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SEAGULL ENERGY CORPORATION
HOUSTON, TEXAS
AMENDED NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, MAY 14, 1996
To the Shareholders:
The 1996 Annual Meeting of Shareholders (the "Annual Meeting") of Seagull
Energy Corporation (the "Company") will be held on Tuesday, May 14, 1996 at
10:00 a.m., local time, in the Grand Ballroom of the Four Seasons Hotel, 1300
Lamar Street, Houston, Texas, for the following purposes:
1. To elect three directors to serve until the 1999 Annual Meeting of
Shareholders;
2. To approve an amendment to the Seagull Energy Corporation 1993
Nonemployee Directors' Stock Option Plan;
3. To ratify the selection of KPMG Peat Marwick LLP as independent auditors
of the Company for the fiscal year ending December 31, 1996; and
4. To transact such other business as may properly come before such meeting
or any adjournment(s) or postponement(s) thereof.
The close of business on March 20, 1996, has been fixed as the record date
for the determination of shareholders entitled to receive notice of and to vote
at the Annual Meeting or any adjournment(s) or postponement(s) thereof.
You are cordially invited to attend the Annual Meeting. WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING, WE ASK THAT YOU SIGN AND RETURN THE ENCLOSED
BLUE PROXY CARD AS PROMPTLY AS POSSIBLE. A SELF-ADDRESSED, POSTPAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE.
SHAREHOLDERS SHOULD RETURN THE ENCLOSED BLUE PROXY CARD INSTEAD OF THE
WHITE PROXY CARD DISTRIBUTED WITH THE PROXY STATEMENT. IF YOU HAVE ALREADY
RETURNED THE WHITE PROXY CARD, YOU SHOULD NEVERTHELESS COMPLETE AND RETURN THE
BLUE PROXY CARD.
BY ORDER OF THE BOARD OF DIRECTORS,
/S/ SYLVIA SANCHEZ
SYLVIA SANCHEZ
Secretary
April 5, 1996
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SEAGULL ENERGY CORPORATION
SUPPLEMENT TO PROXY STATEMENT
APRIL 5, 1996
Seagull Energy Corporation (the "Company") hereby supplements its Proxy
Statement dated March 29, 1996 (the "Proxy Statement") relating to the Company's
Annual Meeting of Shareholders to be held on May 14, 1996 at 10:00 a.m., local
time, in the Grand Ballroom of the Four Seasons Hotel, 1300 Lamar Street,
Houston, Texas, together with any postponement(s) or adjournment(s) thereof (the
"Annual Meeting"). This Supplement should be read in conjunction with the Proxy
Statement, and capitalized terms used but not defined in this Supplement shall
have the meaning set forth in the Proxy Statement.
The Proxy Statement indicated that two items would be submitted for
shareholder approval at the Annual Meeting: (i) the election of three directors
in Class I to serve until the 1999 annual meeting of shareholders and (ii) the
ratification of the selection of KPMG Peat Marwick LLP as the Company's
independent auditors for the year ending December 31, 1996. The Company has now
determined to also submit for shareholder approval the amendment (the
"Amendment") to the Company's 1993 Nonemployee Directors' Stock Option Plan (the
"Directors Option Plan") described below.
SHAREHOLDERS SHOULD RETURN THE ENCLOSED BLUE PROXY CARD INSTEAD OF THE
WHITE PROXY CARD DISTRIBUTED WITH THE PROXY STATEMENT. IF YOU HAVE ALREADY
RETURNED THE WHITE PROXY CARD, YOU SHOULD NEVERTHELESS COMPLETE AND RETURN THE
BLUE PROXY CARD.
PROPOSAL TO AMEND THE
1993 NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN
The Amendment extends the option exercise period for Nonemployee Directors
(as defined below) whose membership on the Board terminates by reason of death,
disability, mandatory retirement or any other reason except a termination for
cause or voluntarily not at the request of the Board. The Amendment was
unanimously approved by the Board on April 4, 1996, subject to shareholder
approval at the Annual Meeting.
Below is a summary of the primary features of the Amendment and the
Directors Option Plan. A copy of the Amendment is attached hereto as Appendix I,
and a copy of the Directors Option Plan and revised Nonemployee Director Stock
Option Agreement is available upon a shareholder's written request to the
Corporate Secretary, Seagull Energy Corporation, 1001 Fannin, Suite 1700,
Houston, Texas 77002.
DESCRIPTION OF THE AMENDMENT
Under the current terms of the Directors Option Plan, the continuing
exercisability of options after a Nonemployee Director ceases to be a director
is determined based on the reason for such termination. If the Nonemployee
Director's membership on the Board terminates for cause or voluntarily not at
the request of the Board (other than by reason of mandatory retirement), the
Nonemployee Director's outstanding options are exercisable to the extent vested
at any time during a period of three months following such termination or, if
the Nonemployee Director dies during such three-month period, by the Nonemployee
Director's estate (or the person who acquires the option by will or the laws of
descent and distribution or otherwise by reason of the death of the Nonemployee
Director) at any time during a period of one year following the Nonemployee
Director's death, subject to the expiration date of such options. If the
Nonemployee Director's membership on the Board terminates by reason of
disability or death, the Nonemployee Director's outstanding options are
exercisable in full at any time during a period of one year following such
termination, subject to the expiration date of such options. If the Nonemployee
Director's membership on the Board terminates for a reason other than the
reasons described above in this paragraph, the Nonemployee Director's
outstanding options are exercisable in full at any time during a period of three
months following such termination or, if the Nonemployee Director dies during
such three-month period, by the Nonemployee Director's estate (or the person who
acquires the option by will or the laws of descent and distribution or otherwise
by reason of the
<PAGE> 3
death of the Nonemployee Director) at any time during a period of one year
following the Nonemployee Director's death, subject to the expiration date of
such options.
If the Amendment is approved, then, if a Nonemployee Director's membership
on the Board terminates by reason of death, disability, mandatory retirement or
any other reason except a termination for cause or voluntarily not at the
request of the Board, the Nonemployee Director's outstanding options will be
exercisable in full at any time until (a) three years after such termination or
(b) one year after the Nonemployee Director's death, whichever is later, in each
case subject to the expiration date of such options.
DESCRIPTION OF THE DIRECTORS OPTION PLAN
The Directors Option Plan is intended to promote the interests of the
Company and its shareholders by helping reward and retain directors who are not
and who have never been employees of the Company or its subsidiaries
("Nonemployee Directors") and allowing them to develop a sense of proprietorship
and personal involvement in the development and financial success of the
Company. Shares issuable pursuant to the Directors Option Plan may be authorized
but unissued shares or reacquired shares, and the Company may purchase shares
required for this purpose. The aggregate maximum number of shares authorized to
be issued under the Directors Option Plan pursuant to grants of stock options is
600,000 shares of Common Stock (which amount is subject to adjustment upon a
reorganization, stock split, recapitalization, or other change in the Company's
capital structure). Shares subject to expired options are available for regrant
under the Directors Option Plan.
The Company believes that the extension of the option exercisability
periods described above will assist in the recruitment and retention of
qualified directors for the Company.
ELIGIBILITY
Only Nonemployee Directors are eligible to receive options under the
Directors Option Plan.
TERM OF THE DIRECTORS OPTION PLAN
The Directors Option Plan was adopted by the Board on February 9, 1993 and
was approved by the shareholders of the Company on May 11, 1993 (the "Effective
Date"). If not sooner terminated by the Board, the Directors Option Plan will
terminate on the date that the remaining shares of Common Stock that may be
issued under the Directors Option Plan are not sufficient to cover the options
required to be granted under the terms of the Directors Option Plan.
OPTION AWARDS
Under the terms of the Directors Option Plan, each Nonemployee Director who
served in such capacity on the Effective Date received a grant of a nonstatutory
stock option to acquire 3,000 shares of Common Stock (increased to 6,000 shares
as a result of the two-for-one stock split with a record date of May 21, 1993).
Each Nonemployee Director elected or appointed to the Board after the Effective
Date will receive, as of the date of such election or appointment, a grant of a
nonstatutory stock option to acquire 6,000 shares of Common Stock (which amount
is subject to adjustment upon a reorganization, stock split, recapitalization,
or other change in the Company's capital structure). Further, each Nonemployee
Director serving in such capacity immediately after an annual meeting in a year
subsequent to the Effective Date and not receiving an initial grant as of such
date will receive, as of the date of such annual meeting, a grant of a
nonstatutory stock option to acquire 6,000 shares of Common Stock (which amount
is subject to adjustment upon a reorganization, stock split, recapitalization,
or other change in the Company's capital structure). The exercise price for
shares purchased pursuant to an option granted under the Directors Option Plan
is the closing price of the shares of Common Stock subject to the option as
reported on the New York Stock Exchange composite tape on the date the option is
granted or on the last preceding date on which such price is so reported.
Options granted under the Directors Option Plan are for a term of ten years from
the date of grant. Options granted under the Directors Option Plan vest in 20%
increments after each full year of service as a Nonemployee Director following
the date of grant. Options granted under the Directors Option Plan are not
transferable by
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the option holder except by will or by the laws of descent and distribution and
are exercisable only by the Nonemployee Director (or his or her guardian or
legal representative) during the lifetime of the Nonemployee Director. The
option price upon exercise may be paid by a Nonemployee Director in cash, other
shares of Common Stock owned by the Nonemployee Director, or by a combination of
cash and Common Stock.
CORPORATE CHANGE
If the Company is not the surviving entity in any merger or consolidation
(or survives only as a subsidiary of another entity not previously wholly owned
by the Company), all options outstanding under the Directors Option Plan will be
exercisable for the number and class of securities or property that the
Nonemployee Director would have been entitled to if the option had already been
exercised. If the Company sells, leases or exchanges or agrees to sell, lease or
exchange all or substantially all of its assets or if the Company is dissolved
and liquidated, all outstanding options will be fully vested and each
Nonemployee Director must surrender his outstanding options to the Company and
the Company will cancel such options and pay to each Nonemployee Director an
amount of cash equal to the per share price offered to shareholders of the
Company in any such sale, lease, exchange of assets or dissolution transaction
for the shares subject to such options over the exercise prices under such
options for such shares.
AMENDMENTS
The Board may terminate the Directors Option Plan at any time with respect
to any shares for which options have not yet been granted. Further, the Board
may alter or amend the Directors Option Plan from time to time; provided,
however, the Directors Option Plan may not be amended more than once every six
months other than to comport with changes in the Internal Revenue Code of 1986,
as amended (the "Code"), the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the rules thereunder; and provided, further, that no
amendment may adversely affect the rights of any holder of an outstanding
option, or any unexercised portion thereof, without the holder's consent and
that no alteration or amendment that materially increases the benefits accruing
to Nonemployee Directors under the Directors Option Plan, increases the
aggregate number of shares of Common Stock that may be issued pursuant to the
Directors Option Plan, increases or decreases the number of shares subject to
each option, changes the schedule of grants, extends the terms of the options,
changes the class of individuals eligible to receive options under the Directors
Option Plan or extends the term of the Directors Option Plan may be adopted
without the prior approval of the shareholders of the Company.
FEDERAL INCOME TAX ASPECTS OF THE DIRECTORS OPTION PLAN
A Nonemployee Director will not recognize any taxable income at the time an
option is granted under the Directors Option Plan. Ordinary income will be
recognized by a Nonemployee Director at the time of exercise in an amount equal
to the excess of the fair market value of the shares of Common Stock on the date
of exercise over the option price for such shares. However, if other shares of
Common Stock have been purchased by a Nonemployee Director within six months of
the exercise of an option, recognition of the income attributable to such
exercise may under certain circumstances be postponed for a period of up to six
months from the date of such purchase of such other shares of Common Stock due
to liability to suit under Section 16(b) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). If applicable, one effect of any such
postponement would be to measure the amount of the Nonemployee Director's
taxable income by reference to the fair market value of such shares at the time
such liability to suit under Section 16(b) of the Exchange Act no longer exists
(rather than at the earlier date of the exercise of the option). Upon a
Nonemployee Director's exercise of an option granted under the Directors Option
Plan, the Company may claim a deduction for compensation paid at the same time
and in the same amount as ordinary income is recognized by the Nonemployee
Director. The Directors Option Plan is not qualified under section 401(a) of the
Code.
The comments set forth in the above paragraph are only a summary of certain
of the Federal income tax consequences relating to the Directors Option Plan. No
consideration has been given to the effects of state, local, or other tax laws
on the Directors Option Plan or a Nonemployee Director.
3
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INAPPLICABILITY OF ERISA
Based upon current law and published interpretations, the Company does not
believe the Directors Option Plan is subject to any of the provisions of ERISA.
OPTIONS GRANTED UNDER THE DIRECTORS OPTION PLAN
The following options are granted or scheduled to be granted under the
Directors Option Plan on the date of the Annual Meeting. As indicated above,
employees and executive officers of the Company are not entitled to receive
options under the Directors Option Plan.
<TABLE>
<CAPTION>
SHARES
UNDERLYING
OPTIONS GRANTED
OR TO BE
CATEGORY GRANTED
---------------------------------------------------------------------- ---------------
<S> <C>
Non-Executive Director Group.......................................... 198,000(1)
</TABLE>
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(1) Includes options to purchase an aggregate of 48,000 shares to be granted at
the Annual Meeting, assuming that the nominees for director from Class I are
elected by the shareholders at the Annual Meeting. The description of the
Directors Option Plan contains information with respect to the exercise
prices, vesting provisions and expiration dates of these options.
The approval of the Amendment will not increase or decrease the number of
options outstanding or issuable under the Directors Option Plan. However, as a
result of the Amendment, Nonemployee Directors who cease to serve as directors
because of death, disability or the Company's mandatory retirement policy will
have three years (subject to the earlier expiration of the ten year term of the
option and possible extension of up to one year in the event of death) in which
to exercise any options under the Directors Option Plan, as opposed to three
months. For example, Mr. George M. Sullivan, who is currently a director of the
Company and has options to purchase 18,000 shares at an average exercise price
of $23.5833 per share, will cease to be a director at the Annual Meeting because
of the Company's mandatory retirement policy for directors, and will therefore
benefit from the Amendment. The closing sales price on the New York Stock
Exchange composite tape on April 4, 1996 was $22.125 per share.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of Common
Stock represented in person or by proxy and entitled to vote at the Annual
Meeting is required for approval of the Amendment, which approval is required
for listing of the shares for trading on the New York Stock Exchange and as a
condition to the effectiveness of the Amendment. Under Texas law, an abstention
would have the same legal effect as a vote against this proposal, but a broker
non-vote would not be counted for purposes of determining whether a majority had
been achieved. The persons named in the proxy intend to vote for the approval of
the Amendment, unless otherwise instructed.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT.
4
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APPENDIX I
FIRST AMENDMENT TO
SEAGULL ENERGY CORPORATION
1993 NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") has heretofore adopted
the SEAGULL ENERGY CORPORATION 1993 NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN
(the "Plan"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan shall be amended as follows:
1. Subject to the provisions of paragraph 2 hereof, Paragraph 3 of the
Nonemployee Director Stock Option Agreement, which is incorporated by Article II
of the Plan, shall be deleted in its entirety 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:
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF FULL YEARS THAT MAY BE PURCHASED
------------------------------------------------ ---------------------
<S> <C> <C>
Less than 1 year.......................................... 0%
1 year.......................................... 20%
2 years......................................... 40%
3 years......................................... 60%
4 years......................................... 80%
5 years or more................................. 100%
</TABLE>
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,
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whichever 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. This amendment to the Plan shall be effective with respect to all
options outstanding under the Plan on or after May 11, 1993, provided that it is
approved by the shareholders of the Company at the 1996 Annual Meeting of
Shareholders.
3. As amended hereby, the Plan is specifically ratified and reaffirmed.
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SHAREHOLDERS SHOULD RETURN THIS BLUE PROXY CARD INSTEAD OF THE WHITE
PROXY CARD DISTRIBUTED WITH THE PROXY STATEMENT. IF YOU HAVE ALREADY
RETURNED THE WHITE PROXY CARD, YOU SHOULD NEVERTHELESS COMPLETE AND
RETURN THIS BLUE PROXY CARD.
PROXY
SEAGULL ENERGY CORPORATION
ANNUAL MEETING OF SHAREHOLDERS -- MAY 14, 1996
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Barry J. Galt and John W. Elias
as Proxies, each with the power to appoint his substitute, and hereby
authorizes each of them to represent and to vote as designated below,
all the shares of Common Stock of Seagull Energy Corporation (the
"Company"), held of record by the undersigned on March 20, 1996, at
the Annual Meeting of Shareholders to be held May 14, 1996, or any
adjournment(s) or postponement(s) thereof.
The undersigned hereby revokes any proxy to vote shares held by
the undersigned heretofore given. THE UNDERSIGNED ACKNOWLEDGES THAT
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER AND THAT IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED
IN PROPOSAL 1 AND IN FAVOR OF PROPOSALS 2 AND 3.
Please sign exactly as name appears hereon. When shares are held
by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign
in partnership name by authorized person.
I plan to attend the meeting (Please check if yes) / /
This proxy may be revoked at any time prior to the voting of the
proxy by the execution and submission of a revised proxy, by written
notice to the Secretary of the Company or by voting in person at the
meeting.
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(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE) SEE REVERSE
SIDE
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1. Election of three directors to serve until the 1999 Annual Meeting
of Shareholders:
Class I Nominees -- Thomas H. Cruikshank, John W. Elias, Sam F. Segnar
<TABLE>
<S> <C> <C>
/ / For / / Withhold Authority / / ______________________________________
For all nominees except as noted above
</TABLE>
2. Proposal to ratify the appointment by the Board of Directors of
the firm of KPMG Peat Marwick LLP as independent public auditors
of the Company for the fiscal year ending December 31, 1996.
<TABLE>
<S> <C> <C>
For / / Against / / Abstain / /
</TABLE>
3. Proposal to amend the Company's 1993 Nonemployee Directors' Stock
Option Plan.
<TABLE>
<S> <C> <C>
For / / Against / / Abstain / /
</TABLE>
4. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting, or any
adjournment(s) thereof.
/ / Mark here for address change and note below
If you receive more than one BLUE
proxy card, please sign and
return all BLUE cards in the
accompanying envelope.
<TABLE>
<S> <C>
Signature: _________________ Date: _______, 1996
Signature: _________________ Date: _______, 1996
(If held jointly)
</TABLE>
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