<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR
- ----- 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
------------------------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION
- --------- 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ------------------------
Commission file number 1-8094
---------------------------------------------------------
Seagull Energy Corporation
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 74-1764876
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1001 Fannin, Suite 1700, Houston, Texas 77002-6714
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(713) 951-4700
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
None
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No _____.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT AUGUST 5, 1996
----- -----------------------------
<S> <C>
Common Stock, $.10 par value 36,772,878
</TABLE>
<PAGE> 2
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
- ------------------------------ ------
Presentation of Financial Information ............................... 3
Consolidated Statements of Earnings - Three and Six Months
Ended June 30, 1996 and 1995 (Unaudited) .......................... 4
Consolidated Balance Sheets - June 30, 1996
and December 31, 1995 (Unaudited) ................................. 5
Consolidated Statements of Cash Flows - Six Months
Ended June 30, 1996 and 1995 (Unaudited) .......................... 6
Notes to Consolidated Financial Statements (Unaudited) .............. 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Unaudited) ............................ 10
PART II. OTHER INFORMATION ........................................... 20
- ---------------------------
SIGNATURES ............................................................ 23
- ----------
-2-
<PAGE> 3
SEAAGULL ENERGY CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
PRESENTATION OF FINANCIAL INFORMATION
In the opinion of management, the following unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of Seagull Energy Corporation and Subsidiaries (the
"Company" or "Seagull") as of June 30, 1996, and the results of its operations
for the three and six months ended June 30, 1996 and 1995, and cash flows for
the six month periods then ended. As discussed in Note 1 to the Company's
Consolidated Financial Statements, 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," effective March
31, 1995. Under SFAS No. 121, the Company recorded a non-cash impairment of gas
and oil properties as a separate line item in the accompanying unaudited
consolidated statement of earnings for the six months ended June 30, 1995. All
other adjustments made are of a normal, recurring nature. The results of
operations for the three and six months ended June 30, 1996 are not necessarily
indicative of the results to be expected for the full year.
The financial information presented herein should be read in conjunction
with the consolidated financial statements and notes included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
Item 2 of this document includes "forward looking" statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Although the Company
believes that the expectations reflected in such forward looking statements are
based upon reasonable assumptions, it can give no assurance that its
expectations will be achieved. Important factors that could cause the actual
results to differ materially from the Company's expectations are disclosed in
conjunction with the forward looking statements included herein ("Cautionary
Disclosures"). Subsequent written and oral forward looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Disclosures.
-3-
<PAGE> 4
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1996 1995 1996 1995
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues:
Gas and oil operations ...................... $ 70,085 $ 63,927 $ 145,302 $ 122,487
Alaska transmission and distribution ........ 15,703 17,560 51,133 53,850
---------- ---------- ---------- ----------
85,788 81,487 196,435 176,337
Costs of Operations:
Alaska transmission and distribution
cost of gas sold .......................... 6,257 7,923 22,457 26,488
Operations and maintenance .................. 25,961 27,814 51,013 56,742
Exploration charges ......................... 10,675 4,137 14,841 14,019
Depreciation, depletion and amortization .... 31,056 31,773 62,320 66,584
Impairment of gas and oil properties ........ -- -- -- 44,376
---------- ---------- ---------- ----------
73,949 71,647 150,631 208,209
---------- ---------- ---------- ----------
Operating Profit (Loss) ....................... 11,839 9,840 45,804 (31,872)
Other (Income) Expense:
General and administrative .................. 4,577 9,847 7,933 12,501
Interest expense ............................ 11,223 13,934 22,654 27,931
Interest income and other ................... (344) (186) (852) (749)
---------- ---------- ---------- ----------
15,456 23,595 29,735 39,683
---------- ---------- ---------- ----------
Earnings (Loss) Before Income Taxes ........... (3,617) (13,755) 16,069 (71,555)
Income Tax Expense (Benefit) .................. 2,290 (6,630) 7,130 (25,880)
---------- ---------- ---------- ----------
Net Earnings (Loss) ........................... $ (5,907) $ (7,125) $ 8,939 $ (45,675)
========== ========== ========== ==========
Earnings (Loss) Per Share ..................... $ (0.16) $ (0.20) $ 0.24 $ (1.27)
========== ========== ========== ==========
Weighted Average Number of Common Shares
Outstanding (in thousands) .................. 36,445 36,108 37,062 36,107
========== ========== ========== ==========
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements.
-4-
<PAGE> 5
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ................................... $ 14,404 $ 11,205
Accounts receivable, net .................................... 107,583 119,898
Inventories ................................................. 5,488 4,947
Prepaid expenses and other .................................. 6,502 11,331
------------ ------------
Total Current Assets ...................................... 133,977 147,381
Property, Plant and Equipment - at cost
(successful efforts method for gas and oil properties) ...... 1,645,282 1,581,002
Accumulated Depreciation, Depletion and Amortization .......... 627,612 569,587
------------ ------------
1,017,670 1,011,415
Other Assets .................................................. 39,917 40,000
------------ ------------
Total Assets .................................................. $ 1,191,564 $ 1,198,796
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable ............................................ $ 79,975 $ 83,111
Accrued expenses ............................................ 33,518 33,080
Current maturities of long-term debt ........................ 1,214 1,214
------------ ------------
Total Current Liabilities ................................. 114,707 117,405
Long-Term Debt ................................................ 522,632 545,343
Other Noncurrent Liabilities .................................. 53,581 52,276
Deferred Income Taxes ......................................... 41,111 36,104
Shareholders' Equity:
Common Stock, $.10 par value; authorized
a100,000,000 shares; issued 36,771,678 shares (1996)
and 36,561,290 shares (1995) ............................... 3,677 3,656
Additional paid-in capital .................................. 329,683 326,918
Retained earnings ........................................... 133,530 124,591
Foreign currency translation adjustment ..................... 529 389
Less - note receivable from employee stock
ownership plan ............................................. (4,922) (4,922)
Less - 308,812 shares of Common Stock held in
Treasury, at cost .......................................... (2,964) (2,964)
------------ ------------
Total Shareholders' Equity ................................ 459,533 447,668
Commitments and Contingencies
------------ ------------
Total Liabilities and Shareholders' Equity .................... $ 1,191,564 $ 1,198,796
============ ============
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements.
-5-
<PAGE> 6
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings (loss) ........................................... $ 8,939 $ (45,675)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation, depletion and amortization .................... 63,993 68,236
Impairment of gas and oil properties ........................ -- 44,376
Amortization of deferred financing costs .................... 1,755 1,716
Deferred income taxes ....................................... 4,976 (26,523)
Dry hole expense ............................................ 7,749 5,961
Other ....................................................... (210) (1,272)
---------- ----------
87,202 46,819
Changes in operating assets and
liabilities, net of acquisitions:
Decrease in accounts receivable ........................... 12,353 26,819
Decrease (Increase) in inventories, prepaid expenses
and other ................................................ 2,642 (3,786)
Decrease in accounts payable .............................. (3,445) (37,548)
Decrease in prepaid gas and oil sales ..................... -- (2,732)
Increase in accrued expenses and other .................... 4,131 6,658
---------- ----------
Net Cash Provided By Operating Activities .............. 102,883 36,230
INVESTING ACTIVITIES:
Capital expenditures .......................................... (52,468) (34,791)
Acquisitions, net of cash acquired ............................ (25,669) --
Proceeds from sales of property, plant and equipment .......... 831 321
---------- ----------
Net Cash Used In Investing Activities .................. (77,306) (34,470)
FINANCING ACTIVITIES:
Proceeds from revolving lines of credit and other borrowings .. 130,260 330,511
Principal payments on revolving lines of credit and
other borrowings ............................................. (148,482) (325,024)
Principal payments on monetary production payment liability ... (4,650) --
Proceeds from sales of common stock ........................... 2,334 44
Other ......................................................... (1,978) (1,337)
---------- ----------
Net Cash Provided by (Used In) Financing Activities .... (22,516) 4,194
Effect of Exchange Rate Changes on Cash ......................... 138 84
---------- ----------
Increase In Cash And Cash Equivalents .................. 3,199 6,038
Cash And Cash Equivalents At Beginning Of Period ................ 11,205 6,432
---------- ----------
Cash And Cash Equivalents At End Of Period ...................... $ 14,404 $ 12,470
========== ==========
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements.
-6-
<PAGE> 7
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Supplemental Disclosures of Cash Flow Information.
- --------------------------------------------------------------------------------
(Dollars in Thousands)
Six Months Ended June 30,
-------------------------
Cash paid during the period for: 1996 1995
-------------------------
Interest, net of amount capitalized ....... $21,528 $26,483
Income taxes .............................. $ 3,015 $ 655
- --------------------------------------------------------------------------------
Gas And Oil Properties.
Effective March 31, 1995, the Company 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." This SFAS
requires that an impairment loss be recognized when the carrying amount of an
asset exceeds the sum of the estimated future cash flows (undiscounted) of the
asset. Under SFAS No. 121, the Company reviewed the impairment of gas and oil
properties on a depletable unit basis. For each depletable unit determined to
be impaired, an impairment loss equal to the difference between the carrying
value and the fair value of the depletable unit was recognized. Fair value, on
a depletable unit basis, was estimated to be the present value of expected
future cash flows computed by applying estimated future gas and oil prices, as
determined by management, to estimated future production of gas and oil
reserves over the economic lives of the reserves. As a result of the adoption
of SFAS No. 121, the Company recognized a non-cash pre-tax charge against
earnings during the first quarter of 1995 of $44.4 million.
Earnings Per Share.
The weighted average number of common shares outstanding for the
computation of earnings per share for the six months ended June 30, 1996 gives
effect to the assumed exercise of dilutive stock options as of the beginning of
the period. The effect of the assumed exercise of stock options as of the
beginning of the period has an anti-dilutive effect on the computation of loss
per share for the three months ended June 30, 1996 and the three and six months
ended June 30, 1995 and has therefore not been included in the weighted average
number of common shares outstanding.
Changes in Financial Presentation.
Certain reclassifications have been made in the 1995 unaudited financial
statements to conform to the presentation used in 1996.
-7-
<PAGE> 8
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2. LONG-TERM DEBT
On May 28, 1996, Seagull's U.S. and Canadian revolving credit facilities
(the "Credit Facilities") were amended to extend the maturity date two years and
reduce stated interest rate margins. The Credit Facilities have a maximum
commitment of $750 million. Under the new terms of the Credit Facilities, the
commitments thereunder begin to decline on March 31, 1999 in equal quarterly
reductions of approximately $46 million and a final reduction of approximately
$56 million on December 31, 2002. The Credit Facilities bear interest, at
Seagull's option, at various market-sensitive rates plus an applicable margin or
a competitive bid rate.
NOTE 3. COMMITMENTS AND CONTINGENCIES
The Company is a party to ongoing litigation in the normal course of
business. Management regularly analyzes current information and, as necessary,
provides accruals for probable liabilities on the eventual disposition of these
matters. While the outcome of lawsuits or other proceedings against the Company
cannot be predicted with certainty, management believes that the effect on its
financial condition and results of operations, if any, will not be material.
NOTE 4. SUBSEQUENT EVENT
On July 22, 1996, Seagull announced that it agreed to purchase the stock
of Esso Suez, Inc. ("ESI") and certain assets of Esso Egypt Limited (the "EEL
Assets") for approximately $68 million net in cash (the "Esso Suez
Acquisition"). The effective date for the acquisition is January 1, 1996 with a
gross purchase price, including cash and receivables, of approximately $168
million. The prompt collectibility of the receivables will preclude any
necessity for financing beyond the $68 million net cash payment, funded through
additional borrowings under the Credit Facilities. ESI holds a 100% interest in
the East Zeit oil producing concession in the offshore Gulf of Suez, and the
EEL Assets consist of the entire working interest in the South Hurghada
concession located onshore on the coast of the Gulf of Suez approximately 250
miles south of Cairo. Seagull estimates that the ESI concession area will
contain at closing 17.4 million net barrels of proved oil reserves. The
63,000-acre South Hurghada concession contains a number of currently drillable
exploratory prospects with substantial potential, plus two existing oil
discoveries.
Also, on July 22, 1996, Seagull announced plans for a stock merger with
Global Natural Resources Inc. ("GNR") (the "Global Merger"). The Board of
Directors of both Seagull and GNR have approved a definitive agreement calling
for a stock merger whereby each share of GNR common stock would be converted
into a right to receive between 0.72 and 0.88 shares of Seagull common stock.
If Seagull's average price for a specified 20-day period is not greater than
$22.50 per share, the exchange ratio would be fixed at 0.88 shares of Seagull.
Conversely, if the average price equals or exceeds $27.50 per share, the
exchange ratio would be fixed at 0.72
-8-
<PAGE> 9
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4. SUBSEQUENT EVENT, Continued
shares of Seagull. Within the specified price range, the exchange ratio would be
determined by interpolation. Accordingly, the indicated value of the
transaction, would be nearly $600 million. The Global Merger will be accounted
for as a pooling of interests. GNR is engaged in worldwide oil and gas
exploration and production with properties located in the U.S. (primarily in the
Gulf of Mexico and along the Gulf Coast), Egypt, Cote d'Ivoire, Indonesia and
Tatarstan, Russia.
The following table presents the unaudited pro forma results of the
combined operations of Seagull, ESI, the EEL Assets and GNR for the six months
ended June 30, 1996 and 1995 as though the Esso Acquisition and the Global
Merger had occurred on January 1, 1995.
The unaudited pro forma information presented does not purport to be
indicative of actual results if the combination had been in effect on the date
or for the period indicated, or of future results.
(Dollars in Thousands Except Per Share Amounts)
- --------------------------------------------------------------------------------
Six Months Ended Six Months Ended
June 30, 1996 June 30, 1995
-------------------- ---------------------
Actual Pro Forma Actual Pro Forma
-------- --------- -------- ---------
Revenues ..................... $196,435 $278,853 $176,337 $253,953
Net earnings (loss) .......... 8,939 21,716 (45,675) (42,538)
Earnings (loss) per share .... 0.24 0.34 (1.27) (0.69)
================================================================================
The following table sets forth the pro forma consolidated total assets and
pro forma capitalization of the Company as of June 30, 1996 as though the Esso
Suez Acquisition and the Global Merger had occurred on June 30, 1996.
(Dollars in Thousands)
- --------------------------------------------------------------------------------
June 30, 1996
-------------------------
Actual Pro Forma
-------------------------
Total assets ....................................... $1,191,564 $1,429,148
================================================================================
Long-term portion of debt .......................... $522,632 $606,882
Redeemable bearer shares ........................... -- 16,265
Shareholders' equity ............................... 459,533 576,256
- --------------------------------------------------------------------------------
Total capitalization ............................... $982,165 $1,199,403
================================================================================
Long-term portion of debt to total capitalization .. 53.2% 52.0%
================================================================================
-9-
<PAGE> 10
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
GENERAL
The following discussion is intended to assist in an understanding of the
Company's financial position and results of operations for each of the periods
indicated. The Company's accompanying unaudited financial statements and the
notes thereto and the consolidated financial statements and notes included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1995
contain detailed information that should be referred to in conjunction with the
following discussion.
RESULTS OF OPERATIONS
CONSOLIDATED HIGHLIGHTS
- --------------------------------------------------------------------------------
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- Percent ---------------------- Percent
1996 1995 Change 1996 1995 Change
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Gas and oil operations (*) ................ $70,085 $63,927 + 10 $145,302 $122,487 + 19
Alaska transmission and distribution ...... 15,703 17,560 - 11 51,133 53,850 - 5
- -------------------------------------------------------------------------------------------------------------------
$85,788 $81,487 + 5 $196,435 $176,337 + 11
===================================================================================================================
Operating Profit (Loss):
Gas and oil operations (*) ................ $9,754 $7,363 + 32 $31,914 $(44,800) +171
Alaska transmission and distribution ...... 2,085 2,477 - 16 13,890 12,928 + 7
- -------------------------------------------------------------------------------------------------------------------
$11,839 $9,840 + 20 $45,804 $(31,872) +244
===================================================================================================================
Net Earnings (Loss) ......................... $(5,907) $(7,125) + 17 $8,939 $(45,675) +120
Earnings (Loss) Per Share ................... (0.16) (0.20) + 20 0.24 (1.27) +119
Net Cash Provided by Operating Activities
Before Changes in Operating Assets and
Liabilities ............................... 34,989 19,253 + 82 87,202 46,819 + 86
Net Cash Provided by Operating Activities ... 64,028 3,449 +1,756 102,883 36,230 +184
Weighted Average Number of Common Shares
Outstanding (in thousands) ................ 36,445 36,108 + 1 37,062 36,107 + 3
===================================================================================================================
</TABLE>
(*) The Company restated its results of operations for the three and six
months ended June 30, 1995, to combine the former Exploration and
Production segment and Pipeline and Marketing segment into Gas and Oil
Operations. Substantially all of the Company's gas processing and gas
gathering assets were sold in September 1995. These assets disposed of
contributed $6.8 million and $13.5 million in revenues and $2.5 and $4.1
million in operating profit for the three and six months ended June 30,
1995, respectively.
Revenues and operating profit are discussed in the respective segment
sections.
The increase in net earnings for the six months ended June 30, 1996 versus
the prior year period was due to the increase in operating profit and decreases
in general and administrative expense and interest expense, which were
partially offset by an increase in income taxes (see "Other (Income) Expense"
section below). The increase in operating profit was primarily due to the Gas
and Oil Operations segment's 30% increase in natural gas prices and the absence
of pre-tax non-cash impairment of gas and oil properties of $44.4 million
recorded in the first quarter of 1995.
-10-
<PAGE> 11
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
CONSOLIDATED HIGHLIGHTS, CONTINUED
Net loss for the three months ended June 30, 1996 improved over the second
quarter of 1995 primarily as a result of an increase in operating profit, lower
general and administrative expense and a reduction in interest expense,
partially offset by increased income tax expense.
Net cash provided by operating activities before and after changes in
operating assets and liabilities increased in the three and six month periods
of 1996 versus the 1995 periods primarily due to increases in natural gas
prices and the absence of one-time pre-tax charges, included in general and
administrative expense, of $8 million to account for the expenses involved in
the workforce reduction and consolidation recorded during the second quarter of
1995.
On September 25, 1995, the Company and three other sellers completed the
sale of their disparate interests in 19 natural gas gathering systems and a gas
processing plant (the "Pipeline Assets"). Net proceeds after payment of
transaction costs were used to reduce the Company's borrowings under its two
revolving credit facilities (the "Credit Facilities"). For the three and six
months ended June 30, 1995, the Pipeline Assets contributed $6.8 million and
$13.5 million, respectively, in revenues and $2.5 million and $4.1 million,
respectively, to the operating profit of the Gas and Oil Operations segment.
With the sale of the Pipeline Assets, the Company's former Exploration and
Production segment and Pipeline and Marketing segment have been combined into
Gas and Oil Operations.
-11-
<PAGE> 12
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
GAS AND OIL OPERATIONS (1)
- --------------------------------------------------------------------------------
(Dollars in Thousands Except Per Unit Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- Percent ------------------- Percent
1996 1995 Change 1996 1995 Change
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues .................................... $ 70,085 $ 63,927 + 10 $145,302 $122,487 + 19
Direct Operating Expense .................... 18,365 18,738 - 2 34,984 37,954 - 8
General Operating Expense ................... 2,211 3,901 - 43 5,202 8,296 - 37
Exploration Charges ......................... 10,675 4,137 +158 14,841 14,019 + 6
Depreciation, Depletion and Amortization .... 29,080 29,788 - 2 58,361 62,642 - 7
Impairment of Gas and Oil Properties ........ -- -- -- -- 44,376 -100
- -------------------------------------------------------------------------------------------------------------
Operating Profit (Loss) ..................... $ 9,754 $ 7,363 + 32 $ 31,914 $(44,800) +171
=============================================================================================================
EXPLORATION AND PRODUCTION OPERATING DATA:
Natural Gas Sales (2):
Revenues .................................. $ 60,774 $ 49,096 + 24 $121,128 $ 92,758 + 31
Net Daily Production (MMcf) ............... 343.7 349.3 - 2 346.3 346.4 --
Average Sales Price per Mcf ............... $ 1.94 $ 1.54 + 26 $ 1.92 $ 1.48 + 30
Oil and Condensate Sales (2):
Revenues .................................. $ 5,645 $ 5,283 + 7 $ 10,712 $ 10,466 + 2
Net Daily Production (Bbl) ................ 3,132 3,317 - 6 3,067 3,413 - 10
Average Sales Price per Bbl ............... $ 19.81 $ 17.49 + 13 $ 19.19 $ 16.94 + 13
Natural Gas Liquids Sales (2):
Revenues .................................. $ 1,181 $ 641 + 84 $ 2,338 $ 1,421 + 65
Net Daily Production (Bbl) ................ 1,176 726 + 62 1,217 788 + 54
Average Sales Price per Bbl ............... $ 11.05 $ 9.71 + 14 $ 10.56 $ 9.97 + 6
Combined Net Daily Production (MMcfe) (3) ... 369.6 373.6 - 1 371.9 371.6 --
Combined Average Sales Price per Mcfe (3) ... $ 1.99 $ 1.61 + 24 $ 1.97 $ 1.55 + 27
Lifting Costs per Mcfe:
Lease Operating ........................... $ 0.28 $ 0.26 + 8 $ 0.27 $ 0.26 + 4
Workovers ................................. 0.04 0.01 +300 0.03 0.02 + 50
Production Taxes .......................... 0.06 0.06 -- 0.06 0.06 --
Transportation ............................ 0.10 0.07 + 43 0.10 0.07 + 43
Ad Valorem Taxes .......................... 0.03 0.02 + 50 0.03 0.03 --
- -------------------------------------------------------------------------------------------------------------
Total ..................................... $ 0.51 $ 0.43 + 19 $ 0.49 $ 0.44 + 11
- -------------------------------------------------------------------------------------------------------------
General operating expense per Mcfe .......... $ 0.03 $ 0.08 - 63 $ 0.04 $ 0.08 - 50
DD&A Rate per Mcfe .......................... $ 0.86 $ 0.87 - 1 $ 0.86 $ 0.91 - 5
=============================================================================================================
THIRD-PARTY GAS MARKETING OPERATING DATA:
Revenues (4) ................................ $ 423 $ 638 - 34 $ 6,919 $ 1,238 +459
Average Daily Volumes (MMcf) ................ 359 195 + 84 392 191 +105
=============================================================================================================
</TABLE>
(1) The Company restated its results of operations for the three and six
months ended June 30, 1995, to combine the former Exploration and
Production segment and Pipeline and Marketing segment into Gas and Oil
Operations. Substantially all of the Company's gas processing and gas
gathering assets were sold in September 1995. The Pipeline Assets
contributed $6.8 million and $13.5 million in revenues and $2.5 and $4.1
million in operating profit for the three and six months ended June 30,
1995, respectively.
(2) Natural gas stated in million cubic feet ("MMcf") or thousand cubic feet
("Mcf"); oil and condensate and natural gas liquids stated in barrels
("Bbl").
(3) MMcfe and Mcfe represent the equivalent of one million and one thousand
cubic feet of natural gas, respectively. Oil and condensate and natural
gas liquids are converted to gas at a ratio of one barrel of liquids per
six Mcf of gas, based on relative energy content.
(4) Marketing revenues are net of cost of gas and third-party delivery fees.
-12-
<PAGE> 13
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
GAS AND OIL OPERATIONS, CONTINUED
The increase in operating profit of the Gas and Oil Operations segment for
the six months ended June 30, 1996 as compared to the 1995 period was primarily
due to a 19% increase in revenues, decreased depreciation, depletion and
amortization ("DD&A") expense and a non-cash charge for impairment of gas and
oil properties in 1995, which was partially offset by an increase in
exploration charges. The increase in operating profit for the 1996 second
quarter as compared to the 1995 period was primarily due to a 10% increase in
revenues and a decrease in general operating expense, partially offset by a
substantial increase in exploration charges.
The increase in revenues for the three and six months ended June 30, 1996
as compared to 1995 was primarily the result of 26% and 30%, respectively,
increases in the Company's average realized price of natural gas sold, slightly
offset by a decrease in revenues related to the Pipeline Assets. Revenues for
the six month period were also impacted by a significant increase in net
third-party marketing revenues. While the Company had voluntary curtailments
during 1995 as a result of the low natural gas price environment, there have
been no voluntary curtailments in the U.S. since October 1995. The resulting
increase in natural gas production was offset by normal declines in production
from developed properties combined with the impact of substantially lower
levels of development expenditures in late 1994 and all of 1995, which was also
a result of the low natural gas price environment.
In late 1995, Seagull began expanding its marketing activities by adding
staff, upgrading facilities and expanding the marketing services offered to
third parties. This ongoing expansion combined with substantially improved
margins in the first quarter of 1996 was responsible for the significant
increase in third-party marketing revenues for the six months ended June 30,
1996 in comparison with 1995.
Direct operating expenses decreased for the three and six months ended
June 30, 1996 primarily due to the absence of substantially all of the
Pipelines and Gas Processing operations and maintenance costs as a result of
the sale of the Pipeline Assets. This decrease in direct operating expenses was
partially offset as increased workovers and transportation expense led to
slightly higher lifting costs per equivalent unit for gas and oil production.
General operating expense for both the three and six month periods
decreased from the prior year largely due to the workforce reduction and
consolidation implemented by Seagull during the second quarter of 1995.
Exploration charges increased for the three and six months ended June 30,
1996 due to an increase in the number of exploratory wells drilled during the
second quarter of 1996. Eight of fifteen exploratory wells drilled,
substantially all occurring during the second quarter, were successful and six
wells were drilling or being evaluated as of the beginning of August 1996 in
comparison to five successes out of twelve exploratory wells drilled for the
1995 period.
-13-
<PAGE> 14
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
GAS AND OIL OPERATIONS, CONTINUED
Effective March 31, 1995, the Company 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". As a result of
the adoption of SFAS No. 121, the Company recognized a non-cash pre-tax charge
against earnings during the first quarter of 1995 of $44.4 million. As a result
of the impairment and a change in the mix of properties being produced, the
Company's average DD&A rate per equivalent unit of production decreased from
$0.91 per Mcfe for the first six months of 1995 to $0.86 per Mcfe for the 1996
period, thereby decreasing DD&A expense for the six months ended June 30, 1996
as compared to the 1995 period.
In late 1995, the Company 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. The risk management program is also an important part of the
Company's third party marketing efforts, allowing the Company to convert a
customer's requested price to a price structure that is consistent with the
Company's overall pricing strategy. The Company accounts for its commodity
derivative contracts as hedging activities and, accordingly, the effect of
hedging activities are included in revenues when the commodities are produced.
As of July 18, 1996, the Company had entered into natural gas price
options, with an approximate cost of $0.6 million, to place a "floor" on
Seagull's realized natural gas price for 150,000 million British thermal units
("MMBtu") per day for July through October 1996. In addition, the Company has
basis swap agreements that hedge against potential adverse effects of
fluctuation in the price differential between the New York Mercantile Exchange
("NYMEX") price at Henry Hub and the price at the market location of the
Company's production or a customer's market location requirements. These
natural gas price basis swaps decline from 94,000 MMBtu per day in July 1996 to
59,000 MMBtu per day in December 1996, with only minor contracts extending
beyond December 1996. Under current price differentials, Seagull has deferred
realized and unrealized income of $0.7 million and $4.0 million, respectively,
related to its basis swaps. The Company also has natural gas price basis swaps
associated with production related to its monetary production payment for
13,200 MMBtu per day through December 1998. At June 30, 1996, the Company has
no open futures positions related to its equity production.
-14-
<PAGE> 15
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
ALASKA TRANSMISSION AND DISTRIBUTION
- --------------------------------------------------------------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ Percent ----------------- Percent
1996 1995 Change 1996 1995 Change
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues .................................... $15,703 $17,560 -11 $51,133 $53,850 - 5
Cost of Gas Sold ............................ 6,257 7,923 -21 22,457 26,488 -15
- ---------------------------------------------------------------------------------------------------------
Gross Margin ................................ 9,446 9,637 - 2 28,676 27,362 + 5
Operations and Maintenance Expense .......... 5,385 5,175 + 4 10,827 10,492 + 3
Depreciation, Depletion and Amortization .... 1,976 1,985 -- 3,959 3,942 --
- ---------------------------------------------------------------------------------------------------------
Operating Profit ............................ $ 2,085 $ 2,477 -16 $13,890 $12,928 + 7
=========================================================================================================
OPERATING DATA:
Degree Days (1) ............................. 1,470 1,508 - 3 5,823 5,685 + 2
Volumes (Bcf)(2):
Gas Sold .................................. 4.0 4.5 -11 14.4 15.0 - 4
Gas Transported ........................... 4.6 4.2 +10 9.9 7.8 +27
Combined .................................. 8.6 8.7 - 1 24.3 22.8 + 7
Margins ($ per Mcf):
Gas Sold .................................. 1.84 1.76 + 5 1.68 1.61 + 4
Gas Transported ........................... 0.45 0.41 +10 0.47 0.42 +12
Combined .................................. 1.10 1.11 - 1 1.18 1.20 - 2
=========================================================================================================
</TABLE>
(1) A measure of weather severity calculated by subtracting the mean
temperature for each day from 65 degrees Fahrenheit. More degree days
equate to colder weather.
(2) Natural gas stated in billion cubic feet ("Bcf").
Operating profit of the Alaska transmission and distribution segment
(ENSTAR Natural Gas Company, a division of the Company, and Alaska Pipeline
Company, a wholly owned subsidiary, (collectively referred to herein as "ENSTAR
Alaska")) for the six months ended June 30, 1996 improved from the 1995 period
primarily as a result of higher volumes due to customer growth and colder
weather in the utility's service area. For the quarter ended June 30, 1996,
operating profit decreased from the prior year principally due to warmer
weather in the utility's service area and slightly higher operating and
maintenance expenses.
In 1995, several large commercial customers that previously purchased gas
from ENSTAR Alaska began purchasing gas directly from gas producers. ENSTAR
Alaska currently transports the customers' gas supplies for a fee that is
comparable to the margin (revenues net of the associated cost of gas sold) it
previously earned. Accordingly, operating profit for the Alaska transmission
and distribution segment was basically unaffected by this change.
This segment's business is seasonal with approximately 65% of its revenues
earned in the first and fourth quarters of each year.
-15-
<PAGE> 16
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
OTHER (INCOME) EXPENSE
- --------------------------------------------------------------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- Percent -------------------- Percent
1996 1995 Change 1996 1995 Change
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
General and Administrative... $ 4,577 $ 9,847 -54 $ 7,933 $ 12,501 -37
Interest Expense ............ 11,223 13,934 -19 22,654 27,931 -19
Interest Income and Other.... (344) (186) +85 (852) (749) +14
- --------------------------------------------------------------------------------------------------
$ 15,456 $ 23,595 -34 $ 29,735 $ 39,683 -25
==================================================================================================
</TABLE>
General and administrative expenses decreased substantially for both the
three and six months ended June 30, 1996 in comparison to 1995 primarily due to
the absence of one-time pre-tax charges of $8 million during the second quarter
of 1995 to account for expenses involved in the Company's workforce reduction
and consolidation, partially offset by increases in the costs relating to
potential acquisitions which were not consummated, accrued incentive
compensation expense and costs associated with three compensation plans, one
for outside directors, one for key managers, and the other for all Seagull
employees, that are tied directly to the price of Seagull Common Stock. The
closing price of Seagull Common Stock increased 10% in the second quarter of
1996 from $22.625 at March 31, 1996 to $25.00 on June 30, 1996 compared to a
16% decrease in the 1995 period. The closing price of Seagull Common Stock
increased 12% for the six months ended June 30, 1996 from $22.25 at December
31, 1995 to $25.00 on June 30, 1996, compared to a 14% decrease in the 1995
period.
Decreases in interest expense for the three and six months ended June 30,
1996 were a result of lower levels of outstanding debt and lower average
interest rates since the 1995 periods. With proceeds from the sale of the
Pipeline Assets in September 1995, the Company repaid a portion of the balances
outstanding under the Credit Facilities. The average interest rates on the
Credit Facilities were 6.2% and 7.1% for the six months ended June 30, 1996 and
1995, respectively, and 5.9% and 7.0% for the three months ended June 30, 1996
and 1995, respectively.
After giving effect to the Company's interest rate swaps, approximately
50% to 60% of the Company's long-term debt bears interest at various fixed
rates through the end of 1996. The remainder of the outstanding long-term debt
bears interest at various market-sensitive interest rates.
-16-
<PAGE> 17
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
INCOME TAXES
The increase in income taxes for the three months ended June 30, 1996 was
primarily a result of an adjustment to increase the forecasted annual effective
tax rate for 1996 from 24.6% in the first quarter to 44.4% for the six months,
the increase in earnings before income taxes for the period and the absence of
Internal Revenue Code Section 29 Tax Credits ("Section 29 Credits") which
reduced the Company's 1995 effective tax rate. The Company's forecasted annual
effective tax rate for the six months ended June 30, 1996 and 1995 was
different than the amount computed using the federal statutory rate (35%) for
the following reasons:
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
Federal statutory tax rate .......................... 35.0% 35.0%
Increases (reductions) in federal tax resulting from:
Foreign tax effect .............................. 7.9 (8.3)
Section 29 Credits .............................. -- 6.2
State taxes (net of federal benefit) ............ 2.6 1.7
Other ........................................... (1.1) 1.8
------------- -------------
Effective tax rate .................................. 44.4% 36.4%
============= =============
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL EXPENDITURES
- --------------------------------------------------------------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ Percent ----------------- Percent
1996 1995 Change 1996 1995 Change
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gas and Oil Operations:
Lease acquisitions ................... $ 2,062 $ 1,696 + 22 $ 3,163 $ 2,223 +42
Exploration costs .................... 18,098 5,439 +233 22,614 15,661 +44
Development costs .................... 16,121 6,480 +149 22,464 13,483 +67
- --------------------------------------------------------------------------------------------------
36,281 13,615 +166 48,241 31,367 +54
Alaska Transmission and Distribution ... 2,169 1,802 + 20 3,347 2,814 +19
Other .................................. 514 76 +576 880 610 +44
- --------------------------------------------------------------------------------------------------
$38,964 $15,493 +151 $52,468 $34,791 +51
==================================================================================================
</TABLE>
The increase in capital expenditures for the three and six months ended
June 30, 1996 is primarily due to the substantial increase in the number of
exploratory and development wells drilled. In accordance with Seagull's
long-standing policy that total capital expenditures will not be allowed to
exceed net cash flow from operating activities before changes in operating
assets
-17-
<PAGE> 18
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
LIQUIDITY AND CAPITAL RESOURCES, CONTINUED
and liabilities, exploratory and development capital expenditures were reduced
in 1995 because natural gas prices remained below acceptable levels. As natural
gas prices increased in late 1995 and remained strong through the second
quarter, planned capital expenditures have resumed. In May, 1996, the Board of
Directors approved an increase in Seagull's planned capital expenditures for
1996 of $20 million, to approximately $152 million, including about $142
million in Gas and Oil Operations. The increase of $20 million will be applied
to exploration and development spending in the Company's domestic drilling
activities.
On May 28, 1996, the Credit Facilities were amended to extend the maturity
date two years and reduce stated interest rate margins. The Credit Facilities
have a maximum commitment of $750 million. Under the new terms of the Credit
Facilities, the commitments thereunder begin to decline on March 31, 1999 in
equal quarterly reductions of approximately $46 million and a final reduction of
approximately $56 million on December 31, 2002. The Credit Facilities bear
interest, at Seagull's option, at various market-sensitive rates (LIBOR,
Banker's Acceptance or the prime rate of the agent bank) plus the applicable
margin or a competitive bid rate.
The amount of senior indebtedness available to the Company under the
provisions of the Credit Facilities is subject to a borrowing base (the
"Borrowing Base"), based upon the proved reserves of the Company's Gas and Oil
Operations segment and the financial performance of the Company's other
business segment. The Borrowing Base is generally determined annually but may
be redetermined, at the option of either Seagull or the banks, one additional
time each year, and will be redetermined upon the sale of certain assets
included in the Borrowing Base.
Currently, the available commitment under the Credit Facilities is subject
to a $500 million Borrowing Base and is determined after consideration of
outstanding borrowings under Seagull's other senior debt facilities. As of
August 5, 1996, borrowings outstanding under the Credit Facilities were $174
million, leaving immediately available unused commitments of approximately $221
million, net of outstanding letters of credit of $3 million, $100 million of
borrowings outstanding under the Company's senior notes and $2 million of
borrowings outstanding under Seagull's money market facilities.
On July 22, 1996, Seagull announced that it agreed to purchase the stock
of Esso Suez, Inc. ("ESI") and certain assets of Esso Egypt Limited (the "EEL
Assets") for approximately $68 million net in cash. The effective date for the
acquisition is January 1, 1996 with a gross purchase price, including cash and
receivables, of approximately $168 million. The prompt collectibility of the
receivables will preclude any necessity for financing beyond the $68 million
net cash payment, funded through additional borrowings under the Credit
Facilities. ESI holds a 100% interest in
-18-
<PAGE> 19
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
LIQUIDITY AND CAPITAL RESOURCES, CONTINUED
the East Zeit oil producing concession in the offshore Gulf of Suez, and the
EEL Assets consist of the entire working interest in the South Hurghada
concession located onshore on the coast of the Gulf of Suez approximately 250
miles south of Cairo. Seagull estimates that the ESI concession area will
contain at closing 17.4 million net barrels of proved oil reserves. The
63,000-acre South Hurghada concession contains a number of currently drillable
exploratory prospects with substantial potential, plus two existing oil
discoveries.
Also, on July 22, 1996, Seagull announced plans for a stock merger with
Global Natural Resources Inc. ("GNR") (the "Global Merger"). The Board of
Directors of both Seagull and GNR have approved a definitive agreement calling
for a stock merger whereby each share of GNR common stock would be converted
into a right to receive between 0.72 and 0.88 shares of Seagull common stock.
If Seagull's average price for a specified 20-day period is not greater than
$22.50 per share, the exchange ratio would be fixed at 0.88 shares of Seagull.
Conversely, if the average price equals or exceeds $27.50 per share, the
exchange ratio would be fixed at 0.72 shares of Seagull. Within the specified
price range, the exchange ratio would be determined by interpolation.
Accordingly, the indicated value of the transaction, would be nearly $600
million. The Global Merger would be accounted for as a pooling of interests.
GNR is engaged in worldwide oil and gas exploration and production with
properties located in the U.S. (primarily in the Gulf of Mexico and along the
Gulf Coast), Egypt, Cote d'Ivoire, Indonesia and Tatarstan, Russia.
In addition to the facilities discussed above, Seagull has money market
facilities with two major U. S. banks with a combined maximum commitment of $70
million. These lines of credit bear interest at rates made available by the
banks at their discretion and may be canceled at either Seagull's or the banks'
discretion. The lines are subject to annual renewal.
-19-
<PAGE> 20
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders of the Company held on May 14, 1996,
the shareholders voted to elect three directors to serve until the 1999 Annual
Meeting of Shareholders, adopt an amendment to the Seagull Energy Corporation
1993 Nonemployee Directors' Stock Option Plan and ratify the selection of KPMG
Peat Marwick LLP as independent auditors of the Company for the fiscal year
ended December 31, 1996. Votes cast were as follows:
<TABLE>
<CAPTION>
For Against Abstained
------------------------------------
<S> <C> <C> <C>
Election of Thomas H. Cruikshank as a Director of the Company ....... 31,220,985 -- 37,474
Election of John W. Elias as a Director of the Company .............. 31,224,555 -- 33,904
Election of Sam F. Segnar as a Director of the Company .............. 31,225,485 -- 32,974
Adoption of the Amendment to the 1993 Nonemployee Directors' Stock
Option Plan ....................................................... 26,634,445 2,847,361 1,776,653
Ratification of Selection of KPMG Peat
Marwick LLP as Independent Auditors for 1996 ...................... 30,018,714 1,217,641 22,104
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
*4.1 Credit Agreement, U. S. $175 million Reducing Revolving Credit
Facility, dated December 30, 1993 by and among Seagull Energy
Canada Ltd., each of the banks signatory thereto, and Chemical
Bank of Canada, The Bank of Nova Scotia and Canadian Imperial
Bank of Commerce, as co-agents (without exhibits) (incorporated
by reference to Exhibit 2.4 to Current Report on Form 8-K filed
January 19, 1994; the First Amendment dated May 24, 1994
(without exhibits) is incorporated by reference to Exhibit 4.5
to Quarterly Report on Form 10-Q for the quarter ended June 30,
1994; the Second Amendment dated June 30, 1994 is incorporated
by reference to Exhibit 4.16 to Annual Report on Form 10-K for
the year ended December 31, 1994; the Third Amendment dated
March 10, 1995 is incorporated by reference to Exhibit 4.17 to
Annual Report on Form 10-K for the year ended December 31, 1994;
the Fourth Amendment dated January 12, 1996 is incorporated by
reference to Exhibit 4.10 to Annual Report on Form 10-K for the
year ended December 31, 1995; the Fifth Amendment dated May 28,
1996 is filed herewith).
-20-
<PAGE> 21
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K, CONTINUED
*4.2 Credit Agreement, $725 million Reducing Revolving Credit and
Competitive Bid Facility, dated May 24, 1994 by and among
Seagull, each of the banks signatory thereto and Texas Commerce
Bank National Association and Chemical Bank, as co-agents
(without exhibits and schedules) (incorporated by reference to
Exhibit 4.1 to Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994; the First Amendment dated June 30, 1994 is
incorporated by reference to Exhibit 4.21 to Annual Report on
Form 10-K for the year ended December 31, 1994; the Second
Amendment dated March 10, 1995 is incorporated by reference to
Exhibit 4.22 to Annual Report on Form 10-K for the year ended
December 31, 1994; the Third Amendment dated January 12, 1996 is
incorporated by reference to Exhibit 4.17 to Annual Report on
Form 10-K for the year ended December 31, 1995; the Fourth
Amendment dated May 28, 1996 is filed herewith).
*#10.1 Seagull Energy Corporation 1993 Nonemployee Directors' Stock
Option Plan including forms of agreements (the Plan is
incorporated by reference to Exhibit 10.37 to Annual Report on
Form 10-K for the year ended December 31, 1992; the amended form
of Nonstatutory Stock Option Agreement is incorporated by
reference to Exhibit 10.29 to Annual Report on Form 10-K for the
year ended December 31, 1993; the Amendment to Nonemployee
Directors' Stock Option Agreement(s) is filed herewith).
*#10.2 Outside Directors Deferred Fee Plan of the Company, as amended
and restated.
*#10.3 Consulting Agreement effective May 1, 1996, by and between
Seagull Energy Corporation and Robert W. Shower.
*#10.4 Severance Agreement between Seagull Energy Corporation and
William L. Transier.
-21-
<PAGE> 22
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K, CONTINUED
*#10.5 Restricted Stock Agreement between Seagull Energy Corporation
and William L. Transier made as of 14th day of May, 1996.
*27 Financial Data Schedule.
(b) Reports on Form 8-K:
None.
- ---------------
* Filed herewith.
# Identifies management contracts and compensatory plans or arrangements.
-22-
<PAGE> 23
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEAGULL ENERGY CORPORATION
By: /s/ William L. Transier
-----------------------------------
William L. Transier, Senior Vice
President and Chief Financial
Officer (Principal Financial Officer)
Date: August 8, 1996
-----------------------------------
By: /s/ Rodney W. Bridges
-----------------------------------
Rodney W. Bridges, Vice President and
Controller (Principal Accounting
Officer)
Date: August 8, 1996
-----------------------------------
-23-
<PAGE> 24
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------ --------------------------------------------------------------- ------
<S> <C> <C>
Exhibits:
*4.1 Credit Agreement, U. S. $175 million Reducing Revolving Credit
Facility, dated December 30, 1993 by and among Seagull Energy
Canada Ltd., each of the banks signatory thereto, and Chemical
Bank of Canada, The Bank of Nova Scotia and Canadian Imperial
Bank of Commerce, as co-agents (without exhibits) (incorporated
by reference to Exhibit 2.4 to Current Report on Form 8-K filed
January 19, 1994; the First Amendment dated May 24, 1994
(without exhibits) is incorporated by reference to Exhibit 4.5
to Quarterly Report on Form 10-Q for the quarter ended June 30,
1994; the Second Amendment dated June 30, 1994 is incorporated
by reference to Exhibit 4.16 to Annual Report on Form 10-K for
the year ended December 31, 1994; the Third Amendment dated
March 10, 1995 is incorporated by reference to Exhibit 4.17 to
Annual Report on Form 10-K for the year ended December 31, 1994;
the Fourth Amendment dated January 12, 1996 is incorporated by
reference to Exhibit 4.10 to Annual Report on Form 10-K for the
year ended December 31, 1995; the Fifth Amendment dated May 28,
1996 is filed herewith).
*4.2 Credit Agreement, $725 million Reducing Revolving Credit and
Competitive Bid Facility, dated May 24, 1994 by and among
Seagull, each of the banks signatory thereto and Texas Commerce
Bank National Association and Chemical Bank, as co-agents
(without exhibits and schedules) (incorporated by reference to
Exhibit 4.1 to Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994; the First Amendment dated June 30, 1994 is
incorporated by reference to Exhibit 4.21 to Annual Report on
Form 10-K for the year ended December 31, 1994; the Second
Amendment dated March 10, 1995 is incorporated by reference to
Exhibit 4.22 to Annual Report on Form 10-K for the year ended
December 31, 1994; the Third Amendment dated January 12, 1996 is
incorporated by reference to Exhibit 4.17 to Annual Report on
Form 10-K for the year ended December 31, 1995; the Fourth
Amendment dated May 28, 1996 is filed herewith).
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------ --------------------------------------------------------------- ------
<S> <C> <C>
Exhibits:
*#10.1 Seagull Energy Corporation 1993 Nonemployee Directors' Stock
Option Plan including forms of agreements (the Plan is
incorporated by reference to Exhibit 10.37 to Annual Report on
Form 10-K for the year ended December 31, 1992; the amended form
of Nonstatutory Stock Option Agreement is incorporated by
reference to Exhibit 10.29 to Annual Report on Form 10-K for the
year ended December 31, 1993; the Amendment to Nonemployee
Directors' Stock Option Agreement(s) is filed herewith).
*#10.2 Outside Directors Deferred Fee Plan of the Company, as amended
and restated.
*#10.3 Consulting Agreement effective May 1, 1996, by and between
Seagull Energy Corporation and Robert W. Shower.
*#10.4 Severance Agreement between Seagull Energy Corporation and
William L. Transier.
*#10.5 Restricted Stock Agreement between Seagull Energy Corporation
and William L. Transier made as of 14th day of May, 1996.
*27 Financial Data Schedule.
</TABLE>
- ----------------
* Filed herewith.
# Identifies management contracts and compensatory plans or arrangements.
<PAGE> 1
EXHIBIT 4.1
FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT ("Fifth Amendment") dated as
of May 28, 1996 (the "Fifth Amendment Effective Date") is made and entered into
by and among SEAGULL ENERGY CANADA LTD. (the "Borrower"), a corporation duly
organized and validly existing under the laws of the Province of Alberta,
Canada, the banking institutions from time to time a party to the Credit
Agreement (as hereinafter defined) as amended by this Fifth Amendment (each,
together with its successors and assigns, a "Bank" and collectively, the
"Banks"), CHEMICAL BANK OF CANADA, as arranger and as administrative agent for
the Banks (in such capacity, the "Administrative Agent"), THE BANK OF NOVA
SCOTIA, as paying agent and co-agent for the Banks (in such capacity, the
"Paying Agent"), and CANADIAN IMPERIAL BANK OF COMMERCE (in such capacity, the
"Co-Agent"), as co-agent for the Banks.
RECITALS:
WHEREAS, the Borrower, the Administrative Agent, the Paying Agent, the
Co-Agent and the Banks are parties to a Credit Agreement dated as of December
30, 1993, as amended (the "Credit Agreement"); and
WHEREAS, the Borrower, the Administrative Agent, the Paying Agent, the
Co-Agent and the Banks have agreed, on the terms and conditions herein set
forth, that the Credit Agreement be amended in certain respects;
NOW, THEREFORE, IT IS AGREED:
Section 1. Definitions. Terms used herein which are defined in the
Credit Agreement shall have the same meanings when used herein unless otherwise
provided herein.
Section 2. Amendments to the Credit Agreement. On and after the Fifth
Amendment Effective Date, the Credit Agreement shall be amended as follows:
(a) The definition of "Applicable Margin" set forth in Section 1 of
the Credit Agreement is hereby amended to read in its entirety as follows:
"Applicable Margin" shall mean, on any day and with respect to any
Loan, the applicable per annum percentage set forth at the appropriate
intersection in the table shown below, based on the
Debt/Capitalization Ratio as of the last day of the most recently
ending fiscal quarter of the Parent and its Subsid0iaries with respect
to which the Administrative Agent shall have received the financial
<PAGE> 2
statements and other information (the "Current Information")
required to be delivered to the Administrative Agent pursuant
to Section 9.1 hereof (said calculation to be made by the
Administrative Agent as soon as practicable after receipt by the
Administrative Agent of all required Current Information):
<TABLE>
<CAPTION>
Applicable Margin For
Alternate Base Rate Applicable
Loans and Canadian Margin for
Prime Rate Eurodollar
Debt/Capitalization Ratio Loans Loans
<S> <C> <C>
Greater than or equal to 60% 0.375 1.375
Greater than or equal to 55%
but less than 60% 0.00 1.00
Greater than or equal to 50%
but less than 55% 0.00 0.75
Less than 50% 0.00 0.625
</TABLE>
Notwithstanding the foregoing, at all times that a Borrowing Base
Deficiency shall exist and is continuing for more than 30 days, the
Applicable Margins provided for in this definition shall each be
increased by adding 1.00%. Each change in the Applicable Margin based
on a change in the Current Information shall be effective as of the
fifteenth day of the month during which the Current Information used to
calculate the new Applicable Margin was delivered to the Administrative
Agent.
(b) The definition of "Revolving Credit Availability Period" set forth
in Section 1 of the Credit Agreement is hereby amended to read in its entirety
as follows:
"Revolving Credit Availability Period" shall mean the period
from and including the date hereof to but not including December 31,
2002 or the date the Commitments are terminated pursuant to Section
11.1, whichever is first to occur.
(c) The definition of "Revolving Credit Commitment Fee Percentage" set
forth in Section 1 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"Revolving Credit Commitment Fee Percentage" shall mean
0.30% per annum.
<PAGE> 3
(d) Section 2.3(a)(i) of the Credit Agreement is hereby amended to
read in its entirety as follows:
(i) The total Commitment of the Banks shall be reduced as follows:
Reduction Resulting Revolving
Reduction Date Amount Credit Commitment
March 31, 1999 U.S. $6,250,000 U.S. $93,750,000
June 30, 1999 U.S. $6,250,000 U.S. $87,500,000
September 30, 1999 U.S. $6,250,000 U.S. $81,250,000
December 31, 1999 U.S. $6,250,000 U.S. $75,000,000
March 31, 2000 U.S. $6,250,000 U.S. $68,750,000
June 30, 2000 U.S. $6,250,000 U.S. $62,500,000
September 30, 2000 U.S. $6,250,000 U.S. $56,250,000
December 31, 2000 U.S. $6,250,000 U.S. $50,000,000
March 31, 2001 U.S. $6,250,000 U.S. $43,750,000
June 30, 2001 U.S. $6,250,000 U.S. $37,500,000
September 30, 2001 U.S. $6,250,000 U.S. $31,250,000
December 31, 2001 U.S. $6,250,000 U.S. $25,000,000
March 31, 2002 U.S. $6,250,000 U.S. $18,750,000
June 30, 2002 U.S. $6,250,000 U.S. $12,500,000
September 30, 2002 U.S. $6,250,000 U.S. $6,250,000
December 31, 2002 U.S. $6,250,000 U.S. $0
Section 3. Maximum Outstanding Amount. The Maximum Outstanding Amount
is hereby designated as U.S. $95,000,000 as of the Fifth Amendment Effective
Date (subject to revision as provided in the Credit Agreement).
Section 4. Modification to Notes. The reference to "December 31, 2000"
in each of the Notes is hereby amended to read "December 31, 2002".
Section 5. Limitations. The amendments set forth herein are limited
precisely as written and shall not be deemed to (a) be a consent to, or waiver
or modification of, any other term or condition of the Credit Agreement or any
of the other Loan Documents, or (b) except as expressly set forth herein,
prejudice any right or rights which the Banks may now have or may have in the
future under or in connection with the Credit Agreement, the Loan Documents or
any of the other documents referred to therein. Except as expressly modified
hereby or by express written amendments thereof, the terms and provisions of the
Credit Agreement, the Notes and any other Loan Documents or any other documents
or instruments executed in connection with any of the foregoing are and shall
remain in full force and effect. In the event of a conflict between this Fifth
Amendment and any of the foregoing documents (other than the Intercreditor
Agreement), the terms of this Fifth Amendment shall be controlling.
<PAGE> 4
Section 6. Payment of Expenses. The Borrower agrees, whether or not the
transactions hereby contemplated shall be consummated, to reimburse and save the
Agents harmless from and against liability for the payment of all reasonable
substantiated out-of-pocket costs and expenses arising in connection with the
preparation, execution, delivery, amendment, modification, waiver and
enforcement of, or the preservation of any rights under this Fifth Amendment,
including, without limitation, the reasonable fees and expenses of any local or
other counsel for the Administrative Agent, and all stamp taxes (including
interest and penalties, if any), recording taxes and fees, filing taxes and
fees, and other charges which may be payable in respect of, or in respect of any
modification of, the Credit Agreement and the other Loan Documents. The
provisions of this Section shall survive the termination of the Credit Agreement
and the repayment of the Loans.
Section 7. Governing Law. THIS FIFTH AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS (OTHER THAN THE CONFLICT OF
LAWS RULES) OF THE PROVINCE OF ALBERTA AND OF CANADA FROM TIME TO TIME IN
EFFECT.
Section 8. Descriptive Headings, etc. The descriptive headings of the
several Sections of this Fifth Amendment are inserted for convenience only and
shall not be deemed to affect the meaning or construction of any of the
provisions hereof.
Section 9. Entire Agreement. This Fifth Amendment and the documents
referred to herein represent the entire understanding of the parties hereto
regarding the subject matter hereof and supersede all prior and contemporaneous
oral and written agreements of the parties hereto with respect to the subject
matter hereof, including, without limitation, any commitment letters regarding
the transactions contemplated by this Fifth Amendment.
Section 10. Counterparts. This Fifth Amendment may be executed in any
number of counterparts and by different parties on separate counterparts and all
of such counterparts shall together constitute one and the same instrument.
Section 11. Amended Definitions. As used in the Credit Agreement
(including all Exhibits thereto) and all other instruments and documents
executed in connection therewith, on and subsequent to the Fifth Amendment
Effective Date the term "Agreement" shall mean the Credit Agreement as amended
by this Fifth Amendment.
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment
to be duly executed and delivered by their respective duly authorized offices as
of the date first above written.
SEAGULL ENERGY CANADA LTD.
By:
Name:
Title:
<PAGE> 6
CHEMICAL BANK OF CANADA,
individually and as Arranger
and as Administrative Agent
By:
Name:
Title:
<PAGE> 7
THE BANK OF NOVA SCOTIA, as Paying
Agent, as Co-Agent and as a Bank
By:
Name:
Title:
<PAGE> 8
CANADIAN IMPERIAL BANK OF COMMERCE,
as Co-Agent and as a Bank
By:
Name:
Title:
<PAGE> 9
ABN AMRO BANK CANADA
By:
Name:
Title:
By:
Name:
Title:
<PAGE> 10
MELLON BANK CANADA
By:
Name:
Title:
<PAGE> 11
FIRST CHICAGO NBD BANK, CANADA
By:
Name:
Title:
By:
Name:
Title:
<PAGE> 12
SOCIETE GENERALE (CANADA)
By:
Name:
Title:
<PAGE> 13
BANK OF MONTREAL
By:
Name:
Title:
<PAGE> 14
The undersigned hereby joins in the execution of this Amendment to
evidence its consent hereto and its acknowledgment that the Guarantee shall
continue to apply to the Credit Agreement, as amended hereby.
SEAGULL ENERGY CORPORATION
By:
Name:
Title:
<PAGE> 1
EXHIBIT 4.2
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT ("Fourth Amendment") dated
as of May 28, 1996 (the "Fourth Amendment Effective Date") is made and entered
into by and among SEAGULL ENERGY CORPORATION (the "Borrower"), a Texas
corporation, the banking institutions from time to time a party to the Credit
Agreement (as hereinafter defined) as amended by this Fourth Amendment (each,
together with its successors and assigns, a "Bank" and collectively, the
"Banks"), CHEMICAL BANK, as Auction Agent (in such capacity, the "Auction
Agent") and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as administrative agent
for the Banks (in such capacity, the "Administrative Agent").
RECITALS:
WHEREAS, the Borrower, the Administrative Agent, the Auction Agent and
the Banks are parties to a Credit Agreement dated as of May 24, 1994, as amended
(the "Credit Agreement"); and
WHEREAS, the Borrower, the Administrative Agent, the Auction Agent and
the Banks have agreed, on the terms and conditions herein set forth, that the
Credit Agreement be amended in certain respects;
NOW, THEREFORE, IT IS AGREED:
Section 1. Definitions. Terms used herein which are defined in the
Credit Agreement shall have the same meanings when used herein unless otherwise
provided herein.
Section 2. Amendments to the Credit Agreement. On and after the Fourth
Amendment Effective Date, the Credit Agreement shall be amended as follows:
(a) The definition of "Applicable Margin" set forth in Section 1 of
the Credit Agreement is hereby amended to read in its entirety as follows:
"Applicable Margin" shall mean, on any day and with respect to
any Loan, the applicable per annum percentage set forth at the
appropriate intersection in the table shown below, based on the
Debt/Capitalization Ratio as of the last day of the most recently
ending fiscal quarter of the Company and its Subsidiaries with respect
to which the Administrative Agent shall have received the financial
statements and other information (the "Current Information") required
to be delivered to the Administrative Agent pursuant to Section 9.1
hereof (said calculation to be made by the Administrative Agent as soon
as practicable after receipt by the Administrative Agent of all
required Current Information):
<PAGE> 2
<TABLE>
<CAPTION>
Eurodollar
Alternate Base Rate Loan
Loan Applicable Applicable
Debt/Capitalization Ratio Margin Margin
<S> <C> <C>
Greater than or equal to 60% 0.375 1.1875
Greater than or equal to 55%
but less than 60% 0.00 0.8125
Greater than or equal to 50%
but less than 55% 0.00 0.5625
Less than 50% 0.00 0.4375
</TABLE>
Notwithstanding the foregoing, at all times that a Borrowing Base
Deficiency shall exist and is continuing for more than 30 days, the
Applicable Margins provided for in this definition shall each be
increased by adding 1.00%. Each change in the Applicable Margin based
on a change in the Current Information shall be effective as of the
fifteenth day of the month during which the Current Information used to
calculate the new Applicable Margin was delivered to the Administrative
Agent.
(b) The definition of "Revolving Credit Availability Period" set forth
in Section 1 of the Credit Agreement is hereby amended to read in its entirety
as follows:
"Revolving Credit Availability Period" shall mean the period
from and including the date hereof to but not including December 31,
2002 or the date the Commitments are terminated pursuant to Section
11.1, whichever is first to occur.
(c) Section 2.3(a) of the Credit Agreement is hereby amended to read
in its entirety as follows:
(a) Mandatory.
(i) The total Commitment of the Banks shall be reduced as follows:
Reduction Resulting Revolving
Reduction Date Amount Credit Commitment
March 31, 1999 $40,000,000 $610,000,000
June 30, 1999 $40,000,000 $570,000,000
September 30, 1999 $40,000,000 $530,000,000
December 31, 1999 $40,000,000 $490,000,000
March 31, 2000 $40,000 000 $450,000,000
<PAGE> 3
June 30, 2000 $40,000,000 $410,000,000
September 30, 2000 $40,000,000 $370,000,000
December 31, 2000 $40,000,000 $330,000,000
March 31, 2001 $40,000,000 $290,000,000
June 30, 2001 $40,000,000 $250,000,000
September 30, 2001 $40,000,000 $210,000,000
December 31, 2001 $40,000,000 $170,000,000
March 31, 2002 $40,000,000 $130,000,000
June 30, 2002 $40,000,000 $90,000,000
September 30, 2002 $40,000,000 $50,000,000
December 31, 2002 $50,000,000 $0
(ii) On December 31, 2002, all Commitments shall be
terminated in their entirety unless terminated at an earlier date
pursuant to Section 11.1.
Section 3. Borrowing Base Component Values. The Borrowing Base
Component Values are as follows:
(i) Oil and Gas Reserves Component Value - $440,000,000
(of which $95,000,000 is attributable to the assets of
Novalta Resources Inc.),
(ii) Alaskan Gas Component Value - $60,000,000,
(iii) Pipeline Component Value - $0,
for a total Borrowing Base of $500,000,000.
Section 4. Maximum Outstanding Amount. The "Maximum Outstanding Amount"
under the Canadian Facility has been set at $95,000,000 concurrently herewith.
Section 5. Modification to Notes. The reference to "December 31, 2000"
in each of the Notes is hereby amended to read "December 31, 2002".
Section 6. Limitations. The amendments set forth herein are limited
precisely as written and shall not be deemed to (a) be a consent to, or waiver
or modification of, any other term or condition of the Credit Agreement or any
of the other Loan Documents, or (b) except as expressly set forth herein,
prejudice any right or rights which the Banks may now have or may have in the
future under or in connection with the Credit Agreement, the Loan Documents or
any of the other documents referred to therein. Except as expressly modified
hereby or by express written amendments thereof, the terms and provisions of the
Credit Agreement, the Notes, the Security Documents and any other Loan Documents
or any other documents or instruments executed in connection with any of the
foregoing are and shall remain in full force and effect. In the event of a
conflict between this Fourth Amendment and any of the foregoing documents, the
terms of this Fourth Amendment shall be controlling.
<PAGE> 4
Section 7. Payment of Expenses. The Borrower agrees, whether or not the
transactions hereby contemplated shall be consummated, to reimburse and save the
Administrative Agent harmless from and against liability for the payment of all
reasonable substantiated out-of-pocket costs and expenses arising in connection
with the preparation, execution, delivery, amendment, modification, waiver and
enforcement of, or the preservation of any rights under this Fourth Amendment,
including, without limitation, the reasonable fees and expenses of any local or
other counsel for the Administrative Agent, and all stamp taxes (including
interest and penalties, if any), recording taxes and fees, filing taxes and
fees, and other charges which may be payable in respect of, or in respect of any
modification of, the Credit Agreement and the other Loan Documents. The
provisions of this Section shall survive the termination of the Credit Agreement
and the repayment of the Loans.
Section 8. Governing Law. This Fourth Amendment and the rights and
obligations of the parties hereunder and under the Credit Agreement shall be
construed in accordance with and be governed by the laws of the State of Texas
and the United States of America.
Section 9. Descriptive Headings, etc. The descriptive headings of the
several Sections of this Fourth Amendment are inserted for convenience only and
shall not be deemed to affect the meaning or construction of any of the
provisions hereof.
Section 10. Entire Agreement. This Fourth Amendment and the documents
referred to herein represent the entire understanding of the parties hereto
regarding the subject matter hereof and supersede all prior and contemporaneous
oral and written agreements of the parties hereto with respect to the subject
matter hereof, including, without limitation, any commitment letters regarding
the transactions contemplated by this Fourth Amendment.
Section 11. Counterparts. This Fourth Amendment may be executed in any
number of counterparts and by different parties on separate counterparts and all
of such counterparts shall together constitute one and the same instrument.
Section 12. Changes to Banks. The parties hereto acknowledge and
consent to the following:
(i) NBD Bank, N.A. has assigned its interests as a Bank to First
National Bank of Chicago;
(ii) Citibank, N.A has assigned its interests as a Bank to Chase
Manhattan Bank, N.A.;
(iii) The Bank of Tokyo, Ltd., Dallas Agency has assigned its
interests as a Bank to The Bank of Tokyo-Mitsubishi, Ltd.;
and
(iv) First Interstate Bank of Texas, N.A. has assigned its
interests as a Bank to Wells Fargo Bank.
<PAGE> 5
Section 13. Amended Definitions. As used in the Credit Agreement
(including all Exhibits thereto) and all other instruments and documents
executed in connection therewith, on and subsequent to the Fourth Amendment
Effective Date the term "Agreement" shall mean the Credit Agreement as amended
by this Fourth Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to be duly executed and delivered by their respective duly authorized
offices as of the date first above written.
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE ss.26.02
THIS FOURTH AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED BY ANY OF
THE PARTIES BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF
TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT AND REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREE MENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SEAGULL ENERGY CORPORATION,
a Texas corporation
By:
Name:
Title:
<PAGE> 6
CHEMICAL BANK,
as Auction Agent
By:
Name:
Title:
<PAGE> 7
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, individually
and as Administrative Agent
By:
Name:
Title:
<PAGE> 8
THE CHASE MANHATTAN BANK, N.A.
By:
Name:
Title:
<PAGE> 9
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:
Name:
Title:
<PAGE> 10
NATIONSBANK OF TEXAS, N.A.
By:
Name:
Title:
<PAGE> 11
THE FIRST NATIONAL BANK OF BOSTON
By:
Name:
Title:
<PAGE> 12
ABN AMRO BANK N.V., HOUSTON AGENCY
By: ABN AMRO North America, Inc., as agent
By:
Name:
Title:
By:
Name:
Title:
<PAGE> 13
THE BANK OF NEW YORK
By:
Name:
Title:
<PAGE> 14
BANQUE PARIBAS HOUSTON AGENCY
By:
Name:
Title:
By:
Name:
Title:
<PAGE> 15
CREDIT LYONNAIS NEW YORK BRANCH
By:
Name:
Title:
<PAGE> 16
THE FUJI BANK, LIMITED
HOUSTON AGENCY
By:
Name:
Title:
<PAGE> 17
FIRST NATIONAL BANK OF CHICAGO
By:
Name:
Title:
<PAGE> 18
SOCIETE GENERALE, SOUTHWEST AGENCY
By:
Name:
Title:
<PAGE> 19
THE BANK OF TOKYO-MITSUBISHI, LTD.
By:
Name:
Title:
<PAGE> 20
BANK OF SCOTLAND
By:
Name:
Title:
<PAGE> 21
CAISSE NATIONALE DE CREDIT
AGRICOLE
By:
Name:
Title:
<PAGE> 22
CHRISTIANIA BANK OG KREDITKASSE
By:
Name:
Title:
By:
Name:
Title:
<PAGE> 23
DEN NORSKE BANK AS
By:
Name:
Title:
By:
Name:
Title:
<PAGE> 24
MIDLAND BANK PLC,
NEW YORK BRANCH
By:
Name:
Title:
<PAGE> 25
WELLS FARGO BANK
By:
Name:
Title:
<PAGE> 26
THE BANK OF NOVA SCOTIA
By:
Name:
Title:
<PAGE> 27
CIBC, INC.
By:
Name:
Title:
<PAGE> 28
MELLON BANK
By:
Name:
Title:
<PAGE> 29
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: First Union Corporation of
North Carolina
By:
Name:
Title:
<PAGE> 30
BANK OF MONTREAL
By:
Name:
Title:
<PAGE> 1
EXHIBIT 10.1
AMENDMENT TO
NONEMPLOYEE DIRECTOR'S STOCK OPTION AGREEMENT(S)
WHEREAS, SEAGULL ENERGY CORPORATION, a Texas corporation (the
"Company") has previously adopted the SEAGULL ENERGY CORPORATION 1993
NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN (the "Directors' Option Plan"); and
WHEREAS, certain nonstatutory stock options (collectively, "Options")
have heretofore been granted to the optionee, a nonemployee director of the
Company (the "Director"), that are currently outstanding under the Directors'
Option Plan, each of such Options being listed on the schedule attached hereto
and evidenced by a Nonemployee Director's Stock Option Agreement (collectively,
the "Agreements"); and
WHEREAS, the Company desires to amend the Agreements in certain
respects; and
WHEREAS, the Board of Directors of the Company has adopted an amendment
to the Agreements and such amendment has been approved by the shareholders of
the Company;
NOW, THEREFORE, the Agreements shall be amended as follows, effective
as of May 14, 1996:
1. Paragraph 3 of the Agreements shall be deleted and the following
shall be substituted therefor:
"3. Exercise of Option. Subject to the earlier expiration of
this Option as herein provided, this Option may be exercised, by
written notice to the Company at its principal executive office
addressed to the attention of its Chairman, President and Chief
Executive Officer, at any time and from time to time after the date of
grant hereof, but, except as otherwise provided below, this Option
shall not be exercisable for more than a percentage of the aggregate
number of shares offered by this Option determined by the number of
full years from the date of grant hereof to the date of such exercise,
in accordance with the following schedule:
<PAGE> 2
Percentage of Shares
Number of Full Years That May Be Purchased
Less than 1 year 0%
1 year 20%
2 years 40%
3 years 60%
4 years 80%
5 years or more 100%
This Option is not transferable by Director otherwise than by
will or the laws of descent and distribution, and may be exercised only
by Director (or Director's guardian or legal representative) during
Director's lifetime. If a Director's membership on the Board of
Directors of the Company (the "Board") terminates, this Option may be
exercised as follows:
(a) If Director's membership on the Board terminates
for cause or voluntarily by Director not at the request of the
Board, this Option may be exercised by Director at any time
during the period of three months following such termination,
or by Director's estate (or the person who acquires this
Option by will or the laws of descent and distribution or
otherwise by reason of the death of Director) during a period
of one year following Director's death if Director dies during
such three-month period, but in each case only as to the
number of shares Director was entitled to purchase hereunder
upon exercise of this Option as of the date Director's
membership on the Board so terminates. For purposes of this
Agreement, "cause" shall mean Director's gross negligence or
willful misconduct in performance of his duties as a director,
or Director's final conviction of a felony or of a misdemeanor
involving moral turpitude. For purposes of this Agreement, a
Director's termination by reason of the mandatory retirement
policy of the Board shall not constitute a voluntary
termination, and the provisions of clause (b) shall be
applicable to any such termination by reason of mandatory
retirement.
(b) If Director's membership on the Board terminates
for any reason other than as described in clause (a) above
(including without limitation because of Director's death,
disability or by reason of mandatory retirement pursuant to
the policy of the Board), this Option may be exercised in full
by Director at any time until (i) three years after such
termination or (ii) one year after Director's death, whichever
<PAGE> 3
is later. After Director's death, this Option shall
be exercisable for the periods stated in the immediately
preceding sentence by Director's estate (or the person who
acquires this Option by will or the laws of descent and
distribution or otherwise by reason of the death of
Director). After Director's termination as a director by
reason of disability, this Option shall be exercisable for
the periods stated in the first sentence of this
clause (b) by Director or by Director's guardian or legal
representative.
This Option shall not be exercisable in any event after the expiration
of ten years from the date of grant hereof. The purchase price of
shares as to which this Option is exercised shall be paid in full at
the time of exercise (A) in cash (including check, bank draft or money
order payable to the order of the Company), (B) by delivering to the
Company shares of Stock having a fair market value equal to the
purchase price, or (C) any combination of cash or Stock. No fraction
of a share of Stock shall be issued by the Company upon exercise
of an Option or accepted by the Company in payment of the purchase
price thereof; rather, Director shall provide a cash payment for such
amount as is necessary to effect the issuance and acceptance of
only whole shares of Stock. Unless and until a certificate or
certificates representing such shares shall have been issued by
the Company to Director, Director (or the person permitted to
exercise this Option in the event of Director's death) shall not be
or have any of the rights or privileges of a shareholder of the
Company with respect to shares acquirable upon an exercise of this
Option."
2. As amended hereby, the Agreements are specifically ratified and
reaffirmed.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officer thereunto duly authorized, and Director has executed
this Agreement, effective as of May 14, 1996.
SEAGULL ENERGY CORPORATION
By:___________________________
Chairman, President and
Chief Executive Officer
---------------------------
Director
<PAGE> 1
EXHIBIT 10.2
SEAGULL ENERGY CORPORATION
OUTSIDE DIRECTORS DEFERRED FEE PLAN
1. History and Purposes of the Plan
The Seagull Energy Corporation Outside Directors Deferred Fee Plan
("Plan") was originally adopted on May 16, 1983 by Seagull Energy Corporation
(the "Company"), formerly known as Seagull Pipeline Corporation, and is intended
to provide a method for attracting and retaining qualified outside directors for
the Company and to encourage them to devote their best efforts to the business
of the Company, thereby advancing the interests of the Company and its
shareholders. Effective as of May 1, 1991, the Company restated the Plan for
purposes of amending the Plan in certain respects.
2. Administration of the Plan
The Plan shall be administered by a committee (the "Committee")
appointed by the Board of Directors of the Company (the "Board"). No director
who is eligible to participate in the Plan shall be eligible to be a member of
the Committee. The Committee is authorized to interpret the Plan and may from
time to time adopt such rules and regulations, consistent with the provisions of
the Plan, as it may deem advisable to carry out the Plan. All decisions made by
the Committee shall be final. All expenses incurred in connection with the
administration of the Plan shall be borne by the Company.
3. Participation in the Plan
(a) Participation. Each outside director of the Company shall become a
participant in the Plan ("Participant"). For purposes of the foregoing sentence,
an individual shall be deemed to be an outside director if he is a validly
elected director of the Company and he does not perform any services for the
Company in a common-law employee capacity.
(b) Deferral of Director's Fees. The receipt of one-half of the annual
retainer fee earned by each Participant shall be deferred under this Plan.
Further, a Participant may elect to defer additional director's fees (whether
annual, periodic or special) to be earned by such Participant for services
rendered by filing with the Committee an election to defer receipt of all or a
designated portion of such fees.
(c) Time and Manner of Making Elections. Any deferral election which
may be made by a Participant under the Plan shall be made with respect to a
twelve consecutive month period ("Service Period") during which services are
rendered by such Participant and must be made not later than the date
immediately preceding the first day of such Service Period. On and after
<PAGE> 2
January 1, 1992, the Service Period for each Participant shall commence on
January 1 of each year. As a result of this change, there shall be short Service
Periods which commence on or after May 1, 1991 and end December 31, 1991. All
elections shall be made in the manner and form prescribed by the Committee.
(d) Nature of Elections. A Participant's election to defer receipt of
all or a designated portion of his fees for a Service Period shall continue in
force and effect for future Service Periods unless modified or revoked by such
Participant. Any such modification or revocation shall be effective only as of
the first day of a Service Period and must be made not later than the date
immediately preceding the first day of such Service Period. A modification or
revocation of an existing deferral election shall be made in the manner and form
prescribed by the Committee. Any deferral election (whether in the nature of an
initial election, an unrevised continuing election or a revised continuing
election) with respect to a Service Period shall be irrevocable as of the first
day of such Service Period.
4. Crediting of Deferred
Fees to Plan Accounts
(a) Establishment of Plan Accounts. The Committee shall establish
memorandum bookkeeping accounts (the "Plan Accounts") for each Participant in
the Plan. Each Participant shall have two accounts, a Required Deferral Account
to which mandatory deferrals under Paragraph 3(b) are credited and an Elective
Deferral Account to which other deferrals under Paragraph 3(b) are credited.
During each quarter within a Service Period, the Committee shall credit to each
Participant's Plan Accounts the Participant's deferred fees as of the date such
fees are earned by the Participant.
(b) Crediting of Interest Equivalents. As of the last day of each
quarter within a Service Period or as of the last day of any quarter subsequent
to a Service Period upon which a Participant has a balance credited to his Plan
Accounts, the Committee shall credit to each Participant's Elective Deferral
Account, as additional deferred fees, a dollar amount equal to simple interest
on the amounts credited to such Account (excluding any amounts being credited
during such quarter) computed at the sum of:
(1) the prime rate published in The Wall Street Journal on
the last business day of such quarter, plus
(2) a rate based upon the number of complete years which have
elapsed since the date the Participant was first elected to
the Board by the shareholders of the Company or by the
Board under applicable corporate law, in accordance with
the following schedule:
<PAGE> 3
Number of Years Additional Rate of Interest
Less than 5 0%
5 but less than 10 1%
10 or more 2%
(c) Alternative Investment in Stock Units. In lieu of having his
Elective Deferral Account credited with interest equivalents pursuant to
Paragraph (b) above, a Participant may elect in accordance with the provisions
of Paragraph (d) below to have the value of such Account determined as if it had
been credited with a number of shares of stock (the "Phantom Stock") equal to
the number of shares of common stock of the Company which could have been
purchased with such Account on the date of such election, or for any amounts
subsequently credited to the Participant's Account, on the date so credited,
based upon the average of the closing prices of common stock of the Company on
the twenty trading days preceding such date. As of the last day of each quarter
within a Service Period and as of any other date which the Committee shall
determine, the Committee shall redetermine the value of each Participant's
Account which is credited with Phantom Stock based upon the increase or decrease
in the value of the common stock of the Company during such quarter plus credit
for dividends paid during such quarter; for the purpose of such redetermination,
one share of Phantom Stock shall be deemed to be the equivalent of one share of
the common stock of the Company. Except as provided in Paragraph (d) below,
amounts credited to each Participant's Required Deferral Account shall be
credited with Phantom Stock pursuant to this Paragraph.
(d) Crediting Election. Prior to the first day of each quarter during a
Service Period, a Participant may elect to have amounts credited to his Elective
Deferral Account credited with Phantom Stock pursuant to Paragraph (c) above for
such quarter. Any such election shall be effective until revoked by the
Participant. If a Participant revokes an election made pursuant to this
Paragraph as of the first day of any quarter during a Service Period, any
amounts previously credited to such Participant's Elective Deferral Account
which have been credited with Phantom Stock pursuant to Paragraph (c) above
shall remain so credited until paid to such Participant pursuant to Section 5
and any amounts subsequently credited to such Participant's Elective Deferral
Account shall be credited with interest equivalents pursuant to Paragraph (b)
above. If a Participant fails to make any election under this Paragraph, his
Elective Deferral Account shall be credited with interest equivalents pursuant
to Paragraph (b) above. Notwithstanding any Plan provision to the contrary, a
Participant whose Plan Accounts will be paid pursuant to Paragraph 5(a) in a
mode other than lump sum may revoke his election pursuant to this Paragraph with
respect to any amounts of Phantom Stock credited to his Elective Deferral
Account and may elect to have his Required Deferral Account credited with
interest equivalents pursuant to Paragraph (b) above, effective as of the first
day of the first month following his final Service Period or final portion
thereof; provided, however, that a Participant shall not be eligible to revoke
or make an election pursuant to this sentence until he has ceased to be a member
of the Board. If a Participant revokes or makes an election pursuant to the
preceding sentence, such Participant's Account or Accounts shall be credited
with the value of the number of shares of Phantom Stock credited to such Account
or Accounts as of the preceding day, based upon the average of the closing
prices of common stock of the Company on the twenty trading days preceding such
date.
<PAGE> 4
5. Payment of Deferred Fees
(a) Payment Election Generally. Prior to the first day of each Service
Period, a Participant shall elect, subject to the provisions of Paragraphs (b),
(c) and (d) below, the time (which may not be prior to the date on which he
ceases to be a member of the Board) and the mode (which may either be a lump sum
payment or monthly, quarterly, or annual installment payments over a specified
term certain) for payment of amounts credited to his Plan Accounts during such
Service Period. Any such elections regarding the time and mode of payment of
amounts credited to a Participant's Plan Accounts shall be irrevocable once
made. In the absence of direction by a Participant regarding the time or mode of
payment of amounts credited to his Plan Accounts during a Service Period, such
amounts shall be distributed in monthly installments over a period of ten years,
beginning on the first day of the first month after the date the Participant
ceased to be a director of the Company.
(b) Payment Upon Death. In the event of a Participant's death, the
balance of such Participant's Plan Accounts, computed as of the date of his
death, shall be paid in one lump sum to his designated beneficiary within the
first four months following the date of such Participant's death. A Participant,
by written instrument filed with the Committee in such manner and form as it may
prescribe, may designate one or more beneficiaries to receive payment of the
amounts credited to his Plan Accounts in the event of his death. Any such
beneficiary designation may be changed from time to time prior to the death of
the Participant. In the absence of a beneficiary designation on file with the
Committee at the time of a Participant's death, the executors or administrator
of the Participant's estate shall be deemed to be his designated beneficiary.
(c) Payment Upon Plan Termination. In the event the Plan is terminated
by the Company, the balance of each Participant's Plan Accounts, computed as of
the day immediately following the six-month anniversary of the date of such Plan
termination, shall be paid to such Participant in one lump sum as soon as
practicable after such date.
(d) Payment Upon Change of Control. With respect to any Participant
that ceases to be a director of the Company (or any successor) as a result of or
in connection with a change of control that is not approved, recommended and
supported by at least two-thirds of the Directors that were also Directors prior
to the occurrence of any such change of control in actions taken prior to, and
with respect to, such change of control, such Participant's Plan Accounts,
computed as of the later of the date such Participant ceases to be a director of
the Company or the date of such change of control, shall be paid to such
Participant in one lump sum as soon as practicable, but no later than thirty
days following such date. For purposes of the Plan, "change of control" shall
be deemed to have occurred if (i) any person (other than Participant or
the Company) including a "group" as determined in accordance with Section
<PAGE> 5
13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of
shares of the Company having 40% or more of the total number of votes that may
be cast for the election of Directors; or (ii) as a result of, or in connection
with, any cash tender or exchange offer, merger or other business combination,
sale of assets or contested election, or any combination of the foregoing
transactions (a "Transaction"), the persons who were Directors before the
Transaction shall cease to constitute a majority of the Board of Directors of
the Company or any successor thereto. The determinations of whether a change of
control has occurred, whether such change of control was not approved,
recommended or supported by the Directors in actions taken prior to, and with
respect to, such change of control and whether any Participant ceased to be a
director of the Company as a result of or in connection with such change of
control shall be made by the Committee as existing at least six months prior to
the occurrence of such change of control and its determination shall be final.
(e) Conversion of Plan Accounts for Purposes of Payment. If a
Participant has elected to receive payment of his Plan Accounts in a lump sum
pursuant to Paragraph (a) above, the value of his Plan Accounts shall be
determined as of the last day of the month preceding the time which he has
elected to receive such payment and an amount equal to such value shall be paid
to the Participant. If such Participant has elected to have his Plan Accounts
credited based on Phantom Stock pursuant to Paragraph 4(d), the value of his
Plan Accounts shall be based upon the average of the closing prices of common
stock of the Company on the twenty trading days preceding such date. If a
Participant has elected to receive payment of his Plan Accounts in any other
mode pursuant to Paragraph (a) above and his Plan Accounts are being credited
with Interest Equivalents pursuant to Paragraph 4(b), the value of his Plan
Accounts shall be determined as of the last day of the month preceding the time
which he has elected to commence receiving such payments and an amount equal to
the value of such Plan Accounts multiplied by a fraction, the numerator of which
is one and the denominator of which is the aggregate number of payments which
the Participant elected, shall be paid as of each interval such Participant
elected; provided, however, that any balance credited to such Participant's Plan
Accounts shall continue to be credited with Interest Equivalents pursuant to
Paragraph 4(b), except that the Interest Equivalents so credited shall be paid
directly to the Participant. If a Participant has elected, pursuant to Paragraph
(a) above, to receive payment of his Plan Accounts in a mode other than a lump
sum and has elected to have his Plan Accounts credited based on Phantom Stock
pursuant to Paragraph 4(d), the number of shares of Phantom Stock credited to
his Plan Accounts shall be determined as of the last day of the month preceding
the time which he has elected to commence receiving such payments and each
subsequent interval thereafter, and such number shall be multiplied by a
fraction, the numerator of which is one and the denominator of which is the
remaining number of payments which the Participant elected, and an amount equal
to the value of the resulting number of shares of Phantom Stock, based upon the
average of the closing prices of common stock of the Company on the twenty
trading days preceding such date, shall be paid to such Participant. If
Paragraphs (b), (c) or (d) above apply, the value of a Participant's Plan
Accounts shall be determined as of the date specified in the applicable
Paragraph and an amount equal to such value shall be paid to the Participant or
<PAGE> 6
his designated beneficiary; provided, however, that if the Participant has
elected to have his Plan Accounts credited based on Phantom Stock pursuant to
Paragraph 4(d), the value of his Plan Accounts shall be based upon the average
of the closing prices of common stock of the Company on the twenty trading days
preceding such date.
(f) Form of Payment. All payments under the Plan shall be solely in the
form of cash. Without limiting the generality of the foregoing, nothing in the
Plan shall be construed as giving any Participant any rights as a holder of
common stock or any other equity security of the Company as a result of such
Participant's participation in this Plan or his election to credit his Plan
Accounts with Phantom Stock.
(g) Debiting of Plan Accounts. Once an amount has been paid to a
Participant or his beneficiary, such amount or the Phantom Stock equivalent
thereof shall be debited from the Participant's Plan Accounts.
6. Hardship Distributions
In the event of hardship incurred by a Participant, as determined in
the sole discretion of the Committee, payment of all or a portion of the amount
credited to his Elective Deferral Account which is being credited with interest
equivalents pursuant to Paragraph 4(b), if any, shall be accelerated by being
paid, in one lump sum, as soon as practicable following the Committee's
determination of the existence of such hardship. For purposes of this paragraph,
hardship shall mean any financial emergency or extreme hardship affecting the
personal or family affairs of the Participant and having a significant financial
effect. The Committee may find that financial emergency or extreme hardship
exists in situations in which a distribution is necessary for purposes such as,
but not limited to, the following: (i) for the purpose of enabling a Participant
to meet financial requirements of an illness or disability of the Participant or
a member of his family; (ii) for the purpose of purchasing a principal home or
preserving a principal home in which the Participant lives or will live; (iii)
for the purpose of providing for the education of a Participant's children; and
(iv) for the purpose of defraying major legal expenses and liability assessments
or judgments arising out of legal proceedings involving the Participant or a
member of his family. The decision of the Committee regarding the existence or
nonexistence of a hardship of a Participant shall be final and binding. The
Committee shall have the authority to require a Participant to provide such
proof as it deems necessary to establish the existence and significant nature of
the Participant's hardship.
7. Prohibition Against Assignment or Encumbrance
No right, title, interest or benefit hereunder shall ever be liable for
or charged with any of the torts or obligations of a Participant or a person
claiming under a Participant, or be subject to seizure by any creditor of a
Participant or any person claiming under a Participant. No Participant or any
person claiming under a Participant shall have the power to anticipate or
dispose of any right, title, interest or benefit hereunder in any manner until
same shall have been actually distributed free and clear of the terms of the
Plan.
<PAGE> 7
8. Nature of the Plan
The Plan and any election agreements executed thereunder constitute an
unfunded, unsecured liability of the Company to make payments in accordance with
the provisions hereof, and neither a Participant nor any person claiming under
the Participant shall have any security or other interest in any specific assets
of the Company by virtue of this Plan. Neither the establishment of the Plan,
the crediting of amounts to Plan Accounts nor the setting aside of any funds
shall be deemed to create a trust. The Company at its election may fund the
payment of benefits under the Plan by setting aside and investing, in an account
on the Company's books, such funds as the Company may from time to time
determine. Legal and equitable title to any funds so set aside shall remain in
the Company, and no Participant shall have any security or other interest in
such funds. Any funds so set aside shall remain subject to the claims of the
creditors of the Company, present and future.
9. Amendment and Termination of Plan
The Company shall have the right to alter or amend the Plan or any part
thereof from time to time, except the Company shall not make any alteration or
amendment which would impair the rights of a Participant with respect to amounts
theretofore credited to that Participant's Plan Accounts. The Company may
terminate the Plan at any time. If not sooner terminated under the provisions of
this paragraph, the Plan shall terminate as of the date on which all amounts
theretofore credited to Plan Accounts have been paid.
10. Laws Governing
The Plan and any documents executed in connection therewith shall be
construed in accordance with and governed by the laws of the State of Texas.
SEAGULL ENERGY
CORPORATION
By ______________________________________
Joe T. Rye, Senior Vice President
and Chief Financial Officer
<PAGE> 8
FIRST AMENDMENT TO
SEAGULL ENERGY CORPORATION
OUTSIDE DIRECTORS DEFERRED FEE PLAN
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") has heretofore
adopted the SEAGULL ENERGY CORPORATION OUTSIDE DIRECTORS DEFERRED FEE PLAN (the
"Plan"); and
WHEREAS, the Company desires to amend the Plan;
NOW, THEREFORE, the Plan shall be amended as follows, effective as of
May 1, 1993:
1. Paragraph 4(c) of the Plan shall be deleted and the following shall
be substituted therefor:
"(c) Alternative Investment in Stock Units.
(1) In lieu of having his Elective Deferral Account credited
with interest equivalents pursuant to Paragraph (b) above, a
Participant may elect in accordance with the provisions of Paragraph
(d) below to have the value of such Account determined as if it had
been credited with a number of shares of stock (the "Phantom Stock")
equal to the number of shares of common stock of the Company which
could have been purchased with such Account on the date of such
election, or for amounts which are subsequently credited to the
Participant's Account, on the date so credited, based upon the average
of the closing prices of the common stock of the Company on the twenty
trading days preceding such date. Except as provided in Paragraph (d)
below, amounts credited to each Participant's Required Deferral Account
shall be credited with Phantom Stock pursuant to this Paragraph.
(2) As of the last day of each quarter within a Service
Period and as of any other date which the Committee shall determine,
the Committee shall redetermine the value of each Participant's Account
which is credited with Phantom Stock based upon the increase or
decrease in the value of the common stock of the Company during such
quarter; for the purpose of such redetermination, one share of Phantom
Stock shall be deemed to be the equivalent of one share of common stock
of the Company. Further, each Participant's Account which is credited
with such Phantom Stock shall be credited with the amount of any cash
dividends paid with respect to the common stock of the Company during
such quarter in accordance with Paragraph (c)(1) above.
<PAGE> 9
(3) If, and whenever, the Company shall effect a subdivision
or consolidation of the common stock of the Company or the payment of a
stock dividend on the common stock of the Company (including, without
limitation, the two-for-one stock split proposed to be effected with a
record date of May 21, 1993), (i) in the event of an increase in the
number of outstanding shares of the common stock of the Company, the
number of shares of Phantom Stock credited to each Participant's
Account shall be proportionately increased and (ii) in the event of an
reduction in the number of outstanding shares of the common stock of
the Company, the number of shares of Phantom Stock credited to each
Participant's Account shall be proportionately reduced."
2. As amended hereby, the Plan is specifically ratified and reaffirmed.
EXECUTED this _____ day of _____________________, 1993.
SEAGULL ENERGY CORPORATION
By _________________________________
<PAGE> 10
SECOND AMENDMENT TO
SEAGULL ENERGY CORPORATION
OUTSIDE DIRECTORS DEFERRED FEE PLAN
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") has heretofore
adopted the SEAGULL ENERGY CORPORATION OUTSIDE DIRECTORS DEFERRED FEE PLAN (the
"Plan"); and
WHEREAS, the Company desires to amend the Plan;
NOW, THEREFORE, the Plan shall be amended as follows, effective as of
March 1, 1996;
1. Paragraph 3(c) of the Plan shall be deleted and the following shall
be substituted therefore:
"(c) Time and Manner of Making Elections. Any deferral
election which may be made by a Participant under the Plan shall be
made with respect to the period commencing on January 1 (or, if later,
the date the Participant is first elected or appointed to the Board)
and ending on December 31 of each year ("Service Period') during which
services are rendered by such Participant and must be made not later
than the date immediately preceding the first day of such Service
Period. All elections shall be made in the manner and form prescribed
by the Committee."
2. As amended hereby, the Plan is specifically ratified and reaffirmed.
EXECUTED this 18th day of May, 1996.
SEAGULL ENERGY CORPORATION
By_____________________________
Barry J. Galt
Chairman of the Board, Chief
Executive Officer and President
<PAGE> 1
EXHIBIT 10.3
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement"), effective as of May 1, 1996
("Effective Date"), is by and between SEAGULL ENERGY CORPORATION, a Texas
corporation ("Seagull"), and ROBERT W. SHOWER, an individual who resides in
Dallas, Texas ("Shower").
W I T N E S S E T H :
WHEREAS, Shower's employment with Seagull terminated on April 30, 1996;
and
WHEREAS, Seagull desires Shower to perform certain professional
services after the termination of his employment with Seagull and Shower is
qualified by experience and training and desires to perform such services for
Seagull;
NOW THEREFORE, the parties, in consideration of the mutual promises,
covenants and obligations contained herein, do hereby agree as follows:
1. During the term of this Agreement, Shower shall serve as a
consultant to the management of Seagull with respect to such areas as requested
by the management of Seagull. It is understood that Shower may be rendering
services to others during the term of this Agreement and, in using the services
of Shower hereunder, Seagull will exercise due regard for other commitments of
Shower. Shower shall faithfully render his best efforts and professional
judgment in performance of these services consistent with good consulting
practice and to the promotion, advancement and successful conduct of the
business of Seagull. In providing such consultation, Shower shall provide
Seagull with such of his ideas, assessments, and evaluations as Seagull may deem
necessary. Further, Shower agrees to be available for such meetings as Seagull
deems necessary for proper communication of his consultation.
2. In consideration for the consulting services to be rendered pursuant
to this Agreement, Seagull agrees to the following:
(a) During the term of this Agreement, Seagull shall pay Shower on
the first day of each calendar quarter, a fee to be determined
based upon the following schedule:
<PAGE> 2
Payment Date Quarterly Fee
July 1, 1996 $25,000
October 1, 1996 $25,000
January 1, 1997 $15,000
April 1, 1997 $15,000
July 1, 1997 $10,000
October 1, 1997 $10,000
January 1, 1998 $10,000
April 1, 1998 $10,000
(b) The Restricted Stock Agreement dated March 17, 1995, between
Seagull and Shower shall be amended pursuant to the amendment
attached hereto as Exhibit A to provide that the forfeiture
restrictions thereunder shall lapse as of March 17, 1998
if Shower performs substantial services pursuant to this
Agreement or, if earlier, the date Shower dies or becomes
disabled (as such term is defined under Seagull's long-term
disability plan) or the date the Compensation Committee of the
Board of Directors of Seagull in its sole discretion waives
such forfeiture restrictions.
(c) The Nonstatutory Stock Option Agreement dated March 20, 1992,
between Seagull and Shower shall be amended pursuant to the
amendment attached hereto as Exhibit B to provide that the
option granted thereunder shall be fully exercisable during
the period beginning on the Effective Date of this Agreement
and ending on January 31, 1998.
3. Unless sooner terminated pursuant to other provisions hereof,
Seagull agrees to retain the services of Shower for the period beginning on the
Effective Date of this Agreement and ending on April 30, 1998.
(a) Notwithstanding the provisions of the preceding sentence of this
Paragraph, Seagull shall have the right to terminate this Agreement and Shower's
services hereunder at any time for any of the following reasons:
(i) Upon Shower's death;
(ii) Upon Shower's becoming disabled as such term is defined
under Seagull's long-term disability plan;
(iii) For cause, which for purposes of this Agreement shall
mean a finding by the Board of Directors of Seagull of
Shower's gross negligence or wilful misconduct in the
rendering of services required of him pursuant to this
Agreement or Shower's final conviction of a felony or
of a misdemeanor involving moral turpitude;
<PAGE> 3
(iv) For Shower's material breach of any material
provision of this Agreement, which, if correctable,
remains uncorrected for 30 days following written
notice of such breach to Shower by Seagull; or
(v) For any other reason whatsoever in the sole discretion
of the Board of Directors of Seagull.
(b) Notwithstanding the provisions of the first sentence of this
Paragraph, Shower shall have the right to terminate this Agreement and his
services hereunder at any time for any of the following reasons:
(i) For Seagull's material breach of any material
provision of this Agreement, which, if correctable,
remains uncorrected for 30 days following written
notice of such breach to Seagull by Shower; or
(ii) For any other reason whatsoever in the sole discretion
of Shower.
(c) If Seagull or Shower desires to terminate Shower's services
hereunder at any time prior to the expiration of the term of this Agreement, it
or he shall do so by giving written notice to the other party that it or he has
elected to terminate Shower's services hereunder and stating the effective date
and reason for such termination; provided that no such action shall alter or
amend any other provisions hereof or rights arising hereunder.
(d) In the event that shower's services are terminated by seagull as
provided in (a) above prior to the expiration of the term of this agreement,
then, upon such termination, the compensation payable pursuant to paragraph 2(a)
shall terminate contemporaneously with the termination of such services, except
that if such termination shall be pursuant to (a)(i), (a)(ii) or (a)(v), such
compensation shall continue for the balance of the term of this agreement.
(e) in the event that shower's services are terminated by shower as
provided in (b) above prior to the expiration of the term of this agreement,
then, upon such termination, the compensation payable pursuant to paragraph 2(a)
shall terminate contemporaneously with the termination of such services, except
that if such termination shall be pursuant to (b)(i), such compensation shall
continue for the balance of the term of this agreement.
4. During the term of this Agreement, Shower shall be entitled to use
the nonresident membership in his name at the River Oaks Country Club, Houston,
Texas, but Shower shall not be reimbursed by Seagull for the membership fees,
dues or assessments with respect to such membership.
<PAGE> 4
5. All reasonable out-of-pocket expenses incurred by Shower in the
performance of his services hereunder and properly accounted for shall be borne
by Seagull. If not paid directly by Seagull, Shower shall be reimbursed by
Seagull for the cost of such expenses.
6. Shower acknowledges that Seagull's business is highly competitive
and that Seagull's methods, strategies, books, records, and documents, Seagull's
technical information concerning its products, equipment, services, and
processes, procurement procedures and pricing techniques, and the names of and
other information (such as credit and financial data) concerning Seagull's
customers, business affiliates, affairs, and operations all comprise
confidential business information and/or trade secrets ("confidential
information") of Seagull which are valuable, special, and unique assets of
Seagull which Seagull uses in its business to obtain a competitive advantage
over its competitors which do not know or use this information. Shower further
acknowledges that protection of Seagull's Confidential Information against
unauthorized disclosure and use is of critical importance to Seagull in
maintaining its competitive position. Accordingly, Shower hereby agrees that,
notwithstanding any other provisions of this Agreement other than those
contained in the following sentences, he will not at any time during the term of
this Agreement make any unauthorized disclosure of any Confidential Information
of Seagull or make any unauthorized use thereof. However, Shower's obligations
under this paragraph shall not extend to:
(a) Information which is or becomes a part of the public domain or
is available to the public by publication or otherwise without
disclosure by Shower;
(b) Information which was within Shower's knowledge or in his
possession prior to his employment by Seagull;
(c) Information which, either prior or subsequent to Seagull's
disclosure to Shower, was disclosed to Shower, without an
obligation of confidentiality, by a third party who did not
acquire such information, directly or indirectly from Shower,
Seagull, or from any third party who is under an obligation of
confidentiality; or
(d) Any disclosure of Confidential Information by Shower which is
required by law, including deposition or trial testimony by
Shower pursuant to subpoena. If Shower is requested or required
(by oral questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, if reasonably
possible under the circumstances as determined in good faith by
Shower, Shower will promptly notify Seagull of such request or
requirements so that Seagull may seek an appropriate protective
order or waive compliance with the provisions of this Agreement.
Money damages would not be sufficient remedy for any breach of this Paragraph
concerning Confidential Information by Shower, and Seagull shall be entitled to
<PAGE> 5
seek specific performance and injunctive relief as remedies for such breach or
threatened breach, as well as reasonable and necessary attorneys' fees, experts'
fees, and costs incurred in the connection with such breach or threatened
breach. Such remedies shall not be deemed the exclusive remedies for such a
breach by Shower but shall be in addition to all remedies available at law or in
equity to Seagull, including the recovery of damages from Shower. For purposes
of this Paragraph, Seagull shall be construed to include any parent, subsidiary,
or other affiliate of Seagull.
7. Seagull shall, without further remuneration to Shower, own, be
entitled to possession of, and have the right to use, publish, and disclose any
results, reports, product, or data developed by Shower during the course of his
services hereunder, but identification of Shower with such results, reports, or
data shall not be made without Shower's express consent.
8. Shower is engaged by Seagull only for the purposes and to the extent
set forth in this Agreement, and his relationship to Seagull hereunder is that
of an independent contractor. Nothing in this Agreement is intended to create an
employer/employee relationship between Seagull and Shower or to allow Seagull to
exercise control or direction over the manner or method by which Shower performs
the services which are the subject matter of this Agreement. Shower shall be
responsible for payment of all income, self-employment, or other taxes
attributable to all compensation paid hereunder by Seagull to Shower, and Shower
agrees to hold Seagull harmless for withholding or payment of such taxes.
9. For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by United States, registered or
certified mail, return receipt requested, postage prepaid, if addressed as
follows:
If to Seagull, to: Seagull Energy Corporation
1700 First City Tower
1001 Fannin
Houston, Texas 77002
Attention: Chairman of the Board
If to Shower, to: Mr. Robert W. Shower
7224 Village Lane
Dallas, Texas 75248-6047
or such other addresses as either party may furnish to the other in writing, in
accordance herewith, except that notices of changes of address shall be
effective only upon receipt.
10. This Agreement is entered into under and shall be governed for all
purposes by the laws of the State of Texas.
<PAGE> 6
11. No failure by either party hereto at any time to give notice of any
breach by the other party of, or to require compliance with, any condition or
provision of this Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same time or at any prior or subsequent time.
12. If a court of competent jurisdiction determines that any provision
of this Agreement is invalid or unenforceable, then the invalidity or
unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
13. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which together will
constitute one and the same Agreement.
14. This Agreement and the rights and obligations of the parties
hereunder are personal, and neither this Agreement nor any right, benefit, or
obligation of either party hereto shall be subject to voluntary or involuntary
assignment, alienation, or transfer, whether by operation of law or otherwise,
without the prior written consent of the other party.
15. This Agreement represents the entire agreement between the parties
hereto with respect to the matters covered herein and may not be changed,
altered, or modified in any respect except by an instrument in writing signed by
both the parties hereto.
IN WITNESS WHEREOF, Seagull has caused this Agreement to be duly
executed by one of its officers thereunto duly authorized and Shower has
executed this Agreement, all as of the day and year first above written.
SEAGULL ENERGY CORPORATION
By:
ROBERT W. SHOWER
<PAGE> 7
EXHIBIT A
AMENDMENT TO
RESTRICTED STOCK AGREEMENT
WHEREAS, SEAGULL ENERGY CORPORATION ("Seagull") entered into a
restricted stock agreement (the "Agreement") with ROBERT W. SHOWER ("Shower")
effective March 17, 1995; and
WHEREAS, in conjunction with, and as part of the consideration for, a
consulting agreement by and between Seagull and Shower for consulting services
to be provided during the period beginning on May 1, 1996 and ending on April
30, 1998, Seagull desires to amend the Agreement in certain respects;
NOW THEREFORE, the Agreement shall be amended as follows, effective as
of May 1, 1996:
1. All references to the term "Employee" in the Agreement shall be
deleted and the term "Consultant" shall be substituted therefor.
2. Paragraph 2 of the Agreement shall be deleted and the following
shall be substituted therefor:
"2. Forfeiture Restrictions. The Stock issued and/or disposed
of to Consultant pursuant to this Agreement may not be sold, assigned,
pledged, exchanged, hypothecated or otherwise transferred, encumbered
or disposed of to the extent then subject to the Forfeiture
Restrictions (as hereinafter defined) and upon the occurrence of a
Performance Forfeiture Event (as hereinafter defined), Consultant
shall, for no consideration, forfeit to the Company all Stock to the
extent then subject to the Forfeiture Restrictions. The prohibition
against transfer and the obligation to forfeit and surrender Stock to
the Company upon Consultant's failure to perform substantial services
under the Consulting Agreement are herein referred to as 'Forfeiture
Restrictions,' and the shares which are then subject to the Forfeiture
Restrictions are herein sometimes referred to as 'Restricted Shares'
The Forfeiture Restrictions shall be binding upon and enforceable
against any transferee of the Stock. For purposes of this Agreement, a
'Performance Forfeiture Event' shall occur upon a good faith
determination by the Compensation Committee of the Board of Directors
(the 'Committee') that Consultant has failed to perform substantial
services under the Consulting Agreement effective May 1, 1996, by and
between the Company and Consultant (the 'Consulting Agreement') for
any reason (other than as described in (2) and (3) below). The
Forfeiture Restrictions shall lapse as to all Stock issued to
Consultant pursuant to this Agreement on the earlier of (1) the third
anniversary of the date of this Agreement, (2) the date Consultant
dies or becomes disabled (as such term is defined under the Company's
long-term disability plan) or (3) the date, if any, the Committee
in its sole discretion waives the Forfeiture Restrictions."
3. Paragraph 8 of the Agreement shall be deleted and the following
shall be substituted therefor:
'8. Consulting Relationship. Any question as to whether
Consultant has provided or failed to provide substantial services
under the Consulting Agreement shall be determined by the Committee,
and its determination shall be final."
4. As amended hereby, the Agreement is specifically ratified and
reaffirmed.
IN WITNESS WHEREOF, the Company has caused this amendment to be duly
executed by one of its officers thereunto duly authorized, and Shower has
executed this amendment, effective as of May 1, 1996.
SEAGULL ENERGY CORPORATION
By _______________________
ROBERT W. SHOWER
<PAGE> 8
EXHIBIT B
AMENDMENT TO
NONSTATUTORY STOCK OPTION AGREEMENT
WHEREAS, SEAGULL ENERGY CORPORATION ("Seagull") has previously adopted
the SEAGULL ENERGY CORPORATION 1990 STOCK OPTION PLAN (the "Option Plan"); and
WHEREAS, a certain nonstatutory stock option (the "Option") to
purchase 90,000 shares of the common stock of Seagull was granted to ROBERT W.
SHOWER ("Shower"), an employee of Seagull, on March 20, 1992, and such Option is
currently outstanding under the Option Plan and is evidenced by a Nonstatutory
Stock Option Agreement (the "Agreement"); and
WHEREAS, in conjunction with, and as part of the consideration for, a
consulting agreement by and between Seagull and Shower for consulting services
to be provided during the period beginning on May 1, 1996 and ending on April
30, 1998, Seagull desires to amend the Agreement in certain respects;
NOW, THEREFORE, the Agreement shall be amended as follows, effective
as of May 1, 1996:
1. The vesting schedule contained in the Agreement shall be waived and
the Option outstanding under such Agreement shall be exercisable in full by
Shower, his estate or the person who acquires the Option by will or the laws of
descent and distribution, at any time on or before January 31, 1998.
2. As amended hereby, the Agreement is specifically ratified and
reaffirmed.
IN WITNESS WHEREOF, the Company has caused this amendment to be duly
executed by one of its officers thereunto duly authorized, and Shower has
executed this amendment, effective as of May 1, 1996.
SEAGULL ENERGY CORPORATION
By ______________________
--------------------------
ROBERT W. SHOWER
<PAGE> 1
EXHIBIT 10.4
SEVERANCE AGREEMENT
AGREEMENT between SEAGULL ENERGY CORPORATION, A Texas corporation (the
"Company"), and William L. Transier ("Executive"),
W I T N E S S E T H :
WHEREAS, the Company desires to retain certain key employee personnel
and, accordingly, the Bard of Directors of the Company (the "Board") has
approved the Company entering into a severance agreement with Executive in order
to encourage his continued service to the Company; and
WHEREAS, Executive is prepared to commit such services in return for
specific arrangements with respect to severance compensation and other benefits;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the Company and Executive agree as follows:
1. Definitions.
(a) "Change in Duties" shall mean the occurrence, within two years
after the date upon which a Change of Control occurs, of any one or more of the
following:
(i) A significant reduction in the duties of Executive
from those applicable to him immediately prior to the date on which a
Change of Control occurs;
(ii) A reduction in Executive's annual salary or target
opportunity under any applicable bonus or incentive compensation plan
from that provided to him immediately prior to the date on which a
Change of Control occurs;
(iii) Receipt of employee benefits (including but not
limited to medical, dental, life insurance, accidental, death, and
dismemberment, and long-term disability plans) and perquisites by
Executive that are materially inconsistent with the employee benefits
and perquisites provided by the Company to executives with comparable
duties; or
(iv) A change in the location of Executive's principal
place of employment by the Company by more than 50 miles from the
location where he was principally employed immediately prior to the
date on which a Change of Control occurs.
(b) "Change of Control" means the occurrence of either of the
following events:
(i) the Company (A) shall not be the surviving entity in
any merger, consolidation or other reorganization (or survives only as
a subsidiary of an entity other than a previously wholly-owned
subsidiary of the Company) or (B) is to be dissolved and liquidated,
and as a result of or in connection such transaction, the persons who
were directors of the Company before such transaction shall cease to
constitute a majority of the Board; or
<PAGE> 2
(ii) Any person or entity, including a "group" as
contemplated by Section 13(d)(3) of the Securities Exchange Act of
1934, as amended, acquires or gains ownership or control (including,
without limitation, power to vote) of 20% or more of the outstanding
shares of the Company's voting stock (based upon voting power), and as
a result of or in connection with such transaction, the persons who
were directors of the Company before such transaction shall cease to
constitute a majority of the Board.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Compensation" shall mean the greater of:
(i) Executive's annual salary plus his Targeted EIP Award
immediately prior to the date on which a Change of Control occurs, or
(ii) Executive's annual salary plus his Targeted EIP Award
at the time of his Involuntary Termination.
(e) "EIP" shall mean the Seagull Energy Corporation Executive
Incentive Plan or any successor thereto.
(f) "Involuntary Termination" shall mean any termination of
Executive's employment with the Company which:
(i) does not result from a resignation by Executive
(other than a resignation pursuant to clause (ii) of this subparagraph
(f)); or
(ii) results from a resignation by Executive on or
before the date which is sixty days after the date upon which Executive
receives notice of a Change in Duties;
provided, however, the term "Involuntary Termination" shall not include a
Termination for Cause or any termination as a result of death, disability under
circumstances entitling him to benefits under the Company's long-term disability
plan, or Retirement.
(g) "Objective EIP Award" shall mean, with respect to Executive,
the amount, if any, earned under the objective criterion of the EIP in effect
for the calendar year preceding such Employee's Involuntary Termination.
(h) "Retirement" shall mean Rxecutive's resignation on or after the
date he reaches age sixty-five.
(i) "Severance Amount" shall mean an amount equal to 2.99 times
Executive's Compensation.
<PAGE> 3
(j) "Targeted EIP Award" shall mean Executive's Incentive Target as
set forth under the EIP in effect for the year with respect to which such award
is being determined, if any, or for the last preceding year in which an EIP was
in effect, expressed as a dollar amount based on such Executive's annual salary
for such year.
(k) "Termination for Cause" shall mean termination of Executive's
employment by the Company (or its subsidiaries) by reason of Executive's (i)
gross negligence in the performance of his duties, (ii) willful and continued
failure to perform his duties, (iii) willful engagement in conduct which is
materially injurious to the Company or its subsidiaries (monetarily or
otherwise) or (iv) conviction of a felony or a misdemeanor involving moral
turpitude.
(l) "Welfare Benefit Coverages" shall mean the medical, dental,
life insurance, accidental death and dismemberment and long-term disability
coverages provided by the Company to its active employees.
2. Services. Executive agrees that he will render services to the
Company (as well as any subsidiary thereof or successor thereto) during the
period of his employment to the best of his ability and in a prudent and
businesslike manner and that he will devote substantially the same time, efforts
and dedication to his duties as heretofore devoted.
3. Severance Benefits. If Executive's employment by the Company or any
subsidiary thereof or successor thereto shall be subject to an Involuntary
Termination which occurs within two years after the date upon which a Change of
Control occurs, then Executive shall be entitled to receive, as additional
compensation for services rendered to the Company (including its subsidiaries),
the following severance benefits:
(a) A lump sum cash payment in an amount equal to Executive's
Severance Amount.
(b) A lump sum cash payment in an amount equal to the remaining
portion of any award to Executive under any prior years' EIP. Further, if
Executive's Involuntary Termination occurs on or after the date an award has
been earned under the EIP, but prior to the date such award is paid, Executive
shall receive an additional lump sum cash payment in an amount equal to two
times his Objective EIP Award.
(c) Executive shall be entitled to continue the Welfare Benefit
Coverages for himself and, where applicable, his eligible dependents following
his Involuntary Termination for up to thirty-six months, as long as Executive
continues either to pay the premiums paid by active employees of the Company for
such coverages or to pay the actual (nonsubsidized) cost of such coverages for
which the Company does not subsidize for active employees. Such benefit rights
shall apply only to those Welfare Benefit Coverages which the Company has in
effect from time to time for active employees, and the applicable payments shall
adjust as premiums for active employees of the Company or actual costs,
whichever is applicable, change. Welfare Benefit Coverage(s) shall immediately
end upon Executive's obtainment of new employment and eligibility for similar
Welfare Benefit Coverage(s) (with Executive being obligated hereunder to
promptly report such eligibility to the Company). Nothing herein shall be deemed
to adversely affect in any way the additional rights, after
<PAGE> 4
consideration of this extension period, of Executive and his eligible dependents
to health care continuation coverage as required pursuant to Part 6 of Title I
of the Employee Retirement Income Security Act of 1974, as amended.
(d) Executive shall be entitled to receive out-placement services
in connection with obtaining new employment up to a maximum cost of $6,000.
(e) The severance benefits payable under this Agreement shall be
paid to an Executive on or before the fifth day after the last day of
Executive's employment with the Company. Any severance benefits paid pursuant to
this Paragraph will be deemed to be a severance payment and not compensation for
purposes of determining benefits under the Company's qualified plans and shall
be subject to any required tax withholding.
4. Interest on Late Benefit Payments. If any payment provided for in
Paragraph 3(a) or 3(b) hereof is not made when due, the Company shall pay to
Executive interest on the amount payable from the date that such payment should
have been made under such paragraph until such payment is made, which interest
shall be calculated at the prime or base rate of interest announced by Texas
Commerce Bank N.A. (Or any successor thereto) at its principal office in
Houston, Texas and shall change when and as any such change in such prime or
base rate shall be announced by such bank.
5. Certain Additional Payments by the Company. Notwithstanding
anything in this Agreement to the contrary, if the severance benefits provided
for in Paragraph 3, together with any other payments which Executive has the
right to receive from the Company, would constitute a "parachute payment " (as
defined in Section 280G(b)(2) of the Code), the severance benefits provided
hereunder shall be either (a) reduced (but not below zero) so that the present
value of such total amounts received by Executive from the Company will be one
dollar ($1.00) Less than three times Executive's base amount (as defined in
section 280G of the Code) and so that no portion of such amounts received by
Executive shall be subject to the excise tax imposed by Section 4999 of the Code
or (b) paid in full, whichever produces the better net after-tax position to
Executive (taking into account any applicable excise tax under Section 4999 of
the Code and any applicable income tax). The Company and Executive shall make an
initial determination as to whether a reduction is required and, if so required,
the amount of any such reduction. Executive shall notify the Company immediately
in writing of any claim by the Internal Revenue Service which, if successful,
would require the Company to make a reduction (or a further reduction in excess
of that, if any, initially determined by the Company and Executive) within five
days of the receipt of such claim. The Company shall notify Executive in writing
at least five days prior to the due date of any response required with respect
to such claim if it plans to contest the claim. If the Company decides to
contest such claim, Executive shall cooperate fully with the Company in such
action; provided, however, the Company shall bear and pay directly or indirectly
all costs and expenses (including additional interest and penalties) incurred in
connection with such action. If, as a result of the Company's action with
respect to a claim, the amount of the reduction is found to have been in excess
of the correct reduction amount, the Company shall promptly pay to Executive the
difference between such amounts with respect to such claim.
<PAGE> 5
6. General.
(a) Term. The effective date of this Agreement is May 14, 1996. The
initial term of this Agreement shall the period beginning on said effective date
and ending on the two-year anniversary of said effective date. At any time
during the initial term of this Agreement or within sixty days after the
expiration thereof and within sixty days after each successive two-year period
of time thereafter that this Agreement is in effect, the Company shall have the
right to review this Agreement, and in its sole discretion either continue and
extend this Agreement, terminate this Agree ment, and/or offer Executive a
different agreement. The Board (excluding any member of the Board who is covered
by this Agreement or by a similar agreement with the Company) will vote on
whether to so extend, terminate, and/or offer Executive a different agreement
and will notify Executive of such action within sixty days following the
expiration of each two-year period of time that this Agreement is in effect.
This Agreement shall remain in effect until so terminated and/or modified by the
Company. Failure of the Board to take any action within sixty days following the
expiration of each two- year period of time that this Agreement is in effect
shall be considered as an extension of this Agreement for an additional two-year
period of time. Notwithstanding anything to the contrary contained in this
"sunset provision," it is agreed that if a Change of Control occurs while this
Agreement is in effect, then this Agreement shall not be subject to termination
or modification under this "sunset provision," and shall remain in force for a
period of two years after such Change of Control, and if within said two years
the contingency factors occur which would entitle Executive to the benefits as
provided herein, this Agreement shall remain in effect in accordance with its
terms. If, within such two years after a Change of Control, the contingency
factors that would entitle Executive to said benefits do not occur, thereupon
this two-year "sunset provision" shall again be applicable with the sixty-day
time period for Board action to thereafter commence at the expiration of said
two years after such Change of Control and on each two-year anniversary date
thereafter.
(b) Indemnification. If Executive shall obtain any money judgment
or otherwise prevail with respect to any litigation brought by Executive or the
Company to enforce or interpret any provision contained herein, the Company, to
the fullest extent permitted by applicable law, hereby indemnifies Executive for
his reasonable attorneys' fees and disbursements incurred in such litigation and
hereby agrees (i) to pay in full all such fees and disbursements and (ii) to pay
prejudgment interest on any money judgment obtained by Executive from the
earliest date that payment to him should have been made under this Agreement
until such judgment shall have been paid in full, which interest shall be
calculated at the prime or base rate of interest announced by Texas Commerce
Bank N.A. (Or any successor thereto) at its principal office in Houston, Texas,
and shall change when and as any such change in such prime or base rate shall be
announced by such bank.
(c) Payment Obligations Absolute. The Company's obligation to pay
(or cause one of its subsidiaries to pay) Executive the amounts and to make the
arrangements provided herein shall be absolute and unconditional and shall not
be affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company (including
its subsidiaries) may have against him or anyone else. All amounts payable by
the Company (including its subsidiaries hereunder) shall be paid without notice
or demand. Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under any provision of
this Agreement, and, except as provided in Paragraph 3(c) hereof, the obtaining
<PAGE> 6
of any such other employment shall in no event effect any reduction of
the Company's obligations to make (or cause to be made) the payments and
arrangements required to be made under this Agreement.
(d) Successors. This Agreement shall be binding upon and inure to
the benefit of the Company and any successor of the Company, by merger or
otherwise. This Agreement shall also be binding upon and inure to the benefit of
Executive and his estate. If Executive shall die prior to full payment of
amounts due pursuant to this Agreement, such amounts shall be payable pursuant
to the terms of this Agreement to his estate.
(e) Severability. Any provision in this Agreement which is
prohibited or unenforceable in any jurisdiction by reason of applicable law
shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating or affecting the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
(f) Non-Alienation. Executive shall not have any right to pledge,
hypothecate, anticipate or assign this Agreement or the rights hereunder, except
by will or the laws of descent and distribution.
(g) Notices. Any notices or other communications provided for in
this Agreement shall be sufficient if in writing. In the case of Executive, such
notices or communications shall be effectively delivered if hand delivered to
Executive at his principal place of employment or if sent by registered or
certified mail to Executive at the last address he has filed with the Company.
In the case of the Company, such notices or communications shall be effectively
delivered if sent by registered or certified mail to the Company at its
principal executive offices.
(h) Controlling Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas. Further, Executive
agrees that any legal proceeding to enforce the provisions of this Agreement
shall be brought in Houston, Harris County, Texas, and hereby waives his right
to any pleas regarding subject matter or personal jurisdiction and venue.
(i) Release. As a condition to the receipt of any benefit under
Paragraph 3 hereof, Executive shall first execute a release, in the form
established by the Company, releasing the Company, its shareholders, partners,
officers, directors, employees and agents from any and all claims and from any
and all causes of action of any kind or character, including but not limited to
all claims or causes of action arising out of Executive's employment with the
Company or the termination of such employment.
(j) Full Settlement. If Executive is entitled to and receives the
benefits provided hereunder, performance of the obligations of the Company
hereunder will constitute full settlement of all claims that Executive might
otherwise assert against the Company on account of his termination of
employment.
<PAGE> 7
(k) Unfunded Obligation. The obligation to pay amounts under this
Agreement is an unfunded obligation of the Company (including its subsidiaries),
and no such obligation shall create a trust or be deemed to be secured by any
pledge or encumbrance on any property of the Company (including its
subsidiaries).
(l) Not a Contract of Employment. This Agreement shall not be
deemed to constitute a contract of employment, nor shall any provision hereof
affect (a) the right of the Company (or its subsidiaries) to discharge executive
at will or (b) the terms and conditions of any other agreement between the
Company and executive except as provided herein.
(m) Number and Gender. Wherever appropriate herein, words used in
the singular shall include the plural and the plural shall include the singular.
The masculine gender where appearing herein shall be deemed to include the
feminine gender.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the 14th day of May, 1996.
"EXECUTIVE"
----------------------------------------
"COMPANY"
SEAGULL ENERGY CORPORATION
By: ____________________________________
Name:_______________________________
Title:______________________________
<PAGE> 1
EXHIBIT 10.5
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT is made as of the 14th day of May, 1996 between SEAGULL
ENERGY CORPORATION, a Texas corporation (the "Company"), and William L. Transier
("Employee").
To carry out the purposes of the SEAGULL ENERGY CORPORATION 1995
OMNIBUS STOCK PLAN (the "Plan"), by affording Employee the opportunity to
acquire shares of common stock of the Company ("Stock"), and in consideration of
the mutual agreements and other matters set forth herein and in the Plan, the
Company and Employee hereby agree as follows:
1. Award of Shares. Upon execution of this Agreement, the Company
shall issue and/or dispose of 3,000 shares of the common stock of the Company
("Stock") shall be issued and/or disposed of to Employee. Employee acknowledges
receipt of a copy of the Plan, and agrees that this award of Stock shall be
subject to all of the terms and conditions set forth herein and in the Plan,
including future amendments thereto, if any, pursuant to the terms thereof,
which Plan is incorporated herein by reference as a part of this Agreement.
2. Forfeiture Restrictions. The Stock issued and/or disposed of to
Employee pursuant to this Agreement may not be sold, assigned, pledged,
exchanged, hypothecated or otherwise transferred, encumbered or disposed of to
the extent then subject to the Forfeiture Restrictions (as hereinafter defined),
and in the event of termination of Employee's employment with the Company for
any reason (other than as described in (3) and (4) below), Employee shall, for
no consideration, forfeit to the Company all Stock to the extent then subject to
the Forfeiture Restrictions. The prohibition against transfer and the obligation
to forfeit and surrender Stock to the Company upon termination of employment are
herein referred to as "Forfeiture Restrictions," and the shares which are then
subject to the Forfeiture Restrictions are herein sometimes referred to as
"Restricted Shares." The Forfeiture Restrictions shall be binding upon and
enforceable against any transferee of the Stock. The Forfeiture Restrictions
shall lapse as to all Stock issued to Employee pursuant to this Agreement on the
earlier of (1) the third anniversary of the date of this Agreement, (2) the date
a Change of Control occurs, (3) the date Employee's employment with the Company
is terminated by reason of death, disability under circumstances entitling him
to benefits under the Company's long- term disability plan, or Involuntary
Termination within two years after a Change of Control (as such terms are
defined in the Severance Agreement effective May 14, 1996 between the Company
and Employee), or (4) if Employee's employment with the Company is terminated
for any other reason, the date, if any, the Committee in its sole discretion
waives the Forfeiture Restrictions.
3. Certificates. A certificate evidencing the Restricted Shares shall
be issued by the Company in Employee's name, pursuant to which Employee shall
have voting rights and shall be entitled to receive dividends and other
distributions (provided, however, that dividends or other distributions paid in
<PAGE> 2
the form of the Company's securities shall be subject to the Forfeiture
Restrictions). The certificate shall bear the following legend:
The shares evidenced by this certificate have been issued pursuant to
an agreement made as of May 14, 1996, a copy of which is attached
hereto and incorporated herein, between the Company and the registered
holder of the shares, and are subject to forfeiture to the Company
under certain circumstances described in such agreement. The sale,
assignment, pledge or other transfer of the shares of stock evidenced
by this certificate is prohibited under the terms and conditions of
such agreement, and such shares may not be sold, assigned, pledged or
otherwise transferred except as provided in such agreement.
The Company may cause the certificate to be delivered upon issuance to the
Secretary of the Company as a depository for safekeeping until the forfeiture
occurs or the Forfeiture Restrictions lapse pursuant to the terms of this
Agreement. Upon request of the Company, Employee shall deliver to the Company a
stock power, endorsed in blank, relating to the Restricted Shares then subject
to the Forfeiture Restrictions. Upon the lapse of the Forfeiture Restrictions
without forfeiture, the Company shall cause a new certificate or certificates to
be issued without legend in the name of Employee in exchange for the certificate
evidencing the Restricted Shares.
4. Consideration. It is understood that the consideration for the
issuance of Restricted Shares shall be past services of Employee rendered to the
Company prior to the date of issuance of the Restricted Shares, having a value
not less than the par value of such Restricted Shares.
5. Withholding of Tax. To the extent that the receipt of the
Restricted Shares or the lapse of any Forfeiture Restrictions results in income
to Employee for federal or state income tax purposes, Employee shall deliver to
the Company at the time of such receipt or lapse, as the case may be, such
amount of money or shares of unrestricted Stock as the Company may require to
meet its obligation under applicable tax laws or regulations, and, if Employee
fails to do so, the Company is authorized to withhold from any cash or Stock
remuneration then or thereafter payable to Employee any tax required to be
withheld by reason of such resulting compensation income.
6. Tax Election. If Employee makes the election authorized by section
83(b) of the Internal Revenue Code of 1986, as amended (the "Code"), Employee
shall submit to the Company a copy of the statement filed by Employee to make
such election.
7. Status of Stock. Employee agrees that the Restricted Shares will
not be sold or otherwise disposed of in any manner that would constitute a
violation of any applicable federal or state securities laws. Employee also
agrees (i) that the certificates representing the Restricted Shares may bear
such legend or legends as the Committee deems appropriate in order to ensure
compliance with applicable securities laws, (ii) that the Company may refuse to
register the transfer of the Restricted Shares on the stock transfer records of
<PAGE> 3
the Company if such proposed transfer would in the opinion of counsel
satisfactory to the Company constitute a violation of any applicable securities
law and (iii) that the Company may give related instructions to its transfer
agent, if any, to stop registration of the transfer of the Restricted Shares.
8. Employment Relationship. For purposes of this Agreement, Employee
shall be considered to be in the employment of the Company as long as Employee
remains an employee of either the Company, any successor corporation or a parent
or subsidiary corporation (as defined in section 424 of the Code) of the Company
or any successor corporation. Any question as to whether and when there has been
a termination of such employment, and the cause of such termination, shall be
determined by the Committee, and its determination shall be final.
9. Committee's Powers. No provision contained in this Agreement shall
in any way terminate, modify or alter, or be construed or interpreted as
terminating, modifying or altering any of the powers, rights or authority vested
in the Committee pursuant to the terms of the Plan, including, without
limitation, the Committee's rights to make certain determinations and elections
with respect to the Restricted Shares.
10. Certain Additional Payments by the Company. Notwithstanding
anything in this Agreement to the contrary, if the lapse of the Forfeiture
Restrictions in Paragraph 2, together with any other payments which Employee has
the right to receive from the Company, would constitute a "parachute payment"
(as defined in Section 280G(b)(2) of the Code), the lapse of the Forfeiture
Restrictions shall be coordinated with such other payments and, after taking
into account all permitted reductions in cash payments to Employee, the
Forfeiture Restrictions shall lapse with respect to that number of shares of
Stock (a) that would result in the present value of such total amounts received
by Employee from the Company being one dollar ($1.00) Less than three times
Employee's base amount (as defined in Section 280G of the Code) and so that no
portion of such amounts received by Employee shall be subject to the excise tax
imposed by Section 4999 of the Code or (b) all shares of Stock, whichever
produces the better net after-tax position to Employee (taking into account any
applicable excise tax under Section 4999 of the Code and any applicable income
tax). The Company and Employee shall make the determination as to the number of
shares of Stock as to which the Forfeiture Restrictions should lapse. Employee
shall notify the Company immediately in writing of any claim by the Internal
Revenue Service which, if successful, would require the Company to reduce the
number of shares with respect to which the Forfeiture Restrictions lapse within
five days of the receipt of such claim. The Company shall notify Employee in
writing at least five days prior to the due date of any response required with
respect to such claim if it plans to contest the claim. If the Company decides
to contest such claim, Employee shall cooperate fully with the Company in such
action; provided, however, the Company shall bear and pay directly or indirectly
all costs and expenses (including additional interest and penalties) incurred in
connection with such action. If, as a result of the Company's action with
respect to a claim, after taking into account all permitted increases in cash
payments to Employee, the number shares of stock as to which the Forfeiture
<PAGE> 4
Restrictions lapsed is found to have been less than the correct number of shares
of Stock, the Forfeiture Restrictions shall immediately lapse with respect to
such additional shares of Stock.
11. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of any successors to the Company and all persons lawfully claiming
under Employee.
12. Non-Alienation. Employee shall not have any right to pledge,
hypothecate, anticipate or assign this Agreement or the rights hereunder, except
by will or the laws of descent and dis tribution.
13. Not a Contract of Employment. This Agreement shall not be deemed
to constitute a contract of employment, nor shall any provision hereof affect
(a) the right of the Company (or its subsidiaries) to discharge Employee at will
or (b) the terms and conditions of any other agreement between the Company and
Employee except as provided herein.
14. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Texas.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by an officer thereunto duly authorized, and Employee has executed this
Agreement, all effective as of the date first above written.
SEAGULL ENERGY CORPORATION
By:
Employee
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 14,404
<SECURITIES> 0
<RECEIVABLES> 107,583
<ALLOWANCES> 0
<INVENTORY> 5,488
<CURRENT-ASSETS> 133,977
<PP&E> 1,645,282
<DEPRECIATION> 627,612
<TOTAL-ASSETS> 1,191,564
<CURRENT-LIABILITIES> 114,707
<BONDS> 0
<COMMON> 3,677
0
0
<OTHER-SE> 455,856
<TOTAL-LIABILITY-AND-EQUITY> 1,191,564
<SALES> 196,435
<TOTAL-REVENUES> 196,435
<CGS> 22,457
<TOTAL-COSTS> 150,631
<OTHER-EXPENSES> 7,081
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,654
<INCOME-PRETAX> 16,069
<INCOME-TAX> 7,130
<INCOME-CONTINUING> 8,939
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,939
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
