<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
SEAGULL ENERGY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[SEAGULL ENERGY CORPORATION LOGO]
SEAGULL ENERGY CORPORATION
HOUSTON, TEXAS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, MAY 13, 1997
To the Shareholders:
The 1997 Annual Meeting of Shareholders (the "Annual Meeting") of Seagull
Energy Corporation (the "Company") will be held on Tuesday, May 13, 1997 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 one director to serve until the 1999 Annual Meeting of
Shareholders and five directors to serve until the 2000 Annual Meeting
of Shareholders.
2. To approve an amendment to the Bylaws of the Company to increase the
permitted number of directors and amend the classified Board provisions.
3. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company for the fiscal year ending December 31, 1997;
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, 1997, has been fixed as the record date
for the determination of shareholders entitled to receive notice of and to vote
at the Annual Meeting or any adjournment(s) or postponement(s) thereof.
You are cordially invited to attend the Annual Meeting. WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING, WE ASK THAT YOU SIGN AND RETURN THE ENCLOSED
PROXY AS PROMPTLY AS POSSIBLE. A SELF-ADDRESSED, POSTPAID ENVELOPE IS ENCLOSED
FOR YOUR CONVENIENCE.
By Order of the Board of Directors,
/s/ SYLVIA SANCHEZ
Sylvia Sanchez
Secretary
March 31, 1997
<PAGE> 3
SEAGULL ENERGY CORPORATION
1001 FANNIN, SUITE 1700
HOUSTON, TEXAS 77002
(713) 951-4700
-------------------------------
PROXY STATEMENT
-------------------------------
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of Directors
(the "Board of Directors" or the "Board") of Seagull Energy Corporation (the
"Company") for use at the 1997 Annual Meeting of Shareholders (the "Annual
Meeting") to be held on Tuesday, May 13, 1997 at 10:00 a.m., local time, in the
Grand Ballroom of the Four Seasons Hotel, 1300 Lamar Street, Houston, Texas, or
at any adjournment(s) or postponement(s) thereof. The solicitation of proxies by
the Board of Directors will be conducted primarily by mail. Georgeson & Company
Inc. has been retained to assist the Company in the solicitation of proxies in
connection with the Annual Meeting for a fee of $10,000, plus out-of-pocket
expenses. In addition, officers, directors and employees of the Company may
solicit proxies personally or by telephone, telegram or other forms of wire or
facsimile communication. The Company will reimburse brokers, custodians,
nominees and fiduciaries for reasonable expenses incurred by them in forwarding
proxy material to beneficial owners of common stock of the Company ("Common
Stock"). The costs of the solicitation will be borne by the Company. This proxy
statement and the form of proxy were first mailed to shareholders of the Company
on or about March 31, 1997.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to the voting of the proxy (a) by the execution and submission of
a revised proxy, (b) by written notice to the Secretary of the Company or (c) by
voting in person at the Annual Meeting. In the absence of such revocation,
shares represented by the proxies will be voted at the Annual Meeting.
At the close of business on March 20, 1997, the record date for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting, there were outstanding 62,931,403 shares of Common Stock, each share of
which is entitled to one vote. Common Stock is the only class of outstanding
securities of the Company entitled to notice of and to vote at the Annual
Meeting.
Seagull's annual report to shareholders for the year ended December 31,
1996, including financial statements, is being mailed herewith to all
shareholders entitled to vote at the Annual Meeting. The annual report does not
constitute a part of the proxy soliciting material.
ELECTION OF DIRECTORS
Six directors are to be elected at the Annual Meeting. The Company's Bylaws
provide for a classified Board of Directors. Thus, the Board of Directors is
divided into Classes I, II and III, the terms of office of which are currently
scheduled to expire, respectively, on the dates of the Company's Annual Meetings
of Shareholders in 1999, 1997 and 1998. Milton Carroll was elected in January
1997 to serve as a director in Class I. The Bylaws of the Company require that
Mr. Carroll stand for re-election by the shareholders to continue serving in
Class I from the date of election until the 1999 Annual Meeting of Shareholders
and until his successor shall have been elected and qualified. J. Evans Attwell,
Richard J. Burgess, Barry J. Galt, Dee S. Osborne and Sidney R. Petersen have
been nominated to continue serving in Class II and, if re-elected, will serve
until the Company's 2000 Annual Meeting of Shareholders and until their
respective successors shall have been elected and qualified. The remaining nine
directors named below will not be required to stand for election at the Annual
Meeting because their present terms expire in either 1998 or 1999. A plurality
of the votes cast in person or by proxy by the holders of Common Stock is
required to elect a director. Accordingly, under the Texas Business Corporation
Act and the Company's Articles of Incorporation and Bylaws,
<PAGE> 4
abstentions and broker non-votes would have no effect on the election of
directors. A broker non-vote occurs if a broker or other nominee does not have
discretionary authority and has not received instructions with respect to a
particular item. Shareholders may not cumulate their votes in the election of
directors.
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted FOR the election of the nominees listed below.
Although the Board of Directors does not contemplate that any of the nominees
will be unable to serve, if such a situation arises prior to the Annual Meeting,
the persons named in the enclosed proxy will vote for the election of such other
person(s) as may be nominated by the Board of Directors.
The following table sets forth information regarding the names, ages and
principal occupations of the nominees and directors, directorships in other
companies held by them and the length of continuous service as a director of the
Company:
<TABLE>
<CAPTION>
NOMINEES AND DIRECTOR
DIRECTORS PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE SINCE
------------ -------------------------------------- --- --------
<S> <C> <C> <C>
CLASS II NOMINEES
- -------------------
J. Evans Attwell............ Vinson & Elkins L.L.P.; Director, American 66 1974
General Corporation and Interra Financial
Incorporated
Richard J. Burgess.......... Retired Vice Chairman of the Board, CMS NOMECO 65 1996
Oil & Gas Co.
Barry J. Galt............... Chairman of the Board and Chief Executive 63 1983
Officer of the Company; Director, Standard
Insurance Company and Trinity Industries, Inc.
Dee S. Osborne.............. President, Finial Investment Corporation 66 1983
(investments); Director, EOTT Energy Corp.
(the general partner of EOTT Energy Partners,
L.P.); and Chairman and Director, People's
Choice TV of Houston, Inc.
Sidney R. Petersen.......... Retired Chairman of the Board and Chief 66 1996
Executive Officer, Getty Oil Company;
Director, Avery Dennison Corporation, NICOR
Inc., Group Technologies Corporation and Union
Bank of California
CLASS I DIRECTORS
- ------------------
John W. Elias............... Executive Vice President of the Company 56 1993
Milton Carroll.............. Chairman of the Board, President and Chief 46 1997
Executive Officer, Instrument Products, Inc.;
Director, PanEnergy Corp, Blue Cross Blue
Shield of Texas and Federal Reserve Bank of
Dallas
Peter J. Fluor.............. President and Chief Executive Officer, Texas 49 1980
Crude Energy, Inc. (independent oil and gas
company); Director, Fluor Corporation
Sam F. Segnar............... Retired Chairman of the Board and Chief 69 1986
Executive Officer, Enron Corp.; Director,
MAPCO Inc. and Textron, Inc.; Advisory
Director, Gulf States Utilities Company
Robert F. Vagt.............. President and Chief Operating Officer of the 50 1996
Company; Director, Monterey Resources, Inc.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NOMINEES AND DIRECTOR
DIRECTORS PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE SINCE
------------ -------------------------------------- --- --------
<S> <C> <C> <C>
CLASS III DIRECTORS
- --------------------
Thomas H. Cruikshank........ Retired Chairman and Chief Executive Officer 65 1996
of Halliburton Company; Director, The Goodyear
Tire & Rubber Company, Lehman Brothers
Holdings, Inc. and The Williams Companies,
Inc.
William R. Grant............ Chairman, Galen Associates (venture capital 72 1986
health care); Director, Allergan, Inc., Fluor
Corporation, MiniMed, Inc., New York Life
Insurance Company, SmithKline Beecham, p.l.c.
and Witco Corporation
Dean P. Guerin.............. Retired Chairman, Eppler, Guerin and Turner 73 1982
and Berry-Barnett Food Distribution Co., Inc.;
Director, Lone Star Technologies, Inc. and
Trinity Industries, Inc.
Richard M. Morrow........... Retired Chairman of the Board and Chief 71 1992
Executive Officer, Amoco Corporation;
Director, Marsh & McLennan Companies, Inc. and
Potlatch Corporation
R. A. Walker................ Managing Director, Prudential Capital Group 40 1996
(investments); Director, YPF/Maxus Energy and
Coca-Cola Bottling Group (Southwest)
</TABLE>
Each of the nominees and directors named above has been engaged in the
principal occupation set forth opposite his name for the past five years except
as follows:
Mr. Burgess served as an officer of CMS NOMECO Oil & Gas Co. since 1967, a
Director since 1968, and its President and Chief Executive Officer since 1981.
Mr. Burgess retired as Vice Chairman of the Board of CMS NOMECO in June 1996.
Mr. Elias served for 30 years with Amoco Production Company and its parent,
Amoco Corporation, in a variety of operational and management positions. Most
recently, he served as Executive Vice President of Natural Gas for Amoco
Production from November 1988 to January 1993. Mr. Elias was elected Executive
Vice President of the Company in March 1993 and served as Chief Operating
Officer from January 1, 1995 to October 3, 1996.
Mr. Segnar served as Chairman of the Board and Chief Executive Officer of
HNG/InterNorth, Inc. (now Enron Corp.) from 1984 until his retirement in early
1986. He served as Chairman of the Board of Vista Chemical, Inc. from October
1986 to October 1988 and as Chairman of the Board of Collecting Bank, National
Association from April 1988 to February 1993.
Mr. Vagt served with Adobe Resources Corporation as a Director from May
1986 to May 1992 and as President and Chief Operating Officer from November 1990
to May 1992. He served as Chairman of the Board, President and Chief Executive
Officer of Global Natural Resources, Inc. from 1992 to October 1996. He was
elected President and Chief Operating Officer of the Company in October 1996.
Mr. Cruikshank had served, until his retirement in January 1996, as an
officer of Halliburton Company since 1969, a Director since 1977, its Chief
Executive Officer since 1983 and its Chairman since 1989.
Mr. Guerin served as Chairman of the Board of Eppler, Guerin & Turner, Inc.
from 1951 until his retirement in December 1987. He served as Chairman of the
Board of Berry-Barnett Food Distribution Co., Inc. from 1990 until 1994.
3
<PAGE> 6
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth the number of shares of Common Stock
beneficially owned by (i) each nonemployee director, (ii) the CEO and each of
the other four most highly compensated executive officers (the "Named Officers")
and (iii) the directors, Named Officers and other executive officers of the
Company as a group:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(1)
---------------------------------
NUMBER PERCENT
OF SHARES OF CLASS
--------- --------
<S> <C> <C>
NONEMPLOYEE DIRECTORS:
J. Evans Attwell.......................... 40,800(2) *
Richard J. Burgess........................ 5,000 *
Milton Carroll............................ 1,000 *
Thomas H. Cruikshank...................... 7,400(2) *
Peter J. Fluor............................ 32,798(2)(3) *
William R. Grant.......................... 12,400(2) *
Dean P. Guerin............................ 48,550(2) *
Richard M. Morrow......................... 16,800(2) *
Dee S. Osborne............................ 39,600(2) *
Sidney R. Petersen........................ 19,360(2) *
Sam F. Segnar............................. 12,200(2) *
R. A. Walker.............................. 0(4)
NAMED OFFICERS:
Barry J. Galt............................. 780,684(2)(5)(6)(7)(8) 1.2%
Robert F. Vagt............................ 411,098(2)(6) *
John W. Elias............................. 47,185(2)(6)(7)(8) *
Richard F. Barnes......................... 81,620(2)(8) *
T. P. McConn.............................. 100,714(2)(6)(7)(8)(9) *
John N. Goodpasture....................... 76,025(2)(6)(7)(8) *
DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP
(28 PERSONS).............................. 1,890,470(10) 2.9%
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated, beneficial owners have sole voting and
investment power with respect to the shares listed. Amounts shown are as of
March 20, 1997, except for amounts held by the trustee of the Company's
Thrift Plan and Employee Stock Ownership Plan, which are as of December 31,
1996.
(2) Includes a portion of the 1,340,220 shares that the nonemployee directors
and the above Named Officers have a right to purchase within 60 days
pursuant to stock options ("Options") granted under the Company's stock
option plans. Such shares are allocated as follows: Messrs. Attwell, Fluor,
Grant, Guerin, Morrow, Osborne, and Segnar -- each 10,800, Mr.
Cruikshank -- 2,400, Mr. Petersen -- 17,600, Mr. Galt -- 600,000, Mr.
Vagt -- 396,000, Mr. Elias -- 40,000, Mr. Barnes -- 69,620, Mr.
McConn -- 84,400 and Mr. Goodpasture -- 54,600. Prior to exercising these
Options, the directors and officers will have no voting or investment power
with respect to said shares.
(3) Includes 4,000 shares held by certain trusts with respect to which Mr.
Fluor is the sole trustee but for which he disclaims any beneficial
ownership.
(4) Does not include 6,519,741 shares held by The Prudential Insurance Company
of America ("Prudential"). Mr. Walker is a Managing Director of Prudential
Capital Group, an affiliate of Prudential. See "Principal Shareholders."
(5) Includes 30,000 shares held by certain trusts with respect to which Mr.
Galt disclaims any beneficial ownership.
4
<PAGE> 7
(6) Includes a portion of the 38,845 shares held by the trustee of the
Company's thrift plans for which the above Named Officers have sole voting
power and no investment power. Shares held are as follows: Mr.
Galt -- 12,690, Mr. Vagt -- 1,898, Mr. Elias -- 2,270, Mr. McConn -- 8,438
and Mr. Goodpasture -- 13,549.
(7) Includes a portion of the 20,661 shares held by the trustee of the
Company's Employee Stock Ownership Plan for which the above Named Officers
have sole voting power and no investment power. Shares held are as follows:
Mr. Galt -- 6,994, Mr. Elias -- 1,915, Mr. McConn -- 5,876 and Mr.
Goodpasture -- 5,876.
(8) Includes a portion of the 15,000 total aggregate shares of Restricted Stock
held by the Company for which the above Named Officers have sole voting
power and no investment power. Shares held are as follows: Mr.
Galt -- 6,000, Mr. Elias -- 3,000, Mr. Barnes -- 2,000, Mr. McConn -- 2,000
and Mr. Goodpasture -- 2,000.
(9) Mr. McConn served as Senior Vice President, Domestic Exploration and
Production of the Company until his death on March 24, 1997.
(10) Includes 112,032 shares held for directors and executive officers as a
group in the Company's thrift plans, Capital Accumulation Plan, Employee
Stock Ownership Plan and in Restricted Stock for which such persons have
sole voting power and no investment power. Also, includes 1,454,348 shares
for directors and executive officers as a group that said persons have the
right to purchase within 60 days pursuant to Options granted under the
Company's stock option plans. Prior to exercising these Options, said
persons will have no voting or investment power with respect to said
shares.
DIRECTORS' MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held sixteen meetings during 1996. Each director
attended at least 75% of the aggregate total meetings of the Board of Directors
and any committee on which such director served.
The Company has the following standing committees:
Audit Committee. The Audit Committee, which currently consists of
Messrs. Grant, Guerin, Morrow, Petersen and Segnar, met three times during
1996. Mr. Petersen was elected a Committee member on November 7, 1996. The
Committee's principal functions are to confirm the existence of effective
accounting and internal control systems and to oversee the entire audit
function, both independent and internal.
Compensation Committee. The Compensation Committee, which currently
consists of Messrs. Fluor, Cruikshank, Osborne and Segnar, met seven times
during 1996. Mr. Cruikshank was elected a Committee member on May 14, 1996.
The Committee's principal functions are to study, advise and consult with
the Company's management respecting the compensation of officers and other
key employees of the Company. Members of the Compensation Committee are not
eligible to participate in any of the plans or programs they administer.
Executive Committee. The Executive Committee, which currently consists
of Messrs. Attwell, Galt, Osborne, Segnar and Vagt, met one time during
1996. Mr. Vagt was elected a Committee member on November 7, 1996. The
Committee's principal function is to aid and assist the Company's
management in the day-to-day operation of the Company.
Nominating Committee. The Nominating Committee, which currently
consists of Messrs. Attwell, Burgess, Grant, Morrow and Walker, met two
times during 1996. Messrs. Burgess and Walker were elected as Committee
members on November 7, 1996. The Committee's principal function is to make
proposals to the full Board of Directors for candidates to be nominated by
the Board to fill vacancies or for new directorship positions, if any,
which may be created from time to time. The Nominating Committee will
consider suggestions from any source, particularly shareholders, regarding
possible candidates for director. With respect to the procedures that must
be followed in order for nominations from shareholders to be considered,
see "Shareholder Proposals and Director Nominations."
5
<PAGE> 8
COMPENSATION OF DIRECTORS
During 1996, each director of the Company who is not a full-time employee
was paid an annual director's fee of $24,000 plus $1,000 for each Board of
Directors and Committee meeting attended. A nonemployee director who attends a
meeting of a committee of which he is not a member is entitled to an attendance
fee of $1,000. Each nonemployee director who serves as a committee chairman
receives an additional $1,000 per year. During 1996, the Company paid an
aggregate of $452,750 in fees to its non-employee directors.
Stock Options. The Nonemployee Directors Stock Option Plan (the "Directors
Option Plan") provides for the grant of options to acquire Common Stock to each
director who is not and never has been an employee of the Company (an "Eligible
Director"). On the date of any Annual Meeting of Shareholders prior to the
termination of the Directors Option Plan, each Eligible Director who is
continuing in office will automatically receive an option to purchase 6,000
shares of Common Stock at an exercise price equal to the fair market value of
the Common Stock on the date of grant. In addition, each Eligible Director who
is elected or appointed to the Board of Directors for the first time will
receive on the date of such director's election or appointment an option to
purchase 6,000 shares of Common Stock at an exercise price equal to the fair
market value of the Common Stock on the date of grant. All outstanding options
have terms of ten years and vest 20% per year over the initial five years of
their terms.
Deferred Fee Plan. The Company has an Outside Directors Deferred Fee Plan
(the "Deferred Fee Plan"), a non-qualified deferred compensation plan. The
Deferred Fee Plan requires the automatic deferral of one-half of the annual
retainer fee for all directors who are not employees of the Company ("Outside
Directors"). In addition, Outside Directors may elect to defer all or a portion
of their remaining directors' fees under the Deferred Fee Plan. Amounts
automatically deferred under the Deferred Fee Plan are credited based upon
"phantom stock" units, which have the same value as Common Stock, which increase
or decrease in value to the full extent of any increase or decrease in the value
of Common Stock and which receive credit for any cash or stock dividends paid
with respect to Common Stock. With respect to fees deferred by Outside Directors
prior to January 1, 1991, or fees deferred in excess of the one-half automatic
deferral, Outside Directors are permitted to make quarterly elections regarding
the method of income crediting for these deferrals, which may be credited either
based upon "phantom stock" units or with interest equivalents based upon the
prime rate of interest as published in The Wall Street Journal on the last day
of the quarter, plus a bonus rate of interest of up to 2% depending on the
number of years the Outside Director has served on the Board. All "phantom
stock" units credited to Outside Directors' accounts must remain so credited
until distribution or, if distribution is to be in a form other than lump sum,
the effective date of a final income crediting election made after Board of
Directors membership has ceased. Distributions under the Deferred Fee Plan can
be made only in cash. As of March 20, 1997, all Outside Directors were
participants in the Deferred Fee Plan.
The following table sets forth Common Stock "phantom stock" units credited
to each participant's account during 1996 and total units credited as of March
20, 1997:
<TABLE>
<CAPTION>
PHANTOM STOCK UNITS
CREDITED
---------------------------
IN FISCAL AS OF
1996 MARCH 20, 1997
--------- --------------
<S> <C> <C>
J. Evans Attwell..................................... 2,322 31,046
Richard J. Burgess................................... 507 507
Thomas H. Cruikshank................................. 1,977 1,977
Peter J. Fluor....................................... 2,231 28,100
William R. Grant..................................... 2,091 21,913
Dean P. Guerin....................................... 2,034 23,276
Richard M. Morrow.................................... 2,085 9,382
Dee S. Osborne....................................... 2,189 27,050
Sidney R. Petersen................................... 283 283
Sam F. Segnar........................................ 507 3,353
R. A. Walker......................................... 283 283
</TABLE>
6
<PAGE> 9
CERTAIN TRANSACTIONS
During 1996, the Company retained the law firm of Vinson & Elkins L.L.P.,
of which Mr. Attwell is of counsel, to perform various legal services for the
Company. Vinson & Elkins L.L.P. has been retained to perform similar services in
1997.
During 1996, the Company retained the law firm of Moyers, Martin, Santee,
Imel & Tetrick ("Moyers, Martin"), of Tulsa, Oklahoma, with respect to matters
of Oklahoma law. Moyers, Martin has been retained to perform similar services
with respect to matters of Oklahoma law in 1997. Mr. D. Stanley Tacker, Mr.
Galt's son-in-law, is a partner in Moyers, Martin. Mr. Galt is Chairman and
Chief Executive Officer of the Company.
Robert W. Shower resigned as an officer of the Company on April 30, 1996
and a Director of the Company on July 15, 1996. In connection with his
termination of employment, Mr. Shower entered into a consulting agreement
whereby his Restricted Stock Agreement dated March 17, 1995, was amended to
provide for the forfeiture restrictions thereunder to lapse as of March 17, 1998
if Mr. Shower performs substantial services pursuant to the consulting agreement
or, if earlier, the date Mr. Shower dies or becomes disabled or the date the
Compensation Committee in its sole discretion waives such forfeiture
restrictions. The terms of the stock option granted to Mr. Shower on March 20,
1992 were amended so that it will be fully exercisable until January 31, 1998.
Mr. Shower has agreed to provide consulting services to the Company until April
30, 1998. Mr. Shower will receive an aggregate of $120,000 during the term of
the consulting arrangement, subject to reduction if he ceases to be a consultant
(other than for reason of death or disability).
SECTION 16 COMPLIANCE
Pursuant to the requirements of Section 16(a) of the Securities Exchange
Act of 1934, as amended, (the "Exchange Act"), Stephen A. Thorington, Vice
President, Finance and Treasurer of the Company, filed a report of change in
beneficial ownership on Form 4 with the Securities and Exchange Commission
("SEC") during July 1996. However, because the purchase to which the Form 4
related occurred during May 1996, Mr. Thorington's filing was not timely made.
Mr. Thorington has advised the Company that he has made all other Section 16(a)
filings during 1996 on a timely basis.
Pursuant to the requirements of the Exchange Act, R. A. Walker, Director of
the Company, filed a statement of beneficial ownership of securities on Form 3
with the SEC during November 1996. However, because the event to which the Form
3 related occurred on October 3, 1996, Mr. Walker's filing was not timely made.
Mr. Walker has advised the Company that he has made all other Section 16(a)
filings during 1996 on a timely basis.
7
<PAGE> 10
EXECUTIVE COMPENSATION
The following table sets forth annual and long-term compensation for
services in all capacities to the Company for the fiscal years ended December
31, 1994, 1995 and 1996, of those persons who were, at December 31, 1996, the
Chief Executive Officer, the other four most highly compensated executive
officers and the President and Chief Operating Officer of the Company (the
"Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------------------
AWARDS
ANNUAL --------------------------
COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME & PRINCIPAL BONUS RESTRICTED OPTIONS/SARS COMPENSATION
POSITION YEAR SALARY($) ($)(1) STOCK(2) (SHS.)(3) ($)(4)
---------------- ---- --------- ------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Barry J. Galt............................... 1996 $516,000 $290,440 0 100,000 $62,407
Chairman of the Board 1995 $496,650 $167,000 6,000(5) 100,000 $59,899
and Chief Executive Officer 1994 $496,000 $ 0(5) 0 100,000 $55,333
Robert F. Vagt (6).......................... 1996 $ 76,718 $ 66,600 0 0 $ 0
President and Chief Operating Officer 1995 $ 0 $ 0 0 0 $ 0
1994 $ 0 $ 0 0 0 $ 0
John W. Elias............................... 1996 $294,000 $136,000 0 40,000 $32,403
Executive Vice President 1995 $283,704 $ 76,000 3,000(5) 40,000 $31,104
1994 $270,000 $ 0(5) 0 40,000 $27,982
Richard F. Barnes........................... 1996 $250,000 $ 36,000 0 15,000 $11,000
Senior Vice President, 1995 $242,400 $ 22,500 2,000(5) 15,000 $10,848
ENSTAR Alaska 1994 $232,000 $ 0(5) 0 16,000 $10,846
T. P. McConn (7)............................ 1996 $250,000 $100,000 0 22,000 $25,881
Senior Vice President, 1995 $236,385 $ 55,000 2,000(5) 22,000 $24,715
Domestic Exploration and Production 1994 $222,000 $ 0(5) 0 24,000 $22,174
John N. Goodpasture......................... 1996 $222,000 $ 94,000 0 20,000 $22,634
Senior Vice President, 1995 $213,216 $ 64,000 2,000(5) 20,000 $21,572
Pipelines and Marketing 1994 $199,500 $ 0(5) 0 16,000 $19,451
</TABLE>
- ---------------
(1) Amounts shown are cash compensation earned by the Named Officers under the
Executive Incentive Plan or, in the case of Mr. Barnes, as a discretionary
bonus for the respective fiscal years.
(2) The following is the market value of the restricted stock held by the Named
Officers at December 31, 1996: Mr. Galt -- $132,000, Mr. Elias -- $66,000,
Mr. Barnes -- $44,000, Mr. McConn -- $44,000 and Mr. Goodpasture -- $44,000.
The Company does not currently pay dividends on Common Stock; however, it
would pay dividends on the restricted stock should the Company change its
dividend policy.
(3) No grants of stock appreciation rights have been made.
(4) Amounts reported under "All Other Compensation" represent contributions by
the Company to defined contribution plans.
(5) The Named Officers did not receive any bonuses under the Company's 1994
Executive Incentive Plan. In lieu thereof the Named Officers received grants
of restricted stock in early 1995.
(6) Robert F. Vagt became President and Chief Operating Officer of the Company
on October 3, 1996 upon the consummation of the Company's merger with Global
Natural Resources Inc. The amounts shown in the table for Mr. Vagt's salary
and bonus are only those amounts paid be the Company after the consummation
of the merger, and do not include any amounts paid by Global prior to the
merger. Mr. Vagt's total annual salary for 1996 from the Company and Global
was $320,000 and his total annual bonus for 1996 from the Company and Global
was $265,300.
(7) Mr. McConn served as Senior Vice President, Domestic Exploration and
Production of the Company until his death on March 24, 1997.
COMPENSATION ARRANGEMENTS
Employment Agreement. In December 1983, Mr. Galt entered into an employment
agreement with the Company with an initial term of three years. Pursuant to the
employment agreement, the term is automatically extended for an additional year
on each anniversary of the agreement, unless terminated prior to such renewal by
either Mr. Galt or the Company, so that the remaining term of the agreement has
ranged
8
<PAGE> 11
from two to three years. If, however, the Company terminates Mr. Galt's
employment because of gross negligence or willful misconduct in the performance
of his duties, the employment agreement will terminate. Similarly, if Mr. Galt
terminates his employment agreement voluntarily other than in connection with a
"change of control" of the Company or other than because he is not re-elected to
his current positions (including as a director) or is assigned materially
inconsistent duties, the employment agreement will terminate. Mr. Galt's annual
salary is subject to review and possible increase by the Compensation Committee
on an annual basis. Mr. Galt received a 6.6% salary increase from his effective
annual salary of $516,000 in 1996 to $550,000 for 1997. During the term of his
employment, Mr. Galt will also receive the use of an automobile, various club
memberships and certain other personal and business related benefits.
Executive Severance Agreements. Messrs. Galt, Elias, Barnes, McConn and
Goodpasture entered into agreements effective March 17, 1995 with the Company
(the "Agreements") that provide certain severance benefits in the event their
employment is subject to an involuntary termination (as defined) within two
years following a change of control (as defined) of the Company. The initial
term of the Agreements is two years and the Company may extend the Agreements
for successive two-year terms following the initial term; however, if a change
of control occurs during the term of the Agreements, the Agreements cannot
terminate until two years after the change of control. The Agreements do not
automatically terminate at the end of their two-year term. Instead, the Company
is entitled to reevaluate the Agreements for up to 60 days following the end of
the two years to determine whether to extend the Agreements for an additional
two-year period or whether to let them expire at the end of the 60-day
reevaluation period. The Company intends to extend each of these Agreements for
an additional two-year term.
The Agreements generally provide for (a) the payment of 2.99 times the sum
of annual salary and targeted incentive bonus at the time of the change of
control or the involuntary termination, whichever is greater, and, where
applicable, reduced by the present value of any salary continuation or severance
payments payable under any other Company plan, policy or agreement, other than a
plan within the meaning of section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended, (b) the payment of the remaining portion of
prior year's incentive bonuses and, if the involuntary termination occurs after
an incentive bonus is earned but before it is paid, 2 times the objective
portion of the incentive bonus, (c) the continuation of health and insurance
benefit coverage at active employee cost for up to thirty-six months, and (d)
outplacement services up to a maximum cost of $6,000. If the severance benefits
under an Agreement, in conjunction with any other amounts paid to the applicable
executive by the Company constitute a "parachute payment" within the meaning of
section 280G of the Internal Revenue Code of 1996, as amended, (the "Code"),
amounts payable under that Agreement will either be reduced or paid in full,
whichever produces the better net after-tax position for the executive.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following is information with respect to the unexercised Options to
purchase Common Stock under the Company's stock option plans granted to the
Named Officers and held by them at December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
NUMBER SECURITIES UNDERLYING IN-THE-MONEY
OF UNEXERCISED OPTIONS/SARS OPTIONS/SARS
SHARES AT DECEMBER 31, 1996 AT DECEMBER 31,
ACQUIRED (SHARES) 1996($)(1)
ON VALUE --------------------------- ---------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Barry J. Galt................. 0 0 550,000 390,000 $5,939,250 $764,375
Robert F. Vagt................ 0 0 396,000 0 $5,224,468 $ 0
John W. Elias................. 0 0 60,000 160,000 $ 0 $185,000
Richard F. Barnes............. 0 0 61,420 60,600 $ 588,189 $119,688
T. P. McConn.................. 23,000 $303,813 71,600 90,400 $ 535,750 $182,250
John N. Goodpasture........... 20,000 $301,250 46,400 70,600 $ 343,750 $142,813
</TABLE>
- ---------------
(1) Value based on the closing price on the NYSE Composite Tape for Common Stock
on December 31, 1996 ($22.00 per share).
9
<PAGE> 12
OPTION GRANTS
The following is information with respect to grants of Options in fiscal
1996 pursuant to the Company's stock option plans to the Named Officers
reflected in the Summary Compensation Table on page 8. No stock appreciation
rights were granted under those plans in fiscal 1996.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------- ANNUAL RATE OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED (SHS.)(1) FISCAL 1996 ($/SH.) DATE 5% 10%
---- ----------------- ------------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Barry J. Galt......... 100,000 4.92% $23.50 7/16/2006 $1,477,902 $3,745,295
John W. Elias......... 40,000 1.97% $23.50 7/16/2006 $ 591,161 $1,498,118
Richard F. Barnes..... 15,000 .74% $23.50 7/16/2006 $ 221,685 $ 561,794
T. P. McConn.......... 22,000 1.08% $23.50 7/16/2006 $ 325,139 $ 823,965
John N. Goodpasture... 20,000 .98% $23.50 7/16/2006 $ 295,580 $ 749,059
</TABLE>
- ---------------
(1) Options were granted to the Named Officers on July 15, 1996, except for Mr.
Vagt who did not receive any options from the Company in 1996. The exercise
price per share is equal to the closing price of Common Stock on the NYSE
Composite Tape on the date of grant. Options granted vest in four equal
annual increments beginning one year from date of grant. The Compensation
Committee has the authority to accelerate the vesting of outstanding Options
including upon the occurrence of a "change of control".
(2) The dollar amounts under these columns represent the potential realizable
value of each grant of Options assuming that the market price of Common
Stock appreciates in value from the date of grant at the 5% and 10% annual
rates of return prescribed by the Securities and Exchange Commission
("SEC"). These calculations are not intended to forecast possible future
appreciation, if any, of the price of Common Stock.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is designed to help the
Company attract, motivate and retain the executive resources that the Company
needs in order to maximize its return to shareholders. The fundamental
philosophy is to relate the amount of compensation "at risk" for an executive
directly to his or her contribution to the Company's success in achieving
superior performance objectives. The Company's executive compensation program,
as structured and implemented by the Compensation Committee (the "Committee"),
consists of three main components: (1) base salary; (2) potential for an annual
bonus based on overall Company performance as well as individual performance;
and (3) the opportunity to earn long-term stock-based incentives that are
intended to encourage the achievement of superior results over time and to align
executive officer and shareholder interests. The compensation program is
structured to provide senior management with a total compensation package
that -- at expected levels of performance -- is competitive with those provided
to executives who hold comparable positions or have similar qualifications in
other similarly situated organizations. The peer companies (the "Peer Group")
named under the heading "Shareholder Return Performance Presentation" are the
only group of companies specifically utilized by the Compensation Committee in
evaluating executive compensation levels of the executive officers named in the
Summary Compensation Table; however, the Committee receives advice regarding
compensation levels from the compensation and benefits practice of KPMG Peat
Marwick LLP ("KPMG"), an outside compensation consulting firm, which utilizes a
number of other sources, including information from other companies depending
upon the job content of the executive officer whose salary is being reviewed.
Base Salary Program. The Company's base salary program is designed to
provide base salaries for senior management that approximate the 50% percentile
of those provided by other companies in the Peer Group. The base salaries for
the Company's senior management group are generally targeted by the Committee to
fall at the 50th percentile for the Peer Group, although salaries for certain
key managers may be above the 50th percentile. The Committee believes that the
Company's ability to provide salaries that are competitive with
10
<PAGE> 13
market alternatives, which vary depending upon the nature and level of the
position in question, is critical to attracting and maintaining talented senior
managers. The Committee reviews information obtained from proxy statements,
special surveys and other sources and employs the services of KPMG to analyze
the competitive level of senior management compensation. Based upon this review,
the Committee believes that the percentile target described above has been met.
The Committee reviews and adjusts executive base salaries annually based on
each individual employee's performance over time (assessed using discretion),
general competitive market salary levels and the Company's market capitalization
and cash flow generated from operations. No specific weight or emphasis is
placed on any one of these factors.
Under the terms of Mr. Galt's employment agreement with the Company, Mr.
Galt's salary is subject to review by the Committee for possible increases each
year.
In 1996, the Committee increased Mr. Galt's salary from $516,000 for 1996
to $550,000 for 1997, which is an increase of 6.6%, in order to recognize the
Company's achievements in 1996 under Mr. Galt's leadership including the
completion of the Company's merger with Global Natural Resources Inc., as well
as the purchase of assets in Egypt from Exxon Corporation ("Exxon").
Short-Term Incentive Compensation. The impact of the Committee's linking
compensation to performance can also be illustrated by the operation of the
Company's Executive Incentive Plan for 1996 (the "1996 Plan"). Under the
Company's Executive Incentive Plan, the Committee grants annual cash incentive
awards that are dependent upon the Company's achievement of previously
established objectives for the fiscal year and an evaluation of each individual
participant's contributions to those achievements. The Committee utilizes data
obtained from KPMG to determine the targeted annual incentive award levels for
plan eligible positions. Such targeted awards are intended by the Committee to
approximate the 55th to 60th percentile for the Peer Group, although awards for
certain key managers may be above the 60th percentile. For example, Mr. Galt's
award for 1996 was at the 63rd percentile.
Annual incentive award targets are expressed as a percentage of total
salary earned during a given year ranging from 15% to 50%, but can increase to a
maximum of two times the targeted percentage or decrease to zero for any year,
based upon the achievement of predetermined objective and subjective performance
goals. The 1996 Plan had four performance criteria, two objective and two
subjective. Each component is measured independently and has a weighting of 25%.
The objective components are: pre-tax cash flow from operations compared to the
Company's Operating Plan and pre-tax cash flow from exploration and production
operations to exploration and production revenue ratio in relation to Peer Group
companies. The subjective components are: the Company's stock performance in
relation to Peer Group companies and an assessment of individual executive
performance.
Under the two objective components of the Executive Incentive Plan, because
the Company's actual pre-tax cash flow from operations was 145% of the amount
targeted in the Company's operating plan, participants in the Executive
Incentive Plan received 190.3% of the 25% targeted amount for the pre-tax cash
flow generated from operations ("PCFO") to annual operating plan. Since the
Company ranked 12th out of 20 peer companies based on PCFO to revenue ratio,
participants earned 60% of the 25% of the participants' total target award.
As indicated above, the remaining half of the award is the subjective
portion. Of this amount, the Committee has adopted a policy that one-half of
this amount (25% of an individual's target bonus) will be based upon the
performance of the Common Stock for the preceding fiscal year compared to the
performance of the common stock of the Peer Group. The remaining half of the
subjective portion is based upon the individual employee's contribution to the
Company's annual success in his or her area of responsibility, measured by both
quantitative and qualitative factors. No specific formula is utilized for
weighing individual performance. Because the performance of the Common Stock did
not compare favorably to the stock performance of the Peer Group companies
during 1996, participants in the Executive Incentive Plan did not receive an
award for this component. As for individual performance, the remaining 25% of
the target award under the 1996 Plan, the cash awards averaged 133% of the
targeted amount for this component. The awards
11
<PAGE> 14
for individual performance were intended to recognize certain individual
achievements as well as those individuals most involved in effecting the
Company's merger with Global Natural Resources Inc. and the purchase of the
Exxon assets in Egypt.
Mr. Galt received a cash bonus for 1996 of $290,440. The award was based
upon the Committee's recognition of achievements in 1996 under Mr. Galt's
leadership including the completion of the Company's merger with Global Natural
Resources Inc. and the purchase of the Exxon assets in Egypt.
Long-Term Incentive Compensation. The Company currently grants long-term
incentive compensation in the form of stock options. The Committee emphasizes
incentive compensation in the form of stock options because they tend to align
the interests of employees and shareholders by rewarding performance that
increases shareholder value. Option holders will only recognize value when the
stock price increases over the exercise price established on the date of grant.
The Committee does not utilize the number of options or shares held by any
individual as a factor to limit option grants to that individual in subsequent
years.
The Committee establishes the overall level of stock options by considering
the stock option grant levels of companies included in the Peer Group. Stock
option awards by the Company are targeted by the Committee to fall at or above
the 65th percentile among the Peer Group. The Committee bases individual option
grants on individual performance (assessed using discretion) and level of
responsibility of the optionee.
All outstanding options have terms of ten years. The Committee adopted a
policy in 1996 to provide that all options granted in 1996 and thereafter would
vest in four equal annual installments beginning one year from the date of
grant. All options have been granted at 100% of the market value of the Common
Stock on the date of grant. The exercise price is payable in cash, shares of
Common Stock, or any combination thereof.
The Company's philosophy is to provide stock option awards at or above the
65th percentile. On July 16, 1996, the Committee granted non-qualified stock
options to purchase an aggregate of 100,000 shares of Common Stock to Mr. Galt
for an exercise price of $23.50 per share. The options were granted at 100% of
fair market value on the date of grant. The option grant was based on a
competitive number of options for chief executive officers in the Peer Group
based on an analysis of information available for fiscal 1995. The options will
not produce gain for Mr. Galt unless the Company's share price rises over the
exercise price established on the date of grant and therefore emphasize
pay-for-performance in the form of enhanced shareholder value.
The Committee periodically reviews the Company's executive compensation
package to ensure that the Company provides an appropriate mix of base salary
and short-term and long-term compensation opportunities that are competitive
with market alternatives.
Section 162(m). Section 162(m) of the Code, which was enacted in 1993,
precludes a public corporation from taking a deduction in 1994 or subsequent
taxable years for compensation in excess of $1 million paid to its chief
executive officer or any of its four other highest-paid officers. However,
compensation that qualified under Section 162(m) of the Code as
"performance-based" is specifically exempt from the deduction limit. The
Committee has been advised that the Company's ability to deduct compensation
income generated in connection with the exercise of stock options granted under
the Company's stock option plans should not be limited by Section 162(m) of the
Code. During 1997, no executive of the Company is expected to receive
compensation in excess of $1 million unless a significant number of vested stock
options is exercised.
Compensation Committee
Peter J. Fluor, Chairman
Thomas H. Cruikshank
Dee S. Osborne
Sam F. Segnar
12
<PAGE> 15
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The performance graph shown below was prepared by using data from the
Standard and Poor's Compustat Database for use in this Proxy Statement. As
required by applicable rules of the Securities and Exchange Commission, the
graph was prepared based upon the following assumptions:
1. $100 was invested in Common Stock, the S&P 500 and the Peer Group (as
defined below) on December 31, 1991.
2. Peer Group investment is weighted based on the market capitalization of
each individual company within the Peer Group at the beginning of each
year.
3. Dividends are reinvested on the ex-dividend dates.
In light of the merger with Global Natural Resources, Inc., many of the
operating characteristics of the Company have changed in a significant manner.
Accordingly, the Company has reevaluated those companies that are peers of the
Company. As a result of this reevaluation, seven companies have been eliminated
from the peer group and four companies have been added. However, as reflected in
the performance graph, the current industry peer group actually performed better
throughout the five-year period than the prior peer group.
The prior industry peer group (the "Prior Peer Group") consisted of the
following companies: Anadarko Petroleum Corporation, Apache Corporation,
Burlington Resources Inc., Cabot Oil & Gas Corporation, Devon Energy
Corporation, Enron Oil & Gas Company, Equitable Resources, Inc., The Louisiana
Land & Exploration Company, Mesa Inc., Mitchell Energy & Development Corp.,
Murphy Oil Corporation, Noble Affiliates, Inc., Oryx Energy Company, Parker &
Parsley Petroleum Company, Pennzoil Company, Pogo Producing Company, Santa Fe
Energy Resources, Inc., Southwestern Energy Company, Union Texas Petroleum
Holdings, Inc. and Vastar Resources, Inc.
The current industry peer group (the "Current Peer Group") is comprised of
the following: Anadarko Petroleum Corporation, Apache Corporation, Burlington
Resources Inc., Enron Oil & Gas Company, Enserch Exploration, Inc., Equitable
Resources, Inc., The Louisiana Land & Exploration Company, Mesa, Inc., Noble
Affiliates, Inc., Nuevo Energy Company, Oryx Energy Company, Parker & Parsley
Petroleum Company, Pogo Producing Company, Santa Fe Energy Resources, Inc.,
Union Pacific Resources Group Inc., United Meridian Corporation and Vastar
Resources, Inc.
13
<PAGE> 16
SEAGULL ENERGY CORPORATION
COMPARATIVE TOTAL RETURNS
DECEMBER 1991-DECEMBER 1996
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG SEAGULL ENERGY CORPORATION, S&P 500 INDEX AND PEER GROUPS
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Seagull Energy Corporation $100.00 $125.76 $205.05 $154.55 $179.80 $177.78
S&P 500 $100.00 $107.64 $118.50 $120.06 $165.18 $203.11
Prior Peer Group $100.00 $111.62 $133.87 $119.67 $139.94 $179.86
Current Peer Group $100.00 $116.42 $140.94 $123.68 $152.40 $191.13
</TABLE>
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
The Company has an Executive Supplemental Retirement Plan (the "Retirement
Plan") in which Barry J. Galt is the only current participant. The Retirement
Plan was established to provide supplemental retirement benefits for those
employees who are designated by the Compensation Committee as participants and
who complete the required period of employment with the Company. Benefits under
the Retirement Plan constitute unfunded, unsecured obligations of the Company.
The Retirement Plan provides a benefit for the surviving spouse of a participant
who dies before retirement with a vested benefit.
Subject to specified vesting requirements, a participant is entitled to
receive commencing upon termination of his or her employment by the Company or
upon his or her normal retirement date, whichever is later, a pension equal to
the applicable percentage of average monthly compensation less 50% of his or her
social security benefit. Compensation covered by the Retirement Plan includes
base salary only. Mr. Galt is fully vested under the Retirement Plan.
For Mr. Galt, the applicable percentage is 50% and his average monthly
compensation (which does not include bonuses) is determined based on his last
three consecutive calendar years of employment with the Company. Based upon the
average of Mr. Galt's annual salary for 1995 ($496,650), 1996 ($516,000) and
1997 ($550,000), the estimated annual benefit for Mr. Galt is $252,552 with such
payment continuing to the survivor for life upon the death of either Mr. Galt or
his spouse.
14
<PAGE> 17
GLOBAL NATURAL RESOURCES INC. EMPLOYEES' PENSION PLAN
The Global Natural Resources Inc. Employees' Pension Plan (the "Global
Pension Plan") was terminated as of December 31, 1996 (the "Termination Date").
Although all benefits ceased to accrue under the Global Pension Plan as of the
Termination Date, Global Natural Resources Inc. (now a wholly owned subsidiary
of the Company) has agreed to contribute to the Global Pension Plan an amount
sufficient to discharge all benefit liabilities existing as of the Termination
Date. Benefit liabilities will be settled under the Global Pension Plan upon
approval by the Pension Benefit Guaranty Corporation and the Internal Revenue
Service.
As a result of the termination of the plan, each participant will be
entitled to a monthly benefit, determined in the manner described below. This
monthly benefit will be determined as of the Termination Date and will be
limited in accordance with applicable Code provisions. Each participant may
choose from among certain payment options, including having the plan purchase an
annuity which will pay the monthly benefit for the participant's lifetime,
commencing upon the later of (i) the participant attaining age 65 or (ii) the
fourth anniversary of the date on which the participant began to participate in
the plan. Although certain other annuity payment options are available under the
plan, the Company believes that many of the participants will elect to receive a
lump sum cash payment that is actuarially equivalent to the monthly benefit
described above. If the lump sum option is selected, the amount payable should
be generally equivalent to the amount that Global Natural Resources Inc. would
be required to pay in order to purchase the annuity described above.
For purposes of these calculations, the monthly benefit for each
participant would be equal to (a) 3% of the participant's average monthly
compensation, multiplied by his or her years of benefit service not in excess of
ten years, plus (b) 1% of the participant's average monthly compensation,
multiplied by his or her years of benefit service in excess of ten years but not
in excess of twenty-one years, plus (c) 1/2% of the participant's average
monthly compensation, multiplied by his or her years of benefit service in
excess of twenty years. The participant's average monthly compensation and years
of benefit service are determined as of the Termination Date. Accordingly, no
increases in compensation or service as an employee beyond the Termination Date
will be taken into account in calculating benefits under the Global Pension
Plan.
Robert F. Vagt is the only Named Officer eligible to participate in the
Global Pension Plan. Based on the formula described above, the annual retirement
benefit payable to Mr. Vagt as of the Termination Date was $22,500.
ENSTAR NATURAL GAS COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Richard F. Barnes is the only Named Officer eligible to participate in the
ENSTAR Natural Gas Company Supplemental Executive Retirement Plan (the "ENSTAR
SERP").
On November 7, 1994, the Board of Directors adopted the ENSTAR SERP to
restore retirement benefits lost by certain employees under certain ENSTAR
Natural Gas Company qualified plans, including the ENSTAR Retirement Plan, as a
result of the limits on qualified plan compensation ($160,000 for 1997) under
Section 401(a)(17) of the Code. Eligible employees become participants of the
ENSTAR SERP upon designation by the Compensation Committee. Benefits under the
ENSTAR SERP constitute unfunded, unsecured obligations of the Company. Subject
to specified vesting requirements, a participant in the ENSTAR SERP (or his
beneficiary or beneficiaries) is entitled to receive a lump sum benefit upon
termination of employment. Mr. Barnes is fully vested in his benefit under the
ENSTAR SERP.
The ENSTAR SERP provides a supplemental retirement benefit equal to the
excess, if any, of the present value of the benefit that would have been payable
under the ENSTAR Retirement Plan if such participant's average monthly
compensation was based on his "Plan Compensation" (without regard to the
limitation on compensation under Section 401(4)(a)(17) of the Code), over the
present value of the benefit actually payable under the ENSTAR Retirement Plan.
"Plan Compensation" is defined as 5/6ths of the sum of a participant's annual
base salary as of January 1 of each year and any cash bonus paid during the
year. Each
15
<PAGE> 18
present value is determined based on the UC-1984 Mortality Table and the Pension
Benefit Guaranty Corporation interest rates in effect at the time of the
participant's termination of employment.
Based on Mr. Barnes' current compensation level of $298,000, the estimated
supplemental retirement benefit for Mr. Barnes, assuming retirement at age 65
and an interest rate of 6%, is a lump sum payment of $252,000.
ENSTAR NATURAL GAS COMPANY RETIREMENT PLAN
Richard F. Barnes is the only Named Officer eligible to participate in the
ENSTAR Natural Gas Company Retirement Plan for Salaried Employees (the "ENSTAR
Retirement Plan").
The salaried employees of ENSTAR Natural Gas Company, a division of the
Company, are eligible to participate in the ENSTAR Retirement Plan. Under the
non-contributory plan, a participant who retires at or after the age of 65 with
four years of plan participation is eligible for a monthly retirement benefit
equal to 2% of the participant's average monthly compensation multiplied by his
or her years of benefit service not to exceed ten full years, added to an amount
equal to 1% of the participant's average monthly compensation multiplied by his
or her years of benefit service exceeding ten full years. Benefits under the
ENSTAR Retirement Plan are not subject to reduction because of social security
benefits but are reduced by benefits payable under another defined benefit plan
to the extent that there is a duplication of benefits for the same period of
service.
The ENSTAR Retirement Plan provides that a participant's benefit will be
determined pursuant to the above formula as of the date of termination of
employment, but also provides that such benefit will be at least equal to (1)
the participant's accrued benefit as of December 31, 1988 or if greater, (2) the
sum of the participant's accrued benefit as of December 31, 1993 and his accrued
benefit determined under the benefit formula applicable for plan years beginning
on and after January 1, 1994 based on years of accrual service credited on and
after January 1, 1994.
A participant (or his or her beneficiary) may also be entitled to the
foregoing benefit under the ENSTAR Retirement Plan if the participant terminates
employment by reason of early retirement (i.e., after the participant has
attained the age of 55 and completed five years of vesting service), by reason
of total and permanent disability, by reason of death or if the participant
terminates employment after the participant has attained a "vested percentage"
in his or her ENSTAR Retirement Plan benefit based on his or her years of
vesting service under the following schedule:
<TABLE>
<CAPTION>
YEARS OF VESTED
SERVICE PERCENTAGE
-------- ----------
<S> <C>
Less than 5................................................. 0%
5 or more................................................... 100%
</TABLE>
16
<PAGE> 19
The following table shows estimated annual benefits payable upon normal
retirement at age 65 based on certain salary assumptions and years of service.
PENSION PLAN TABLE*
<TABLE>
<CAPTION>
YEARS OF SERVICE
RANGE OF ---------------------------------------------------
COMPENSATION 15 20 25 30 35
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 50,000......................... $12,500 $15,000 $17,500 $20,000 $22,500
$ 75,000......................... $18,750 $22,500 $26,250 $30,000 $33,750
$100,000......................... $25,000 $30,000 $35,000 $40,000 $45,000
$125,000......................... $31,250 $37,500 $43,750 $50,000 $56,250
$150,000......................... $37,500 $45,000 $52,500 $60,000 $67,500
$160,000......................... $40,000 $48,000 $56,000 $64,000 $72,000
</TABLE>
- ---------------
* For purposes of determining the benefits shown above, plan compensation for
all years of service has been limited in accordance with the limits on
qualified plan compensation under Section 401(a)(17) of the Code, without
regard to any future adjustments for changes in the cost of living. Benefits
accrued prior to January 1, 1994 with respect to plan compensation in excess
of $150,000 have been disregarded.
The following table sets forth the estimated annual benefits payable under
normal retirement at age 65, assuming current remuneration levels and
participation until normal retirement at age 65, with respect to Mr. Barnes
under the provisions of the ENSTAR Retirement Plan.
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED
CURRENT CREDITED ANNUAL BENEFIT
CREDITED YEARS OF CURRENT COMPENSATION PAYABLE
YEARS OF SERVICE CURRENT COMPENSATION ADJUSTED FOR PLAN UPON
SERVICE AT AGE 65 COVERED BY PLANS COMPENSATION LIMITS RETIREMENT
-------- --------- -------------------- -------------------- --------------
<S> <C> <C> <C> <C> <C>
Richard F. Barnes.... 30 42 $298,000 $160,000 $77,100*
</TABLE>
- ---------------
* This benefit assumes the current limit on plan compensation, $160,000, will
remain at $160,000 (with no inflationary adjustments). Mr. Barnes' service
from 1967 through 1985 has been recognized under this plan and another
retirement plan. Accordingly, his benefit under the ENSTAR Retirement Plan
formula has been reduced by $24,657 per year, which is his accrued benefit
under the other plan.
17
<PAGE> 20
PRINCIPAL SHAREHOLDERS
To the knowledge of the management of the Company and based upon filings
with the Securities and Exchange Commission (the "SEC"), the only persons who
may be deemed to own beneficially more than 5% of the outstanding Common Stock
(including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of March
20, 1997, are named in the following table:
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
------------------- ---------------- ----------------
<S> <C> <C>
MacKay Shields Financial Corporation(1)............... 5,316,000 8.4%
9 West 57th Street
New York, NY 10019
The Prudential Insurance Company of America(2)........ 6,519,741 10.4%
75 Broad Street
Newark, NJ 07102-37777
Wellington Management Company, LLP(3)................. 3,793,700 6.0%
75 State Street
Boston, Massachusetts 02109
</TABLE>
- ---------------
(1) According to information provided by MacKay Shields Financial Corporation
("MacKay"), an investment adviser registered under Section 203 of the
Investment Advisers Act of 1940, MacKay is the beneficial owner of 5,316,000
shares (8.4%) of the Common Stock which are owned by numerous investment
counseling clients, none of which is known to have such interest with
respect to more than five percent of the class. MacKay has shared voting and
dispositive power with respect to all such shares.
(2) According to information provided by The Prudential Insurance Company of
America ("Prudential"), Prudential is the beneficial owner of 6,519,741
shares (10.4%) of the Common Stock. Prudential has sole voting and
dispositive power as to 5,573,061 shares (8.9%), which are held for the
benefit of its general account, and shared voting and dispositive power as
to 946,680 shares (1.5%), which are held for the benefit of its clients by
its separate accounts, externally managed accounts, registered investment
companies, subsidiaries or other affiliates.
(3) According to information provided by Wellington Management Company ("WMC"),
WMC in its capacity as investment adviser, may be deemed the beneficial
owner of 3,793,700 shares (6.0%) of the Common Stock which are owned by
numerous investment counseling clients, none of which is known to have such
interest with respect to more than five percent of the class. WMC has shared
voting power as to 1,576,200 shares and shared dispositive power as to
3,793,700 shares. Because WMC has shared voting power with respect to only
1,576,200 shares, and no voting power with respect to the remaining shares
beneficially owned by WMC, it is deemed to own or control only these
1,576,200 shares (2.5%) for purposes of the Public Utility Holding Company
Act of 1935.
PROPOSED AMENDMENT TO THE BYLAWS
On March 7, 1997, the Board of Directors adopted a resolution recommending
that the following amendment to the Bylaws (the "Bylaw Amendment") be submitted
to the Company's shareholders for their approval at the Annual Meeting. Pursuant
to the Bylaw Amendment, the second paragraph of Article III, Section 1 of the
Bylaws would be amended to read in its entirety as follows:
"The authorized number of directors that shall constitute the
entire Board of Directors shall not be less than eight nor more than
eighteen, and shall be determined from time to time by resolution of
the Board of Directors (provided that no decrease in the number of
directors that would have the effect of shortening the term of an
incumbent director may be made by the Board of Directors). The Board
of Directors shall be divided into three classes: Class I, Class II
and Class III, and the membership of each class shall be as nearly as
equal as possible. Except as otherwise provided in Section 8 of this
Article III, each director elected at an annual meeting shall serve
for a term ending
18
<PAGE> 21
on the third annual meeting following the meeting at which such director
was elected. For purposes of the foregoing, as of May 1, 1997, the terms of
the directors designated to Classes I, II and III were scheduled to expire
at the Company's Annual Meetings of Shareholders for 1999, 1997 and 1998,
respectively. The foregoing notwithstanding, each director shall serve
until his successor shall have been duly elected and qualified or until his
earlier death, resignation or removal. The directors chosen to succeed
those whose terms then expire shall be identified as being of the same
class as the directors they succeed. If for any reason the number of
directors in the various classes shall not conform with the formula set
forth in this paragraph, the Board of Directors (by the affirmative vote of
a majority of the total number of the directors) may redesignate any
director into a different class in order that the balance of directors in
such classes shall conform thereto; provided, however, that no such
redesignation may have the effect of reducing the term to which a director
was elected without the prior written consent of such director."
THE CURRENT CLASSIFIED BOARD PROVISIONS
In 1986, Article III of the Company's Bylaws was amended to provide for a
classified board. Under the classified board provisions, the Board is divided
into three classes, each class to be as nearly equal in number as possible. The
directors in each class are elected for a three-year term, and the terms of the
classes are staggered so that the terms of approximately one-third of the Board
of Directors expire at each annual meeting of shareholders.
The classified board provisions currently state that if the size of the
Board is increased, then the director elected to fill the directorship will be
assigned to a class in accordance with a specific formula set forth in the
Bylaws. This formula is based upon the number of directors resulting from the
increase in question. Pursuant to this formula, if the quotient resulting from
dividing the number of authorized directors by three leaves a remainder of one
(i.e., there is one director "left over"), then the director will be assigned to
Class III. If the remainder is two, then one director will be assigned to Class
III and one will be assigned to Class II.
Article III of the Bylaws also currently provides that the number of
directors will be determined by the Board of Directors, but that there will not
be less than eight directors and there will not be more than 15 directors.
THE BYLAW AMENDMENT
Under the terms of the proposed Bylaw Amendment, the Bylaws would be
amended (i) to increase the maximum number of directors from 15 to 18 and (ii)
to amend the classified board provision so that upon an increase in the number
of directors, the new directors may be assigned to any class designated by the
Board, including the class with the longest remaining term.
Maximum Number of Directors. As described under "Directors' Meetings and
Committee Meetings of the Board of Directors," the Nominating Committee of the
Board is charged with the responsibility of finding additional qualified
individuals to serve on the Board. Although the number of directors may be
increased or decreased by the Board of Directors, it may not be decreased below
8 directors nor increased above 15 directors.
Because the current number of directors is 15, the Board could not increase
the number of directors in order to elect any additional individuals to the
Board, unless the same number of current directors were to resign from the
Board. Therefore, the Bylaw Amendment increases the maximum number of directors
to 18 in order to give the Board of Directors (with advice from the Nominating
Committee) the ability to add new members whose qualifications will enhance the
Board.
Assignment of New Directors to Classes. If the size of the Board is
increased beyond its then current size, then each director elected to fill a new
directorship must be assigned to one of the three classes of directors. As
described above, the current method for this assignment process is to assign the
"remainder" directors first to Class III, then to Class II and then to Class I.
However, depending on the circumstances at the time, the Board may wish to elect
the new director to the longest possible term at the time, and Class III may not
then have the longest remaining term. For example, after the 1997 Annual
Meeting, the class of
19
<PAGE> 22
directors with the longest remaining term will be Class II (with its term
expiring at 2000 annual meeting), and the class with the shortest remaining term
will be Class III (with its term expiring at the 1998 annual meeting).
Therefore, the Bylaw Amendment removes the formula described above from the
Bylaws and permits the Board of Directors to assign a new director to any class,
as long as the number of directors in each class are as nearly equal as
possible. For example, under the current classified Board provisions, if the
size of the Board were increased from 12 to 13, the "remainder" would be one,
and the new director would be required to be placed in Class III. However, if
the Bylaw Amendment is adopted by the shareholders at the Annual Meeting, then
the Board could assign the new director to any of the three classes. Because
each of the classes would be required to be nearly as equal as possible, two of
the classes would have four directors and the other class would have five
directors.
Other Conforming Changes. The Bylaw Amendment would also make certain
technical changes to the classified Board provisions to take into account
certain amendments to the Texas Business Corporation Act that have occurred
since the classified Board provisions were implemented by the Company in 1986.
Specifically, prior to 1989, the Texas Business Corporation Act provided that a
Texas corporation could not have a classified board unless it had at least nine
directors. Because this requirement was eliminated from the Texas Business
Corporation Act in 1989, the Bylaw Amendment removes the provision from the
Bylaws.
REASONS FOR THE BYLAW AMENDMENT
The Board of Directors believes that the classified board structure
currently in place is in the best interests of the Company and its shareholders
because it helps to lend continuity and stability to the management of the
Company and in the Board's leadership and policies. Furthermore, the classified
board helps to ensure that at all times a portion of the Board of Directors will
have had prior experience with the Company. As a result, the classified board
facilitates long-range planning, strategy and policy.
The classification of directors (together with a related provision that
directors may only be removed for cause by the shareholders) could have the
effect of making it more difficult for shareholders to change the composition of
the Board of Directors. At least two annual meetings of shareholders, instead of
one, will generally be required to effect a change in a majority of the members
of the Board. Such a delay may help ensure that the Company's directors, if
confronted by a shareholder attempting to force a proxy contest, a tender or
exchange offer, or an extraordinary corporate transaction, would have sufficient
time to review the proposal as well as any available alternatives to the
proposal and to act in what they believe to be the best interest of the
shareholders.
Neither management of the Company nor the Board of Directors is aware of
any existing or planned effort on the part of any party to accumulate material
amounts of any class of its capital stock, or to acquire control of the Company
by means of a merger, tender offer, solicitation of proxies in opposition to
management or otherwise, or to change the Company's management, nor is the
Company aware of any person having made an offer to acquire the capital or any
material assets of the Company.
REQUIRED VOTE AND RECOMMENDATION
A vote in favor of, or against, the Bylaw Amendment does not constitute a
vote for, or against, the existence of a classified Board of Directors. The
Bylaw Amendment would provide the Company with more flexibility in the size and
composition of the Board of Directors, and the Company believes that the Bylaw
Amendment is beneficial and in the best interests of the Company and the
shareholders. However, even if the Bylaw Amendment is not adopted at the Annual
Meeting, the Company's Board of Directors will continue to be divided into three
classes.
Pursuant to Article IX, Section 2 of the Bylaws, any amendment to the
classified Board provisions (or the provisions relating to the filling of
vacancies or removal of directors) requires the affirmative vote of the holders
of at least two-thirds of the shares of the Company's outstanding Common Stock.
Accordingly, under the Texas Business Corporation Act and the Company's Articles
of Incorporation and Bylaws, abstentions and
20
<PAGE> 23
broker non-votes would have the same legal effect as a vote against this
proposal, even though this may not be the intent of the person entitled to vote
or giving the proxy. The persons named in the proxy intend to vote for the
approval of the Bylaw Amendment, unless otherwise instructed.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THIS PROPOSAL.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of KPMG Peat Marwick LLP,
which has served as independent auditors of the Company since 1981, as
independent auditors of the Company for the fiscal year ending December 31,
1997, and recommends ratification by the shareholders of such appointment. Such
ratification requires the affirmative vote of the holders of a majority of the
shares of Common Stock present or represented by proxy and entitled to vote at
the Annual Meeting. Under Texas law, an abstention would have the same legal
effect as a vote against this proposal, but a broker non-vote would not be
counted for purposes of determining whether a majority has been achieved. The
persons named in the accompanying proxy intend to vote for ratification of such
appointment unless instructed otherwise on the proxy. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
In the event the appointment is not ratified, the Board of Directors will
consider the appointment of other independent auditors. The Board of Directors
may terminate the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors without the approval of the shareholders of the Company
whenever the Board of Directors deems such termination necessary or appropriate.
A representative of KPMG Peat Marwick LLP is expected to attend the Annual
Meeting and will have the opportunity to make a statement, if such
representative desires to do so, and will be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Shareholders may propose matters to be presented at shareholders' meetings
and may also nominate persons to be directors. Formal procedures have been
established for those proposals and nominations.
PROPOSALS FOR 1998 ANNUAL MEETING
Pursuant to various rules promulgated by the SEC, any proposals of holders
of Common Stock intended to be presented to the annual meeting of shareholders
of the Company to be held in 1998 must be received by the Company, addressed to
Sylvia Sanchez, Corporate Secretary, 1001 Fannin, Suite 1700, Houston, Texas
77002, no later than November 29, 1997, to be included in the Company proxy
statement and form of proxy relating to that meeting. With respect to business
to be brought before the Annual Meeting, the Company has not received any
notices from its shareholders.
In addition to the SEC rules described in the preceding paragraph, the
Company's bylaws provide that for business to be properly brought before the
Company's annual meetings of shareholders, it must be either (a) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (b) otherwise brought before the meeting by or at the
direction of the Board of Directors or (c) otherwise properly brought before the
meeting by a shareholder of the Company who is a shareholder of record at the
time of giving of notice hereinafter provided for, who shall be entitled to vote
at such meeting and who complies with the following notice procedures. In
addition to any other applicable requirements, for business to be brought before
an annual meeting by a shareholder of the Company, the shareholder must have
given timely notice in writing of the business to be brought before an annual
meeting of shareholders of the Company to the Secretary of the Company. To be
timely, a shareholder's notice must be delivered to or mailed and received at
the Company's principal executive offices, 1001 Fannin, Suite 1700, Houston,
Texas 77002, on or before February 16, 1998. A shareholder's notice to the
Secretary shall set forth as to each matter the shareholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and address, as they appear on the
Company's books, of the shareholder proposing such business, (iii) the
acquisition date, the class and the number of shares of Common Stock which are
owned
21
<PAGE> 24
beneficially by the shareholder, (iv) any material interest of the shareholder
in such business and (v) a representation that the shareholder intends to appear
in person or by proxy at the meeting to bring the proposed business before the
meeting. Notwithstanding the foregoing bylaw provisions, a shareholder shall
also comply with all applicable requirements of the Exchange Act and the rules
and regulations thereunder with respect to the matters set forth in the
foregoing bylaw provisions. Notwithstanding anything in the Company's bylaws to
the contrary, no business shall be conducted at the annual meeting except in
accordance with the procedures outlined above.
NOMINATIONS FOR 1998 ANNUAL MEETING AND FOR ANY SPECIAL MEETINGS
Only persons who are nominated in accordance with the following procedures
will be eligible for election as directors. Nominations of persons for election
to the Company's Board of Directors may be made at a meeting of shareholders (a)
by or at the direction of the Board of Directors or (b) by any shareholder of
the Company who is a shareholder of record at the time of giving of notice
hereinafter provided for, who shall be entitled to vote for the election of
directors at the meeting and who complies with the following notice procedures.
Such nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Company. To be timely, a shareholder's notice shall be delivered to or
mailed and received at the Company's principal executive offices, 1001 Fannin,
Suite 1700, Houston, Texas 77002 (i) with respect to an election to be held at
the annual meeting of shareholders of the Company, on or before February 16,
1998, and (ii) with respect to an election to be held at a special meeting of
shareholders of the Company for the election of Directors, not later than the
close of business on the 10th day following the date on which notice of the date
of the meeting was mailed or public disclosure of the date of the meeting was
made, whichever first occurs. Such shareholder's notice to the Secretary shall
set forth (a) as to each person whom the shareholder proposes to nominate for
election or re-election as a director, all information relating to the person
that is required to be disclosed in solicitations for proxies for election of
directors, or is otherwise required, pursuant to Regulation 14A under the
Exchange Act (including the written consent of such person to be named in the
proxy statement as a nominee and to serve as a director if elected); and (b) as
to the shareholder giving the notice, (i) the name and address, as they appear
on the Company's books, of such shareholder, and (ii) the class and number of
shares of capital stock of the Company which are beneficially owned by the
shareholder. In the event a person is validly designated as a nominee to the
Board and shall thereafter become unable or unwilling to stand for election to
the Board of Directors, the Board of Directors or the shareholder who proposed
such nominee, as the case may be, may designate a substitute nominee.
Notwithstanding the foregoing bylaw provisions, a shareholder shall also comply
with all applicable requirements of the Exchange Act and the rules and
regulations thereunder with respect to the matters set forth in the foregoing
bylaw provisions.
OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for action at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting or any adjournment(s) or postponement(s)
thereof, it is intended that the enclosed proxy will be voted in accordance with
the judgment of the persons named in the proxy.
By Order of the Board of Directors,
/s/ SYLVIA SANCHEZ
Sylvia Sanchez
Secretary
March 31, 1997
22
<PAGE> 25
- --------------------------------------------------------------------------------
PROXY
SEAGULL ENERGY CORPORATION
ANNUAL MEETING OF SHAREHOLDERS -- MAY 13, 1997
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Barry J. Galt and Robert F. Vagt 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, 1997, at the Annual Meeting of Shareholders to be held
May 13, 1997, 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.
(Continued and to be signed on the reverse side)
SEE REVERSE SIDE
- --------------------------------------------------------------------------------
<PAGE> 26
- --------------------------------------------------------------------------------
1. Election of one director to serve in Class I until the 1999 Annual Meeting of
Shareholders and five directors to serve in Class II until the 2000 Annual
Meeting of Shareholders:
Class I Nominee: Milton Carroll
Class II Nominees: J. Evans Attwell, Richard J. Burgess, Barry J.
Galt, Dee S. Osborne, Sidney R. Petersen
[ ] For [ ] Withhold Authority [ ] ________________________________________
For all nominees except as noted above
2. Proposal to amend the Company's Bylaws to increase the permitted number of
directors and amend the classified Board provisions.
[ ] For [ ] Against [ ] Abstain
3. 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, 1997.
[ ] For [ ] Against [ ] Abstain
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting, or any adjournment(s) or
postponement(s) thereof.
[ ] Mark here for address change and
note at left
If you receive more than one proxy
card, please sign and return all
cards in the accompanying envelope.
Signature: Date:
------------------ -------------
Signature: Date:
----------------- -------------
(If held jointly)
- --------------------------------------------------------------------------------
