PAGE> 13
Effective March 31, 1995, car allowances for certain other executive
officers were eliminated and their base salaries were adjusted in a manner that
resulted in a reduction in the sum of these two compensation elements averaging
approximately 3.3%.
Short-Term Incentive Compensation. The impact of the Committee's linking
compensation to performance can also be illustrated by the operation of the
Company's Executive Incentive Plan for 1995 (the "1995 Plan"). Under the
Company's Executive Incentive Plan, the Committee grants annual cash incentive
awards that are dependent upon the Company's achievement of previously
established objectives for the fiscal year and an evaluation of each individual
participant's contributions to those achievements. The Committee utilizes data
obtained from Mercer to determine the targeted annual incentive award levels for
plan eligible positions. Such targeted awards are intended by the Committee to
fall just above the 50th percentile for the Peer Group, although target awards
for certain key managers may be significantly above the 50th percentile.
Annual incentive award targets are expressed as a percentage of total
salary earned during a given year ranging from 15% to 50%, but can increase to a
maximum of two times the targeted percentage or decrease to zero for any year,
based upon the achievement of predetermined objective and subjective performance
goals. The 1995 Plan had four performance criteria, two objective and two
subjective. Each component is measured independently and has a weighting of 25%.
The objective components are: pre-tax cash flow from operations compared to the
Company's Operating Plan and pre-tax cash flow from exploration and production
operations to exploration and production revenue ratio in relation to Peer Group
companies. The subjective components are: company stock performance in relation
to Peer Group companies and an assessment of individual executive performance.
Under the two objective components of the Executive Incentive Plan, because
the Company's actual pre-tax cash flow from operations was 101% of the amount
targeted in the Company's operating plan, participants in the Executive
Incentive Plan received 21.3% of the 25% targeted amount for the pre-tax cash
flow generated from operations ("PCFO") to annual operating plan. Since the
Company ranked 12th out of 20 peer companies based on PCFO to revenue ratio,
participants earned 48.4% of the 25% of the participants' total target award.
As indicated above, the remaining half of the award is the subjective
portion. Of this amount, the Committee has adopted a policy that one-half of
this amount (25% of an individual's target bonus) will be based upon the
performance of the Common Stock for the preceding fiscal year compared to the
performance of the common stock of the Peer Group. The remaining half of the
subjective portion is based upon the individual employee's contribution to the
Company's annual success in his or her area of responsibility, measured by both
quantitative and qualitative factors. No specific formula is utilized for
weighing individual performance. Because the performance of the Common Stock
ranked 10th compared to the stock of the 20 Peer Group companies during 1995,
participants in the Executive Incentive Plan received an award of 50% of 25% of
the participants' total target. As for individual performance, the remaining 25%
of the target award under the 1995 Plan, the cash awards averaged 119% of the
targeted amount for the component. During the past five years, Seagull's total
shareholder return has exceeded that of the Prior Peer Group by over 12.9%. This
performance achievement during this uncertain time supports the above-average
target incentive payouts for individual performance. The awards were intended to
recognize certain individual achievements and operating performance
improvements, assessed using discretion.
In order to encourage retention of key personnel, annual incentive awards
generally are paid out over a period expiring in approximately three years.
Mr. Galt received a cash bonus for 1995 of $167,000. The award was based
upon the Committee's recognition of Mr. Galt's work in guiding the Company
through a difficult period in its industry and positioning the Company for the
future.
Long-Term Incentive Compensation. The Company currently grants long-term
incentive compensation in the form of stock options. The Committee emphasizes
incentive compensation in the form of stock options because they tend to align
the interests of employees and shareholders by rewarding performance that
increases shareholder values. Option holders will only recognize value when the
stock price increases over the
11
<PAGE> 14
exercise price established on the date of grant. The Committee does not utilize
the number of options or shares held by any individual as a factor to limit
option grants to that individual in subsequent years.
The Committee establishes the overall level of stock options by considering
the stock option grant levels of companies included in the Peer Group. Stock
option awards by the Company are targeted by the Committee to fall at or above
the 75th percentile among the Peer Group. The Committee bases individual option
grants on individual performance (assessed using discretion) and level of
responsibility of the optionee.
All outstanding options have terms of ten years. Because the Committee
believes that it is important to emphasize the long-term nature of this
incentive program, the Committee adopted a policy in May 1993 generally
providing that all options granted after that date would vest 40% on the third
anniversary of the date of grant, and an additional 20% would become exercisable
in each of the next three years. All options have been granted at 100% of the
market value of the Common Stock on the date of grant. The exercise price is
payable in cash, shares of Common Stock, or any combination thereof.
On July 10, 1995, the Committee granted non-qualified stock options to
purchase an aggregate of 100,000 shares of Common Stock to Mr. Galt for an
exercise price of $17.375 per share. The options were granted at 100% of fair
market value on the date of grant. The option grant was based on a competitive
number of options for chief executive officers in the Peer Group granted to the
chief executive officers of the companies in the Peer Group based on an analysis
of information available for fiscal 1994 given the Company's philosophy of
providing stock option awards at or above the 75th percentile. The options will
not produce gain for Mr. Galt unless the Company's share price rises over the
exercise price established on the date of grant and therefore emphasize
pay-for-performance in the form of enhanced shareholder value.
The Committee periodically reviews the Company's executive compensation
package to ensure that the Company provides an appropriate mix of base salary
and short-term and long-term compensation opportunities that are competitive
with market alternatives.
Section 162(m). Section 162(m) of the Code, which was enacted in 1993,
precludes a public corporation from taking a deduction in 1994 or subsequent
taxable years for compensation in excess of $1 million paid to its chief
executive officer or any of its four other highest-paid officers. However,
compensation that qualified under Section 162(m) of the Code as
"performance-based" is specifically exempt from the deduction limit. The
Committee has been advised that the Company's ability to deduct compensation
income generated in connection with the exercise of stock options granted under
the Company's stock option plans should not be limited by Section 162(m) of the
Code. During 1996, no executive of the Company is expected to receive
compensation in excess of $1 million unless a significant number of vested stock
options are exercised.
Compensation Committee
Peter J. Fluor, Chairman
Dee S. Osborne
Sam F. Segnar
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The performance graph shown below was prepared by William M. Mercer, Inc.
(compensation consultants retained by the Company) using data from the Standard
and Poor's Compustat Database for use in this Proxy Statement. As required by
applicable rules of the SEC, the graph was prepared based upon the following
assumptions:
1. $100 was invested in Common Stock, the S&P 500 and the Peer Group (as
defined below) on December 31, 1990.
2. Peer Group investment is weighted based on the market capitalization of
each individual company within the Peer Group at the beginning of each
year.
3. Dividends are reinvested on the ex-dividend dates.
12
<PAGE> 15
Due to mergers, acquisitions and other organizational changes within the
Company, the Peer Group has changed somewhat over the last five years. As a
result, the performance graph reflects data using two peer group comparisons:
The prior industry peer group (the "Prior Peer Group") consisted of the
following companies: Anadarko Petroleum Corporation, Apache Corporation, Barrett
Resources Corporation, Burlington Resources, Inc., Cabot Oil & Gas Corporation,
Devon Energy Corporation, Enron Oil & Gas Company, Equitable Resources, Inc.,
Louisiana Land & Exploration Company, Mesa Inc., Mitchell Energy & Development
Corp., Murphy Oil Corporation, Noble Affiliates, Inc., Oryx Energy Company,
Parker & Parsley Petroleum Company, Pogo Producing Company, Santa Fe Energy
Resources, Inc., Southwestern Energy Company, and Union Texas Petroleum
Holdings, Inc.
The current industry peer group (the "Current Peer Group") is comprised of
the following: Anadarko Petroleum Corporation, Apache Corporation, Burlington
Resources, Inc., Cabot Oil & Gas Corporation, Devon Energy Corporation, Enron
Oil & Gas Company, Equitable Resources, Inc., The Louisiana Land & Exploration
Company, Mesa, Inc., Mitchell Energy & Development Corp., Murphy Oil
Corporation, Noble Affiliates, Inc., Oryx Energy Company, Parker & Parsley
Petroleum Company, Pennzoil Company, Pogo Producing Company, Santa Fe Energy
Resources, Inc., Southwestern Energy Company, Union Texas Petroleum Holdings,
Inc., and Vastar Resources, Inc.
SEAGULL ENERGY CORPORATION
COMPARATIVE TOTAL RETURNS
DECEMBER 1990-DECEMBER 1995
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG SEAGULL ENERGY CORPORATION, S&P 500 INDEX AND COMPOSITE PEER GROUPS
<TABLE>
<CAPTION>
SEAGULL PRIOR CURRENT
MEASUREMENT PERIOD ENERGY INDUSTRY INDUSTRY
(FISCAL YEAR COVERED) CORPORATION S&P 500 PEER GROUP PEER GROUP
<S> <C> <C> <C> <C>
12/31/90 100 100 100 100
12/31/91 82 130 90 90
12/31/92 103 140 104 104
12/31/93 168 155 128 124
12/31/94 127 157 116 112
12/31/95 148 215 136 131
</TABLE>
<TABLE>
<CAPTION>
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------
Seagull Energy Corporation $ 100 $ 82 $ 103 $ 168 $ 127 $ 148
S&P 500 $ 100 $ 130 $ 140 $ 155 $ 157 $ 215
Prior Peer Group $ 100 $ 90 $ 105 $ 128 $ 116 $ 136
Current Peer Group $ 100 $ 90 $ 104 $ 124 $ 112 $ 131
</TABLE>
13
<PAGE> 16
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
The Company has an Executive Supplemental Retirement Plan (the "Retirement
Plan") in which Barry J. Galt is the only current participant. The Retirement
Plan was established to provide supplemental retirement benefits for those
employees who are designated by the Compensation Committee as participants and
who complete the required period of employment with the Company. Benefits under
the Retirement Plan constitute unfunded, unsecured obligations of the Company.
The Retirement Plan provides a benefit for the surviving spouse of a participant
who dies before retirement with a vested benefit.
Subject to specified vesting requirements, a participant is entitled to
receive commencing upon termination of his or her employment by the Company or
upon his or her normal retirement date, whichever is later, a pension equal to
the applicable percentage of average monthly compensation less 50% of his or her
social security benefit. Compensation covered by the Retirement Plan includes
base salary only. Mr. Galt is fully vested under the Retirement Plan.
For Mr. Galt, the applicable percentage is 50% and his average monthly
compensation (which does not include bonuses) is determined based on his last
three consecutive calendar years of employment with the Company. Based on Mr.
Galt's current effective annual salary for 1996 of $516,000, the estimated
annual benefit for Mr. Galt, assuming retirement at age 65, is $262,739 with
such payment continuing to the survivor for life upon the death of either Mr.
Galt or his spouse.
ENSTAR NATURAL GAS COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Richard F. Barnes is the only Named Officer eligible to participate in the
ENSTAR Natural Gas Company Supplemental Executive Retirement Plan (the "ENSTAR
SERP").
On November 7, 1994, the Board of Directors adopted the ENSTAR SERP to
restore retirement benefits lost by certain employees under certain ENSTAR
Natural Gas Company qualified plans, including the ENSTAR Retirement Plan, as a
result of the $150,000 compensation limitation of Section 401(a)(17) of the
Code. Eligible employees become participants of the ENSTAR SERP upon designation
by the Compensation Committee. Benefits under the ENSTAR SERP constitute
unfunded, unsecured obligations of the Company. Subject to specified vesting
requirements, a participant in the ENSTAR SERP (or his beneficiary or
beneficiaries) is entitled to receive a lump sum benefit upon termination of
employment. Mr. Barnes is fully vested in his benefit under the ENSTAR SERP.
The ENSTAR SERP provides a supplemental retirement benefit equal to the
excess, if any, of the present value of the benefit that would have been payable
under the ENSTAR Retirement Plan if such participant's average monthly
compensation was based on his "Plan Compensation" (without regard to the
$150,000 compensation limitation), over the present value of the benefit
actually payable under the ENSTAR Retirement Plan. "Plan Compensation" is
defined as 5/6ths of the sum of a participant's annual base salary as of January
1 of each year and any cash bonus paid during the year.
Based on Mr. Barnes' current compensation level of $272,500, the estimated
supplemental retirement benefit for Mr. Barnes, assuming retirement at age 65
and an interest rate of 6%, is a lump sum payment of $153,900.
ENSTAR NATURAL GAS COMPANY RETIREMENT PLAN
Richard F. Barnes is the only Named Officer eligible to participate in the
ENSTAR Natural Gas Company Retirement Plan for Salaried Employees (the "ENSTAR
Retirement Plan").
The salaried employees of ENSTAR Natural Gas Company, a division of the
Company, are eligible to participate in the ENSTAR Retirement Plan. Under the
non-contributory plan, a participant who retires at or after the age of 65 with
four years of plan participation is eligible for a monthly retirement benefit
equal to 2% of the participant's average monthly compensation multiplied by his
or her years of benefit service not to exceed ten full years, added to an amount
equal to 1% of the participant's average monthly compensation multiplied by his
or her years of benefit service exceeding ten full years. Benefits under the
ENSTAR
14
<PAGE> 17
Retirement Plan are not subject to reduction because of social security benefits
but are reduced by benefits payable under another defined benefit plan to the
extent that there is a duplication of benefits for the same period of service.
The ENSTAR Retirement Plan provides that a participant's benefit will be
determined pursuant to the above formula as of the date of termination of
employment, but also provides that such benefit will be at least equal to (1)
the participant's accrued benefit as of December 31, 1988 or if greater, (2) the
sum of the participant's accrued benefit as of December 31, 1993 and his accrued
benefit determined under the benefit formula applicable for plan years beginning
on and after January 1, 1994 based on years of accrual service credited on and
after January 1, 1994.
A participant (or his or her beneficiary) may also be entitled to the
foregoing benefit under the ENSTAR Retirement Plan if the participant terminates
employment by reason of early retirement (i.e., after the participant has
attained the age of 55 and completed five years of vesting service), by reason
of total and permanent disability, by reason of death or if the participant
terminates employment after the participant has attained a "vested percentage"
in his or her ENSTAR Retirement Plan benefit based on his or her years of
vesting service under the following schedule:
<TABLE>
<CAPTION>
YEARS OF VESTED
SERVICE PERCENTAGE
-------------- ----------
<S> <C>
Less than 5............................................................. 0%
5 or more............................................................... 100%
</TABLE>
The following table shows estimated annual benefits payable upon normal
retirement at age 65 based on certain salary assumptions and years of service.
PENSION PLAN TABLE*
<TABLE>
<CAPTION>
YEARS OF SERVICE
RANGE OF -------------------------------------------------------
COMPENSATION 15 20 25 30 35
--------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 50,000......................... $12,500 $15,000 $17,500 $20,000 $22,500
$ 75,000......................... $18,750 $22,500 $26,250 $30,000 $33,750
$100,000......................... $25,000 $30,000 $35,000 $40,000 $45,000
$125,000......................... $31,250 $37,500 $43,750 $50,000 $56,250
$150,000......................... $37,500 $45,000 $52,500 $60,000 $67,500
</TABLE>
- ---------------
* For purposes of determining the benefits shown above, plan compensation for
all years of service has been limited to $150,000 in accordance with the
limits on qualified plan compensation under Section 401(a)(17) of the Code,
without regard to any future adjustments for changes in the cost of living.
Benefits accrued prior to January 1, 1994 with respect to plan compensation in
excess of $150,000 have been disregarded.
The following table sets forth the estimated annual benefits payable under
normal retirement at age 65, assuming current remuneration levels and
participation until normal retirement at age 65, with respect to Mr. Barnes
under the provisions of the ENSTAR Retirement Plan.
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED
CURRENT CREDITED ANNUAL BENEFIT
CREDITED YEARS OF CURRENT COMPENSATION PAYABLE
YEARS OF SERVICE CURRENT COMPENSATION ADJUSTED FOR PLAN UPON
SERVICE AT AGE 65 COVERED BY PLANS COMPENSATION LIMITS RETIREMENT
-------- --------- -------------------- -------------------- --------------
<S> <C> <C> <C> <C> <C>
Richard F. Barnes.... 23 36 $272,500 $150,000 $ 79,500*
</TABLE>
- ---------------
* This benefit assumes the current limit on plan compensation, $150,000 will
remain at $150,000 (with no inflationary adjustments). Mr. Barnes' service
from 1967 through 1980 has been recognized under this plan and another
retirement plan. Accordingly, his benefit under the ENSTAR Retirement Plan
formula has been reduced by $7,896 per year, which is his accrued benefit
under the other plan.
15
<PAGE> 18
PRINCIPAL SHAREHOLDERS
To the knowledge of the management of the Company and based upon filings
with the Securities and Exchange Commission (the "SEC"), the only persons who
may be deemed to own beneficially more than 5% of the outstanding Common Stock
(including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of March
20, 1996, are named in the following table:
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT 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 the 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
the 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 the 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 the 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 Public Utility Holding Company
Act of 1935.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of KPMG Peat Marwick LLP,
which has served as independent auditors of the Company since 1981, as
independent auditors of the Company for the fiscal year ending December 31,
1996, and recommends ratification by the shareholders of such appointment. Such
ratification requires the affirmative vote of the holders of a majority of the
shares of Common Stock present or represented by proxy and entitled to vote at
the Annual Meeting. Under Texas law, an abstention would have the same legal
effect as a vote against this proposal, but a broker non-vote would not be
counted for purposes of determining whether a majority has been achieved. The
persons named in the accompanying proxy intend
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to vote for ratification of such appointment unless instructed otherwise on the
proxy. The Board of Directors recommends a vote "FOR" this proposal.
In the event the appointment is not ratified, the Board of Directors will
consider the appointment of other independent auditors. The Board of Directors
may terminate the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors without the approval of the shareholders of the Company
whenever the Board of Directors deems such termination necessary or appropriate.
A representative of KPMG Peat Marwick LLP is expected to attend the Annual
Meeting and will have the opportunity to make a statement, if such
representative desires to do so, and will be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Shareholders may propose matters to be presented at shareholders' meetings
and may also nominate persons to be directors. Formal procedures have been
established for those proposals and nominations.
PROPOSALS FOR 1997 ANNUAL MEETING
Pursuant to various rules promulgated by the SEC, any proposals of holders
of Common Stock intended to be presented to the annual meeting of shareholders
of the Company to be held in 1997 must be received by the Company, addressed to
Sylvia Sanchez, Corporate Secretary, 1001 Fannin, Suite 1700, Houston, Texas
77002, no later than November 29, 1996, to be included in the Company proxy
statement and form of proxy relating to that meeting. With respect to business
to be brought before the Annual Meeting, the Company has not received any
notices from its shareholders.
In addition to the SEC rules described in the preceding paragraph, the
Company's bylaws provide that for business to be properly brought before the
Company's annual meetings of shareholders beginning with the 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 Board of Directors,
(b) otherwise brought before the meeting by or at the direction of the Board of
Directors or (c) otherwise properly brought before the meeting by a shareholder
of the Company who is a shareholder of record at the time of giving of notice
hereinafter provided for, who shall be entitled to vote at such meeting and who
complies with the following notice procedures. In addition to any other
applicable requirements, for business to be brought before an annual meeting by
a shareholder of the Company, the shareholder must have given timely notice in
writing of the business to be brought before an annual meeting of shareholders
of the Company to the Secretary of the Company. To be timely, a shareholder's
notice must be delivered to or mailed and received at the Company's principal
executive offices, 1001 Fannin, Suite 1700, Houston, Texas 77002, on or before
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 the Company's books, of the shareholder
proposing such business, (iii) the acquisition date, the class and the number of
shares of Common Stock which are owned beneficially by the shareholder, (iv) any
material interest of the shareholder in such business and (v) a representation
that the shareholder intends to appear in person or by proxy at the meeting to
bring the proposed business before the meeting. Notwithstanding the foregoing
bylaw provisions, a shareholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in the foregoing bylaw provisions.
Notwithstanding anything in the Company's bylaws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures outlined above.
NOMINATIONS FOR 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 the Company's Board of Directors may be made at a meeting of shareholders (a)
by or at the direction of the Board of Directors or (b) by any shareholder of
the Company who is a shareholder of record at the time of giving of notice
hereinafter provided for, who shall be entitled to vote for the election of
directors at the meeting and who complies with the following notice
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<PAGE> 20
procedures. Such nominations, other than those made by or at the direction of
the Board of Directors, shall be made pursuant to timely notice in writing to
the Secretary of the Company. To be timely, a shareholder's notice shall be
delivered to or mailed and received at the Company's principal executive
offices, 1001 Fannin, Suite 1700, Houston, Texas 77002 (i) with respect to an
election to be held at the annual meeting of shareholders of the Company, on or
before February 12, 1997, and (ii) with respect to an election to be held at a
special meeting of shareholders of the Company for the election of Directors,
not later than the close of business on the 10th day following the date on which
notice of the date of the meeting was mailed or public disclosure of the date of
the meeting was made, whichever first occurs. Such shareholder's notice to the
Secretary shall set forth (a) as to each person whom the shareholder proposes to
nominate for election or re-election as a director, all information relating to
the person that is required to be disclosed in solicitations for proxies for
election of directors, or is otherwise required, pursuant to Regulation 14A
under the Exchange Act (including the written consent of such person to be named
in the proxy statement as a nominee and to serve as a director if elected); and
(b) as to the shareholder giving the notice, (i) the name and address, as they
appear on the Company's books, of such shareholder, and (ii) the class and
number of shares of capital stock of the Company which are beneficially owned by
the shareholder. In the event a person is validly designated as a nominee to the
Board and shall thereafter become unable or unwilling to stand for election to
the Board of Directors, the Board of Directors or the shareholder who proposed
such nominee, as the case may be, may designate a substitute nominee.
Notwithstanding the foregoing bylaw provisions, a shareholder shall also comply
with all applicable requirements of the Exchange Act and the rules and
regulations thereunder with respect to the matters set forth in the foregoing
bylaw provisions.
OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for action at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting or any adjournment(s) or postponement(s)
thereof, it is intended that the enclosed proxy will be voted in accordance with
the judgment of the persons named in the proxy.
By Order of the Board of Directors,
/s/ Sylvia Sanchez
Sylvia Sanchez
Secretary
March 29, 1996
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<PAGE> 21
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PROXY
SEAGULL ENERGY CORPORATION
ANNUAL MEETING OF SHAREHOLDERS -- MAY 14, 1996
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Barry J. Galt and John W. Elias
as Proxies, each with the power to appoint his substitute, and hereby
authorizes each of them to represent and to vote as designated below,
all the shares of Common Stock of Seagull Energy Corporation (the
"Company"), held of record by the undersigned on March 20, 1996, at
the Annual Meeting of Shareholders to be held May 14, 1996, or any
adjournment(s) or postponement(s) thereof.
The undersigned hereby revokes any proxy to vote shares held by
the undersigned heretofore given. THE UNDERSIGNED ACKNOWLEDGES THAT
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER AND THAT IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED
IN PROPOSAL 1 AND IN FAVOR OF PROPOSAL 2.
Please sign exactly as name appears hereon. When shares are held
by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign
in partnership name by authorized person.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
SEE REVERSE
SIDE
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<PAGE> 22
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I plan to attend the meeting (Please check if yes) / /
This proxy may be revoked at any time prior to the voting of the
proxy by the execution and submission of a revised proxy, by written
notice to the Secretary of the Company or by voting in person at the
meeting.
1. Election of three directors to serve until the 1999 Annual Meeting
of Shareholders:
Class I Nominees -- Thomas H. Cruikshank, John W. Elias, Sam F.
Segnar
<TABLE>
<C> <C> <S>
/ / For / / Withhold Authority / / ---------------------------------
For all nominees except as noted above
</TABLE>
2. Proposal to ratify the appointment by the Board of Directors of
the firm of KPMG Peat Marwick LLP as independent public auditors
of the Company for the fiscal year ending December 31, 1996.
<TABLE>
<S> <C> <C>
For Against Abstain
/ / / / / /
</TABLE>
3. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting, or any
adjournment(s) thereof.
/ / Mark here for address change and note below
If you receive more than one
proxy card, please sign and
return all cards in the
accompanying envelope.
<TABLE>
<S> <C> <C>
Signature: Date:_____________,1996
Signature: Date:_____________,1996
(If held jointly)
</TABLE>
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