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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- -------
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-8094
Seagull Energy Corporation
(Exact name of registrant as specified in its charter)
Texas 74-1764876
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1001 Fannin, Suite 1700, Houston, Texas 77002-6714
(Address of principal executive offices) (Zip code)
(713) 951-4700
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
As of November 6, 1998, 63,393,735 shares of Common Stock, par value $0.10 per
share, were outstanding.
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<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
Part I. Financial Information
Item 1. Unaudited Consolidated Financial Statements
Consolidated Statements of Operations for the Three and
Nine Months Ended September 30, 1998 and 1997.................. 1
Consolidated Balance Sheets - September 30, 1998
and December 31, 1997.......................................... 2
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1998 and 1997.............................. 3
Consolidated Statements of Comprehensive Income for the
Three and Nine Months Ended September 30, 1998 and 1997........ 4
Notes to Consolidated Financial Statements..................... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.................................. 19
Signatures...................................................................... 20
</TABLE>
i
<PAGE>
Item 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
1998 1997 1998 1997
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas operations................................... $ 79,862 $ 108,543 $ 256,415 $ 338,953
Alaska transmission and distribution..................... 13,237 12,112 62,538 63,455
-------------- ------------- -------------- -------------
93,099 120,655 318,953 402,408
Costs of Operations:
Operations and maintenance............................... 40,702 39,744 119,083 123,620
Alaska transmission and distribution cost of gas sold.... 5,021 4,557 27,127 28,523
Exploration charges...................................... 22,032 15,217 40,328 31,516
Depreciation, depletion and amortization................. 46,990 42,787 127,845 130,559
Impairment of long-lived assets.......................... 77,827 - 77,827 -
General and administrative............................... 9,344 4,894 15,784 10,317
-------------- ------------- -------------- -------------
201,916 107,199 407,994 324,535
-------------- ------------- -------------- -------------
Operating Profit (Loss)..................................... (108,817) 13,456 (89,041) 77,873
Other (Income) Expense:
Interest expense......................................... 10,638 9,990 28,490 29,985
Interest income and other................................ 174 (626) (2,027) (1,539)
-------------- ------------- -------------- -------------
10,812 9,364 26,463 28,446
-------------- ------------- -------------- -------------
Income (Loss) Before Income Taxes and Extraordinary Item.... (119,629) 4,092 (115,504) 49,427
Income Tax Expense (Benefit)................................ (33,022) 890 (31,001) 26,350
-------------- ------------- -------------- -------------
Net Income (Loss) Before Extraordinary Item................. (86,607) 3,202 (84,503) 23,077
Extraordinary Item.......................................... (1,031) - (1,031) -
-------------- ------------- -------------- -------------
Net Income (Loss)........................................... $ (87,638) $ 3,202 $ (85,534) $ 23,077
============== ============= ============== =============
Earnings (Loss) Before Extraordinary Item Per Share:
Basic.................................................... $ (1.37) $ 0.05 $ (1.34) $ 0.37
============== ============= ============== =============
Diluted.................................................. $ (1.37) $ 0.05 $ (1.34) $ 0.36
============== ============= ============== =============
Earnings (Loss) Per Share:
Basic.................................................... $ (1.39) $ 0.05 $ (1.36) $ 0.37
============== ============= ============== =============
Diluted.................................................. $ (1.39) $ 0.05 $ (1.36) $ 0.36
============== ============= ============== =============
Weighted Average Number of Common Shares Outstanding:
Basic.................................................... 63,141 63,160 63,072 62,986
============== ============= ============== =============
Diluted.................................................. 63,141 63,933 63,072 63,746
============== ============= ============== =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
1
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents......................................... $ 13,884 $ 45,654
Accounts receivable, net.......................................... 109,078 147,442
Inventories....................................................... 18,840 13,635
Prepaid expenses and other........................................ 17,385 16,240
-------------- ------------
Total Current Assets............................................ 159,187 222,971
Property, Plant and Equipment - at cost............................. 2,341,234 2,053,683
Accumulated Depreciation, Depletion and Amortization................ 1,105,398 908,849
-------------- ------------
1,235,836 1,144,834
Other Assets........................................................ 46,440 43,261
-------------- ------------
Total Assets........................................................ $ 1,441,463 $ 1,411,066
============== ============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts and note payable......................................... $ 145,807 $ 159,138
Accrued expenses.................................................. 30,245 47,625
Current maturities of long-term debt.............................. 6,967 7,097
-------------- ------------
Total Current Liabilities....................................... 183,019 213,860
Long-Term Debt...................................................... 622,314 469,017
Other Noncurrent Liabilities........................................ 58,121 51,168
Deferred Income Taxes............................................... - 14,126
Redeemable Bearer Shares............................................ 15,542 15,691
Commitments and Contingencies....................................... - -
Shareholders' Equity:
Common Stock, $.10 par value; authorized 100,000,000 shares;
issued 64,255,017 shares (1998) and 63,877,442 shares (1997)... 6,426 6,388
Additional paid-in capital........................................ 497,413 493,829
Retained earnings................................................. 79,401 164,935
Less - note receivable from employee stock ownership plan......... (2,990) (2,990)
Less - 861,282 shares (1998) and 861,314 shares (1997) of
Common Stock held in Treasury, at cost.......................... (14,958) (14,958)
Less - note receivable for stock.................................. (1,212) -
Less - deferred compensation...................................... (1,613) -
-------------- ------------
Total Shareholders' Equity...................................... 562,467 647,204
-------------- ------------
Total Liabilities and Shareholders' Equity......................... $ 1,441,463 $ 1,411,066
============== ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------------
1998 1997
----------------- ---------------
<S> <C> <C>
Operating Activities:
Net income (loss)...................................................... $ (85,534) $ 23,077
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation, depletion and amortization............................. 127,845 130,559
Impairment of long-lived assets...................................... 77,827 -
Amortization of deferred financing costs............................. 1,460 1,629
Deferred income taxes................................................ (38,149) 2,914
Dry hole expense..................................................... 21,537 13,844
Extraordinary item................................................... 1,031 -
Other................................................................ 507 549
----------------- ---------------
106,524 172,572
Changes in operating assets and liabilities, net of acquisitions:
Decrease in accounts receivable.................................... 41,296 47,596
Increase in inventories, prepaid expenses and other................ (11,572) (16,706)
Decrease in accounts and notes payable............................. (27,928) (12,151)
Decrease in accrued expenses and other............................. (12,178) (15,378)
----------------- ---------------
Net Cash Provided By Operating Activities.............................. 96,142 175,933
Investing Activities:
Capital expenditures................................................... (193,079) (205,564)
Acquisitions of oil and gas properties, net of cash acquired........... (101,731) (7,421)
Acquisitions of other assets and liabilities, net of cash acquired..... (1,833) -
Proceeds from sales of property, plant and equipment................... 760 1,191
----------------- ---------------
Net Cash Used In Investing Activities.................................. (295,883) (211,794)
Financing Activities:
Proceeds from debt..................................................... 393,254 695,297
Principal payments on debt ............................................ (225,738) (656,858)
Proceeds from sales of common stock.................................... 599 5,586
Purchase of treasury stock............................................. - (5,667)
Premiums paid on debt purchased........................................ (934) -
Other.................................................................. 790 (1,998)
----------------- ---------------
Net Cash Provided By Financing Activities.............................. 167,971 36,360
Effect of exchange rate changes on cash.................................. - (28)
----------------- ---------------
Increase (Decrease) In Cash And Cash Equivalents....................... (31,770) 471
Cash And Cash Equivalents At Beginning Of Period......................... 45,654 15,284
----------------- ---------------
Cash And Cash Equivalents At End Of Period............................... $ 13,884 $ 15,755
================= ===============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Net income (loss).................................... $ (87,638) $ 3,202 $ (85,534) $ 23,077
Other comprehensive income, net of tax:
Foreign currency translation adjustment........... - 35 - (820)
------------- ------------- ------------- ------------
Comprehensive income (loss).......................... $ (87,638) $ 3,237 $ (85,534) $ 22,257
============= ============= ============= ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Presentation of Financial Information
In the opinion of management, the unaudited consolidated financial
statements presented herein contain all adjustments necessary to present fairly
the financial position of Seagull Energy Corporation and Subsidiaries (the
"Company" or "Seagull") as of September 30, 1998, and the results of its
operations and cash flows for the three and nine months ended September 30, 1998
and 1997. All adjustments made, other than the impairment charges and one-time
compensation charges discussed in Note 2 and the extraordinary item discussed in
Note 5, are of a normal, recurring nature. The results of operations for the
three and nine months ended September 30, 1998 and 1997 are not necessarily
indicative of the results to be expected for the full year.
The financial information presented herein should be read in
conjunction with the consolidated financial statements and notes included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
Comprehensive Income -- Effective January 1, 1998, the Company adopted
Financial Accounting Standards Board ("FASB") Statement of Financial Accounting
Standard ("SFAS") No. 130, "Reporting Comprehensive Income." This statement
established standards for reporting and display of comprehensive income and its
components in the Company's financial statements. Comprehensive income includes
all changes in the Company's equity except those resulting from investments by
and distributions to owners.
Earnings Per Share -- The following table provides a reconciliation
between basic and diluted earnings (loss) per share (stated in thousands except
per share data):
<TABLE>
<CAPTION>
Weighted Average Earnings (Loss)
Common Shares Per-Share
Net Income (Loss) Outstanding Amount
-------------------- ---------------------- --------------------
<S> <C> <C> <C>
Quarter Ended September 30, 1998:
Basic..................................... $ (87,638) 63,141 $ (1.39)
Effect of dilutive stock options.......... - -
-------------------- ----------------------
Diluted................................... $ (87,638) 63,141 $ (1.39)
==================== ======================
Quarter Ended September 30, 1997:
Basic..................................... $ 3,202 63,160 $ 0.05
Effect of dilutive stock options.......... - 773
------------------- ----------------------
Diluted................................... $ 3,202 63,933 $ 0.05
==================== ======================
</TABLE>
5
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Weighted Average Earnings (Loss)
Common Shares Per-Share
Net Income (Loss) Outstanding Amount
-------------------- ---------------------- --------------------
<S> <C> <C> <C>
Nine Months Ended September 30, 1998:
Basic..................................... $ (85,534) 63,072 $ (1.36)
Effect of dilutive stock options.......... - -
-------------------- ----------------------
Diluted................................... $ (85,534) 63,072 $ (1.36)
==================== ======================
Nine Months Ended September 30, 1997:
Basic..................................... $ 23,077 62,986 $ 0.37
Effect of dilutive stock options.......... - 760
-------------------- ----------------------
Diluted................................... $ 23,077 63,746 $ 0.36
==================== ======================
</TABLE>
The effects of the assumed exercise of stock options for the first nine
months of 1998 and the third quarter of 1998 have an anti-dilutive effect on the
computation of loss per diluted share for these periods. Therefore, weighted
average options to purchase 4,621,507 and 4,859,702 shares of common stock at
$5.89 to $26.38 per share have not been included in the weighted average number
of common shares outstanding for the first nine months of 1998 and the third
quarter of 1998, respectively. Weighted average options to purchase 1,748,523 at
$20.00 to $26.38 per share and 1,636,272 shares of common stock at $23.50 to
$26.38 per share were outstanding during the first nine months of 1997 and the
third quarter of 1997, respectively, but were not included in the computation of
earnings per diluted share because the options' exercise prices were greater
than the average market price of the common shares. Outstanding options expire
at various dates from 2003 to 2008.
Derivative Financial Instruments -- From time to time, the Company
enters into a variety of commodity derivative financial instruments (futures,
swaps and options contracts) for non-trading purposes. In 1998 and 1997, the
Company made limited use of these derivative financial instruments as a hedging
strategy to manage commodity prices associated with oil and gas sales and to
reduce the impact of commodity price fluctuations. While commodity derivative
financial instruments are intended to reduce the Company's exposure to declines
in the market price of oil and natural gas, the commodity derivative financial
instruments may also limit the Company's gain from increases in those market
prices.
The Company uses the hedge or deferral method of accounting for these
instruments and, as a result, gains and losses on commodity derivative financial
instruments are generally offset by similar changes in the realized prices of
the commodities. To qualify as hedges, these instruments must highly correlate
to anticipated future production and prices such that the Company's exposure to
the effects of price changes is reduced. Income and costs related to these
hedging activities are recognized in oil and gas revenues when the commodities
are produced. Income and costs on commodity derivative financial instruments
that are closed before the hedged production occurs are also deferred until the
production month originally hedged. In the event of a loss of correlation
between changes in oil and gas reference prices under a commodity derivative
financial instrument and actual oil and gas prices, income or costs are
recognized currently to the extent the financial instrument has not offset
changes in actual oil and gas prices. Any realized income and costs that are
deferred at the balance sheet date and any margin accounts for futures contracts
are included as net current assets.
6
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company recorded costs of $0.6 million and $8 million for the nine
months ended September 30, 1998 and 1997, respectively, related to equity
hedging activities, including costs related to the monetary production payment
hedges of approximately $0.6 million and $2 million in 1998 and 1997,
respectively. By the end of the first quarter of 1997, the Company's equity
hedging activities had been substantially reduced, leaving primarily the
commodity hedges of approximately 11 MMcf per day through December 1998, which
were required by the monetary production payment (related to the 1995 sale of
the Company's Section 29 tax credit-bearing properties). For the third quarter
of 1998 and 1997, all of the Company's equity hedging costs of $0.1 million and
$0.6 million, respectively, related to the monetary production payment hedges.
The Company also recorded hedging costs related to third-party marketing
activities of $3.8 million and $0.8 million for the nine months ended September
30, 1998 and 1997, respectively, and $2.3 million and $0.6 million for the third
quarter of 1998 and 1997, respectively.
At September 30, 1998, the Company had open natural gas futures, swaps
and option contracts related to its equity and third-party marketing hedging
activities totaling 20 Bcf related to purchases and 25 Bcf related to sales for
the period from October 1998 through July 1999. At September 30, 1998, the fair
value related to the Company's commodity hedging activities was $0.6 million of
costs related to open contracts.
Accounting Pronouncements -- In June 1997, the FASB issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." This
statement establishes standards for reporting information about operating
segments in annual financial statements and requires selected information about
operating segments be included in interim reports issued to shareholders. In
February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." This statement establishes
standards for disclosure for pensions and other postretirement benefits in
annual financial statements. These statements are effective for financial
statements for periods beginning after December 15, 1997. As both SFAS Nos. 131
and 132 establish standards for reporting and display, the Company does not
expect the adoption of these statements to have a material impact on its
financial condition or results of operations.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes standards of
accounting for and disclosures of derivative instruments and hedging activities.
This statement is effective for fiscal years beginning after June 15, 1999. The
Company has not yet determined the impact of this statement on its financial
condition or results of operations.
Note 2. Special Charges
Impairment of Long-Lived Assets -- The Company performs a review for
impairment of proved oil and gas properties on a depletable unit basis when
circumstances suggest there is a need for such a review. For each depletable
unit determined to be impaired, an impairment loss equal to the difference
between the carrying value and the fair value of the depletable unit will be
recognized. Fair value, on a
7
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
depletable unit basis, is estimated to be the present value of expected future
cash flows computed by applying estimated future oil and gas prices, as
determined by management, to estimated future production of oil and gas reserves
over the economic lives of the reserves. In the third quarter of 1998, the
Company recorded impairment charges of $74 million related to its oil and gas
properties and approximately $4 million related to certain of its pipeline
assets. The oil and gas asset impairment charges resulted primarily from
disappointing well performance, much lower oil and natural gas prices and a lack
of any perceived significant near-term improvement in oil prices that has led to
a reduction in reserves at certain of Seagull's Egyptian concessions. The
impairment of the pipeline assets is a result of the Company's decision to
dispose of these assets. No impairment charges were recorded during 1997.
One-Time Compensation Charges -- During the third quarter of 1998,
Seagull recorded approximately $6 million in compensation expenses included in
general and administrative expense, related to the retirement of Barry J. Galt
and the appointment of James T. Hackett as the Company's Chief Executive
Officer.
Note 3. Acquisitions and Dispositions
Acquisition of Oil and Gas Assets -- On June 1, 1998, the Company
completed the purchase of the stock of BRG Petroleum, Inc. ("BRG"), a closely
held private company, and the assets of BRG's limited partnerships and programs
for $103 million in cash, excluding cash acquired of $2 million and noncash
deferred tax liabilities of $25 million. The Company funded this acquisition
through existing credit facilities.
The following table presents the unaudited pro forma results of Seagull
as though the acquisition of the acquired assets had occurred on January 1,
1998:
<TABLE>
<CAPTION>
PRO FORMA INFORMATION
(Amounts in Thousands Except Per Share Data)
Nine Months Ended
September 30, 1998
--------------------------
<S> <C>
Revenues................................................................................. $327,624
Net loss................................................................................. (87,001)
Basic loss per share..................................................................... (1.38)
Diluted loss per share................................................................... (1.38)
</TABLE>
The unaudited pro forma information does not purport to be indicative
of actual results, if the acquisition of the BRG assets had been in effect for
the period indicated, or of future results.
Relinquishment of Darag Concession -- The Company's Egyptian
concessions include a 50%, non-operated working interest in the Darag block,
which is located in the northern portion of the Gulf of Suez. Future plans for
this concession have been uncertain as the working interest owners and the
Egyptian national oil company ("EGPC") have been unable to secure the necessary
drilling permits from
8
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
marine authorities. In the third quarter of 1998, the working interest owners
agreed to relinquish the concession to EGPC in exchange for reimbursement of
substantially all of their costs incurred in connection with the concession.
Seagull's share of the reimbursement is expected to be approximately $6 million.
The effect of this reimbursement is not expected to be material to the Company's
results of operations.
Disposition of Pipeline Assets -- During the third quarter of 1998, the
Company decided to liquidate its nonstrategic pipeline assets in late 1998 or
early 1999. As a result of this decision, the Company recorded a noncash
impairment of pipeline assets of approximately $4 million during the third
quarter of 1998 to reduce the asset carrying value to net realizable value. The
pipeline assets to be disposed of contributed $3 million and $4 million in
revenues for the three months ended September 30, 1998 and 1997, respectively,
and $9 million and $11 million in revenues for the nine months ended September
30, 1998 and 1997, respectively, but did not have a material effect on operating
profit for any of these periods. These assets have a net book value after
impairment of approximately $3 million at September 30, 1998.
Note 4. Supplemental Disclosures of Cash Flow Information
<TABLE>
<CAPTION>
(Amounts in Thousands)
Nine Months Ended September 30,
-------------------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash paid during the period for:
Interest, net of amount capitalized... $36,143 $35,801
Income taxes.......................... $ 8,277 $20,305
</TABLE>
Note 5. Long-term Debt
During the third quarter of 1998, the Company repurchased in
open-market transactions approximately $50 million in aggregate principal amount
of its 8 5/8% Senior Subordinated Notes due 2005. These purchases were funded
using borrowings under Seagull's revolving credit facility. In connection with
this repurchase, the Company recorded an after-tax extraordinary loss of $1
million, or $0.02 per basic and diluted share during the third quarter of 1998.
The extraordinary item includes a tax benefit of approximately $0.6 million.
Note 6. Commitments and Contingencies
The Company is a party to ongoing litigation in the normal course of
business. Management regularly analyzes current information and, as necessary,
provides accruals for probable liabilities on the eventual disposition of these
matters. While the outcome of lawsuits or other proceedings against the Company
cannot be predicted with certainty, management believes that the effect on its
financial condition, results of operations and cash flows, if any, will not be
material.
9
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion is intended to assist in an understanding of
the financial position and results of operations of Seagull Energy Corporation
("Seagull" or the "Company") for each of the periods indicated. The Company's
accompanying unaudited financial statements and the notes thereto and the
consolidated financial statements and notes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 contain detailed
information that should be referred to in conjunction with the following
discussion.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
CONSOLIDATED HIGHLIGHTS
(Amounts in Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- ------------------------------------
1998 1997 1998 1997
--------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas operations....................... $ 79,862 $ 108,543 $ 256,415 $ 338,953
Alaska transmission and distribution......... 13,237 12,112 62,538 63,455
--------------- ------------- --------------- -----------------
$ 93,099 $ 120,655 $ 318,953 $ 402,408
=============== ============= =============== =================
Operating Profit (Loss):
Oil and gas operations....................... $ (99,574) $ 18,603 $ (83,808) $ 77,363
Alaska transmission and distribution......... 1,146 548 13,436 12,985
Corporate.................................... (10,389) (5,695) (18,669) (12,475)
--------------- ------------- --------------- -----------------
$ (108,817) $ 13,456 $ (89,041) $ 77,873
=============== ============= =============== =================
Net income (loss).............................. $ (87,638) $ 3,202 $ (85,534) $ 23,077
Net cash provided by operating activities before
changes in operating assets and liabilities.. $ 21,683 $ 48,623 $ 106,524 $ 172,572
Net cash provided by operating activities...... $ 31,901 $ 49,939 $ 96,142 $ 175,933
</TABLE>
For both the three and nine months ended September 30, 1998, Seagull
experienced decreases in revenues, operating profit, net income and net cash
provided by operating activities versus the same periods in 1997. These
decreases can be primarily attributed to the following key items:
- - A noncash impairment charge of $78 million in the third quarter of 1998
related to the impairment of the Company's oil and gas and pipeline
assets;
- - Substantial decreases in worldwide oil prices and moderate decreases in
domestic gas prices from the 1997 periods;
- - Substantial increases in exploration charges for the quarter and nine
months of 1998 versus the equivalent 1997 periods;
10
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
- - The absence of contributions from the Company's Canadian oil and gas
operations which were sold in October 1997;
- - One-time compensation costs of approximately $6 million associated with
the retirement of Barry J. Galt and the appointment of James T. Hackett
as the Company's Chief Executive Officer; and
- - A change in the Company's tax expense from approximately 53% of
earnings before taxes for the nine months ended September 30, 1997 to
an approximate 27% benefit for the first nine months of 1998,
reflecting primarily the tax benefits of the impairment of long-lived
assets and one-time compensation matters.
<TABLE>
<CAPTION>
OIL AND GAS OPERATIONS
(Amounts in Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Natural gas............................... $ 54,970 $ 70,374 $ 173,287 $ 224,093
Oil and NGL............................... 19,583 32,986 66,258 96,220
Pipeline and marketing.................... 5,309 5,183 16,870 18,640
--------------- ------------- -------------- --------------
79,862 108,543 256,415 338,953
--------------- ------------- -------------- --------------
Production operating expenses............... 28,651 27,967 82,961 87,091
Pipeline and marketing expenses............. 7,109 6,860 20,524 20,840
Exploration charges......................... 22,032 15,217 40,328 31,516
Depreciation, depletion and amortization.... 43,817 39,896 118,583 122,143
Impairment of long-lived assets............. 77,827 - 77,827 -
--------------- ------------- -------------- --------------
Operating profit.......................... $ (99,574) $ 18,603 $ (83,808) $ 77,363
=============== ============= ============== ==============
</TABLE>
The decline in commodity prices was the significant factor in the 26%
and 24% decreases in revenues for the Oil and Gas Operations ("O&G") segment to
$80 million and $256 million for the three and nine months ended September 30,
1998, respectively. Domestic natural gas prices realized by the Company
decreased 9% from $2.28 per Mcf in the first nine months of 1997 to $2.07 per
Mcf for the same period in 1998. This price decrease and a 5% decrease in
domestic gas production combined to create a $26 million decrease in domestic
natural gas revenues. Worldwide oil prices realized by the Company showed a
decrease of 33%, from $17.40 per Bbl in 1997's first nine months to $11.62 per
Bbl in 1998. While declining oil prices were the primary factor for the decrease
in oil revenues, this was partially offset by an increase in oil and NGL
production in the U.S. and Egypt as Seagull realized additional contributions
from several new domestic wells and three Egyptian concessions - Qarun, where
additional facilities became operational during mid-1997, East Beni Suef, where
production began in mid-1998, and West Abu Gharadig, which was purchased in late
1997. For the third quarter of 1998, the Company's oil and gas production was
essentially unchanged from the third quarter of 1997, excluding
11
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Canadian production. However, worldwide oil and gas prices realized by the
Company during the third quarter of 1998 reflected the similar downward trends
expressed during the first nine months of 1998 versus the same period in 1997.
Seagull sold its Canadian oil and gas operations in October 1997. These
Canadian operations contributed approximately $8 million and $26 million in
revenues and $4 million and $8 million in operating profit for the three and
nine months ended September 30, 1997, respectively.
<TABLE>
<CAPTION>
EXPLORATION AND PRODUCTION OPERATING DATA
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------------- -----------------------------------------------------
Net Daily Production Unit Price Net Daily Production Unit Price
1998 1997 1998 1997 1998 1997 1998 1997
----------- ------------- ----------- ----------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gas Sales(1):
Domestic............. 293 299 $ 1.94 $ 2.19 289 304 $ 2.07 $ 2.28
Canada(2) ........... - 49 - 1.38 - 49 - 1.63
Cote d'Ivoire........ 7 7 1.59 1.77 9 6 1.57 1.81
Indonesia............ 8 8 1.97 3.58 9 11 2.32 3.54
Other................ 1 - 1.40 1.07 1 - 1.36 1.02
----------- ------------- ----------- ----------- ------------- ------------- ----------- -------------
309 363 $ 1.94 $ 2.11 308 370 $ 2.06 $ 2.22
=========== ============= =========== =========== ============= ============= =========== =============
Oil and NGL Sales(1):
Domestic............. 5,151 5,292 $ 10.79 $ 16.52 5,094 4,689 $ 11.88 $ 18.03
Canada(2)............ - 932 - 15.37 - 889 - 16.46
Egypt................ 10,085 9,838 12.07 18.02 10,555 8,987 12.67 18.30
Cote d'Ivoire........ 782 1,146 7.34 17.44 993 1,285 10.90 19.06
Tatarstan............ 4,201 4,113 6.74 13.94 4,060 4,224 8.57 14.34
Indonesia............ 115 94 12.84 22.01 172 166 16.09 20.99
Other................ 9 9 7.33 15.49 8 15 10.78 17.18
----------- ------------- ----------- ----------- ------------- ------------- ----------- -------------
20,343 21,424 $ 10.46 $ 16.74 20,882 20,255 $ 11.62 $ 17.40
=========== ============= =========== =========== ============= ============= =========== =============
</TABLE>
(1) Natural gas is stated in MMcf and $ per Mcf. Oil and NGLs are stated in Bbl
and $ per Bbl.
(2) All of the Company's Canadian oil and gas operations were sold in October
1997.
Income and costs related to the Company's commodity hedging activities
are recognized in oil and gas revenues when the commodities are produced. The
Company recorded costs of $0.6 million and $8 million for the nine months ended
September 30, 1998 and 1997, respectively, related to equity hedging activities,
including costs related to the monetary production payment hedges of
approximately $0.6 million and $2 million in 1998 and 1997, respectively. By the
end of the first quarter of 1997, the Company's equity hedging activities had
been substantially reduced, leaving primarily the commodity hedges of
approximately 11 MMcf per day through December 1998, which were required by the
monetary production payment (related to the 1995 sale of the Company's Section
29 tax credit-bearing
12
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
properties). For the third quarter of 1998 and 1997, all of the Company's equity
hedging costs of $0.1 million and $0.6 million, respectively, related to the
monetary production payment hedges. The Company also recorded hedging costs
related to third-party marketing activities of $3.8 million and $0.8 million for
the nine months ended September 30, 1998 and 1997, respectively, and $2.3
million and $0.6 million for the third quarter of 1998 and 1997, respectively.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes standards of
accounting for and disclosures of derivative instruments and hedging activities.
This statement is effective for fiscal years beginning after June 15, 1999. The
Company has not yet determined the impact of this statement on its financial
condition or results of operations.
In comparison to 1997, exploration charges for 1998 were approximately
$7 million and $9 million higher for the third quarter and nine months,
respectively, primarily due to increases in dry hole expense and impairment of
leaseholds on certain of the Company's Egyptian concessions.
The decrease in depreciation, depletion and amortization ("DD&A")
expense to $119 million for the nine months ended September 30, 1998 from $122
million for the prior year is primarily due to the decrease in domestic gas
production and the sale of the Company's Canadian operations, partially offset
by increased oil production in Egypt and an increase in the DD&A expense per
equivalent unit of production related to the Company's Egyptian operations. The
DD&A expense per equivalent unit of production for oil and gas producing
activities increased to $5.95 per Boe from $5.41 per Boe for the first nine
months of 1998 and 1997, respectively. For the third quarter, DD&A expense
increased nearly $4 million from 1997's $40 million also due to the increase in
the DD&A expense per equivalent unit of production related to the Company's
Egyptian operations.
During the third quarter of 1998, the Company recorded a noncash
impairment charge of $74 million related to its oil and gas assets. The
impairments of the oil and gas assets were primarily a result of disappointing
well performance, much lower oil and natural gas prices and a lack of any
perceived significant near-term improvement in oil prices that has led to a
reduction in reserves at certain of Seagull's Egyptian concessions. During this
quarter, the Company also decided to liquidate nonstrategic pipeline assets
which resulted in an additional noncash impairment of $4 million.
Even if worldwide oil and gas prices improve materially in the
remainder of 1998, O&G operating results will be substantially lower in 1998
versus the prior year. As the O&G segment represents the majority of the
Company's operations, a substantial decrease in O&G operating results will have
a significant impact on the Company's total operating results.
13
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
<TABLE>
<CAPTION>
ALASKA TRANSMISSION AND DISTRIBUTION
(Amounts in Thousand Except Operating Data)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- --------------------------------------
1998 1997 1998 1997
-------------- ------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Revenues.................................. $ 13,237 $ 12,112 $ 62,538 $ 63,455
Cost of gas sold.......................... 5,021 4,557 27,127 28,523
-------------- ------------- ---------------- -----------------
Gross margin............................ 8,216 7,555 35,411 34,932
Operations and maintenance expense........ 4,942 4,917 15,598 15,689
Depreciation, depletion and amortization.. 2,128 2,090 6,377 6,258
-------------- ------------- ---------------- -----------------
Operating profit........................ $ 1,146 $ 548 $ 13,436 $ 12,985
============== ============= ================ =================
OPERATING DATA:
Degree days (*)......................... 1,050 762 6,332 6,053
Sales and transport volumes (MMcf)...... 7,280 7,543 29,544 31,362
Sales and transport margin per MMcf..... $ 1.13 $ 1.00 $ 1.20 $ 1.11
</TABLE>
(*) A measure of weather severity calculated by subtracting the mean
temperature for each day from 65 degrees Fahrenheit. More degree days
equate to colder weather.
Operating profit of the Alaska transmission and distribution segment
for the third quarter of 1998 increased from the 1997 period primarily as a
result of cooler temperatures, increased customer count and increased gross
margin due to a change in the mix of customers. This segment's business is
seasonal with approximately 65%-70% of its sales made in the first and fourth
quarters of each year.
OTHER
During the third quarter of 1998, Seagull recorded approximately $6
million in compensation expenses, related to the retirement of Barry J. Galt and
the appointment of James T. Hackett as the Company's Chief Executive Officer,
included in general and administrative ("G&A") expense. Additional compensation
costs related to Mr. Galt's retirement of approximately $1 million will be
recorded in G&A expense throughout the remainder of 1998 and the first half of
1999.
14
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES AND ACQUISITIONS
(Amounts in Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------- ---------------------------------------
1998 1997 1998 1997
-------------- -------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Capital expenditures:
Exploration and production:
Leasehold........................... $ 13,988 $ 3,634 $ 18,412 $ 17,893
Exploration......................... 27,361 28,456 59,695 73,089
Development......................... 34,805 30,359 101,715 101,109
-------------- -------------- ---------------- -----------------
76,154 62,449 179,822 192,091
Pipeline and marketing................ 85 162 1,302 207
-------------- -------------- ---------------- -----------------
Oil and gas operations.............. 76,239 62,611 181,124 192,298
Alaska transmission and distribution.. 2,974 3,081 6,978 6,532
Corporate............................. 1,261 2,524 4,977 6,734
-------------- -------------- ---------------- -----------------
$ 80,474 $ 68,216 $ 193,079 $ 205,564
============== ============== ================ =================
Acquisitions............................. $ 673 $ 6,600 $ 128,142 $ 7,421
============== ============== ================ =================
</TABLE>
Seagull's capital expenditure program is designed to fulfill the
Company's goals of growing its reserve base and production capacity. Capital
expenditures, excluding acquisitions, decreased by $12 million for the first
nine months of 1998 versus 1997 due to the sale of the Company's Canadian
operations, which had expenditures of $13 million in the first nine months of
1997, and a decline in domestic capital expenditures, partially offset by
increased expenditures related to the Company's Egyptian operations.
The Company has a revolving credit facility (the "Credit Facility")
with a maximum commitment of $500 million. At September 30, 1998, there was $205
million borrowed under the Credit Facility and $277 million of the unused
commitment was immediately available. The Credit Facility contains certain
covenants and restrictive provisions, including limitations on the incurrence of
additional debt or liens, the declaration or payment of dividends and the
repurchase or redemption of capital stock and the maintenance of certain
financial ratios. Under the most restrictive of these provisions, approximately
$143 million was available for payment of cash dividends on common stock or to
repurchase common stock as of September 30, 1998.
During the third quarter of 1998, the Company repurchased in
open-market transactions approximately $50 million in aggregate principal amount
of its 8 5/8% Senior Subordinated Notes due 2005. These purchases were funded
using borrowings under the Credit Facility. In connection with this repurchase,
the Company recorded an extraordinary loss of $1 million, or $0.02 per basic and
15
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
diluted share. At current interest rates under the Credit Facility, the Company
expects to save approximately $1.6 million in annual interest expense by
refinancing the $50 million of Senior Subordinated Notes under the Credit
Facility.
On June 1, 1998, the Company completed the purchase of the stock of BRG
Petroleum, Inc. and its related partnership interests for $103 million in cash,
excluding cash acquired of $2 million and noncash deferred tax liabilities of
$25 million. The Company funded this acquisition through its existing credit
facility.
The assets acquired include proved oil and gas reserves of 102 billion
cubic feet of natural gas equivalents ("Bcfe"). BRG operated approximately 70
percent of 600 currently producing oil and gas wells in approximately 140
fields. Daily production from the properties net to the combined BRG interests
averaged approximately 18 million cubic feet of gas and 400 barrels of oil and
natural gas liquids in 1997. The most significant of these assets are
concentrated in East Texas, primarily in Freestone, Upshur, Rusk and Nacogdoches
counties.
Management believes the Company's internally generated funds and bank
borrowing capabilities will be sufficient to finance current and forecasted
operations, including capital expenditures.
In March 1998, Seagull announced it may include some of its less
strategic E&P properties located away from its various core assets in packages
of properties to be liquidated in the fourth quarter of 1998. During the third
quarter of 1998, the Company also decided to liquidate its nonstrategic pipeline
assets in late 1998 or early 1999. The Company also announced its intentions to
exit its third-party marketing business and to explore alternatives for
marketing its equity production, including outsourcing.
YEAR 2000 ISSUES
Historically, most computer systems (including microprocessors embedded
into field equipment and other machinery) utilized software that recognized a
calendar year by its last two digits. Beginning in the year 2000, these systems
will require modification to distinguish twenty-first century dates from
twentieth century dates ("Year 2000 issues").
Accordingly, the Company has initiated a comprehensive plan to address
the Year 2000 issues associated with its operations and business. Seagull's
Board of Directors has been briefed about the Year 2000 problem generally and as
it may affect Seagull. The Board has created a committee consisting of senior
executives and a representative from the Board to oversee the adoption and
implementation of a Year 2000 plan covering all of Seagull's business units. The
plan has been developed, and the aim of the plan is to take reasonable steps to
prevent Seagull's mission-critical functions from being impaired due to the Year
2000 problem.
16
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The plan includes several phases - (i) assessment of all of the
Company's systems and technology; (ii) implementation and testing of
modifications to or replacements of existing systems and technology, both
financial and operational; (iii) communication with key business partners; and
(iv) contingency planning.
In planning and developing the project, Seagull has considered both its
information technology ("IT") and its non-IT systems. The term "computer
equipment and software" includes systems that are commonly thought of as IT
systems, including accounting, data processing, telephone systems, scanning
equipment, and other miscellaneous systems. Those items not considered IT
technology include alarm systems, fax machines, monitors for field operations,
or other miscellaneous systems. Both IT and non-IT systems may contain embedded
technology, which complicates Seagull's Year 2000 identification, assessment,
remediation, and testing efforts. Based upon its identification and assessment
efforts to date, Seagull is in the process of replacing the computer equipment
and software it currently uses to become Year 2000 compliant. In addition, in
the ordinary course of replacing computer equipment and software, Seagull plans
to obtain replacements that are in compliance with Year 2000.
During 1997, the Company utilized both internal and external resources
to reprogram, or replace, and test much of its IT systems, primarily financial
and operational software, for necessary modifications identified in its
assessment of Year 2000 issues. As of the date of this filing, the Company
estimates that approximately 80% of its Year 2000 plan for these IT systems has
been implemented and anticipates that the remainder of the plan, including any
necessary remedial action, will be completed by March 31, 1999. During September
1998, the Company began utilizing internal and external resources to evaluate
its vulnerability to Year 2000 issues related to its non-IT systems, primarily
field operational systems and equipment. The Company has also initiated formal
communications with all of its key business partners to determine the extent to
which the Company is vulnerable to those third parties' potential failure to
remediate their own Year 2000 issues. While the evaluation of non-IT systems and
communications with key business partners is just beginning, the Company
estimates that the remainder of the Year 2000 plan concerning these areas will
be complete by March 31, 1999.
During the fourth quarter of 1998, the Company plans to develop
contingency plans for both financial and operational systems. Seagull's
contingency plans are being designed to minimize the disruptions or other
adverse effects resulting from Year 2000 incompatibilities regarding these
systems, and to facilitate the early identification and remediation of Year 2000
problems that first manifest themselves after January 1, 2000.
The failure to correct a material Year 2000 issue could result in an
interruption in, or a failure of, certain normal business activities, thereby
having a material, adverse affect on the Company's results of operations,
liquidity and financial position. The Company's remediation efforts are expected
to significantly reduce the Company's level of uncertainty about Year 2000
compliance and the possibility of interruptions of normal operations. However,
there can be no guarantee that the systems of other companies, on which the
Company's systems rely, will be timely converted, or that a failure to convert
17
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
by another company, or a conversion that is incompatible with the Company's
systems, would not have a material adverse effect on the Company. Disruptions to
the oil and gas transportation networks controlled by third-party carriers could
result in reduced production volumes delivered to market. In addition, risks
associated with foreign operations may increase with the uncertainty of Year
2000 compliance by foreign governments and their supporting infrastructures.
The total costs for the Year 2000 compliance review, evaluation,
assessment and remediation efforts are not expected to be in excess of
$1,000,000. Of this amount, approximately $300,000 had been incurred as of
September 30, 1998.
Defined Terms
Natural gas is stated herein in billion cubic feet ("Bcf"), million
cubic feet ("MMcf") or thousand cubic feet ("Mcf"). Oil, condensate and natural
gas liquids ("NGL") are stated in barrels ("Bbl") or thousand barrels ("MBbl").
MMcfe and Mcfe represent the equivalent of one million and one thousand cubic
feet of natural gas, respectively. Oil, condensate and NGL are converted to gas
at a ratio of one barrel of liquids per six Mcf of gas, based on relative energy
content. MMBoe, MBoe and Boe represent one million barrels, one thousand barrels
and one barrel of oil equivalent, respectively, with six Mcf of gas converted to
one barrel of liquid.
Forward Looking Statements
Item 2 of this document includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, as amended. Although Seagull believes that such
forward-looking statements are based upon reasonable assumptions, it can give no
assurance that its expectations will in fact occur. Important factors that could
cause actual results to differ materially from those in the forward-looking
statements include, but are not limited to, political developments in foreign
countries, federal and state regulatory developments, the timing and extent of
changes in commodity prices, the timing and extent of success in discovering,
developing and producing or acquiring oil and gas reserves, the availability of
skilled personnel, materials and equipment, operating hazards attendant to the
industry, and conditions of the capital and equity markets during the periods
covered by the forward-looking statements, as well as the other factors
discussed in Seagull's Annual Report on Form 10-K for the year ended December
31, 1997.
18
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
#*10.1 Employment and Consulting Agreement by and between the Company and
Barry J. Galt.
#*10.2 Severance Agreement, including Amendment and Second Amendment to
Severance Agreement, between the Company and Barry J. Galt.
#*10.3 Form of Severance Agreement, including Form of Amendment and Second
Amendment to Severance Agreement, between the Company and Richard F.
Barnes, John N. Goodpasture, and William L. Transier.
#*10.4 Second and Third Amendments to Seagull Energy Corporation Management
Stability Plan.
#*10.5 Third Amendment to the Outside Directors' Deferred Fee Plan.
#*10.6 Employment Agreement by and between the Company and James T. Hackett.
#*10.7 Executive Supplemental Retirement Plan Membership Agreement by and
between the Company and James T. Hackett.
#*10.8 Severance Agreement between the Company and James T. Hackett.
#*10.9 Severance Agreement, including Amendment and Second Amendment to
Severance Agreement, between the Company and Gerald R. Colley.
#*10.10 Severance Agreement, including Amendment and Second Amendment, between
the Company and Carl B. King.
#*10.11 Third Amendment to the Company's Executive Supplemental Retirement
Plan.
#*10.12 Third Amendment to Supplemental Benefit Plan.
#*27.1 Financial Data Schedule.
* Filed herewith.
# Identifies management contracts and compensatory plans or arrangements.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three months ended September
30, 1998.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEAGULL ENERGY CORPORATION
By: /s/ William L. Transier
William L. Transier, Executive Vice
President and Chief Financial
Officer (Principal Financial Officer)
Date: November 16, 1998
By: /s/ Gordon L. McConnell
Gordon L. McConnell, Vice President and
Controller (Principal Accounting Officer)
Date: November 16, 1998
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ----------------- ------------------------------------------------------------------------------- -------------
#*10.1 Employment and Consulting Agreement by and between the Company and
Barry J. Galt.
#*10.2 Severance Agreement, including Amendment and Second Amendment to
Severance Agreement, between the Company and Barry J. Galt.
#*10.3 Form of Severance Agreement, including Form of Amendment and Second
Amendment to Severance Agreement, between the Company and Richard F.
Barnes, John N. Goodpasture, and William L. Transier.
#*10.4 Second and Third Amendments to Seagull Energy Corporation Management
Stability Plan.
#*10.5 Third Amendment to the Outside Directors' Deferred Fee Plan.
#*10.6 Employment Agreement by and between the Company and James T. Hackett.
#*10.7 Executive Supplemental Retirement Plan Membership Agreement by and
between the Company and James T. Hackett.
#*10.8 Severance Agreement between the Company and James T. Hackett.
#*10.9 Severance Agreement, including Amendment and Second Amendment to
Severance Agreement, between the Company and Gerald R. Colley.
#*10.10 Severance Agreement, including Amendment and Second Amendment, between
the Company and Carl B. King.
#*10.11 Third Amendment to the Company's Executive Supplemental Retirement
Plan.
#*10.12 Third Amendment to Supplemental Benefit Plan.
#*27.1 Financial Data Schedule.
</TABLE>
- ----------------
* Filed herewith.
# Identifies management contracts and compensatory plans or arrangements.
EMPLOYMENT AND CONSULTING AGREEMENT
THIS EMPLOYMENT AND CONSULTING AGREEMENT ("Agreement"), effective as of
August 24, 1998 (the "Effective Date"), is by and between SEAGULL ENERGY
CORPORATION, a Texas corporation ("Seagull"), and BARRY J. GALT, an individual
who resides in Houston, Texas ("Galt").
W I T N E S S E T H :
WHEREAS, Galt is currently employed by Seagull; and
WHEREAS, Seagull and Galt entered into an Employment Agreement dated
December 30, 1983, which has been previously amended in certain minor respects
and is currently in effect (the "Employment Agreement"); and
WHEREAS, Seagull and Galt desire to enter into an agreement that
replaces the Employment Agreement and that reflects their desire for Galt to
perform certain services as a Seagull employee during a transition period
beginning on the Effective Date and subsequently to perform certain services as
a consultant after such transition period;
NOW THEREFORE, the parties, in consideration of the mutual promises,
covenants and obligations contained herein, do hereby agree as follows:
1. Effect of Agreement. Effective as of the Effective Date, this
Agreement supersedes and replaces the Employment Agreement in its entirety and
the Employment Agreement shall be null and void and of no further force and
effect.
2. Employment. Galt has resigned (a) as President and Chief Executive
Officer of Seagull, effective as of James T. Hackett's first day of employment
with Seagull (the "Resignation Effective Date"), (b) as a member of the
Executive Committee and its Chairman, effective as of the Resignation Effective
Date, (c) as a member of any other committee of Seagull on which Galt serves,
effective as of the Resignation Effective Date, (d) as Chairman of the Board of
Directors of Seagull (the "Board of Directors"), effective as of December 31,
1998, provided that Galt has been designated as Vice Chairman of Seagull
effective as of January, 1, 1999, and continuing through the adjournment of
Seagull's 1999 Annual Meeting of Shareholders (the "1999 Annual Meeting"), (e)
as Chairman of Seagull's ENSTAR Natural Gas Company division and as Chairman of
the ENSTAR Natural Gas Company Advisory Board, effective as of December 31, 1998
(but not as a member of such Advisory Board), and (f) from any other office,
trusteeship or position that Galt holds with
-1-
<PAGE>
Seagull (other than as a director or employee of Seagull) or any subsidiary or
division of Seagull (other than as a member of the ENSTAR Natural Gas Company
Advisory Board) or any employee benefit plan (other than as a participant or
beneficiary of any employee benefit plan) relating to Seagull, in each case
effective as of the Resignation Effective Date. Effective at the close of
business on May 31, 1999, Galt shall cease to be an employee of Seagull. Galt
acknowledges that, effective as of January 1, 1999, he has been designated as
Vice Chairman of Seagull.
3. Vice Chairman. Effective as of January 1, 1999, the Board of
Directors has elected Galt to serve as Vice Chairman of the Board of Directors.
As Vice Chairman, Galt shall have such powers and duties as designated in
Seagull's bylaws and as from time to time may be assigned to him by the Board of
Directors or the Chairman of the Board of Directors. The designation of Vice
Chairman shall continue through the adjournment of the 1999 Annual Meeting.
4. Directorship. Galt shall serve the remainder of his current term as
a director of Seagull. Any renomination of Galt for a subsequent term as a
director of Seagull shall be considered in the same manner as other directors of
Seagull.
5. Consultancy. Effective June 1, 1999, and continuing for the
remainder of the Term of this Agreement pursuant to Paragraph 7 (the "Period of
Consultancy"), Galt shall serve as a consultant to the management of Seagull
with respect to such areas as are requested by the management of Seagull,
including the prosecution, defense, or other resolution of any litigation, now
pending or future. It is understood that during the Period of Consultancy, Galt
may be rendering services to others and, in using the services of Galt
hereunder, Seagull will exercise due regard for other commitments of Galt. Galt
shall faithfully render his best efforts and professional judgment in
performance of these services consistent with good consulting practice and to
the promotion, advancement and successful conduct of the business of Seagull. In
providing such consultation, Galt shall provide Seagull with such of his ideas,
assessments, and evaluations as Seagull may deem necessary. Galt agrees to be
available for such meetings as Seagull deems necessary for proper communication
of his consultation.
6. Compensation, Benefits and Perquisites. In consideration for the
services to be rendered pursuant to this Agreement, Seagull agrees to the
following:
(a) Compensation and Benefits During Period of Employment.
During the period beginning on the Effective Date and ending on May 31,
1999 (the "Period of Employment"), Seagull shall provide to Galt the
following compensation and benefits:
(i) Signing Bonus. Within five business days after
the date of execution hereof, Seagull shall pay to Galt a lump
sum cash payment in the amount of $1,800,000.
-2-
<PAGE>
(ii) Base Salary. Seagull shall pay to Galt a base
salary of $49,166.67 per month ($590,000 annual rate) in
accordance with Seagull's standard policy regarding payment of
compensation to executives, but no less frequently than
monthly.
(iii) Bonuses. For the 1998 performance year, Galt
shall be eligible to receive an annual bonus under the 1998
Seagull Energy Corporation Executive Incentive Plan (the
"EIP"), based on an Incentive Target (as such term is used in
the EIP) of 50% of Galt's annual base salary, with a Maximum
Incentive (as such term is used in the EIP) of 100% of Galt's
annual base salary; provided however, that the amount of such
annual bonus shall not be less than $295,000. In lieu of
participation in the EIP for the 1999 performance year,
Seagull shall pay Galt a lump sum cash payment in the amount
of $122,917 within five business days after May 31, 1999.
(iv) Stock Options. On August 24, 1998, Seagull shall
grant to Galt the option to purchase 100,000 shares of
Seagull's common stock ("Stock") pursuant to the Seagull
Energy Corporation 1998 Omnibus Stock Plan (the "Plan") and
effective as of January 1, 1999, Seagull shall grant to Galt
an option to purchase 50,000 shares of Stock pursuant to the
Plan (jointly, the "Options"). The purchase price for each
share of Stock subject to the Options shall be equal to the
Fair Market Value (as such term is defined in the Plan) of a
share of Stock as of the date of grant thereof. Subject to the
terms of the Plan and the agreements to be executed by Seagull
and Galt evidencing the Options, each Option shall (A) be a
nonqualified stock option, (B) have a term that expires on May
31, 2004 and (C) become fully exercisable as of May 31, 1999
(prior to which date it shall not be exercisable, except to
the extent otherwise provided pursuant to the terms of the
Plan).
(v) Loan. After the Effective Date, Seagull shall
lend, or cause to be lent to Galt (the "Loan"), an amount
sufficient to enable Galt to exercise his option to purchase
192,000 shares of Stock, which expires September 20, 1998 (the
"Expiring Option"), and to pay any applicable taxes imposed on
Galt by reason of the exercise of the Expiring Option. The
loan shall (A) be recourse, (B) be secured by a pledge of the
Stock underlying the Expiring Option, (C) have a term maturing
on May 31, 2002 and (D) bear interest at a rate that is not
less than the applicable Federal rate as such term is defined
in
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<PAGE>
section 7872(f)(2) of the Internal Revenue Code of 1986, as
amended (the "Code") at the time thereof.
(vi) Outstanding Stock Options. Effective as of May
31, 1999, Seagull shall cause Galt's options to purchase Stock
outstanding as of such date to be amended to provide that each
such option shall be fully exercisable on such date and shall
continue to be exercisable until May 31, 2004, subject to the
expiration date contained in such options. Galt acknowledges
and agrees that the extension of the such outstanding stock
options may cause any such options intended to be incentive
stock options within the meaning of section 422(b) of the Code
("ISOs") to be treated as options that do not constitute ISOs.
(vii) Executive Supplemental Retirement Plan. Prior
to May 31, 1999, Seagull shall establish a trust (the "Trust")
in connection with the Seagull Executive Supplemental
Retirement Plan (the "ESRP"). The Trust is not intended to
result in the ESRP being treated as funded for purposes of the
Code and Title I of the Employee Retirement Income Security
Act of 1974, as amended, and shall conform to the terms of the
model rabbi trust set forth in Revenue Procedure 92-64, 1992-2
C.B. 422. Prior to May 31, 1999, Seagull shall contribute to
the Trust the Actuarially Equivalent (as such term is defined
in the ESRP) present value of Galt's Accrued Benefit (as such
term is defined in the ESRP) under the ESRP. Further, Seagull
shall cause the ESRP to be amended to expand Section 7.01 to
provide that no amendment to the ESRP shall deprive any Member
(as such term is defined in the ESRP) of any Accrued Benefit
under the ESRP to the extent that such Member has a Vested
Interest (as such term is defined in the ESRP) in such Accrued
Benefit at the time of such amendment.
(viii) Supplemental Benefit Plan. Seagull shall cause
the Seagull Supplemental Benefit Plan (the "SBP") to be
amended to provide that benefits under the SBP shall be paid
upon the later of a Participant's (as such term is defined in
the SBP) termination of employment or termination of service
as a consultant of Seagull.
(ix) Seagull Benefit Plans. Galt and, to the extent
applicable, Galt's spouse, dependents and beneficiaries, shall
be allowed to participate in all benefits, plans and programs,
including
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<PAGE>
improvements or modifications of the same, which are now, or
may hereafter be, available to other executive employees of
Seagull. Such benefits, plans and programs shall include,
without limitation, the SBP, any profit sharing plan, thrift
plan, employee stock ownership plan, health insurance or
health care plan, life insurance, disability insurance,
pension plan, supplemental retirement plan, vacation and sick
leave plan, and the like that may be maintained by Seagull.
Seagull shall not, however, by reason of this Paragraph be
obligated to institute, maintain, or refrain from changing,
amending, or discontinuing, any such benefit plan or program,
so long as such changes are similarly applicable to executive
employees generally.
(b) Other Items. Seagull shall reimburse Galt for reasonable
out-of-pocket legal expenses that he has incurred in connection with
the transition of his employment. Such reimbursement shall occur within
five business days after the date of execution hereof or the date that
Galt submits a copies of the invoices for such legal expenses,
whichever is later. Prior to May 31, 1999, Seagull shall cause the
following items to be transferred to Galt, AS IS, WHERE IS, without
warranty (i) the Seagull memberships in the River Oaks Country Club,
the Coronado Club, the Houston Petroleum Club and the Ramada Club and
(ii) Galt's current office furnishings, all of which shall be used in
the office provided pursuant to Paragraph (d)(vi) for as long as Galt
maintains an office at Seagull's offices or otherwise provided by
Seagull.
(c) Compensation and Benefits During Period of Consultancy. During the
Period of Consultancy, Seagull shall provide to Galt the following
compensation and benefits:
(i) Consulting Fees. Within five business days after
the first day of each month during the Period of Consultancy,
Seagull shall pay Galt a monthly consulting fee in the amount
of $35,416.67 ($425,000 annual rate).
(ii) Economic Value of Seagull Benefit Plan
Participation. On January 1, 1999, Seagull shall pay to Galt a
lump sum cash payment in the amount of $400,000, which shall
represent the economic value of participation in Seagull's
benefit plans (based on an annual salary rate of $590,000) for
the Period of Consultancy.
(d) Perquisites During Term of Agreement. During the Term of
this Agreement, Seagull shall provide to Galt the following
perquisites:
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<PAGE>
(i) Annual Life Insurance Premiums. On the date and
in the manner designated by Galt, which date shall be within
ninety days of the date specified below, Seagull shall tender
annual premiums in the amounts specified below by check
payable to the insurance company designated by Galt to be
applied by such company to the insurance policy designated by
Galt.
<TABLE>
<S> <C>
Due Date Amount
2-9-99 $6,355
2-9-00 7,225
2-9-01 8,100
2-9-02 8,990
</TABLE>
(ii) Company Automobile. Seagull will provide to Galt
for his personal and business use a top-of-the-line
automobile, and shall provide, or reimburse Galt for,
maintenance and insurance (liability and collision coverage
insuring both Seagull and Galt and covering both business and
personal use) for such automobile. Such automobile shall be
owned or leased by Seagull, or an affiliate of Seagull, and,
if requested by Galt, shall be replaced, provided that more
than three years have elapsed since the last such replacement.
At any time during the term of this Agreement, Galt shall have
the right to purchase the automobile provided by Seagull as of
the date of execution hereof, and any other automobile
subsequently provided by Seagull for an amount equal to
Seagull's book value at the time of any such purchase.
(iii) Business and Entertainment Expenses. Seagull
will reimburse Galt for, or pay on behalf of Galt, reasonable
and appropriate expenses incurred and properly accounted for
by Galt for Seagull business related purposes, including dues
and fees to industry and professional organizations, costs of
entertainment and business development, and costs reasonably
incurred as a result of Galt's spouse accompanying Galt on
business travel.
(iv) Club Dues. In addition to the other business and
entertainment expenses reimbursable pursuant to Paragraph
6(d)(iii), Seagull shall pay the membership fees, dues and
assessments for Galt's memberships in the Eldorado Country
Club, the Castle Pines Golf Club, the River Oaks Country Club,
the Southern Hills Country
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<PAGE>
Club, the Coronado Club, the Houston Petroleum Club and the
Ramada Club.
(v) Annual Physical Examination. Seagull shall pay
for the cost of an annual physical examination to be conducted
by a doctor or clinic of Galt's choosing in Houston, Texas.
(vi) Office, Secretary and Parking. Seagull shall
provide Galt with an office and secretary within Seagull's
Houston offices. Further, Seagull shall provide at no expense
to Galt a parking place convenient to Galt's office.
Notwithstanding the foregoing, during the period beginning
June 1, 2002 and ending May 31, 2004, Seagull shall provide
Galt with (A) an office in the same office building, but
outside of Seagull's principal executive offices, (B) Seagull
support services with respect to such office, and (C) at no
expense to Galt a parking place convenient to such office.
(vii) Medicare Supplemental Coverage. In the event
that Seagull amends its health insurance or health care plan
during the Term of this Agreement in order to provide for
Medicare supplemental coverage for retirees, Galt and any of
his eligible dependents shall be allowed to participate in
such coverage; provided, however, that if such amendment
occurs during the Period of Consultancy, and Galt and his
dependents are not otherwise eligible for such coverage, Galt
shall receive, within five business days of the effective date
of such amendment, a lump sum payment in amount equal to the
economic value of such coverage for the remainder of the Term
of this Agreement.
Galt acknowledges and hereby agrees that the compensation payable pursuant to
this Paragraph is for all services rendered pursuant to this Agreement and that
he shall receive no separate fees or other compensation, benefits or perquisites
with respect to his services as a director, Vice Chairman or any other offices
of Seagull.
7. Term and Termination of Agreement. Seagull agrees to retain the
services of Galt and Galt agrees to provide such services pursuant to this
Agreement for a term of beginning on the Effective Date and ending on May 31,
2002 (the "Term"), subject to earlier termination as provided below.
Notwithstanding the foregoing, the parties hereto may terminate Galt's services
prior to the end of such Term pursuant to Paragraphs (a) or (b) below.
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<PAGE>
(a) Seagull shall have the right to terminate Galt's services
under this Agreement at any time for any of the following reasons:
(i) Upon Galt's death;
(ii) Upon Galt's becoming incapacitated by
accident, sickness or other circumstance
which renders him mentally or physically
incapable of performing the duties and
services required of him hereunder on a
full-time basis with reasonable
accommodation for a period of at least 120
consecutive days or for a period of 180
business days during any twelve-month
period;
(iii) For cause, which for purposes of this
Agreement shall mean a finding by the Board
of Directors of Galt's gross negligence or
wilful misconduct in the rendering of
services required of him pursuant to this
Agreement or Galt's final conviction of a
felony or of a misdemeanor involving moral
turpitude, excluding misdemeanor convictions
relating to the operation of a motor
vehicle;
(iv) For Galt's material breach of any material
provision of this Agreement, which, if
correctable, remains uncorrected for 30 days
following written notice of such breach to
Galt by Seagull; or
(v) For any other reason whatsoever in the sole
discretion of the Board of Directors.
(b) Galt shall have the right to terminate his services under
this Agreement at any time for any of the following reasons:
(i) For Seagull's material breach of any
material provision of this Agreement, which,
if correctable, remains uncorrected for 30
days following written notice of such breach
to Seagull by Galt; or
(ii) For any other reason whatsoever in the sole
discretion of Galt.
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<PAGE>
(c) If Seagull or Galt desires to terminate Galt's services
hereunder at any time prior to the expiration of the Term of this
Agreement, it or he shall do so by giving written notice to the other
party that it or he has elected to terminate Galt's services hereunder
and stating the effective date and reason for such termination;
provided that no such action shall alter or amend any other provisions
hereof or rights arising hereunder.
(d) In the event that Galt's services are terminated by
Seagull as provided in (a) above prior to the expiration of the Term of
this Agreement, then, upon such termination, the compensation, benefits
and perquisites payable pursuant to Paragraph 6 shall terminate
contemporaneously with the termination of such services, except that if
such termination shall be pursuant to (a)(i), (a)(ii) or (a)(v), such
compensation, benefits and perquisites shall continue for the balance
of the Term of this Agreement; provided, however, that (i) if such
termination occurs prior to January 1, 1999, the stock option scheduled
to be granted on such date pursuant to Paragraph 6(a)(iv) shall be
granted outside the Plan and shall be fully exercisable on the date of
grant thereof, and (ii) if such termination occurs prior to May 31,
1999, (A) effective as of the date of such termination, Galt's
outstanding options as of such date shall become fully exercisable and
shall continue to be exercisable until May 31, 2004, subject to the
expiration date contained in such options and (B) Galt shall receive
the Economic Value of participation in the Seagull Benefit Plans for
the period after the date of such termination and before May 31, 1999.
(e) In the event that Galt's services are terminated by Galt
as provided in (b) above prior to the expiration of the Term of this
Agreement, then, upon such termination, the compensation, benefits and
perquisites payable pursuant to Paragraph 6 shall terminate
contemporaneously with the termination of such services, except that if
such termination shall be pursuant to (b)(i), such compensation,
benefits and perquisites shall continue for the balance of the Term of
this Agreement provided, however, that (i) if such termination occurs
prior to January 1, 1999, the stock option scheduled to be granted on
such date pursuant to Paragraph 6(a)(iv) shall be granted outside the
Plan and shall be fully exercisable on the date of grant thereof, and
(ii) if such termination occurs prior May 31, 1999, (A) effective as of
the date of such termination, Galt's outstanding options as of such
date shall become fully exercisable and shall continue to be
exercisable until May 31, 2004, subject to the expiration date
contained in such options and (B) Galt shall receive the Economic Value
of participation in the Seagull Benefit Plans for the period after the
date of such termination and before May 31, 1999.
8. Protection of Information. Galt acknowledges that Seagull's business
is highly competitive and that Seagull's methods, strategies, books, records,
and documents, Seagull's
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<PAGE>
technical information concerning its products, equipment, services, and
processes, procurement procedures and pricing techniques, and the names of and
other information (such as credit and financial data) concerning Seagull's
customers, business affiliates, affairs, and operations all comprise
confidential business information and/or trade secrets ("Confidential
Information") of Seagull which are valuable, special, and unique assets of
Seagull which Seagull uses in its business to obtain a competitive advantage
over its competitors which do not know or use this information. Galt further
acknowledges that protection of Seagull's Confidential Information against
unauthorized disclosure and use is of critical importance to Seagull in
maintaining its competitive position. Accordingly, Galt hereby agrees that,
notwithstanding any other provisions of this Agreement other than those
contained in the following sentences, he will not at any time during the Term of
this Agreement make any unauthorized disclosure of any Confidential Information
of Seagull or make any unauthorized use thereof. However, Galt's obligations
under this paragraph shall not extend to:
(a) Information which is or becomes a part of the public domain or
is available to the public by publication or otherwise without
disclosure by Galt;
(b) Information which was within Galt's knowledge or in his
possession prior to his initial employment by Seagull;
(c) Information which, either prior or subsequent to Seagull's
disclosure to Galt, was disclosed to Galt, without an
obligation of confidentiality, by a third party who did not
acquire such information, directly or indirectly from Galt,
Seagull, or from any third party who is under an obligation of
confidentiality; or
(d) Any disclosure of Confidential Information by Galt which is
required by law, including deposition or trial testimony by
Galt pursuant to subpoena. If Galt is requested or
required (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative
demand, or similar process) to disclose any Confidential
Information, Galt will promptly notify Seagull of such request
or requirements so that Seagull may seek an appropriate
protective order or waive compliance with the provisions
of this Agreement.
Galt acknowledges and agrees that money damages would not be sufficient remedy
for any breach of this Paragraph concerning Confidential Information by Galt,
and Seagull shall be entitled to seek specific performance and injunctive relief
as remedies for such breach or threatened breach, as well as reasonable and
necessary attorneys' fees, experts' fees, and costs incurred in the connection
with such breach or threatened breach. Such remedies shall not be deemed the
exclusive remedies for
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<PAGE>
such a breach by Galt but shall be in addition to all remedies available at law
or in equity to Seagull, including the recovery of damages from Galt. For
purposes of this Paragraph, Seagull shall be construed to include any parent,
subsidiary, or other affiliate of Seagull.
9. Ownership by Seagull. Seagull shall, without further remuneration to
Galt, own, be entitled to possession of, and have the right to use, publish, and
disclose any results, reports, product, or data developed by Galt during the
course of his services hereunder, but identification of Galt with such results,
reports, or data shall not be made without Galt's express consent.
10. Noncompetition Provisions. As part of the consideration for the
compensation, benefits and perquisites to be paid to Galt pursuant to Paragraph
6 hereunder; to protect the trade secrets and confidential information of
Seagull and its affiliates that have been and will in the future be disclosed or
entrusted to Galt, the business good will of Seagull and its affiliates that has
been and will in the future be developed in Galt, or the business opportunities
that have been and will in the future be disclosed or entrusted to Galt by
Seagull and its affiliates; and as an additional incentive for Seagull to enter
into this Agreement, Seagull and Galt agree to the noncompetition obligations
hereunder. Galt shall not, directly or indirectly for Galt or for others, in any
geographic area or market where Seagull or any of its affiliates are conducting
any business as of the Effective Date or have during the previous twelve months
conducted such business:
(a) engage in any business competitive with the business conducted
by Seagull;
(b) render advice or services to, or otherwise assist, any other
person, association, or entity who is engaged, directly or
indirectly, in any business competitive with the business
conducted by Seagull with respect to such competitive
business; or
(c) induce any employee of Seagull or any of its affiliates to
terminate his or her employment with Seagull or such
affiliates, or hire or assist in the hiring of any such
employee by any person, association, or entity not affiliated
with Seagull.
These noncompetition obligations shall apply during the period that Galt is
employed by Seagull, is a consultant to Seagull or following the termination of
employment or consultancy, is receiving compensation, benefits or perquisites
pursuant to Paragraph 6. Notwithstanding the preceding sentence, these
noncompetition obligations shall not apply after a termination for a reason
encompassed by Paragraph 7(a)(v) or (b)(i). Galt understands that the
restrictions set forth in this Paragraph may limit Galt's ability to engage in
certain businesses anywhere in the world during the period provided for above,
but acknowledges that Galt will receive sufficiently high remuneration under
this Agreement to justify such restriction. Galt acknowledges that money damages
would not be sufficient remedy for any breach of this Paragraph by Galt, and
Seagull shall be entitled to enforce
-11-
<PAGE>
the provisions of this Paragraph by terminating any payments then owing to Galt
under this Agreement and/or to specific performance and injunctive relief as
remedies for such breach or any threatened breach; provided, however, that
payments then owing to Galt may not be terminated unless the Board of Directors
determines that such breach by Galt has directly resulted or could reasonably be
expected to result in a material adverse economic impact on Seagull's business.
Such remedies shall not be deemed the exclusive remedies for a breach of this
Paragraph, but shall be in addition to all remedies available at law or in
equity to Seagull, including without limitation, the recovery of damages from
Galt and Galt's agents involved in such breach and remedies available to Seagull
pursuant to other agreements with Galt. It is expressly understood and agreed
that Seagull and Galt consider the restrictions contained in this Paragraph to
be reasonable and necessary to protect the proprietary information of Seagull.
Nevertheless, if any of the aforesaid restrictions are found by a court having
jurisdiction to be unreasonable, or overly broad as to geographic area or time,
or otherwise unenforceable, the parties intend for the restrictions therein set
forth to be modified by such court so as to be reasonable and enforceable and,
as so modified by the court, to be fully enforced.
11. Release. As part of the consideration for the compensation,
benefits and perquisites to be paid to Galt pursuant to Paragraph 6 and as an
additional incentive for Seagull to enter into this Agreement, Galt hereby
agrees to execute a release, at the time and in the form established by Seagull,
releasing Seagull, its shareholders, partners, officers, directors, employees
and agents from any and all claims and from any and all causes of action of any
kind or character, including but not limited to all claims or causes of action
arising out of Galt's employment with Seagull or his separation therefrom, other
than claims or causes of action arising out of the provisions of this Agreement.
12. Withholding of Taxes and Other Employee Deductions. During the
Period of Employment, Seagull may withhold from any benefits and payments made
pursuant to this Agreement all federal, state, city and other taxes as may be
required pursuant to any law or governmental regulation or ruling and all other
normal employee deductions made with respect to Seagull's employees generally.
13. Independent Contractor. During the Period of Consultancy, Galt's
relationship to Seagull hereunder will be that of an independent contractor.
Nothing in this Agreement is intended to create an employer/employee
relationship between Seagull and Galt during the Period of Consultancy or to
allow Seagull to exercise control or direction over the manner or method by
which Galt performs the consulting services which are the subject matter of this
Agreement during such period. Galt shall be responsible for payment of all
income, self-employment, or other taxes attributable to compensation paid
hereunder by Seagull to Galt during the Period of Consultancy, and Galt agrees
to hold Seagull harmless for withholding or payment of such taxes.
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<PAGE>
14. Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States,
registered or certified mail, return receipt requested, postage prepaid, if
addressed as follows:
If to Seagull, to: Seagull Energy Corporation
1700 First City Tower
1001 Fannin
Houston, Texas 77002
Attention: Chairman of
the Board
If to Galt, to: Mr. Barry J. Galt
1811 Kirby Drive
Houston, Texas 77019
or such other addresses as either party may furnish to the other in writing, in
accordance herewith, except that notices of changes of address shall be
effective only upon receipt.
15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
16. Governing Law. This Agreement is entered into under and shall be
governed for all purposes by the laws of the State of Texas.
17. No Waiver. No failure by either party hereto at any time to give
notice of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or at any prior or
subsequent time.
18. Severability. If a court of competent jurisdiction determines that
any provision of this Agreement is invalid or unenforceable, then the invalidity
or unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
19. Assignment. This Agreement shall be binding upon and inure to the
benefit of Seagull and any successor of Seagull, by merger or otherwise.
Further, this Agreement shall be binding and inure to the benefit of Galt, his
spouse, Kathryn M. Galt, and his estate. If Galt shall die prior to full payment
of amounts due pursuant to this Agreement, such amounts shall be payable
pursuant to the terms of this Agreement to his spouse, Kathryn M. Galt, if then
living, or if Kathryn M. Galt is not then living, to his estate. Except as
provided in the preceding sentences, this
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<PAGE>
Agreement and the rights and obligations of the parties hereunder are personal,
and neither this Agreement nor any right, benefit, or obligation of either party
hereto shall be subject to voluntary or involuntary assignment, alienation, or
transfer, whether by operation of law or otherwise, without the prior written
consent of the other party.
20. Entire Agreement. Except as provided in (i) the written benefit
plans and programs referenced in Paragraph 6, (ii) any signed agreement
contemporaneously executed by Seagull and Galt and (iii) the Severance Agreement
dated March 17, 1997, as amended, between Seagull and Galt, this Agreement
represents the entire agreement between the parties hereto with respect to the
matters covered herein and may not be changed, altered, or modified in any
respect except by an instrument in writing signed by both the parties hereto.
IN WITNESS WHEREOF, Seagull has caused this Agreement to be duly
executed by one of its officers thereunto duly authorized and Galt has executed
this Agreement, this 21st day of September, 1998, to be effective as of the
Effective Date.
SEAGULL ENERGY CORPORATION
By: /s/William L. Transier
William L. Transier
Executive Vice President
and Chief Financial Officer
/s/Barry J. Galt
BARRY J. GALT
VEHOU02:119746.1
-14-
SEVERANCE AGREEMENT
AGREEMENT between SEAGULL ENERGY CORPORATION, a Texas corporation
(the "Company"), and Barry J. Galt ("Executive"),
W I T N E S S E T H :
WHEREAS, the Company desires to retain certain key employee personnel
and, accordingly, the Board of Directors of the Company (the "Board") has
approved the Company entering into a severance agreement with Executive in order
to encourage his continued service to the Company; and
WHEREAS, Executive is prepared to commit such services in return for
specific arrangements with respect to severance compensation and other benefits;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the Company and Executive agree as follows:
1. Definitions.
(a) "Change in Duties" shall mean the occurrence, within two
years after the date upon which a Change of Control occurs, of any one or more
of the following:
(i) A significant reduction in the duties of
Executive from those applicable to him immediately prior to the date on
which a Change of Control occurs;
(ii) A reduction in Executive's annual salary or
target opportunity under any applicable bonus or incentive compensation
plan from that provided to him immediately prior to the date on which a
Change of Control occurs;
(iii) Receipt of employee benefits (including but not
limited to medical, dental, life insurance, accidental, death, and
dismemberment, and long-term disability plans) and perquisites by
Executive that are materially inconsistent with the employee benefits
and perquisites provided by the Company to executives with comparable
duties; or
(iv) A change in the location of Executive's
principal place of employment by the Company by more than 50 miles from
the location where he was principally employed immediately prior to the
date on which a Change of Control occurs.
(b) "Change of Control" means the occurrence of either of the
following events:
(i) The Company (A) shall not be the surviving entity
in any merger, consolidation or other reorganization (or survives only
as a subsidiary of an entity other than a previously wholly-owned
subsidiary of the Company) or (B) is to be dissolved and liquidated,
and as a result of or in connection such transaction, the persons who
were directors of the Company before such transaction shall cease to
constitute a majority of the Board; or
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<PAGE>
(ii) Any person or entity, including a "group" as
contemplated by Section 13(d)(3) of the Securities Exchange Act of
1934, as amended, acquires or gains ownership or control (including,
without limitation, power to vote) of 20% or more of the outstanding
shares of the Company's voting stock (based upon voting power), and as
a result of or in connection with such transaction, the persons who
were directors of the Company before such transaction shall cease to
constitute a majority of the Board.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Compensation" shall mean the greater of:
(i) Executive's annual salary plus his Targeted EIP
Award immediately prior to the date on which a Change of Control
occurs, or
(ii) Executive's annual salary plus his Targeted EIP
Award at the time of his Involuntary Termination.
(e) "EIP" shall mean the Seagull Energy Corporation Executive
Incentive Plan or any successor thereto.
(f) "Involuntary Termination" shall mean any termination of
Executive's employment with the Company which:
(i) does not result from a resignation by Executive
(other than a resignation pursuant to clause (ii) of this subparagraph
(f) or a resignation at the request of the Company); or
(ii) results from a resignation by Executive on or
before the date which is sixty days after the date upon which Executive
receives notice of a Change in Duties;
provided, however, the term "Involuntary Termination" shall not include a
Termination for Cause or any termination as a result of death, disability under
circumstances entitling him to benefits under the Company's long-term disability
plan, or Retirement.
(g) "Retirement" shall mean Executive's resignation on or
after the date he reaches age sixty-five.
(h) "Severance Amount" shall mean an amount equal to 2.99
times Executive's Compensation, reduced by the present value of any salary
continuation or severance payments payable to Executive 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. Such
present value shall be determined using the rate of interest referred to in
Paragraph 4 hereof as of the last day of Executive's employment with the
Company.
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(i) "Targeted EIP Award" shall mean Executive's Incentive
Target as set forth under the EIP in effect for the year with respect to which
such award is being determined, if any, or for the last preceding year in which
an EIP was in effect, expressed as a dollar amount based on such Executive's
annual salary for such year.
(j) "Termination for Cause" shall mean termination of
Executive's employment by the Company (or its subsidiaries) by reason of
Executive's (i) gross negligence in the performance of his duties, (ii) willful
and continued failure to perform his duties, (iii) willful engagement in conduct
which is materially injurious to the Company or its subsidiaries (monetarily or
otherwise) or (iv) conviction of a felony or a misdemeanor involving moral
turpitude.
(k) "Welfare Benefit Coverages" shall mean the medical,
dental, life insurance, accidental death and dismemberment and long-term
disability coverages provided by the Company to its active employees.
2. Services. Executive agrees that he will render services to the
Company (as well as any subsidiary thereof or successor thereto) during the
period of his employment to the best of his ability and in a prudent and
businesslike manner and that he will devote substantially the same time, efforts
and dedication to his duties as heretofore devoted.
3. Severance Benefits. If Executive's employment by the Company or any
subsidiary thereof or successor thereto shall be subject to an Involuntary
Termination which occurs within two years after the date upon which a Change of
Control occurs, then Executive shall be entitled to receive, as additional
compensation for services rendered to the Company (including its subsidiaries),
the following severance benefits:
(a) A lump sum cash payment in an amount equal to Executive's
Severance Amount.
(b) A lump sum cash payment in an amount equal to the
remaining portion of any award to Executive under any prior years' EIP. Further,
if Executive's Involuntary Termination occurs on or after the date an award has
been earned under the EIP, but prior to the date such award is paid, Executive
shall receive an additional lump sum cash payment in an amount equal to his
Targeted EIP Award.
(c) Executive shall be entitled to continue the Welfare
Benefit Coverages for himself and, where applicable, his eligible dependents
following his Involuntary Termination for up to thirty-six months, as long as
Executive continues either to pay the premiums paid by active employees of the
Company for such coverages or to pay the actual (nonsubsidized) cost of such
coverages for which the Company does not subsidize for active employees. Such
benefit rights shall apply only to those Welfare Benefit Coverages which the
Company has in effect from time to time for active employees, and the applicable
payments shall adjust as premiums for active employees of the Company or actual
costs, whichever is applicable, change. Welfare Benefit Coverage(s) shall
immediately end upon Executive's obtainment of new employment and eligibility
for similar Welfare
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Benefit Coverage(s) (with Executive being obligated hereunder to promptly report
such eligibility to the Company). Nothing herein shall be deemed to adversely
affect in any way the additional rights, after consideration of this extension
period, of Executive and his eligible dependents to health care continuation
coverage as required pursuant to Part 6 of Title I of the Employee Retirement
Income Security Act of 1974, as amended.
(d) Executive shall be entitled to receive out-placement
services in connection with obtaining new employment up to a maximum cost of
$6,000.
(e) The severance benefits payable under this Agreement shall
be paid to an Executive on or before the fifth day after the last day of
Executive's employment with the Company. Any severance benefits paid pursuant to
this Paragraph will be deemed to be a severance payment and not compensation for
purposes of determining benefits under the Company's qualified plans and shall
be subject to any required tax withholding.
4. Interest on Late Benefit Payments. If any payment provided for in
Paragraph 3(a) or 3(b) hereof is not made when due, the Company shall pay to
Executive interest on the amount payable from the date that such payment should
have been made under such paragraph until such payment is made, which interest
shall be calculated at the prime or base rate of interest announced by Texas
Commerce Bank N.A. (or any successor thereto) at its principal office in
Houston, Texas and shall change when and as any such change in such prime or
base rate shall be announced by such bank.
5. Certain Additional Payments by the Company. Notwithstanding anything
in this Agreement to the contrary, if the severance benefits provided for in
Paragraph 3, together with any other payments which Executive has the right to
receive from the Company, would constitute a "parachute payment " (as defined in
Section 280G(b)(2) of the Code), the severance benefits provided hereunder shall
be either (a) reduced (but not below zero) so that the present value of such
total amounts received by Executive from the Company will be one dollar ($1.00)
less than three times Executive's base amount (as defined in Section 280G of the
Code) and so that no portion of such amounts received by Executive shall be
subject to the excise tax imposed by Section 4999 of the Code or (b) paid in
full, whichever produces the better net after-tax position to Executive (taking
into account any applicable excise tax under Section 4999 of the Code and any
applicable income tax). The Company and Executive shall make an initial
determination as to whether a reduction is required and, if so required, the
amount of any such reduction. Executive shall notify the Company immediately in
writing of any claim by the Internal Revenue Service which, if successful, would
require the Company to make a reduction (or a further reduction in excess of
that, if any, initially determined by the Company and Executive) within five
days of the receipt of such claim. The Company shall notify Executive in writing
at least five days prior to the due date of any response required with respect
to such claim if it plans to contest the claim. If the Company decides to
contest such claim, Executive shall cooperate fully with the Company in such
action; provided, however, the Company shall bear and pay directly or indirectly
all costs and expenses (including additional interest and penalties) incurred in
connection with such action. If, as a result of the Company's action with
respect to a claim, the amount of the reduction is found to have been in excess
of the correct
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reduction amount, the Company shall promptly pay to Executive the difference
between such amounts with respect to such claim.
6. General.
(a) Term. The effective date of this Agreement is March 17,
1997. Within sixty days from and after the expiration of two years after said
effective date and within sixty days after each successive two-year period of
time thereafter that this Agreement is in effect, the Company shall have the
right to review this Agreement, and in its sole discretion either continue and
extend this Agreement, terminate this Agreement, and/or offer Executive a
different agreement. The Board (excluding any member of the Board who is covered
by this Agreement or by a similar agreement with the Company) will vote on
whether to so extend, terminate, and/or offer Executive a different agreement
and will notify Executive of such action within said sixty-day time period
mentioned above. This Agreement shall remain in effect until so terminated
and/or modified by the Company. Failure of the Board to take any action within
said sixty days shall be considered as an extension of this Agreement for an
additional two-year period of time. Notwithstanding anything to the contrary
contained in this "sunset provision," it is agreed that if a Change of Control
occurs while this Agreement is in effect, then this Agreement shall not be
subject to termination or modification under this "sunset provision," and shall
remain in force for a period of two years after such Change of Control, and if
within said two years the contingency factors occur which would entitle
Executive to the benefits as provided herein, this Agreement shall remain in
effect in accordance with its terms. If, within such two years after a Change of
Control, the contingency factors that would entitle Executive to said benefits
do not occur, thereupon this two-year "sunset provision" shall again be
applicable with the sixty-day time period for Board action to thereafter
commence at the expiration of said two years after such Change of Control and on
each two-year anniversary date thereafter.
(b) Indemnification. If Executive shall obtain any money
judgment or otherwise prevail with respect to any litigation brought by
Executive or the Company to enforce or interpret any provision contained herein,
the Company, to the fullest extent permitted by applicable law, hereby
indemnifies Executive for his reasonable attorneys' fees and disbursements
incurred in such litigation and hereby agrees (i) to pay in full all such fees
and disbursements and (ii) to pay prejudgment interest on any money judgment
obtained by Executive from the earliest date that payment to him should have
been made under this Agreement until such judgment shall have been paid in full,
which interest shall be calculated at the prime or base rate of interest
announced by Texas Commerce Bank N.A. (or any successor thereto) at its
principal office in Houston, Texas, and shall change when and as any such change
in such prime or base rate shall be announced by such bank.
(c) Payment Obligations Absolute. The Company's obligation to
pay (or cause one of its subsidiaries to pay) Executive the amounts and to make
the arrangements provided herein shall be absolute and unconditional and shall
not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company
(including its subsidiaries) may have against him or anyone else. All amounts
payable by the Company (including its subsidiaries hereunder) shall be paid
without notice or demand. Executive shall not be obligated to seek other
employment in mitigation of the amounts payable or arrangements made under any
provision of this Agreement, and, except as provided in Paragraph 3(c) hereof,
the
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obtaining of any such other employment shall in no event effect any reduction of
the Company's obligations to make (or cause to be made) the payments and
arrangements required to be made under this Agreement.
(d) Successors. This Agreement shall be binding upon and inure
to the benefit of the Company and any successor of the Company, by merger or
otherwise. This Agreement shall also be binding upon and inure to the benefit of
Executive and his estate. If Executive shall die prior to full payment of
amounts due pursuant to this Agreement, such amounts shall be payable pursuant
to the terms of this Agreement to his estate.
(e) Severability. Any provision in this Agreement which is
prohibited or unenforceable in any jurisdiction by reason of applicable law
shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating or affecting the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
(f) Non-Alienation. Executive shall not have any right to
pledge, hypothecate, anticipate or assign this Agreement or the rights
hereunder, except by will or the laws of descent and distribution.
(g) Notices. Any notices or other communications provided for
in this Agreement shall be sufficient if in writing. In the case of Executive,
such notices or communications shall be effectively delivered if hand delivered
to Executive at his principal place of employment or if sent by registered or
certified mail to Executive at the last address he has filed with the Company.
In the case of the Company, such notices or communications shall be effectively
delivered if sent by registered or certified mail to the Company at its
principal executive offices.
(h) Controlling Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas. Further, Executive
agrees that any legal proceeding to enforce the provisions of this Agreement
shall be brought in Houston, Harris County, Texas, and hereby waives his right
to any pleas regarding subject matter or personal jurisdiction and venue.
(i) Release. As a condition to the receipt of any benefit
under Paragraph 3 hereof, Executive shall first execute a release, in the form
established by the Company, releasing the Company, its shareholders, partners,
officers, directors, employees and agents from any and all claims and from any
and all causes of action of any kind or character, including but not limited to
all claims or causes of action arising out of Executive's employment with the
Company or the termination of such employment.
(j) Full Settlement. If Executive is entitled to and receives
the benefits provided hereunder, performance of the obligations of the Company
hereunder will constitute full settlement of all claims that Executive might
otherwise assert against the Company on account of his termination of
employment.
(k) Unfunded Obligation. The obligation to pay amounts under
this Agreement is an unfunded obligation of the Company (including its
subsidiaries), and no such obligation shall
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<PAGE>
create a trust or be deemed to be secured by any pledge or encumbrance on any
property of the Company (including its subsidiaries).
(l) Not a Contract of Employment. This Agreement shall not be
deemed to constitute a contract of employment, nor shall any provision hereof
affect (i) the right of the Company (or its subsidiaries) to discharge Executive
at will or (ii) the terms and conditions of any other agreement between the
Company and Executive except as provided herein.
(m) Number and Gender. Wherever appropriate herein, words used
in the singular shall include the plural and the plural shall include the
singular. The masculine gender where appearing herein shall be deemed to include
the feminine gender.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the 29th day of April, 1997.
"EXECUTIVE"
/s/Barry J. Galt
"COMPANY"
SEAGULL ENERGY CORPORATION
By: /s/Jack M. Robertson
Name: Jack M. Robertson
Title: Vice President, Human Resources
VEHOU02:68909.1
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<PAGE>
AMENDMENT TO
SEVERANCE AGREEMENT
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") and
Barry J. Galt ("Executive") have entered into a severance agreement
effective as of March 17, 1997 (the "Agreement"); and
WHEREAS, the Company and Executive desire to amend the Agreement in certain
respects;
NOW, THEREFORE, the Agreement shall be amended as follows, effective as
of July 15, 1998:
1. Paragraph 5 of the Agreement shall be deleted and the following
shall be substituted therefor:
"5. Certain Additional Payments by the Company.
Notwithstanding anything to the contrary in this Agreement, in the
event that any payment or distribution by the Company to or for the
benefit of Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (a
"Payment"), would be subject to the excise tax imposed by Section 4999
of the Code or any interest or penalties with respect to such excise
tax (such excise tax, together with any such interest or penalties, are
hereinafter collectively referred to as the "Excise Tax"), the Company
shall pay to Executive an additional payment (a "Gross-up Payment") in
an amount such that after payment by Executive of all taxes (including
any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed on any Gross-up Payment, Executive
retains an amount of the Gross-up Payment equal to the Excise Tax
imposed upon the Payment. The Company and Executive shall make an
initial determination as to whether a Gross-up Payment is required and
the amount of any such Gross-up Payment. Executive shall notify the
Company in writing of any claim by the Internal Revenue Service which,
if successful, would require the Company to make a Gross-up Payment (or
a Gross-up Payment in excess of that, if any, initially determined by
the Company and Executive) within ten days of the receipt of such
claim. The Company shall notify Executive in writing at least ten days
prior to the due date of any response required with respect to such
claim if it plans to contest the claim. If the Company decides to
contest such claim, Executive shall cooperate fully with the Company in
such action; provided, however, the Company shall bear and pay directly
or indirectly all costs and expenses (including additional interest and
penalties) incurred in connection with such action and shall indemnify
and hold Executive harmless, on an after-tax basis, for any Excise Tax
or income tax, including interest and penalties with respect thereto,
imposed as a result of the Company's action. If, as a result of the
Company's action with respect to a claim, Executive receives a refund
of any amount paid by the Company with respect to such claim, Executive
shall promptly pay such refund to the
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Company. If the Company fails to timely notify Executive whether it
will contest such claim or the Company determines not to contest such
claim, then the Company shall immediately pay to Executive the portion
of such claim, if any, which it has not previously paid to Executive."
2. As amended hereby, the Agreement is specifically ratified and
reaffirmed.
EXECUTED this 19th day of August, 1998.
"EXECUTIVE"
/s/ Barry J. Galt
"COMPANY"
SEAGULL ENERGY CORPORATION
By: /s/ Jack M. Robertson
Name: Jack M. Robertson
Title: Vice President,
Human Resources
VEHOU02:114735.1
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<PAGE>
SECOND AMENDMENT TO
SEVERANCE AGREEMENT
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") and Barry J. Galt
("Executive") have entered into a severance agreement effective as of March 17,
1997 (the "Agreement"); and
WHEREAS, the Company and Executive desire to amend the Agreement in
certain respects;
NOW, THEREFORE, the Agreement shall be amended as follows, effective as
of September 16, 1998:
1. Paragraph 1(b) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(b) 'Change of Control' means the occurrence of one of the
following events:
(i) The Company (A) shall not be the surviving entity
in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity other than a
previously wholly-owned subsidiary of the Company) or (B) is
to be dissolved and liquidated, and as a result of or in
connection such transaction, the persons who were directors of
the Company before such transaction shall cease to constitute
a majority of the Board;
(ii) Any person or entity, including a 'group' as
contemplated by Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended, acquires or gains ownership or
control (including, without limitation, power to vote) of 20%
or more of the outstanding shares of the Company's voting
stock (based upon voting power), and as a result of or in
connection with such transaction, the persons who were
directors of the Company before such transaction shall cease
to constitute a majority of the Board; or
(iii) The Company sells all or substantially all of
the assets of the Company to any other person or entity (other
than a wholly-owned subsidiary of the Company) in a
transaction that requires shareholder approval pursuant to the
Texas Business Corporation Act."
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<PAGE>
2. Paragraph 1(g) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(g) 'Retirement' shall mean Executive's voluntary resignation
on or after the date he reaches age sixty-five (other than a
resignation within sixty days after the date Executive receives notice
of a Change in Duties or a resignation at the request of the Company)."
3. Paragraph 1(j) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(j) 'Termination for Cause' shall mean termination of
Executive's employment by the Company (or its subsidiaries) by reason
of Executive's gross negligence, gross neglect or willful misconduct in
the performance of his duties or Executive's final conviction of a
felony or of a misdemeanor involving moral turpitude, excluding
misdemeanor convictions relating to the operation of a motor vehicle."
4. Paragraph 3(d) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(d) Executive shall be entitled to receive out-placement
services in connection with obtaining new employment up to a maximum
cost of $6,000, or an equivalent cash payment, if Executive either has
or is not seeking new employment."
5. Paragraph 4 of the Agreement shall be deleted and the following
shall be substituted therefor:
"4. Interest on Late Benefit Payments. If any payment provided
for in Paragraph 3(a) or 3(b) hereof is not made when due, the Company
shall pay to Executive interest on the amount payable from the date
that such payment should have been made under such paragraph until such
payment is made, which interest shall be calculated at a rate equal to
two percentage points over the prime or base rate of interest announced
by Chase Bank of Texas, N.A. (or any successor thereto) at its
principal office in Houston, Texas and shall change when and as any
such change in such prime or base rate shall be announced by such
bank."
6. Paragraph 6(b) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(b) Indemnification. If Executive shall obtain any money
judgment or otherwise prevail with respect to any litigation brought by
Executive or the Company to enforce or interpret any provision
contained herein, the Company, to the fullest
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extent permitted by applicable law, hereby indemnifies Executive for
his reasonable attorneys' fees and disbursements incurred in such
litigation and hereby agrees (i) to pay in full all such fees and
disbursements and (ii) to pay prejudgment interest on any money
judgment obtained by Executive from the earliest date that payment to
him should have been made under this Agreement until such judgment
shall have been paid in full, which interest shall be calculated at a
rate equal to two percentage points over the prime or base rate of
interest announced by Chase Bank of Texas, N.A. (or any successor
thereto) at its principal office in Houston, Texas, and shall change
when and as any such change in such prime or base rate shall be
announced by such bank."
7. As amended hereby, the Agreement is specifically ratified and
reaffirmed.
EXECUTED this 28th day of October, 1998.
"EXECUTIVE"
/s/ Barry J. Galt
"COMPANY"
SEAGULL ENERGY CORPORATION
By: /s/ William L. Transier
Name: William L. Transier
Title: Executive Vice
President & Chief
Financial Officer
VEHOU02:121318.1
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SEVERANCE AGREEMENT
AGREEMENT between SEAGULL ENERGY CORPORATION, a Texas corporation
(the "Company"), and ___________________________________________ ("Executive"),
W I T N E S S E T H :
WHEREAS, the Company desires to retain certain key employee personnel
and, accordingly, the Board of Directors of the Company (the "Board") has
approved the Company entering into a severance agreement with Executive in order
to encourage his continued service to the Company; and
WHEREAS, Executive is prepared to commit such services in return for
specific arrangements with respect to severance compensation and other benefits;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the Company and Executive agree as follows:
1. Definitions.
(a) "Change in Duties" shall mean the occurrence, within two
years after the date upon which a Change of Control occurs, of any one or more
of the following:
(i) A significant reduction in the duties of
Executive from those applicable to him immediately prior to the date on
which a Change of Control occurs;
(ii) A reduction in Executive's annual salary or
target opportunity under any applicable bonus or incentive compensation
plan from that provided to him immediately prior to the date on which a
Change of Control occurs;
(iii) Receipt of employee benefits (including but not
limited to medical, dental, life insurance, accidental, death, and
dismemberment, and long-term disability plans) and perquisites by
Executive that are materially inconsistent with the employee benefits
and perquisites provided by the Company to executives with comparable
duties; or
(iv) A change in the location of Executive's
principal place of employment by the Company by more than 50 miles from
the location where he was principally employed immediately prior to the
date on which a Change of Control occurs.
(b) "Change of Control" means the occurrence of either of the
following events:
(i) The Company (A) shall not be the surviving entity
in any merger, consolidation or other reorganization (or survives only
as a subsidiary of an entity other than a previously wholly-owned
subsidiary of the Company) or (B) is to be dissolved and liquidated,
and as a result of or in connection such transaction, the persons who
were
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<PAGE>
directors of the Company before such transaction shall cease to
constitute a majority of the Board; or
(ii) Any person or entity, including a "group" as
contemplated by Section 13(d)(3) of the Securities Exchange Act of
1934, as amended, acquires or gains ownership or control (including,
without limitation, power to vote) of 20% or more of the outstanding
shares of the Company's voting stock (based upon voting power), and as
a result of or in connection with such transaction, the persons who
were directors of the Company before such transaction shall cease to
constitute a majority of the Board.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Compensation" shall mean the greater of:
(i) Executive's annual salary plus his Targeted EIP
Award immediately prior to the date on which a Change of Control
occurs, or
(ii) Executive's annual salary plus his Targeted EIP
Award at the time of his Involuntary Termination.
(e) "EIP" shall mean the Seagull Energy Corporation Executive
Incentive Plan or any successor thereto.
(f) "Involuntary Termination" shall mean any termination of
Executive's employment with the Company which:
(i) does not result from a resignation by Executive
(other than a resignation pursuant to clause (ii) of this subparagraph
(f) or a resignation at the request of the Company); or
(ii) results from a resignation by Executive on or
before the date which is sixty days after the date upon which Executive
receives notice of a Change in Duties;
provided, however, the term "Involuntary Termination" shall not include a
Termination for Cause or any termination as a result of death, disability under
circumstances entitling him to benefits under the Company's long-term disability
plan, or Retirement.
(g) "Retirement" shall mean Executive's resignation on or
after the date he reaches age sixty-five.
(h) "Severance Amount" shall mean an amount equal to 2.99
times Executive's Compensation.
(i) "Targeted EIP Award" shall mean Executive's Incentive
Target as set forth under the EIP in effect for the year with respect to which
such award is being determined, if any, or
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<PAGE>
for the last preceding year in which an EIP was in effect, expressed as a dollar
amount based on such Executive's annual salary for such year.
(j) "Termination for Cause" shall mean termination of
Executive's employment by the Company (or its subsidiaries) by reason of
Executive's (i) gross negligence in the performance of his duties, (ii) willful
and continued failure to perform his duties, (iii) willful engagement in conduct
which is materially injurious to the Company or its subsidiaries (monetarily or
otherwise) or (iv) conviction of a felony or a misdemeanor involving moral
turpitude.
(k) "Welfare Benefit Coverages" shall mean the medical,
dental, life insurance, accidental death and dismemberment and long-term
disability coverages provided by the Company to its active employees.
2. Services. Executive agrees that he will render services to the
Company (as well as any subsidiary thereof or successor thereto) during the
period of his employment to the best of his ability and in a prudent and
businesslike manner and that he will devote substantially the same time, efforts
and dedication to his duties as heretofore devoted.
3. Severance Benefits. If Executive's employment by the Company or any
subsidiary thereof or successor thereto shall be subject to an Involuntary
Termination which occurs within two years after the date upon which a Change of
Control occurs, then Executive shall be entitled to receive, as additional
compensation for services rendered to the Company (including its subsidiaries),
the following severance benefits:
(a) A lump sum cash payment in an amount equal to Executive's
Severance Amount.
(b) A lump sum cash payment in an amount equal to the
remaining portion of any award to Executive under any prior years' EIP. Further,
if Executive's Involuntary Termination occurs on or after the date an award has
been earned under the EIP, but prior to the date such award is paid, Executive
shall receive an additional lump sum cash payment in an amount equal to his
Targeted EIP Award.
(c) Executive shall be entitled to continue the Welfare
Benefit Coverages for himself and, where applicable, his eligible dependents
following his Involuntary Termination for up to thirty-six months, as long as
Executive continues either to pay the premiums paid by active employees of the
Company for such coverages or to pay the actual (nonsubsidized) cost of such
coverages for which the Company does not subsidize for active employees. Such
benefit rights shall apply only to those Welfare Benefit Coverages which the
Company has in effect from time to time for active employees, and the applicable
payments shall adjust as premiums for active employees of the Company or actual
costs, whichever is applicable, change. Welfare Benefit Coverage(s) shall
immediately end upon Executive's obtainment of new employment and eligibility
for similar Welfare Benefit Coverage(s) (with Executive being obligated
hereunder to promptly report such eligibility to the Company). Nothing herein
shall be deemed to adversely affect in any way the additional rights, after
consideration of this extension period, of Executive and his eligible dependents
to health care
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<PAGE>
continuation coverage as required pursuant to Part 6 of Title I of the Employee
Retirement Income Security Act of 1974, as amended.
(d) Executive shall be entitled to receive out-placement
services in connection with obtaining new employment up to a maximum cost of
$6,000.
(e) The severance benefits payable under this Agreement shall
be paid to an Executive on or before the fifth day after the last day of
Executive's employment with the Company. Any severance benefits paid pursuant to
this Paragraph will be deemed to be a severance payment and not compensation for
purposes of determining benefits under the Company's qualified plans and shall
be subject to any required tax withholding.
4. Interest on Late Benefit Payments. If any payment provided for in
Paragraph 3(a) or 3(b) hereof is not made when due, the Company shall pay to
Executive interest on the amount payable from the date that such payment should
have been made under such paragraph until such payment is made, which interest
shall be calculated at the prime or base rate of interest announced by Texas
Commerce Bank N.A. (or any successor thereto) at its principal office in
Houston, Texas and shall change when and as any such change in such prime or
base rate shall be announced by such bank.
5. Certain Additional Payments by the Company. Notwithstanding anything
in this Agreement to the contrary, if the severance benefits provided for in
Paragraph 3, together with any other payments which Executive has the right to
receive from the Company, would constitute a "parachute payment " (as defined in
Section 280G(b)(2) of the Code), the severance benefits provided hereunder shall
be either (a) reduced (but not below zero) so that the present value of such
total amounts received by Executive from the Company will be one dollar ($1.00)
less than three times Executive's base amount (as defined in Section 280G of the
Code) and so that no portion of such amounts received by Executive shall be
subject to the excise tax imposed by Section 4999 of the Code or (b) paid in
full, whichever produces the better net after-tax position to Executive (taking
into account any applicable excise tax under Section 4999 of the Code and any
applicable income tax). The Company and Executive shall make an initial
determination as to whether a reduction is required and, if so required, the
amount of any such reduction. Executive shall notify the Company immediately in
writing of any claim by the Internal Revenue Service which, if successful, would
require the Company to make a reduction (or a further reduction in excess of
that, if any, initially determined by the Company and Executive) within five
days of the receipt of such claim. The Company shall notify Executive in writing
at least five days prior to the due date of any response required with respect
to such claim if it plans to contest the claim. If the Company decides to
contest such claim, Executive shall cooperate fully with the Company in such
action; provided, however, the Company shall bear and pay directly or indirectly
all costs and expenses (including additional interest and penalties) incurred in
connection with such action. If, as a result of the Company's action with
respect to a claim, the amount of the reduction is found to have been in excess
of the correct reduction amount, the Company shall promptly pay to Executive the
difference between such amounts with respect to such claim.
-4-
<PAGE>
6. General.
(a) Term. The effective date of this Agreement is March 17,
1997. Within sixty days from and after the expiration of two years after said
effective date and within sixty days after each successive two-year period of
time thereafter that this Agreement is in effect, the Company shall have the
right to review this Agreement, and in its sole discretion either continue and
extend this Agreement, terminate this Agreement, and/or offer Executive a
different agreement. The Board (excluding any member of the Board who is covered
by this Agreement or by a similar agreement with the Company) will vote on
whether to so extend, terminate, and/or offer Executive a different agreement
and will notify Executive of such action within said sixty-day time period
mentioned above. This Agreement shall remain in effect until so terminated
and/or modified by the Company. Failure of the Board to take any action within
said sixty days shall be considered as an extension of this Agreement for an
additional two-year period of time. Notwithstanding anything to the contrary
contained in this "sunset provision," it is agreed that if a Change of Control
occurs while this Agreement is in effect, then this Agreement shall not be
subject to termination or modification under this "sunset provision," and shall
remain in force for a period of two years after such Change of Control, and if
within said two years the contingency factors occur which would entitle
Executive to the benefits as provided herein, this Agreement shall remain in
effect in accordance with its terms. If, within such two years after a Change of
Control, the contingency factors that would entitle Executive to said benefits
do not occur, thereupon this two-year "sunset provision" shall again be
applicable with the sixty-day time period for Board action to thereafter
commence at the expiration of said two years after such Change of Control and on
each two-year anniversary date thereafter.
(b) Indemnification. If Executive shall obtain any money
judgment or otherwise prevail with respect to any litigation brought by
Executive or the Company to enforce or interpret any provision contained herein,
the Company, to the fullest extent permitted by applicable law, hereby
indemnifies Executive for his reasonable attorneys' fees and disbursements
incurred in such litigation and hereby agrees (i) to pay in full all such fees
and disbursements and (ii) to pay prejudgment interest on any money judgment
obtained by Executive from the earliest date that payment to him should have
been made under this Agreement until such judgment shall have been paid in full,
which interest shall be calculated at the prime or base rate of interest
announced by Texas Commerce Bank N.A. (or any successor thereto) at its
principal office in Houston, Texas, and shall change when and as any such change
in such prime or base rate shall be announced by such bank.
(c) Payment Obligations Absolute. The Company's obligation to
pay (or cause one of its subsidiaries to pay) Executive the amounts and to make
the arrangements provided herein shall be absolute and unconditional and shall
not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company
(including its subsidiaries) may have against him or anyone else. All amounts
payable by the Company (including its subsidiaries hereunder) shall be paid
without notice or demand. Executive shall not be obligated to seek other
employment in mitigation of the amounts payable or arrangements made under any
provision of this Agreement, and, except as provided in Paragraph 3(c) hereof,
the obtaining of any such other employment shall in no event effect any
reduction of the Company's obligations to make (or cause to be made) the
payments and arrangements required to be made under this Agreement.
-5-
<PAGE>
(d) Successors. This Agreement shall be binding upon and inure
to the benefit of the Company and any successor of the Company, by merger or
otherwise. This Agreement shall also be binding upon and inure to the benefit of
Executive and his estate. If Executive shall die prior to full payment of
amounts due pursuant to this Agreement, such amounts shall be payable pursuant
to the terms of this Agreement to his estate.
(e) Severability. Any provision in this Agreement which is
prohibited or unenforceable in any jurisdiction by reason of applicable law
shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating or affecting the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
(f) Non-Alienation. Executive shall not have any right to
pledge, hypothecate, anticipate or assign this Agreement or the rights
hereunder, except by will or the laws of descent and distribution.
(g) Notices. Any notices or other communications provided for
in this Agreement shall be sufficient if in writing. In the case of Executive,
such notices or communications shall be effectively delivered if hand delivered
to Executive at his principal place of employment or if sent by registered or
certified mail to Executive at the last address he has filed with the Company.
In the case of the Company, such notices or communications shall be effectively
delivered if sent by registered or certified mail to the Company at its
principal executive offices.
(h) Controlling Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas. Further, Executive
agrees that any legal proceeding to enforce the provisions of this Agreement
shall be brought in Houston, Harris County, Texas, and hereby waives his right
to any pleas regarding subject matter or personal jurisdiction and venue.
(i) Release. As a condition to the receipt of any benefit
under Paragraph 3 hereof, Executive shall first execute a release, in the form
established by the Company, releasing the Company, its shareholders, partners,
officers, directors, employees and agents from any and all claims and from any
and all causes of action of any kind or character, including but not limited to
all claims or causes of action arising out of Executive's employment with the
Company or the termination of such employment.
(j) Full Settlement. If Executive is entitled to and receives
the benefits provided hereunder, performance of the obligations of the Company
hereunder will constitute full settlement of all claims that Executive might
otherwise assert against the Company on account of his termination of
employment.
(k) Unfunded Obligation. The obligation to pay amounts under
this Agreement is an unfunded obligation of the Company (including its
subsidiaries), and no such obligation shall create a trust or be deemed to be
secured by any pledge or encumbrance on any property of the Company (including
its subsidiaries).
-6-
<PAGE>
(l) Not a Contract of Employment. This Agreement shall not be
deemed to constitute a contract of employment, nor shall any provision hereof
affect (i) the right of the Company (or its subsidiaries) to discharge Executive
at will or (ii) the terms and conditions of any other agreement between the
Company and Executive except as provided herein.
(m) Number and Gender. Wherever appropriate herein, words used
in the singular shall include the plural and the plural shall include the
singular. The masculine gender where appearing herein shall be deemed to include
the feminine gender.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the ______ day of __________________, 1997.
"EXECUTIVE"
------------------------------------------
"COMPANY"
SEAGULL ENERGY CORPORATION
By:________________________
Name:______________________
Title:_____________________
VEHOU02:68893.1
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<PAGE>
AMENDMENT TO
SEVERANCE AGREEMENT
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") and
____________________________ ("Executive") have entered into a severance
agreement effective as of _____________________ (the "Agreement"); and
WHEREAS, the Company and Executive desire to amend the Agreement in certain
respects;
NOW, THEREFORE, the Agreement shall be amended as follows, effective as
of July 15, 1998:
1. Paragraph 5 of the Agreement shall be deleted and the following
shall be substituted therefor:
"5. Certain Additional Payments by the Company.
Notwithstanding anything to the contrary in this Agreement, in the
event that any payment or distribution by the Company to or for the
benefit of Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (a
"Payment"), would be subject to the excise tax imposed by Section 4999
of the Code or any interest or penalties with respect to such excise
tax (such excise tax, together with any such interest or penalties, are
hereinafter collectively referred to as the "Excise Tax"), the Company
shall pay to Executive an additional payment (a "Gross-up Payment") in
an amount such that after payment by Executive of all taxes (including
any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed on any Gross-up Payment, Executive
retains an amount of the Gross-up Payment equal to the Excise Tax
imposed upon the Payment. The Company and Executive shall make an
initial determination as to whether a Gross-up Payment is required and
the amount of any such Gross-up Payment. Executive shall notify the
Company in writing of any claim by the Internal Revenue Service which,
if successful, would require the Company to make a Gross-up Payment (or
a Gross-up Payment in excess of that, if any, initially determined by
the Company and Executive) within ten days of the receipt of such
claim. The Company shall notify Executive in writing at least ten days
prior to the due date of any response required with respect to such
claim if it plans to contest the claim. If the Company decides to
contest such claim, Executive shall cooperate fully with the Company in
such action; provided, however, the Company shall bear and pay directly
or indirectly all costs and expenses (including additional interest and
penalties) incurred in connection with such action and shall indemnify
and hold Executive harmless, on an after-tax basis, for any Excise Tax
or income tax, including interest and penalties with respect thereto,
imposed as a result of the Company's action. If, as a result of the
Company's action with respect to a claim, Executive receives a refund
of any amount paid by the Company with respect to such claim, Executive
shall promptly pay such refund to the
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<PAGE>
Company. If the Company fails to timely notify Executive whether it
will contest such claim or the Company determines not to contest such
claim, then the Company shall immediately pay to Executive the portion
of such claim, if any, which it has not previously paid to Executive."
2. As amended hereby, the Agreement is specifically ratified and
reaffirmed.
EXECUTED this ______ day of ________________, 1998.
"EXECUTIVE"
"COMPANY"
SEAGULL ENERGY CORPORATION
By:
Name:
Title:
VEHOU02:114735.1
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<PAGE>
SECOND AMENDMENT TO
SEVERANCE AGREEMENT
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") and _______________
_________ ("Executive") have entered into a severance agreement effective as of
_____________________ (the "Agreement"); and
WHEREAS, the Company and Executive desire to amend the Agreement in
certain respects;
NOW, THEREFORE, the Agreement shall be amended as follows, effective as
of September 16, 1998:
1. Paragraph 1(b) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(b) 'Change of Control' means the occurrence of one of the
following events:
(i) The Company (A) shall not be the surviving entity
in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity other than a
previously wholly-owned subsidiary of the Company) or (B) is
to be dissolved and liquidated, and as a result of or in
connection such transaction, the persons who were directors of
the Company before such transaction shall cease to constitute
a majority of the Board;
(ii) Any person or entity, including a 'group' as
contemplated by Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended, acquires or gains ownership or
control (including, without limitation, power to vote) of 20%
or more of the outstanding shares of the Company's voting
stock (based upon voting power), and as a result of or in
connection with such transaction, the persons who were
directors of the Company before such transaction shall cease
to constitute a majority of the Board; or
(iii) The Company sells all or substantially all of
the assets of the Company to any other person or entity (other
than a wholly-owned subsidiary of the Company) in a
transaction that requires shareholder approval pursuant to the
Texas Business Corporation Act."
-1-
<PAGE>
2. Paragraph 1(g) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(g) 'Retirement' shall mean Executive's voluntary resignation
on or after the date he reaches age sixty-five (other than a
resignation within sixty days after the date Executive receives notice
of a Change in Duties or a resignation at the request of the Company)."
3. Paragraph 1(j) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(j) 'Termination for Cause' shall mean termination of
Executive's employment by the Company (or its subsidiaries) by reason
of Executive's gross negligence, gross neglect or willful misconduct in
the performance of his duties or Executive's final conviction of a
felony or of a misdemeanor involving moral turpitude, excluding
misdemeanor convictions relating to the operation of a motor vehicle."
4. Paragraph 3(d) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(d) Executive shall be entitled to receive out-placement
services in connection with obtaining new employment up to a maximum
cost of $6,000, or an equivalent cash payment, if Executive either has
or is not seeking new employment."
5. Paragraph 4 of the Agreement shall be deleted and the following
shall be substituted therefor:
"4. Interest on Late Benefit Payments. If any payment provided
for in Paragraph 3(a) or 3(b) hereof is not made when due, the Company
shall pay to Executive interest on the amount payable from the date
that such payment should have been made under such paragraph until such
payment is made, which interest shall be calculated at a rate equal to
two percentage points over the prime or base rate of interest announced
by Chase Bank of Texas, N.A. (or any successor thereto) at its
principal office in Houston, Texas and shall change when and as any
such change in such prime or base rate shall be announced by such
bank."
6. Paragraph 6(b) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(b) Indemnification. If Executive shall obtain any money
judgment or otherwise prevail with respect to any litigation brought by
Executive or the Company to enforce or interpret any provision
contained herein, the Company, to the fullest
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<PAGE>
extent permitted by applicable law, hereby indemnifies Executive for
his reasonable attorneys' fees and disbursements incurred in such
litigation and hereby agrees (i) to pay in full all such fees and
disbursements and (ii) to pay prejudgment interest on any money
judgment obtained by Executive from the earliest date that payment to
him should have been made under this Agreement until such judgment
shall have been paid in full, which interest shall be calculated at a
rate equal to two percentage points over the prime or base rate of
interest announced by Chase Bank of Texas, N.A. (or any successor
thereto) at its principal office in Houston, Texas, and shall change
when and as any such change in such prime or base rate shall be
announced by such bank."
7. As amended hereby, the Agreement is specifically ratified and
reaffirmed.
EXECUTED this ______ day of October, 1998.
"EXECUTIVE"
"COMPANY"
SEAGULL ENERGY CORPORATION
By:
Name:
Title:
VEHOU02:121318.1
-3-
SECOND AMENDMENT TO
SEAGULL ENERGY CORPORATION
MANAGEMENT STABILITY PLAN
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") has heretofore
adopted and currently maintains the SEAGULL ENERGY CORPORATION MANAGEMENT
STABILITY PLAN (the "Plan"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan is hereby amended, effective as of July 15,
1998:
1. Section 2.5 of the Plan shall be deleted and the following shall be
substituted therefor:
"2.5 Certain Additional Payments by the Employer.
Notwithstanding anything to the contrary in the Plan, in the event that
any payment or distribution by the Employer to or for the benefit of a
Covered Employee, whether paid or payable or distributed or
distributable pursuant to the terms of the Plan or otherwise (a
"Payment"), would be subject to the excise tax imposed by Section 4999
of the Code or any interest or penalties with respect to such excise
tax (such excise tax, together with any such interest or penalties, are
hereinafter collectively referred to as the "Excise Tax"), the Employer
shall pay to the Covered Employee an additional payment (a "Gross-up
Payment") in an amount such that after payment by the Covered Employee
of all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax imposed on any Gross-up
Payment, the Covered Employee retains an amount of the Gross-up Payment
equal to the Excise Tax imposed upon the Payment. The Employer and the
Covered Employee shall make an initial determination as to whether a
Gross-up Payment is required and the amount of any such Gross-up
Payment. The Covered Employee shall notify the Employer in writing of
any claim by the Internal Revenue Service which, if successful, would
require the Employer to make a Gross-up Payment (or a Gross-up Payment
in excess of that, if any, initially determined by the Employer and the
Covered Employee) within ten days of the receipt of such claim. The
Employer shall notify the Covered Employee in writing at least ten days
prior to the due date of any response required with respect to such
claim if it plans to contest the claim. If the Employer decides to
contest such claim, the Covered Employee shall cooperate fully with the
Employer in such action; provided, however, the Employer shall bear and
pay directly or indirectly all costs and expenses (including additional
interest and penalties) incurred in connection with such action and
shall indemnify and hold the Covered Employee harmless, on an after-tax
basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of the Employer's
action. If, as a result of the Employer's action with respect to a
claim, the Covered Employee receives a refund of any amount paid by the
Employer with respect to such
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<PAGE>
claim, the Covered Employee shall promptly pay such refund to the
Employer. If the Employer fails to timely notify the Covered Employee
whether it will contest such claim or the Employer determines not to
contest such claim, then the Employer shall immediately pay to the
Covered Employee the portion of such claim, if any, which it has not
previously paid to the Covered Employee."
2. As amended hereby, the Plan is specifically ratified and reaffirmed.
EXECUTED this 21st day of July, 1998.
SEAGULL ENERGY CORPORATION
By: /s/Jack M. Robertson
Name: Jack M. Robertson
Title: Vice President, Human Resources
VEHOU02:114751.1
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<PAGE>
THIRD AMENDMENT TO
SEAGULL ENERGY CORPORATION
MANAGEMENT STABILITY PLAN
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") has heretofore
adopted and currently maintains the SEAGULL ENERGY CORPORATION MANAGEMENT
STABILITY PLAN (the "Plan"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan is hereby amended, effective as of September
16, 1998:
1. Section 1.1(c) of the Plan shall be deleted and the following shall
be substituted therefor:
"(c) 'Change of Control' shall mean the occurrence of one
of the following events:
(1) the Company (A) shall not be the surviving entity
in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity other than a
previously wholly-owned subsidiary of the Company) or (B) is
to be dissolved and liquidated, and as a result of or in
connection with such transaction, the persons who were
directors of the Company before such transaction cease to
constitute a majority of the Board;
(2) any person or entity, including a 'group' as
contemplated by Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended, acquires or gains ownership or
control (including, without limitation, power to vote) of 20%
or more of the outstanding shares of the Company's voting
stock (based upon voting power), and as a result of or in
connection with such transaction, the persons who were
directors of the Company before such transaction cease to
constitute a majority of the Board; or
(3) the Company sells all or substantially all of the
assets of the Company to any other person or entity (other
than a wholly-owned subsidiary of the Company) in a
transaction that requires shareholder approval pursuant to the
Texas Business Corporation Act."
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<PAGE>
2. Section 1.1(p) of the Plan shall be deleted and the following shall
be substituted therefor:
"(g) 'Retirement' shall mean the Covered Employee's voluntary
resignation on or after the date he reaches age sixty-five (other than
a resignation within sixty days after the date the Covered Employee
receives notice of a Change in Duties or a resignation at the request
of the Company)."
3. As amended hereby, the Plan is specifically ratified and reaffirmed.
EXECUTED this 14th day of October, 1998.
SEAGULL ENERGY CORPORATION
By: /s/ Jack M. Robertson
Name: Jack M. Robertson
Title: Vice President, Human Resources
VEHOU02:121333.1
-2-
THIRD AMENDMENT TO
SEAGULL ENERGY CORPORATION
OUTSIDE DIRECTORS DEFERRED FEE PLAN
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") has heretofore
adopted the SEAGULL ENERGY CORPORATION OUTSIDE DIRECTORS DEFERRED
FEE PLAN (the "Plan"); and
WHEREAS, the Company desires to amend the Plan;
NOW, THEREFORE, the Plan shall be amended as follows, effective as of
the date of adoption hereof:
1. The following sentence shall be added to Paragraph 3(b) of the Plan:
"Finally, a Participant may elect to defer Senior Advisory Council fees
to be earned by such Participant for services rendered by filing with
the Committee an election to defer receipt of all or a designated
portion of such fees."
2. Paragraph 4(d) of the Plan shall be deleted and the following shall
be substituted therefor:
"(d) Crediting Election.
(1) Prior to the first day of each quarter during a Service
Period or prior to the first day of each quarter subsequent to a
Service Period upon which a Participant has a balance credited to his
Plan Accounts, a Participant may elect to have amounts credited to his
Elective Deferral Account and, if the Participant has ceased to be a
member of the Board, his Required Deferral Account, credited with
Phantom Stock pursuant to Paragraph (c) above for such quarter. Any
such election shall be effective until revoked by the Participant. If a
Participant fails to make any election under this Paragraph, his
Elective Deferral Account shall be credited with interest equivalents
pursuant to Paragraph (b) above.
(2) Prior to the first day of any quarter during a Service
Period or prior to the first day of any quarter subsequent to a Service
Period upon which a Participant has a balance credited to his Plan
Accounts, a Participant may revoke his election pursuant to Paragraph
(d)(1) above to have amounts credited to his Elective Deferral Account
credited with Phantom Stock pursuant to Paragraph (c) above and, if the
Participant has ceased to be a member of the Board, revoke his election
pursuant to Paragraph (d)(1) above to have amounts credited to his
Required Deferral Account credited with Phantom Stock pursuant to
Paragraph (c) above or elect to have his Required Deferral Account
credited with interest equivalents pursuant to Paragraph (b) above,
effective as of the first day of such quarter. If the Participant is a
member
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<PAGE>
of the Board when he revokes his election pursuant to Paragraph (d)(1)
above, any amounts previously credited to such Participant's Elective
Deferral Account which have been credited with Phantom Stock pursuant
to Paragraph (c) above shall remain so credited and any amounts
subsequently credited to such Participant's Elective Deferral Account
shall be credited with interest equivalents pursuant to Paragraph (b)
above. Notwithstanding any Plan provision to the contrary, a
Participant who has ceased to be a member of the Board may revoke his
election pursuant to Paragraph (d)(1) above with respect to amounts of
Phantom Stock credited to his Elective Deferral Account and may elect
to have his Required Deferral Account credited with interest
equivalents pursuant to Paragraph (b) above, prior to and effective as
of the first day of the first month following the date he ceased to be
a member of the Board. If a Participant who has ceased to be a member
of the Board revokes or makes an election pursuant to this Paragraph
(d)(2), such Participant's Account or Accounts shall be credited with
the value of the number of shares of Phantom Stock credited to such
Account or Accounts as of the preceding day, based upon the average of
the closing prices of common stock of the Company on the twenty trading
days preceding such date."
3. Paragraph 5(a) of the Plan shall be deleted and the following shall
be substituted therefor:
"(a) Payment Election Generally. A Participant shall elect,
subject to the provisions of Paragraphs (b), (c) and (d) below, the
time (which may not be prior to the later of (i) the date on which he
ceases to be a member of the Board or (ii) the date on which he ceases
to be a member of the Senior Advisory Council to the Board) and the
mode (which may either be a lump sum payment or monthly, quarterly, or
annual installment payments over a specified term certain) for payment
of amounts credited to his Plan Accounts during each Service Period. A
Participant may revise his election regarding the time and mode of
payment of amounts credited to his Plan Accounts, but such revised
election shall not be effective until the later of (A) the January 1
following the date of such revised election or (B) the date that is six
months after the date of such revised election. In the absence of
direction by a Participant regarding the time or mode of payment of
amounts credited to his Plan Accounts during a Service Period, such
amounts shall be distributed in monthly installments over a period of
ten years, beginning on the first day of the first month after the
later of (i) the date on which he ceases to be a member of the Board or
(ii) the date on which he ceases to be a member of the Senior Advisory
Council to the Board."
4. Paragraph 5(e) of the Plan shall be deleted and the following shall
be substituted therefor:
"(e) Conversion of Plan Accounts for Purposes of Payment. If
a Participant has elected to receive payment of his Plan Accounts in a lump sum
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<PAGE>
pursuant to Paragraph (a) above, the value of his Plan Accounts shall
be determined as of the last day of the month preceding the time which
he has elected to receive such payment and an amount equal to such
value shall be paid to the Participant. If such Participant has elected
to have his Plan Accounts credited based on Phantom Stock pursuant to
Paragraph 4(d), the value of his Plan Accounts shall be based upon the
average of the closing prices of common stock of the Company on the
twenty trading days preceding such date. If a Participant has elected
to receive payment of his Plan Accounts in any other mode pursuant to
Paragraph (a) above and his Plan Accounts are being credited with
Interest Equivalents pursuant to Paragraph 4(b), the value of his Plan
Accounts shall be determined as of the last day of the month preceding
the date of any such payment and each subsequent interval thereafter,
and an amount equal to the value of such Plan Accounts multiplied by a
fraction, the numerator of which is one and the denominator of which is
the remaining number of payments which the Participant elected, shall
be paid as of each interval such Participant elected; provided,
however, that any balance credited to such Participant's Plan Accounts
shall continue to be credited with Interest Equivalents pursuant to
Paragraph 4(b), except that the Interest Equivalents so credited shall
be paid directly to the Participant. If a Participant has elected,
pursuant to Paragraph (a) above, to receive payment of his Plan
Accounts in a mode other than a lump sum and has elected to have his
Plan Accounts credited based on Phantom Stock pursuant to Paragraph
4(d), the number of shares of Phantom Stock credited to his Plan
Accounts shall be determined as of the last day of the month preceding
the date of any such payment and each subsequent interval thereafter,
and such number shall be multiplied by a fraction, the numerator of
which is one and the denominator of which is the remaining number of
payments which the Participant elected, and an amount equal to the
value of the resulting number of shares of Phantom Stock, based upon
the average of the closing prices of common stock of the Company on the
twenty trading days preceding such date, shall be paid to such
Participant. If Paragraphs (b), (c) or (d) above apply, the value of a
Participant's Plan Accounts shall be determined as of the date
specified in the applicable Paragraph and an amount equal to such value
shall be paid to the Participant or his designated beneficiary;
provided, however, that if the Participant has elected to have his Plan
Accounts credited based on Phantom Stock pursuant to Paragraph 4(d),
the value of his Plan Accounts shall be based upon the average of the
closing prices of common stock of the Company on the twenty trading
days preceding such date."
5. As amended hereby, the Plan is specifically ratified and reaffirmed.
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<PAGE>
EXECUTED this 13th day of May, 1998.
SEAGULL ENERGY CORPORATION
By /s/ William L. Transier
William L. Transier
Senior Vice President
and Chief Financial
Officer
VEHOU02:104496.1
-4-
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made by and between SEAGULL
ENERGY CORPORATION, a Texas corporation ("Company"), and James T. Hackett
("Executive").
W I T N E S S E T H:
WHEREAS, Company is desirous of employing Executive in an executive
capacity on the terms and conditions, and for the consideration, hereinafter set
forth and Executive is desirous of being employed by Company on such terms and
conditions and for such consideration;
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and obligations contained herein, Company and Executive agree as
follows:
ARTICLE 1: EMPLOYMENT AND DUTIES
1.1 Employment; Effective Date. Company agrees to employ Executive and
Executive agrees to be employed by Company, beginning as of the Effective Date
(as hereinafter defined) and continuing for the period of time set forth in
Article 2 of this Agreement, subject to the terms and conditions of this
Agreement. For purposes of this Agreement, the "Effective Date" shall be the
first date that Executive reports for work at the offices of the Company, but no
later than October 15, 1998.
1.2 Positions. Effective as of the Effective Date, Company shall cause
Executive to be appointed President and Chief Executive Officer of Company and
to be elected a member of the Board of Directors of Company (the "Board of
Directors"). Effective as of January 1, 1999, Company shall cause Executive to
be elected as Chairman of the Board of Directors. Company shall maintain
Executive in such positions, or in such other positions as the parties mutually
may agree, for the full term of Executive's employment hereunder.
1.3 Duties and Services. Executive agrees to serve in the positions
referred to in paragraph 1.2 and to perform diligently and to the best of his
abilities the duties and services appertaining to such office, as well as such
additional duties and services appropriate to such office which the parties
mutually may agree upon from time to time. Executive's employment shall also be
subject to the policies maintained and established by Company, as the same may
be amended from time to time.
1.4 Other Interests. Executive agrees, during the period of his
employment by Company, to devote his primary business time, energy and best
efforts to the business and affairs of Company and its affiliates and not to
engage, directly or indirectly, in any other business or businesses, whether or
not similar to that of Company, except with the consent of the Board of
Directors. The foregoing notwithstanding, the parties recognize and agree that
Executive may engage in passive personal investments and other civic, charitable
and business activities that do not conflict with the business
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and affairs of Company or interfere with Executive's performance of his duties
hereunder without the necessity of obtaining the consent of the Board of
Directors.
1.5 Duty of Loyalty. Executive acknowledges and agrees that Executive
owes a fiduciary duty of loyalty, fidelity, and allegiance to act at all times
in the best interests of Company. In keeping with these duties, Executive shall
make full disclosure to Company of all business opportunities pertaining to
Company's business and shall not appropriate for Executive's own benefit
business opportunities concerning the subject matter of the fiduciary
relationship.
ARTICLE 2: TERM AND TERMINATION OF EMPLOYMENT
2.1 Term. Unless sooner terminated pursuant to other provisions hereof,
Company agrees to employ Executive for the period beginning on the Effective
Date and ending on the third anniversary of the Effective Date. Beginning with
the first anniversary of the Effective Date, said term of employment shall be
extended automatically for an additional successive one-year period as of each
anniversary date of the Effective Date that occurs while this Agreement is in
effect; provided, however, that if, at any time prior to any such anniversary
date of the Effective Date, either party shall give written notice to the other
that no such automatic extension shall occur, then Executive's employment shall
terminate on the last day of the two-year period beginning on the anniversary
date of the Effective Date that next occurs after such notice is given.
2.2 Company's Right to Terminate. Notwithstanding the provisions of
paragraph 2.1, Company shall have the right to terminate Executive's employment
under this Agreement at any time for any of the following reasons:
(i) upon Executive's death;
(ii) upon Executive's becoming incapacitated by accident,
sickness or other circumstance which renders him mentally or physically
incapable of performing the duties and services required of him
hereunder on a full-time basis with reasonable accommodation for a
period of at least 120 consecutive days or for a period of 180 business
days during any twelve-month period;
(iii) for cause, which for purposes of this Agreement shall
mean Executive's gross negligence, gross neglect or willful misconduct
in the performance of the duties required of him hereunder or
Executive's final conviction of a felony or of a misdemeanor involving
moral turpitude, excluding misdemeanor convictions relating to the
operation of a motor vehicle;
(iv) for Executive's material breach of any material provision
of this Agreement which, if correctable, remains uncorrected for 30
days following written notice to Executive by Company of such breach;
or
(v) for any other reason whatsoever, in the sole discretion of
the Board of Directors.
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2.3 Executive's Right to Terminate. Notwithstanding the provisions of
paragraph 2.1, Executive shall have the right to terminate his employment under
this Agreement at any time for any of the following reasons:
(i) for (A) Company's material breach of any material
provision of this Agreement, (B) Company's assignment to Executive of
duties and responsibilities that are materially inconsistent with the
positions referred to in paragraph 1.2, (C) Company's failure to
appoint or elect or reappoint or reelect Executive to the positions
referred to in paragraph 1.2 or (D) a change in the location of
Executive's principal place of employment by the Company by more than
50 miles from the location where he was principally employed
immediately prior to such change; provided, however, that, prior to
Executive's termination of employment under (A), (B) or (C) of this
paragraph 2.3(i), Executive must give written notice to Company of any
such breach, assignment or failure and such breach, assignment or
failure must remain uncorrected for 30 days following such written
notice; or
(ii) for any other reason whatsoever, in the sole discretion
of Executive.
2.4 Notice of Termination. If Company or Executive desires to terminate
Executive's employment hereunder at any time prior to expiration of the term of
employment as provided in paragraph 2.1, it or he shall do so by giving written
notice to the other party that it or he has elected to terminate Executive's
employment hereunder and stating the effective date and reason for such
termination, provided that no such action shall alter or amend any other
provisions hereof or rights arising hereunder, including, without limitation,
the provisions of Article 4 hereof. Such notice shall also, to the extent
material to any right or obligation hereunder, constitute notice under paragraph
2.1 of the discontinuance of any further automatic extensions of the term of
paragraph 2.1.
ARTICLE 3: COMPENSATION AND BENEFITS
3.1 Base Salary. During the period of this Agreement, Executive shall
receive a minimum annual base salary of $500,000. The Compensation Committee of
the Board of Directors (the "Compensation Committee") shall review Executive's
annual base salary on an annual basis and shall make a recommendation to the
Board of Directors regarding possible increases in such annual base salary, and
the Board of Directors, in its sole discretion, may increase, but not decrease,
Executive's annual base salary. Executive's annual base salary shall be paid in
equal installments in accordance with the Company's standard policy regarding
payment of compensation to executives but no less frequently than monthly.
Notwithstanding the foregoing, in lieu of annual base salary (other than the
amount necessary to provide certain Company benefits, which is not expected to
exceed $5,000 annually) for the period beginning on the Effective Date and
ending on December 31, 1999, on the Effective Date, Company shall grant to
Executive an option (the "Option") to purchase 200,000 shares of Company's
common stock ("Stock") under the Seagull Energy Corporation 1998 Omnibus Stock
Plan (the "1998 Plan"). The purchase price for each share of Stock subject to
the Option shall be equal to the Fair Market Value (as such term is defined in
the 1998 Plan) of a share of Stock as of the Effective Date. Subject to the
terms of the 1998 Plan and the agreement, in the form attached hereto as Exhibit
A1, to be executed by Company and Executive evidencing the
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Option, such Option shall (i) be a nonqualified stock option, (ii) have a
ten-year term, (iii) be fully exercisable on the date of grant thereof. The
grant of the Option shall be deemed to satisfy Company's obligation to pay
Executive's annual base salary under this Agreement including, without
limitation, pursuant to this paragraph 3.1 and the termination provisions of
Article 7, with respect to the period beginning on the Effective Date and ending
on December 31, 1999.
3.2 Signing Bonus. On the Effective Date, Executive shall be entitled
to a signing bonus in the amount of $580,000, which Company shall cause to be
credited to Executive's Deferred Compensation Account under the Seagull Energy
Corporation Supplemental Benefit Plan (the "SBP"), and which Executive agrees
shall be credited with Phantom Stock (as such term is defined in the SBP) for at
least one year following the Effective Date.
3.3 Annual Bonuses. For the 1999 performance year and subsequent
performance years ending during the period of this Agreement, Executive shall be
eligible to receive an annual bonus under the Seagull Energy Corporation
Executive Incentive Plan (or any successor thereto) (the "EIP") as established
from time to time by the Compensation Committee, based on an Incentive Target
(as such term is used in the EIP) of 60% of Executive's annual base salary (or
the annual base salary that Executive would have received if he had not received
an Option in lieu of such annual salary pursuant to paragraph 3.1), with a
Maximum Incentive (as such term is used in the EIP) of 120% of Executive's
annual base salary (or the annual base salary that Executive would have received
if he had not received an Option in lieu of such annual salary pursuant to
paragraph 3.1).
3.4 Initial Stock Option. On the Effective Date, Company shall grant to
Executive an option (the "Initial Option") to purchase 191,996 shares of Stock
pursuant to the Seagull Energy Corporation 1995 Omnibus Stock Plan (the "1995
Plan"). The purchase price for each share of Stock subject to the Initial Option
shall be equal to the Fair Market Value (as such term is defined in the 1995
Plan) of a share of Stock as of the Effective Date. Subject to the terms of the
1995 Plan and the agreement, in the forms attached hereto as Exhibits A2 and A3,
to be executed by Company and Executive evidencing the Initial Option, the
Initial Option shall (i) be an incentive stock option to the extent permitted
under applicable law and a nonqualified stock option to the extent of the
remainder of the grant, if any, (ii) have a ten-year term, (iii) become
exercisable in 25% increments on each of the first four anniversaries of the
Effective Date.
3.5 Initial Restricted Stock Awards. Company shall grant to Executive
300,000 restricted shares of Stock (the "Initial Restricted Stock Awards") as
follows:
(i) Effective as of the Effective Date, Company shall grant to
Executive 58,004 restricted shares of Stock pursuant to the 1995 Plan.
Subject to the terms of the Plan and the agreement, in the form
attached hereto as Exhibit B1, to be executed by Company and Executive
evidencing such award, such award shall contain forfeiture restrictions
that shall lapse with respect to (A) 25,000 of the shares subject
thereto on December 31, 1998, (B) the remainder of the shares subject
thereto, if any, in 331/3% increments on each of the first three
anniversaries of the Effective Date.
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(ii) Effective as of January 1, 1999, Company shall grant to
Executive 241,996 restricted shares of Stock pursuant to the 1998 Plan.
Subject to the terms of the Plan and the agreement, in the form
attached hereto as Exhibit B2, to be executed by Company and Executive
evidencing such award, such award shall contain forfeiture restrictions
that shall lapse with respect to (A) 1/3 of the shares subject thereto
on the first anniversary of the Effective Date, (B) an additional 1/3
of the shares subject thereto on the second anniversary of the
Effective Date, and (C) and an additional 1/3 of the shares subject
thereto on the third anniversary of the Effective Date.
3.6 Subsequent Stock Options. On each of the first, second and third
anniversaries of the Effective Date, Company shall grant to Executive options to
purchase a number of shares of Stock (the "Subsequent Options") pursuant to the
1998 Plan or any other appropriate Company stock plan (the "Company Stock Plan")
in accordance with the following schedule:
<TABLE>
<S> <C>
Anniversary of Effective Date Number of Shares
First Anniversary 75,000
Second Anniversary 50,000
Third Anniversary 25,000
</TABLE>
The purchase price for each share of Stock subject to each Subsequent Option
shall be equal to the Fair Market Value (as such term is defined in the Company
Stock Plan) of a share of Stock as of the date of grant of such Subsequent
Option. Subject to the terms of the Company Stock Plan and the agreement to be
executed by Company and Executive evidencing each Subsequent Option, each
Subsequent Option shall (i) be an incentive stock option to the extent permitted
under applicable law and a nonqualified stock option to the extent of the
remainder of the grant, if any, (ii) have a ten-year term, (iii) become
exercisable in 25% increments on each of the first four anniversaries of the
date of grant of such Subsequent Option. To the extent the grant of a Subsequent
Stock Option would exceed the applicable limitations under any Company Stock
Plan, such grant or portion thereof shall be subject to the approval by the
shareholders of Company of an amendment to such Company Stock Plan that would
permit such grant or portion thereof. In the event of any such limitation,
Company shall (a) cause the 1998 Plan to be amended, (b) submit such amendment
to Company's shareholders at Company's 1999 Annual Meeting of Shareholders and
(c) use its reasonable best efforts to secure approval by the shareholders of
Company of such amendment.
3.7 Subsequent Restricted Stock Awards. On each of the first, second
and third anniversaries of the Effective Date, Company shall grant to Executive
a number of restricted shares of Stock (the "Subsequent Restricted Stock
Awards") in accordance with the following schedule:
<TABLE>
<S> <C>
Anniversary of Effective Date Number of Restricted Shares
First Anniversary 25,000
Second Anniversary 50,000
Third Anniversary 75,000
</TABLE>
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Subject to the terms of the agreement to be executed by Company and Executive
evidencing each Subsequent Restricted Stock Award, each Subsequent Restricted
Stock Award shall contain forfeiture restrictions that shall lapse with respect
to (i) 1/3 of the shares subject thereto on the first anniversary of the grant
thereof, (ii) an additional 1/3 of the shares subject thereto on the second
anniversary of the grant thereof, and (iii) and an additional 1/3 of the shares
subject thereto on the third anniversary of the grant thereof. Company shall
file a registration statement on Form S-8 (or other applicable form) with the
Securities and Exchange Commission in connection with Executive's receipt of
shares pursuant to the Subsequent Restricted Stock Awards.
3.8 Life Insurance. Company will provide, or cause to be provided, to
Executive, at no cost to Executive, $1,0000,000 of term life insurance coverage
payable to a beneficiary to be designated in writing by Executive, together with
a tax gross-up payment in the amount necessary to offset any applicable taxes
imposed on Executive by reason of such coverage and such tax gross-up payment.
Notwithstanding the foregoing, however, if Executive fails to qualify medically
for such insurance coverage at standard rates for his age group, Company shall
not be required to provide such coverage unless Executive pays the cost of such
coverage that is in excess of the standard rate cost. Such insurance, including
replacement or substitute policies therefor, shall be maintained for the same
period as Executive's compensation hereunder is continued pursuant to Article 7
hereof.
3.9 Other Perquisites. During his employment hereunder, Executive
shall be afforded the following benefits as incidences of his employment:
(i) Business and Entertainment Expenses - Subject to Company's
standard policies and procedures with respect to expense reimbursement
as applied to its executive employees generally, Company shall
reimburse Executive for, or pay on behalf of Executive, reasonable and
appropriate expenses incurred by Executive for business related
purposes, including dues and fees to industry and professional
organizations and costs of entertainment and business development.
(ii) Club Memberships - In addition to the other business and
entertainment expenses reimbursable pursuant to subparagraph 3.9(i)
above, Company shall pay (A) 50% of the initiation fee for the Castle
Pines Golf Club and (B) the membership fees, dues and assessments for
(1) the Castle Pines Golf Club, (2) the River Oaks Country Club, (3)
the Merit Club in Chicago, Illinois, (4) a luncheon club located in
Houston, Texas, to be selected by Executive, and (5) such other
luncheon or country club memberships as the Compensation Committee may
deem to be justified by business usage. The foregoing notwithstanding,
Company shall not be obligated to buy from Executive, or to reimburse
Executive for the price of, his membership in any club of which
Executive is a member prior to the Effective Date, other than the
Castle Pines Golf Club.
(iii) Annual Physical Examination - Company shall pay for the
cost of an annual physical examination to be conducted by a doctor or
clinic of Executive's choosing in Houston, Texas.
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(iv) Parking - Company shall provide at no expense to
Executive a parking place convenient to Executive's office.
(v) Executive Supplemental Retirement Plan - Executive shall
be allowed to participate in the Company's Executive Supplemental
Retirement Plan (the "ESRP"). For purposes of the ESRP, Executive's
Applicable Percentage (as such term is defined in the ESRP) shall be
50% and Executive's Vested Interest (as such term is defined in the
ESRP) in his benefit under the ESRP shall be determined in accordance
with the following schedule:
<TABLE>
<S> <C>
Vested Interest
Prior to First Anniversary of Effective Date 50%
As of First Anniversary of Effective Date* 60%
As of Second Anniversary of Effective Date* 70%
As of Third Anniversary of Effective Date* 80%
As of Fourth Anniversary of Effective Date* 90%
As of Fifth Anniversary of Effective Date* 100%
</TABLE>
*provided that Executive is employed by Company on such date and has
been so employed by Company on a full-time basis during the
twelve-month period immediately preceding such date.
Notwithstanding the foregoing, Executive's Vested Interest in his
benefit under the ESRP shall be 100% in the event of his Involuntary
Termination (as such term is defined in the Severance Agreement between
Company and Executive (the "Severance Agreement")) within two years
after the date upon which a Change of Control (as such term is defined
in the Severance Agreement) occurs. Further, Company shall cause the
ESRP to be amended (A) to expand the definition of the term
"Compensation" in Section 1.01(8) with respect to Executive to include
(1) "deemed salary" equal to the annual base salary that Executive
would have received if he had not received an Option in lieu of such
annual salary pursuant to paragraph 3.1 and (2) bonuses under the EIP,
(B) to remove Section 5.02, which provides for the forfeiture of a
Member's Accrued Benefit (as such term is defined in the ESRP) for
competition with the Company and (C) to expand Section 7.01 to provide
that no amendment to the ESRP shall deprive any Member of any Accrued
Benefit under the ESRP to the extent that such Member has a Vested
Interest in such Accrued Benefit at the time of such amendment.
(vi) Supplemental Benefit Plan - Executive shall be allowed to
participate in the SBP. Further, Executive shall receive the
Supplemental Thrift Benefit pursuant to Section 3.2(a) of the SBP.
Finally, Company shall cause the SBP to be amended (A) to remove
Section 6.4 thereof, which provides for reductions of benefits to avoid
imposition of the sanctions imposed under sections 280G and 4999 of the
Code and (B) to provide for the crediting of an additional benefit
thereunder which, with respect to Executive, shall not be less than the
Supplemental Thrift Benefit and the
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Supplemental ESOP Benefit under the SBP, the Employer Contributions
under the Seagull Thrift Plan and the Employer Contributions under the
Seagull Employee Stock Ownership Plan that Executive would have
received if he had made the maximum allowable contributions under such
plans, and based on the annual base salary that Executive would have
received if he had not received an Option in lieu of such annual base
salary pursuant to paragraph 3.1.
(vii) Other Company Benefits - Executive and, to the extent
applicable, Executive's spouse, dependents and beneficiaries, shall be
allowed to participate in all benefits, plans and programs, including
improvements or modifications of the same, which are now, or may
hereafter be, available to other executive employees of Company. Such
benefits, plans and programs shall include, without limitation, any
profit sharing plan, thrift plan, employee stock ownership plan, health
insurance or health care plan, life insurance, disability insurance,
pension plan, supplemental retirement plan, vacation and sick leave
plan, and the like which may be maintained by Company. Company shall
not, however, by reason of this paragraph be obligated to institute,
maintain, or refrain from changing, amending, or discontinuing, any
such benefit plan or program, so long as such changes are similarly
applicable to executive employees generally. In the event that
Executive (or his beneficiaries) are provided welfare benefits under
Company's benefit plans that are less than the welfare benefits that
would have been provided to Executive (or his beneficiaries) if
Executive had not received an Option in lieu of annual base salary
pursuant to paragraph 3.1, Company shall provide, or cause to be
provided, to Executive (or his beneficiaries) any such welfare benefits
lost as a result of Executive's receipt of the Option in lieu of annual
base salary.
(viii) Vacation - During each year of his employment,
Executive shall be entitled to five weeks of paid vacation in
accordance with Company's vacation policy.
(ix) Tax and Financial Planning - Company shall reimburse
Executive for reasonable expenses incurred by Executive for tax return
preparation and financial planning.
ARTICLE 4: PROTECTION OF INFORMATION
4.1 Disclosure to Executive. Company shall disclose to Executive, or
place Executive in a position to have access to or develop, trade secrets or
confidential information of Company or its affiliates; and/or shall entrust
Executive with business opportunities of Company or its affiliates; and/or shall
place Executive in a position to develop business good will on behalf of Company
or its affiliates.
4.2 Disclosure to and Property of Company. All information, ideas,
concepts, improvements, discoveries, and inventions, whether patentable or not,
which are conceived, made, developed, or acquired by Executive, individually or
in conjunction with others, during Executive's employment by Company (whether
during business hours or otherwise and whether on Company's
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premises or otherwise) which relate to Company's business, products, or services
(including, without limitation, all such information relating to corporate
opportunities, research, financial and sales data, pricing terms, evaluations,
opinions, interpretations, acquisitions prospects, the identity of customers or
their requirements, the identity of key contacts within the customer's
organizations or within the organization of acquisition prospects, or marketing
and merchandising techniques, prospective names, and marks) shall be disclosed
to Company and are and shall be the sole and exclusive property of Company.
Moreover, all documents, drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, E-mail,
voice mail, electronic databases, maps, and all other writings or materials of
any type embodying any of such information, ideas, concepts, improvements,
discoveries, and inventions are and shall be the sole and exclusive property of
Company. Upon termination of Executive's employment by Company, for any reason,
Executive promptly shall deliver the same, and all copies thereof, to Company.
4.3 No Unauthorized Use or Disclosure. Executive will not, at any time
during or after Executive's employment by Company, make any unauthorized
disclosure of any confidential business information or trade secrets of Company
or its affiliates, or make any use thereof, except in the carrying out of
Executive's employment responsibilities hereunder. Affiliates of the Company
shall be third party beneficiaries of Executive's obligations under this
paragraph. As a result of Executive's employment by Company, Executive may also
from time to time have access to, or knowledge of, confidential business
information or trade secrets of third parties, such as customers, suppliers,
partners, joint venturers, and the like, of Company and its affiliates.
Executive also agrees to preserve and protect the confidentiality of such third
party confidential information and trade secrets to the same extent, and on the
same basis, as Company's confidential business information and trade secrets.
4.4 Ownership by Company. If, during Executive's employment by Company,
Executive creates any work of authorship fixed in any tangible medium of
expression which is the subject matter of copyright (such as videotapes, written
presentations, or acquisitions, computer programs, E-mail, voice mail,
electronic databases, drawings, maps, architectural renditions, models, manuals,
brochures, or the like) relating to Company's business, products, or services,
whether such work is created solely by Executive or jointly with others (whether
during business hours or otherwise and whether on Company's premises or
otherwise), Company shall be deemed the author of such work if the work is
prepared by Executive in the scope of Executive's employment; or, if the work is
not prepared by Executive within the scope of Executive's employment but is
specially ordered by Company as a contribution to a collective work, as a part
of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional text, then the work
shall be considered to be work made for hire and Company shall be the author of
the work. If such work relates in any way to the business of Company but is
neither prepared by Executive within the scope of Executive's employment nor a
work specially ordered that is deemed to be a work made for hire, then Executive
hereby agrees to assign, and by these presents does assign, to Company all of
Executive's worldwide right, title, and interest in and to such work and all
rights of copyright therein.
4.5 Assistance by Executive. Both during the period of Executive's
employment by Company and thereafter, Executive shall assist Company and its
nominee, at any time, in the protection of Company's worldwide right, title, and
interest in and to information, ideas, concepts,
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improvements, discoveries, and inventions, and its copyrighted works, including
without limitation, the execution of all formal assignment documents requested
by Company or its nominee and the execution of all lawful oaths and applications
for patents and registration of copyright in the United States and foreign
countries.
4.6 Remedies. Executive acknowledges that money damages would not be
sufficient remedy for any breach of this Article by Executive, and Company shall
be entitled to enforce the provisions of this Article by terminating payments
then owing to Executive under this Agreement and/or to specific performance and
injunctive relief as remedies for such breach or any threatened breach;
provided, however, that payments then owing to Executive may not be terminated
unless the Board of Directors determines that such breach by Executive has
directly resulted or could reasonably be expected to result in a material
adverse economic impact on the Company's business. Such remedies shall not be
deemed the exclusive remedies for a breach of this Article, but shall be in
addition to all remedies available at law or in equity to Company, including the
recovery of damages from Executive and his agents involved in such breach and
remedies available to Company pursuant to this and other agreements with
Executive.
ARTICLE 5: NONCOMPETITION AND NONSOLICITATION
5.1 In General. As part of the consideration for the compensation and
benefits to be paid to Executive hereunder; to protect the trade secrets and
confidential information of Company and its affiliates that have been and will
in the future be disclosed or entrusted to Executive, the business good will of
Company and its affiliates that has been and will in the future be developed in
Executive, or the business opportunities that have been and will in the future
be disclosed or entrusted to Executive by Company and its affiliates; and as an
additional incentive for Company to enter into this Agreement, Company and
Executive agree to the noncompetition and the nonsolicitation obligations
hereunder.
5.2 Noncompetition. Executive shall not, directly or indirectly for
Executive or for others, in any geographic area or market where Company or any
of its affiliates are conducting any business or have during the previous twelve
months conducted such business:
(i) engage in any business competitive with the business
conducted by Company; or
(ii) render advice or services to, or otherwise assist, any
other person, association, or entity who is engaged, directly or
indirectly, in any business competitive with the business conducted by
Company with respect to such competitive business.
These noncompetition obligations shall apply (A) during the period that
Executive is employed by Company, (B) during any period after Executive's
termination of employment by Company for a reason encompassed by paragraph
2.2(ii) when Company is providing Executive with Termination Benefits pursuant
to Article 7, and (C) if Executive terminates his employment with Company for a
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reason encompassed by paragraph 2.3(ii) within two years after the Effective
Date, during the two-year period commencing on the date of Executive's
termination of employment.
5.3 Nonsolicitation. Executive shall not, directly or indirectly for
Executive or for others, in any geographic area or market where Company or any
of its affiliates are conducting any business or have during the previous twelve
months conducted such business, induce any employee of Company or any of its
affiliates to terminate his or her employment with Company or such affiliates,
or hire or assist in the hiring of any such employee by any person, association,
or entity not affiliated with Company. These nonsolicitation obligations shall
apply during the period that Executive is employed by Company and during the
one-year period commencing on the date of Executive's termination of employment
for any reason. Notwithstanding the foregoing, the provisions of this paragraph
5.3 shall not restrict the ability of Company to take actions with respect to
the employment or the termination of employment of any of its employees, or for
Executive to participate in any such actions in his capacity as an officer of
Company.
5.4 Enforcement and Remedies. Executive acknowledges that money damages
would not be sufficient remedy for any breach of this Article by Executive, and
Company shall be entitled to enforce the provisions of this Article by
terminating any payments then owing to Executive under this Agreement and/or to
specific performance and injunctive relief as remedies for such breach or any
threatened breach; provided, however, that payments then owing to Executive may
not be terminated unless the Board of Directors determines that such breach by
Executive has directly resulted or could reasonably be expected to result in a
material adverse economic impact on the Company's business. Such remedies shall
not be deemed the exclusive remedies for a breach of this Article, but shall be
in addition to all remedies available at law or in equity to Company, including
without limitation, the recovery of damages from Executive and Executive's
agents involved in such breach and remedies available to Company pursuant to
this and other agreements with Executive.
5.5 Reformation. It is expressly understood and agreed that Company and
Executive consider the restrictions contained in this Article to be reasonable
and necessary to protect the proprietary information of Company. Nevertheless,
if any of the aforesaid restrictions are found by a court having jurisdiction to
be unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such court so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
ARTICLE 6: STATEMENTS CONCERNING COMPANY
6.1 In General. Executive shall refrain, both during the employment
relationship and after the employment relationship terminates, from publishing
any oral or written statements about Company, any of its affiliates, or any of
such entities' officers, employees, agents or representatives that are
slanderous, libelous, or defamatory; or that disclose private or confidential
information about Company, any of its affiliates, or any of such entities'
business affairs, officers, employees, agents, or representatives; or that
constitute an intrusion into the seclusion or private lives of any of such
entities' officers, employees, agents, or representatives; or that give rise to
unreasonable adverse publicity about the private lives of any of such entities'
officers, employees, agents, or representatives; or that place Company, any of
its affiliates, or any of such entities' officers, employees, agents, or
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representatives in a false light before the public; or that constitute a
misappropriation of the name or likeness of Company, any of its affiliates, or
any of such entities' officers, employees, agents, or representatives, except
where any of such actions are disclosures required by operation of law or
judicial process. A violation or threatened violation of this prohibition may be
enjoined by the courts. The rights afforded Company and its affiliates under
this provision are in addition to any and all rights and remedies otherwise
afforded by law.
ARTICLE 7: EFFECT OF TERMINATION ON COMPENSATION
7.1 By Expiration. If Executive's employment hereunder shall terminate
upon expiration of the term provided in paragraph 2.1 hereof, then all
compensation and all benefits to Executive hereunder shall terminate
contemporaneously with termination of his employment.
7.2 By Company. If Executive's employment hereunder shall be terminated
by Company prior to expiration of the term provided in paragraph 2.1, then, upon
such termination, regardless of the reason therefor, all compensation and
benefits to Executive hereunder shall terminate contemporaneously with the
termination of such employment; provided, however, that if such termination
shall be for any reason other than those encompassed by paragraphs 2.2 (iii) or
(iv), then Company shall provide Executive with the Termination Benefits. For
purposes of this Agreement, the term "Termination Benefits" shall mean the
following: (i) Company shall continue to pay to Executive his base salary then
in effect pursuant to paragraph 3.1 (but not less than $500,000 for the period
beginning on January 1, 2000) for the unexpired portion of the term set forth in
paragraph 2.1; (ii) all outstanding stock options granted by Company to
Executive shall become immediately exercisable in full upon Executive's
termination of employment and shall remain exercisable thereafter for the period
provided pursuant to the terms thereof, which period shall not be less than
twelve months (but in no event shall any such stock option be exercisable after
the expiration of the original term of such stock option); (iii) the forfeiture
restrictions with respect to all outstanding restricted stock issued to
Executive shall lapse upon Executive's termination of employment, (iv) within
five business days after the date of Executive's termination of employment,
Company shall pay to Executive a lump sum cash payment equal to the sum of (A)
the product of Executive's Incentive Target set forth in paragraph 3.3
multiplied by Executive's annual base salary at the time of such termination
(the "Target Bonus") and (B) the Target Bonus amount prorated for the number of
months in the performance year of Executive's termination of employment that
have elapsed prior to such termination, (v) the life insurance coverage and
annual tax gross-up pursuant to paragraph 3.8 shall continue to be provided to
Executive for the unexpired portion of the term set forth in paragraph 2.1, (vi)
Company shall continue to pay to Executive his club dues pursuant to paragraph
3.9(ii) for the unexpired portion of the term set forth in paragraph 2.1, (vii)
within five business days after the date of Executive's termination of
employment, Company shall pay to Executive a lump sum cash payment equal to the
amounts credited to his accounts under the Seagull Thrift Plan, the Seagull
Employee Stock Ownership Plan and the SBP that are forfeitable in accordance
with the terms of such plans and (viii) during the period, if any (but in no
event for more
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than 18 months after the date of Executive's termination of employment), that
Executive elects to continue coverage for himself and any of his eligible
dependents under Company's group health plans pursuant to the continuation of
coverage provisions contained in Sections 601 through 608 of the Employee
Retirement Income Security Act of 1974, as amended, Executive's premiums for
such coverage shall be no greater than that charged by Company generally to its
active executive employees for coverage under such plans. In the event the
Company does not fulfill its obligations under paragraph 1.1 to employ Executive
and appoint him to the positions set forth in paragraph 1.2, then Executive
shall be entitled to the Initial Option, which shall be fully exercisable, and
the Initial Restricted Stock Awards (or to the extent such Initial Restricted
Stock Awards cannot be granted to Executive, the economic value thereof), which
shall be fully nonforfeitable, and to Termination Benefits as if Executive's
employment terminated on the Effective Date.
7.3 By Executive. If Executive's employment hereunder shall be
terminated by Executive prior to expiration of the term provided in paragraph
2.1, then, upon such termination, regardless of the reason therefor, all
compensation and benefits to Executive hereunder shall terminate
contemporaneously with the termination of such employment; provided, however,
that if such termination shall occur for the reason encompassed by paragraph
2.3(i), then Company shall provide Executive with the Termination Benefits.
7.5 No Duty to Mitigate Losses. Executive shall have no duty to find
new employment following the termination of his employment under circumstances
which require Company to pay any amount to Executive pursuant to this Article 7.
Any salary or remuneration received by Executive from a third party for the
providing of personal services (whether by employment or by functioning as an
independent contractor) following the termination of his employment under
circumstances pursuant to which this Article 7 apply shall not reduce Company's
obligation to make a payment to Executive (or the amount of such payment)
pursuant to the terms of this Article 7. Notwithstanding the preceding sentence,
if, and to the extent that, following the termination of his employment under
circumstances pursuant to which this Article 7 apply, Executive becomes entitled
to receive benefits from a third party that are comparable to the Termination
Benefits set forth in paragraphs 7.2(v), (vi) and (viii), Company's obligation
to provide such Termination Benefits to Executive shall cease.
7.6 Liquidated Damages. In light of the difficulties in estimating the
damages for an early termination of this Agreement, Company and Executive hereby
agree that the payments, if any, to be received by Executive pursuant to this
Article 7 shall be received by Executive as liquidated damages.
7.7 Incentive and Deferred Compensation. This Agreement governs the
rights and obligations of Executive and Company with respect to Executive's base
salary and certain perquisites of employment. Except as expressly provided
herein, Executive's rights and obligations both during the term of his
employment and thereafter with respect to stock options, restricted stock,
incentive and deferred compensation, life insurance policies insuring the life
of Executive, and other benefits under the plans and programs maintained by
Company shall be governed by the separate agreements, plans and other documents
and instruments governing such matters. Without limiting the scope of the
preceding sentence, Executive acknowledges that he has no right to grants of
stock options or
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restricted stock either under the stock plans maintained by the Company or
otherwise other than (i) as provided in paragraphs 3.1, 3.4, 3.5, 3.6 or 3.7
hereof or (ii) in the discretion of the Compensation Committee or the Board of
Directors.
ARTICLE 8: MISCELLANEOUS
8.1 Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Company to: Seagull Energy Corporation
1700 First City Tower
1001 Fannin
Houston, Texas 77002
Attention: Chairman of the Board of Directors
If to Executive to: James T. Hackett
3372 Del Monte
Houston, Texas 77019
or to such other address as either party may furnish to the other in writing in
accordance herewith, except that notices or changes of address shall be
effective only upon receipt.
8.2 Applicable Law. This Agreement is entered into under, and
shall be governed for all purposes by, the laws of the State of Texas.
8.3 No Waiver. No failure by either party hereto at any time to give
notice of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
8.4 Severability. If a court of competent jurisdiction determines that
any provision of this Agreement is invalid or unenforceable, then the invalidity
or unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
8.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
8.6 Withholding of Taxes and Other Employee Deductions. Company may
withhold from any benefits and payments made pursuant to this Agreement all
federal, state, city and other taxes as may be required pursuant to any law or
governmental regulation or ruling and all other normal employee deductions made
with respect to Company's employees generally. Company shall
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cause the agreements evidencing the Initial Restricted Stock Awards and the
Subsequent Restricted Stock Awards to provide that, upon lapse of the forfeiture
restrictions contained therein, Company will withhold (a) at Executive's
election, shares of Stock subject to such Awards to satisfy Company's
withholding obligation under applicable tax laws or regulations and (b) such
additional shares of Stock subject to such Awards as may be requested in writing
by Executive.
8.7 Headings. The paragraph headings have been inserted for purposes of
convenience and shall not be used for interpretive purposes.
8.8 Gender and Plurals. Wherever the context so requires, the masculine
gender includes the feminine or neuter, and the singular number includes the
plural and conversely.
8.9 Affiliate. As used in this Agreement, the term "affiliate" shall
mean any entity which owns or controls, is owned or controlled by, or is under
common ownership or control with, Company.
8.10 Assignment. This Agreement shall be binding upon and inure to the
benefit of Company and any successor of Company, by merger or otherwise. Except
as provided in the preceding sentence, this Agreement, and the rights and
obligations of the parties hereunder, are personal and neither this Agreement,
nor any right, benefit, or obligation of either party hereto, shall be subject
to voluntary or involuntary assignment, alienation or transfer, whether by
operation of law or otherwise, without the prior written consent of the other
party.
8.11 Term. This Agreement has a term co-extensive with the term of
employment provided in paragraph 2.1. Termination shall not affect any right or
obligation of any party which is accrued or vested prior to such termination.
Without limiting the scope of the preceding sentence, the provisions of Articles
4, 5 and 6 shall survive any termination of the employment relationship and/or
of this Agreement.
8.12 Entire Agreement. Except as provided in (i) the written benefit
plans and programs and agreements referenced in Article 3, (ii) the Severance
Agreement between Company and Executive dated August 25, 1998 (the "Severance
Agreement"), and (iii) any signed written agreement contemporaneously or
hereafter executed by Company and Executive, this Agreement constitutes the
entire agreement of the parties with regard to the subject matter hereof, and
contains all the covenants, promises, representations, warranties and agreements
between the parties with respect to employment of Executive by Company. Without
limiting the scope of the preceding sentence, all prior understandings and
agreements among the parties hereto relating to the subject matter hereof are
hereby null and void and of no further force and effect. Further, without
limiting the scope of this paragraph, this Agreement supersedes and replaces the
Employment Agreement between Company and Executive dated August 25, 1998 (the
"Prior Agreement") in its entirety and the Prior Agreement shall be null and
void and of no further force and effect, and any references to the Prior
Agreement in any other agreement including, without limitation, the Severance
Agreement, shall be deemed to be references to this Agreement. Any modification
of this Agreement will be effective only if it is in writing and signed by the
party to be charged.
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8.13 Representation By Executive. Executive hereby represents and
warrants to Company that, as of August 25, 1998 and the date of execution of
this Agreement, he is not a party to any employment or other agreement with any
third party which would preclude him from accepting employment with Company and
performing his obligations under this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the 16th day of September, 1998 to be effective as of the Effective Date.
SEAGULL ENERGY CORPORATION
By: /s/ William L. Transier
Name: William L. Transier
Title: Executive Vice President and
Chief Financial Officer
"COMPANY"
/s/ James T. Hackett
James T. Hackett
"EXECUTIVE"
VEHOU02:119869.1
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SEAGULL ENERGY CORPORATION
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
MEMBERSHIP AGREEMENT
WHEREAS, JAMES T. HACKETT ("Employee") has been selected as eligible to
become a Member of the SEAGULL ENERGY CORPORATION EXECUTIVE SUPPLEMENT
RETIREMENT PLAN (the "Plan"); and
WHEREAS, the Plan provides that each Member shall execute a Membership
Agreement setting forth the terms and conditions of his membership; and
WHEREAS, Employee desires to become a Member of the Plan on the terms
and conditions set forth therein, in the Employment Agreement between the
Company and Employee (the "Employment Agreement"), and in this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Employee agrees to become a Member of the Plan, effective as of
September 16, 1998.
2. For purposes of Section 1.01(5) of the Plan, Employee's considered
period shall be his last thirty-six consecutive months of employment or, if
less, all of his completed months of employment.
3. For purposes of Section 1.01(8) of the Plan, Employee's Compensation
shall include (a) "deemed salary" equal to the base salary that Employee would
have received if he had not received an option to purchase common stock of the
Company in lieu of such salary pursuant to paragraph 3.1 of the Employment
Agreement and (b) Employee's annual bonus under the Seagull Energy Corporation
Executive Incentive Plan (or any successor thereto).
4. Employee's Applicable Percentage under the Plan shall be 50%.
5. Employee's Vested Interest in his benefit under the Plan shall be
determined in accordance with the following Vesting Schedule:
<TABLE>
<S> <C>
Vested Interest
Prior to September 16, 1999 50%
As of September 16, 1999* 60%
As of September 16, 2000* 70%
As of September 16, 2001* 80%
As of September 16, 2002* 90%
As of September 16, 2003* 100%
</TABLE>
*provided that Employee is employed by Company on such date and has
been so employed by Company on a full-time basis during the
twelve-month period immediately preceding such date.
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<PAGE>
Notwithstanding the foregoing, Employee's Vested Interest in his benefit under
the Plan shall be 100% in the event of his Involuntary Termination (as such term
is defined in the Severance Agreement between the Company and Employee (the
"Severance Agreement")) within two years after the date upon which a Change of
Control (as such term is defined in the Severance Agreement) occurs.
6. Section 5.02 of the Plan shall not apply with respect to Employee.
EXECUTED this 4th day of November, 1998.
SEAGULL ENERGY CORPORATION
By: /s/ William L. Transier
Name: William L. Transier
Title: Executive Vice President and
Chief Financial Officer
EMPLOYEE
/s/ James T. Hackett
James T. Hackett
VEHOU02:121810.1
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SEVERANCE AGREEMENT
AGREEMENT between SEAGULL ENERGY CORPORATION, a Texas corporation
(the "Company"), and James T. Hackett ("Executive"),
W I T N E S S E T H :
WHEREAS, the Company desires to retain certain key employee personnel
and, accordingly, the Board of Directors of the Company (the "Board") has
approved the Company entering into a severance agreement with Executive in order
to encourage his continued service to the Company; and
WHEREAS, Executive is prepared to commit such services in return for
specific arrangements with respect to severance compensation and other benefits;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the Company and Executive agree as follows:
1. Definitions.
(a) "Change in Duties" shall mean the occurrence, within two
years after the date upon which a Change of Control occurs, of any one or more
of the following:
(i) A significant reduction in the duties of
Executive from those applicable to him immediately prior to the date on
which a Change of Control occurs;
(ii) A reduction in Executive's annual salary or
target opportunity under any applicable bonus or incentive compensation
plan from that provided to him immediately prior to the date on which a
Change of Control occurs;
(iii) Receipt of employee benefits (including but not
limited to medical, dental, life insurance, accidental, death, and
dismemberment, and long-term disability plans) and perquisites by
Executive that are materially inconsistent with the employee benefits
and perquisites provided by the Company to executives with comparable
duties;
(iv) A change in the location of Executive's
principal place of employment by the Company by more than 50 miles from
the location where he was principally employed immediately prior to the
date on which a Change of Control occurs; or
(v) A termination encompassed by paragraph 2.3(i) of
the Employment Agreement dated August 25, 1998, between Executive and
the Company.
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(b) "Change of Control" means the occurrence of either of the
following events:
(i) The Company (A) shall not be the surviving entity
in any merger, consolidation or other reorganization (or survives only
as a subsidiary of an entity other than a previously wholly-owned
subsidiary of the Company) or (B) is to be dissolved and liquidated,
and as a result of or in connection such transaction, the persons who
were directors of the Company before such transaction shall cease to
constitute a majority of the Board;
(ii) Any person or entity, including a "group" as
contemplated by Section 13(d)(3) of the Securities Exchange Act of
1934, as amended, acquires or gains ownership or control (including,
without limitation, power to vote) of 20% or more of the outstanding
shares of the Company's voting stock (based upon voting power), and as
a result of or in connection with such transaction, the persons who
were directors of the Company before such transaction shall cease to
constitute a majority of the Board; or
(iii) The Company sells all or substantially all of
the assets of the Company to any other person or entity (other than a
wholly-owned subsidiary of the Company) in a transaction that requires
shareholder approval pursuant to the Texas Business Corporation Act.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Compensation" shall mean the greater of:
(i) Executive's annual salary plus his Targeted EIP
Award immediately prior to the date on which a Change of Control
occurs, or
(ii) Executive's annual salary plus his Targeted EIP
Award at the time of his Involuntary Termination.
(e) "EIP" shall mean the Seagull Energy Corporation Executive
Incentive Plan or any successor thereto.
(f) "Involuntary Termination" shall mean any termination of
Executive's employment with the Company which:
(i) does not result from a resignation by Executive
(other than a resignation pursuant to clause (ii) of this subparagraph
(f) or a resignation at the request of the Company); or
(ii) results from a resignation by Executive on or
before the date which is sixty days after the date upon which Executive
receives notice of a Change in Duties;
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provided, however, the term "Involuntary Termination" shall not include a
Termination for Cause or any termination as a result of death, disability under
circumstances entitling him to benefits under the Company's long-term disability
plan, or Retirement.
(g) "Retirement" shall mean Executive's voluntary resignation
on or after the date he reaches age sixty-five (other than a resignation within
sixty days after the date Executive receives notice of a Change in Duties or a
resignation at the request of the Company).
(h) "Severance Amount" shall mean an amount equal to 2.99
times Executive's Compensation, reduced by the present value of any salary
continuation or bonus amounts payable to Executive under the Employment
Agreement between the Company and the Executive dated August 25, 1998 or any
successor thereto. Such present value shall be determined using the rate of
interest referred to in Paragraph 4 hereof as of the last day of Executive's
employment with the Company.
(i) "Targeted EIP Award" shall mean Executive's Incentive
Target as set forth under the EIP in effect for the year with respect to which
such award is being determined, if any, or for the last preceding year in which
an EIP was in effect, expressed as a dollar amount based on such Executive's
annual salary for such year.
(j) "Termination for Cause" shall mean termination of
Executive's employment by the Company (or its subsidiaries) by reason of
Executive's gross negligence, gross neglect or willful misconduct in the
performance of his duties or Executive's final conviction of a felony or of a
misdemeanor involving moral turpitude, excluding misdemeanor convictions
relating to the operation of a motor vehicle.
(k) "Welfare Benefit Coverages" shall mean the medical,
dental, life insurance, accidental death and dismemberment and long-term
disability coverages provided by the Company to its active employees.
2. Services. Executive agrees that he will render services to the
Company (as well as any subsidiary thereof or successor thereto) during the
period of his employment to the best of his ability and in a prudent and
businesslike manner.
3. Severance Benefits. If Executive's employment by the Company or any
subsidiary thereof or successor thereto shall be subject to an Involuntary
Termination which occurs within two years after the date upon which a Change of
Control occurs, then Executive shall be entitled to receive, as additional
compensation for services rendered to the Company (including its subsidiaries),
the following severance benefits:
(a) A lump sum cash payment in an amount equal to Executive's
Severance Amount.
(b) A lump sum cash payment in an amount equal to the
remaining portion of any award to Executive under any prior years' EIP.
Further, if Executive's Involuntary Termination
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occurs on or after the date an award has been earned under the EIP, but prior to
the date such award is paid, Executive shall receive an additional lump sum cash
payment in an amount equal to his Targeted EIP Award.
(c) Executive shall be entitled to continue the Welfare
Benefit Coverages for himself and, where applicable, his eligible dependents
following his Involuntary Termination for up to thirty-six months, as long as
Executive continues either to pay the premiums paid by active employees of the
Company for such coverages or to pay the actual (nonsubsidized) cost of such
coverages for which the Company does not subsidize for active employees. Such
benefit rights shall apply only to those Welfare Benefit Coverages which the
Company has in effect from time to time for active employees, and the applicable
payments shall adjust as premiums for active employees of the Company or actual
costs, whichever is applicable, change. Welfare Benefit Coverage(s) shall
immediately end upon Executive's obtainment of new employment and eligibility
for similar Welfare Benefit Coverage(s) (with Executive being obligated
hereunder to promptly report such eligibility to the Company). Nothing herein
shall be deemed to adversely affect in any way the additional rights, after
consideration of this extension period, of Executive and his eligible dependents
to health care continuation coverage as required pursuant to Part 6 of Title I
of the Employee Retirement Income Security Act of 1974, as amended.
(d) Executive shall be entitled to receive out-placement
services in connection with obtaining new employment up to a maximum cost of
$6,000, or an equivalent cash payment, if Executive either has or is not seeking
new employment.
(e) The severance benefits payable under this Agreement shall
be paid to an Executive on or before the fifth day after the last day of
Executive's employment with the Company. Any severance benefits paid pursuant to
this Paragraph will be deemed to be a severance payment and not compensation for
purposes of determining benefits under the Company's qualified plans and shall
be subject to any required tax withholding.
4. Interest on Late Benefit Payments. If any payment provided for in
Paragraph 3(a) or 3(b) hereof is not made when due, the Company shall pay to
Executive interest on the amount payable from the date that such payment should
have been made under such paragraph until such payment is made, which interest
shall be calculated at a rate equal to two percentage points over the prime or
base rate of interest announced by Chase Bank of Texas, N.A. (or any successor
thereto) at its principal office in Houston, Texas and shall change when and as
any such change in such prime or base rate shall be announced by such bank.
5. Certain Additional Payments by the Company. Notwithstanding anything
to the contrary in this Agreement, in the event that any payment or distribution
by the Company to or for the benefit of Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest or penalties, are hereinafter
collectively referred to as the "Excise Tax"), the Company shall pay to
Executive an additional payment (a "Gross-up Payment") in an amount such that
after payment by Executive of all taxes (including any interest or penalties
imposed
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<PAGE>
with respect to such taxes), including any Excise Tax imposed on any Gross-up
Payment, Executive retains an amount of the Gross-up Payment equal to the Excise
Tax imposed upon the Payment. The Company and Executive shall make an initial
determination as to whether a Gross-up Payment is required and the amount of any
such Gross-up Payment. Executive shall notify the Company in writing of any
claim by the Internal Revenue Service which, if successful, would require the
Company to make a Gross-up Payment (or a Gross-up Payment in excess of that, if
any, initially determined by the Company and Executive) within ten days of the
receipt of such claim. The Company shall notify Executive in writing at least
ten days prior to the due date of any response required with respect to such
claim if it plans to contest the claim. If the Company decides to contest such
claim, Executive shall cooperate fully with the Company in such action;
provided, however, the Company shall bear and pay directly or indirectly all
costs and expenses (including additional interest and penalties) incurred in
connection with such action and shall indemnify and hold Executive harmless, on
an after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of the Company's action. If,
as a result of the Company's action with respect to a claim, Executive receives
a refund of any amount paid by the Company with respect to such claim, Executive
shall promptly pay such refund to the Company. If the Company fails to timely
notify Executive whether it will contest such claim or the Company determines
not to contest such claim, then the Company shall immediately pay to Executive
the portion of such claim, if any, which it has not previously paid to
Executive.
6. General.
(a) Term. The effective date of this Agreement is August 25,
1998. The initial term of this Agreement shall be the period beginning on said
effective date and ending on the two-year anniversary of said effective date.
Within sixty days after the expiration of this Agreement and within sixty days
after each successive two-year period of time thereafter that this Agreement is
in effect, the Company shall have the right to review this Agreement, and in its
sole discretion either continue and extend this Agreement, terminate this
Agreement, and/or offer Executive a different agreement. The Board (excluding
any member of the Board who is covered by this Agreement or by a similar
agreement with the Company) will vote on whether to so extend, terminate, and/or
offer Executive a different agreement and will notify Executive of such action
before the end of said sixty-day time period mentioned above. This Agreement
shall remain in effect until so terminated and/or modified by the Company.
Failure of the Board to take any action within said sixty-day time period shall
be considered as an extension of this Agreement for an additional two-year
period of time. Notwithstanding anything to the contrary contained in this
"sunset provision," it is agreed that if a Change of Control occurs while this
Agreement is in effect, then this Agreement shall not be subject to termination
or modification under this "sunset provision," and shall remain in force for a
period of two years after such Change of Control, and if within said two years
the contingency factors occur which would entitle Executive to the benefits as
provided herein, this Agreement shall remain in effect in accordance with its
terms. If, within such two years after a Change of Control, the contingency
factors that would entitle Executive to said benefits do not occur, thereupon
this two-year "sunset provision" shall again be applicable with the sixty-day
time period for Board action to thereafter commence at the expiration of said
two years after such Change of Control and on each two-year anniversary date
thereafter.
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(b) Indemnification. If Executive shall obtain any money
judgment or otherwise prevail with respect to any litigation brought by
Executive or the Company to enforce or interpret any provision contained herein,
the Company, to the fullest extent permitted by applicable law, hereby
indemnifies Executive for his reasonable attorneys' fees and disbursements
incurred in such litigation and hereby agrees (i) to pay in full all such fees
and disbursements and (ii) to pay prejudgment interest on any money judgment
obtained by Executive from the earliest date that payment to him should have
been made under this Agreement until such judgment shall have been paid in full,
which interest shall be calculated at a rate equal to two percentage points over
the prime or base rate of interest announced by Chase Bank of Texas, N.A. (or
any successor thereto) at its principal office in Houston, Texas, and shall
change when and as any such change in such prime or base rate shall be announced
by such bank.
(c) Payment Obligations Absolute. The Company's obligation to
pay (or cause one of its subsidiaries to pay) Executive the amounts and to make
the arrangements provided herein shall be absolute and unconditional and shall
not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company
(including its subsidiaries) may have against him or anyone else. All amounts
payable by the Company (including its subsidiaries hereunder) shall be paid
without notice or demand. Executive shall not be obligated to seek other
employment in mitigation of the amounts payable or arrangements made under any
provision of this Agreement, and, except as provided in Paragraph 3(c) hereof,
the obtaining of any such other employment shall in no event effect any
reduction of the Company's obligations to make (or cause to be made) the
payments and arrangements required to be made under this Agreement.
(d) Successors. This Agreement shall be binding upon and inure
to the benefit of the Company and any successor of the Company, by merger or
otherwise. This Agreement shall also be binding upon and inure to the benefit of
Executive and his estate. If Executive shall die prior to full payment of
amounts due pursuant to this Agreement, such amounts shall be payable pursuant
to the terms of this Agreement to his estate.
(e) Severability. Any provision in this Agreement which is
prohibited or unenforceable in any jurisdiction by reason of applicable law
shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating or affecting the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
(f) Non-Alienation. Executive shall not have any right to
pledge, hypothecate, anticipate or assign this Agreement or the rights
hereunder, except by will or the laws of descent and distribution.
(g) Notices. Any notices or other communications provided for
in this Agreement shall be sufficient if in writing. In the case of Executive,
such notices or communications shall be effectively delivered if hand delivered
to Executive at his principal place of employment or if sent by registered or
certified mail to Executive at the last address he has filed with the Company.
In the
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case of the Company, such notices or communications shall be effectively
delivered if sent by registered or certified mail to the Company at its
principal executive offices.
(h) Controlling Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas. Further, Executive
agrees that any legal proceeding to enforce the provisions of this Agreement
shall be brought in Houston, Harris County, Texas, and hereby waives his right
to any pleas regarding subject matter or personal jurisdiction and venue.
(i) Release. As a condition to the receipt of any benefit
under Paragraph 3 hereof, Executive shall first execute a release, in the form
established by the Company, releasing the Company, its shareholders, partners,
officers, directors, employees and agents from any and all claims and from any
and all causes of action of any kind or character, including but not limited to
all claims or causes of action arising out of Executive's employment with the
Company or, with the exception of rights provided in any other agreement between
the Company and Executive, the termination of such employment.
(j) Full Settlement. If Executive is entitled to and receives
the benefits provided hereunder, performance of the obligations of the Company
hereunder will constitute full settlement of all claims that Executive might
otherwise assert against the Company on account of his termination of
employment, except such claims as may be asserted pursuant to any other
agreement between the Company and Executive.
(k) Unfunded Obligation. The obligation to pay amounts under
this Agreement is an unfunded obligation of the Company (including its
subsidiaries), and no such obligation shall create a trust or be deemed to be
secured by any pledge or encumbrance on any property of the Company (including
its subsidiaries).
(l) Not a Contract of Employment. This Agreement shall not be
deemed to constitute a contract of employment, nor shall any provision hereof
affect (i) the right of the Company (or its subsidiaries) to discharge Executive
at will, subject to the terms of any other agreement between the Company (or its
subsidiaries) and Executive, or (ii) the terms and conditions of any other
agreement between the Company and Executive except as provided herein.
(m) Number and Gender. Wherever appropriate herein, words used
in the singular shall include the plural and the plural shall include the
singular. The masculine gender where appearing herein shall be deemed to include
the feminine gender.
(n) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which together will constitute one and the same Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the 25th day of August, 1998.
"EXECUTIVE"
/s/James T. Hackett
"COMPANY"
SEAGULL ENERGY CORPORATION
By: /s/William L. Transier
Name: William L. Transier
Title: Senior Vice President and
Chief Financial Officer
VEHOU02:117215.1
-8-
SEVERANCE AGREEMENT
AGREEMENT between SEAGULL ENERGY CORPORATION, a Texas corporation
(the "Company"), and Gerald R. Colley ("Executive"),
W I T N E S S E T H :
WHEREAS, the Company desires to retain certain key employee personnel
and, accordingly, the Board of Directors of the Company (the "Board") has
approved the Company entering into a severance agreement with Executive in order
to encourage his continued service to the Company; and
WHEREAS, Executive is prepared to commit such services in return for
specific arrangements with respect to severance compensation and other benefits;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the Company and Executive agree as follows:
1. Definitions.
(a) "Change in Duties" shall mean the occurrence, within two
years after the date upon which a Change of Control occurs, of any one or more
of the following:
(i) A significant reduction in the duties of
Executive from those applicable to him immediately prior to the date on
which a Change of Control occurs;
(ii) A reduction in Executive's annual salary or
target opportunity under any applicable bonus or incentive compensation
plan from that provided to him immediately prior to the date on which a
Change of Control occurs;
(iii) Receipt of employee benefits (including but not
limited to medical, dental, life insurance, accidental, death, and
dismemberment, and long-term disability plans) and perquisites by
Executive that are materially inconsistent with the employee benefits
and perquisites provided by the Company to executives with comparable
duties; or
(iv) A change in the location of Executive's
principal place of employment by the Company by more than 50 miles from
the location where he was principally employed immediately prior to the
date on which a Change of Control occurs.
(b) "Change of Control" means the occurrence of either of the
following events:
(i) The Company (A) shall not be the surviving entity
in any merger, consolidation or other reorganization (or survives only
as a subsidiary of an entity other than a previously wholly-owned
subsidiary of the Company) or (B) is to be dissolved and liquidated,
and as a result of or in connection such transaction, the persons who
were
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<PAGE>
directors of the Company before such transaction shall cease to
constitute a majority of the Board; or
(ii) Any person or entity, including a "group" as
contemplated by Section 13(d)(3) of the Securities Exchange Act of
1934, as amended, acquires or gains ownership or control (including,
without limitation, power to vote) of 20% or more of the outstanding
shares of the Company's voting stock (based upon voting power), and as
a result of or in connection with such transaction, the persons who
were directors of the Company before such transaction shall cease to
constitute a majority of the Board.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Compensation" shall mean the greater of:
(i) Executive's annual salary plus his Targeted EIP
Award immediately prior to the date on which a Change of Control
occurs, or
(ii) Executive's annual salary plus his Targeted EIP
Award at the time of his Involuntary Termination.
(e) "EIP" shall mean the Seagull Energy Corporation Executive
Incentive Plan or any successor thereto.
(f) "Involuntary Termination" shall mean any termination of
Executive's employment with the Company which:
(i) does not result from a resignation by Executive
(other than a resignation pursuant to clause (ii) of this subparagraph
(f) or a resignation at the request of the Company); or
(ii) results from a resignation by Executive on or
before the date which is sixty days after the date upon which Executive
receives notice of a Change in Duties;
provided, however, the term "Involuntary Termination" shall not include a
Termination for Cause or any termination as a result of death, disability under
circumstances entitling him to benefits under the Company's long-term disability
plan, or Retirement.
(g) "Retirement" shall mean Executive's resignation on or
after the date he reaches age sixty-five.
(h) "Severance Amount" shall mean an amount equal to 2.99
times Executive's Compensation.
(i) "Targeted EIP Award" shall mean Executive's Incentive
Target as set forth under the EIP in effect for the year with respect to which
such award is being determined, if any, or
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<PAGE>
for the last preceding year in which an EIP was in effect, expressed as a dollar
amount based on such Executive's annual salary for such year.
(j) "Termination for Cause" shall mean termination of
Executive's employment by the Company (or its subsidiaries) by reason of
Executive's (i) gross negligence in the performance of his duties, (ii) willful
and continued failure to perform his duties, (iii) willful engagement in conduct
which is materially injurious to the Company or its subsidiaries (monetarily or
otherwise) or (iv) conviction of a felony or a misdemeanor involving moral
turpitude.
(k) "Welfare Benefit Coverages" shall mean the medical,
dental, life insurance, accidental death and dismemberment and long-term
disability coverages provided by the Company to its active employees.
2. Services. Executive agrees that he will render services to the
Company (as well as any subsidiary thereof or successor thereto) during the
period of his employment to the best of his ability and in a prudent and
businesslike manner and that he will devote substantially the same time, efforts
and dedication to his duties as heretofore devoted.
3. Severance Benefits. If Executive's employment by the Company or any
subsidiary thereof or successor thereto shall be subject to an Involuntary
Termination which occurs within two years after the date upon which a Change of
Control occurs, then Executive shall be entitled to receive, as additional
compensation for services rendered to the Company (including its subsidiaries),
the following severance benefits:
(a) A lump sum cash payment in an amount equal to Executive's
Severance Amount.
(b) A lump sum cash payment in an amount equal to the
remaining portion of any award to Executive under any prior years' EIP. Further,
if Executive's Involuntary Termination occurs on or after the date an award has
been earned under the EIP, but prior to the date such award is paid, Executive
shall receive an additional lump sum cash payment in an amount equal to his
Targeted EIP Award.
(c) Executive shall be entitled to continue the Welfare
Benefit Coverages for himself and, where applicable, his eligible dependents
following his Involuntary Termination for up to thirty-six months, as long as
Executive continues either to pay the premiums paid by active employees of the
Company for such coverages or to pay the actual (nonsubsidized) cost of such
coverages for which the Company does not subsidize for active employees. Such
benefit rights shall apply only to those Welfare Benefit Coverages which the
Company has in effect from time to time for active employees, and the applicable
payments shall adjust as premiums for active employees of the Company or actual
costs, whichever is applicable, change. Welfare Benefit Coverage(s) shall
immediately end upon Executive's obtainment of new employment and eligibility
for similar Welfare Benefit Coverage(s) (with Executive being obligated
hereunder to promptly report such eligibility to the Company). Nothing herein
shall be deemed to adversely affect in any way the additional rights, after
consideration of this extension period, of Executive and his eligible dependents
to health care
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<PAGE>
continuation coverage as required pursuant to Part 6 of Title I of the Employee
Retirement Income Security Act of 1974, as amended.
(d) Executive shall be entitled to receive out-placement
services in connection with obtaining new employment up to a maximum cost of
$6,000.
(e) The severance benefits payable under this Agreement shall
be paid to an Executive on or before the fifth day after the last day of
Executive's employment with the Company. Any severance benefits paid pursuant to
this Paragraph will be deemed to be a severance payment and not compensation for
purposes of determining benefits under the Company's qualified plans and shall
be subject to any required tax withholding.
4. Interest on Late Benefit Payments. If any payment provided for in
Paragraph 3(a) or 3(b) hereof is not made when due, the Company shall pay to
Executive interest on the amount payable from the date that such payment should
have been made under such paragraph until such payment is made, which interest
shall be calculated at the prime or base rate of interest announced by Chase
Bank of Texas, N.A. (or any successor thereto) at its principal office in
Houston, Texas and shall change when and as any such change in such prime or
base rate shall be announced by such bank.
5. Certain Additional Payments by the Company. Notwithstanding anything
in this Agreement to the contrary, if the severance benefits provided for in
Paragraph 3, together with any other payments which Executive has the right to
receive from the Company, would constitute a "parachute payment " (as defined in
Section 280G(b)(2) of the Code), the severance benefits provided hereunder shall
be either (a) reduced (but not below zero) so that the present value of such
total amounts received by Executive from the Company will be one dollar ($1.00)
less than three times Executive's base amount (as defined in Section 280G of the
Code) and so that no portion of such amounts received by Executive shall be
subject to the excise tax imposed by Section 4999 of the Code or (b) paid in
full, whichever produces the better net after-tax position to Executive (taking
into account any applicable excise tax under Section 4999 of the Code and any
applicable income tax). The Company and Executive shall make an initial
determination as to whether a reduction is required and, if so required, the
amount of any such reduction. Executive shall notify the Company immediately in
writing of any claim by the Internal Revenue Service which, if successful, would
require the Company to make a reduction (or a further reduction in excess of
that, if any, initially determined by the Company and Executive) within five
days of the receipt of such claim. The Company shall notify Executive in writing
at least five days prior to the due date of any response required with respect
to such claim if it plans to contest the claim. If the Company decides to
contest such claim, Executive shall cooperate fully with the Company in such
action; provided, however, the Company shall bear and pay directly or indirectly
all costs and expenses (including additional interest and penalties) incurred in
connection with such action. If, as a result of the Company's action with
respect to a claim, the amount of the reduction is found to have been in excess
of the correct reduction amount, the Company shall promptly pay to Executive the
difference between such amounts with respect to such claim.
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<PAGE>
6. General.
(a) Term. The effective date of this Agreement is January 1,
1998. The initial term of this Agreement shall be the period beginning on said
effective date and ending on the two-year anniversary of said effective date. At
any time during the initial term of this Agreement or within sixty days after
the expiration thereof and within sixty days after each successive two-year
period of time thereafter that this Agreement is in effect, the Company shall
have the right to review this Agreement, and in its sole discretion either
continue and extend this Agreement, terminate this Agree ment, and/or offer
Executive a different agreement. The Board (excluding any member of the Board
who is covered by this Agreement or by a similar agreement with the Company)
will vote on whether to so extend, terminate, and/or offer Executive a different
agreement and will notify Executive of such action before the end of said
sixty-day time period mentioned above. This Agreement shall remain in effect
until so terminated and/or modified by the Company. Failure of the Board to take
any action within said sixty-day time period shall be considered as an extension
of this Agreement for an additional two-year period of time. Notwithstanding
anything to the contrary contained in this "sunset provision," it is agreed that
if a Change of Control occurs while this Agreement is in effect, then this
Agreement shall not be subject to termination or modification under this "sunset
provision," and shall remain in force for a period of two years after such
Change of Control, and if within said two years the contingency factors occur
which would entitle Executive to the benefits as provided herein, this Agreement
shall remain in effect in accordance with its terms. If, within such two years
after a Change of Control, the contingency factors that would entitle Executive
to said benefits do not occur, thereupon this two-year "sunset provision" shall
again be applicable with the sixty-day time period for Board action to
thereafter commence at the expiration of said two years after such Change of
Control and on each two-year anniversary date thereafter.
(b) Indemnification. If Executive shall obtain any money
judgment or otherwise prevail with respect to any litigation brought by
Executive or the Company to enforce or interpret any provision contained herein,
the Company, to the fullest extent permitted by applicable law, hereby
indemnifies Executive for his reasonable attorneys' fees and disbursements
incurred in such litigation and hereby agrees (i) to pay in full all such fees
and disbursements and (ii) to pay prejudgment interest on any money judgment
obtained by Executive from the earliest date that payment to him should have
been made under this Agreement until such judgment shall have been paid in full,
which interest shall be calculated at the prime or base rate of interest
announced by Chase Bank of Texas, N.A. (or any successor thereto) at its
principal office in Houston, Texas, and shall change when and as any such change
in such prime or base rate shall be announced by such bank.
(c) Payment Obligations Absolute. The Company's obligation to
pay (or cause one of its subsidiaries to pay) Executive the amounts and to make
the arrangements provided herein shall be absolute and unconditional and shall
not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company
(including its subsidiaries) may have against him or anyone else. All amounts
payable by the Company (including its subsidiaries hereunder) shall be paid
without notice or demand. Executive shall not be obligated to seek other
employment in mitigation of the amounts payable or arrangements made under any
provision of this Agreement, and, except as provided in Paragraph 3(c) hereof,
the obtaining of any such other employment shall in no event effect any
reduction of the Company's
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<PAGE>
obligations to make (or cause to be made) the payments and arrangements required
to be made under this Agreement.
(d) Successors. This Agreement shall be binding upon and inure
to the benefit of the Company and any successor of the Company, by merger or
otherwise. This Agreement shall also be binding upon and inure to the benefit of
Executive and his estate. If Executive shall die prior to full payment of
amounts due pursuant to this Agreement, such amounts shall be payable pursuant
to the terms of this Agreement to his estate.
(e) Severability. Any provision in this Agreement which is
prohibited or unenforceable in any jurisdiction by reason of applicable law
shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating or affecting the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
(f) Non-Alienation. Executive shall not have any right to
pledge, hypothecate, anticipate or assign this Agreement or the rights
hereunder, except by will or the laws of descent and distribution.
(g) Notices. Any notices or other communications provided for
in this Agreement shall be sufficient if in writing. In the case of Executive,
such notices or communications shall be effectively delivered if hand delivered
to Executive at his principal place of employment or if sent by registered or
certified mail to Executive at the last address he has filed with the Company.
In the case of the Company, such notices or communications shall be effectively
delivered if sent by registered or certified mail to the Company at its
principal executive offices.
(h) Controlling Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas. Further, Executive
agrees that any legal proceeding to enforce the provisions of this Agreement
shall be brought in Houston, Harris County, Texas, and hereby waives his right
to any pleas regarding subject matter or personal jurisdiction and venue.
(i) Release. As a condition to the receipt of any benefit
under Paragraph 3 hereof, Executive shall first execute a release, in the form
established by the Company, releasing the Company, its shareholders, partners,
officers, directors, employees and agents from any and all claims and from any
and all causes of action of any kind or character, including but not limited to
all claims or causes of action arising out of Executive's employment with the
Company or the termination of such employment.
(j) Full Settlement. If Executive is entitled to and receives
the benefits provided hereunder, performance of the obligations of the Company
hereunder will constitute full settlement of all claims that Executive might
otherwise assert against the Company on account of his termination of
employment.
(k) Unfunded Obligation. The obligation to pay amounts under
this Agreement is an unfunded obligation of the Company (including its
subsidiaries), and no such obligation shall
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<PAGE>
create a trust or be deemed to be secured by any pledge or encumbrance on any
property of the Company (including its subsidiaries).
(l) Not a Contract of Employment. This Agreement shall not be
deemed to constitute a contract of employment, nor shall any provision hereof
affect (i) the right of the Company (or its subsidiaries) to discharge Executive
at will or (ii) the terms and conditions of any other agreement between the
Company and Executive except as provided herein.
(m) Number and Gender. Wherever appropriate herein, words used
in the singular shall include the plural and the plural shall include the
singular. The masculine gender where appearing herein shall be deemed to include
the feminine gender.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the 24th day of March, 1998.
"EXECUTIVE"
/s/ Gerald R. Colley
"COMPANY"
SEAGULL ENERGY CORPORATION
By: /s/ Jack M. Robertson
Name: Jack M. Robertson
Title: Vice President, Human Resources
VEHOU02:102307.1
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<PAGE>
AMENDMENT TO
SEVERANCE AGREEMENT
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") and Gerald R. Colley
("Executive") have entered into a severance agreement effective as of January 1,
1998 (the "Agreement"); and
WHEREAS, the Company and Executive desire to amend the Agreement in certain
respects;
NOW, THEREFORE, the Agreement shall be amended as follows, effective as
of July 15, 1998:
1. Paragraph 5 of the Agreement shall be deleted and the following
shall be substituted therefor:
"5. Certain Additional Payments by the Company.
Notwithstanding anything to the contrary in this Agreement, in the
event that any payment or distribution by the Company to or for the
benefit of Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (a
"Payment"), would be subject to the excise tax imposed by Section 4999
of the Code or any interest or penalties with respect to such excise
tax (such excise tax, together with any such interest or penalties, are
hereinafter collectively referred to as the "Excise Tax"), the Company
shall pay to Executive an additional payment (a "Gross-up Payment") in
an amount such that after payment by Executive of all taxes (including
any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed on any Gross-up Payment, Executive
retains an amount of the Gross-up Payment equal to the Excise Tax
imposed upon the Payment. The Company and Executive shall make an
initial determination as to whether a Gross-up Payment is required and
the amount of any such Gross-up Payment. Executive shall notify the
Company in writing of any claim by the Internal Revenue Service which,
if successful, would require the Company to make a Gross-up Payment (or
a Gross-up Payment in excess of that, if any, initially determined by
the Company and Executive) within ten days of the receipt of such
claim. The Company shall notify Executive in writing at least ten days
prior to the due date of any response required with respect to such
claim if it plans to contest the claim. If the Company decides to
contest such claim, Executive shall cooperate fully with the Company in
such action; provided, however, the Company shall bear and pay directly
or indirectly all costs and expenses (including additional interest and
penalties) incurred in connection with such action and shall indemnify
and hold Executive harmless, on an after-tax basis, for any Excise Tax
or income tax, including interest and penalties with respect thereto,
imposed as a result of the Company's action. If, as a result of the
Company's action with respect to a claim, Executive receives a refund
of any amount paid by the Company with respect to such claim, Executive
shall promptly pay such refund to the
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<PAGE>
Company. If the Company fails to timely notify Executive whether it
will contest such claim or the Company determines not to contest such
claim, then the Company shall immediately pay to Executive the portion
of such claim, if any, which it has not previously paid to Executive."
2. As amended hereby, the Agreement is specifically ratified and
reaffirmed.
EXECUTED this 1 day of August, 1998.
"EXECUTIVE"
/s/ Gerald R. Colley
"COMPANY"
SEAGULL ENERGY CORPORATION
By: /s/ Jack M. Robertson
Name: Jack M. Robertson
Title: Vice President,
Human Resources
VEHOU02:114735.1
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<PAGE>
SECOND AMENDMENT TO
SEVERANCE AGREEMENT
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") and Gerald R. Colley
("Executive") have entered into a severance agreement effective as of January 1,
1998 (the "Agreement"); and
WHEREAS, the Company and Executive desire to amend the Agreement in
certain respects;
NOW, THEREFORE, the Agreement shall be amended as follows, effective as
of September 16, 1998:
1. Paragraph 1(b) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(b) 'Change of Control' means the occurrence of one of the
following events:
(i) The Company (A) shall not be the surviving entity
in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity other than a
previously wholly-owned subsidiary of the Company) or (B) is
to be dissolved and liquidated, and as a result of or in
connection such transaction, the persons who were directors of
the Company before such transaction shall cease to constitute
a majority of the Board;
(ii) Any person or entity, including a 'group' as
contemplated by Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended, acquires or gains ownership or
control (including, without limitation, power to vote) of 20%
or more of the outstanding shares of the Company's voting
stock (based upon voting power), and as a result of or in
connection with such transaction, the persons who were
directors of the Company before such transaction shall cease
to constitute a majority of the Board; or
(iii) The Company sells all or substantially all of
the assets of the Company to any other person or entity (other
than a wholly-owned subsidiary of the Company) in a
transaction that requires shareholder approval pursuant to the
Texas Business Corporation Act."
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<PAGE>
2. Paragraph 1(g) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(g) 'Retirement' shall mean Executive's voluntary resignation
on or after the date he reaches age sixty-five (other than a
resignation within sixty days after the date Executive receives notice
of a Change in Duties or a resignation at the request of the Company)."
3. Paragraph 1(j) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(j) 'Termination for Cause' shall mean termination of
Executive's employment by the Company (or its subsidiaries) by reason
of Executive's gross negligence, gross neglect or willful misconduct in
the performance of his duties or Executive's final conviction of a
felony or of a misdemeanor involving moral turpitude, excluding
misdemeanor convictions relating to the operation of a motor vehicle."
4. Paragraph 3(d) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(d) Executive shall be entitled to receive out-placement
services in connection with obtaining new employment up to a maximum
cost of $6,000, or an equivalent cash payment, if Executive either has
or is not seeking new employment."
5. Paragraph 4 of the Agreement shall be deleted and the following
shall be substituted therefor:
"4. Interest on Late Benefit Payments. If any payment provided
for in Paragraph 3(a) or 3(b) hereof is not made when due, the Company
shall pay to Executive interest on the amount payable from the date
that such payment should have been made under such paragraph until such
payment is made, which interest shall be calculated at a rate equal to
two percentage points over the prime or base rate of interest announced
by Chase Bank of Texas, N.A. (or any successor thereto) at its
principal office in Houston, Texas and shall change when and as any
such change in such prime or base rate shall be announced by such
bank."
6. Paragraph 6(b) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(b) Indemnification. If Executive shall obtain any money
judgment or otherwise prevail with respect to any litigation brought by
Executive or the Company to enforce or interpret any provision
contained herein, the Company, to the fullest
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<PAGE>
extent permitted by applicable law, hereby indemnifies Executive for
his reasonable attorneys' fees and disbursements incurred in such
litigation and hereby agrees (i) to pay in full all such fees and
disbursements and (ii) to pay prejudgment interest on any money
judgment obtained by Executive from the earliest date that payment to
him should have been made under this Agreement until such judgment
shall have been paid in full, which interest shall be calculated at a
rate equal to two percentage points over the prime or base rate of
interest announced by Chase Bank of Texas, N.A. (or any successor
thereto) at its principal office in Houston, Texas, and shall change
when and as any such change in such prime or base rate shall be
announced by such bank."
7. As amended hereby, the Agreement is specifically ratified and
reaffirmed.
EXECUTED this 26th day of October, 1998.
"EXECUTIVE"
/s/ Gerald R. Colley
"COMPANY"
SEAGULL ENERGY CORPORATION
By: /s/ William L. Transier
Name: William L. Transier
Title: Executive Vice
President & Chief
Financial Officer
VEHOU02:121318.1
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SEVERANCE AGREEMENT
AGREEMENT between SEAGULL ENERGY CORPORATION, a Texas corporation
(the "Company"), and Carl B. King ("Executive"),
W I T N E S S E T H :
WHEREAS, the Company desires to retain certain key employee personnel
and, accordingly, the Board of Directors of the Company (the "Board") has
approved the Company entering into a severance agreement with Executive in order
to encourage his continued service to the Company; and
WHEREAS, Executive is prepared to commit such services in return for
specific arrangements with respect to severance compensation and other benefits;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the Company and Executive agree as follows:
1. Definitions.
(a) "Change in Duties" shall mean the occurrence, within two
years after the date upon which a Change of Control occurs, of any one or more
of the following:
(i) A significant reduction in the duties of
Executive from those applicable to him immediately prior to the date on
which a Change of Control occurs;
(ii) A reduction in Executive's annual salary or
target opportunity under any applicable bonus or incentive compensation
plan from that provided to him immediately prior to the date on which a
Change of Control occurs;
(iii) Receipt of employee benefits (including but not
limited to medical, dental, life insurance, accidental, death, and
dismemberment, and long-term disability plans) and perquisites by
Executive that are materially inconsistent with the employee benefits
and perquisites provided by the Company to executives with comparable
duties; or
(iv) A change in the location of Executive's
principal place of employment by the Company by more than 50 miles from
the location where he was principally employed immediately prior to the
date on which a Change of Control occurs.
(b) "Change of Control" means the occurrence of either of the
following events:
(i) The Company (A) shall not be the surviving entity
in any merger, consolidation or other reorganization (or survives only
as a subsidiary of an entity other than a previously wholly-owned
subsidiary of the Company) or (B) is to be dissolved and liquidated,
and as a result of or in connection such transaction, the persons who
were
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directors of the Company before such transaction shall cease to constitute
a majority of the Board; or
(ii) Any person or entity, including a "group" as
contemplated by Section 13(d)(3) of the Securities Exchange Act of
1934, as amended, acquires or gains ownership or control (including,
without limitation, power to vote) of 20% or more of the outstanding
shares of the Company's voting stock (based upon voting power), and as
a result of or in connection with such transaction, the persons who
were directors of the Company before such transaction shall cease to
constitute a majority of the Board.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Compensation" shall mean the greater of:
(i) Executive's annual salary plus his Targeted EIP
Award immediately prior to the date on which a Change of Control
occurs, or
(ii) Executive's annual salary plus his Targeted EIP
Award at the time of his Involuntary Termination.
(e) "EIP" shall mean the Seagull Energy Corporation Executive
Incentive Plan or any successor thereto.
(f) "Involuntary Termination" shall mean any termination of
Executive's employment with the Company which:
(i) does not result from a resignation by Executive
(other than a resignation pursuant to clause (ii) of this subparagraph
(f) or a resignation at the request of the Company); or
(ii) results from a resignation by Executive on or
before the date which is sixty days after the date upon which Executive
receives notice of a Change in Duties;
provided, however, the term "Involuntary Termination" shall not include a
Termination for Cause or any termination as a result of death, disability under
circumstances entitling him to benefits under the Company's long-term disability
plan, or Retirement.
(g) "Retirement" shall mean Executive's resignation on or
after the date he reaches age sixty-five.
(h) "Severance Amount" shall mean an amount equal to 2.99
times Executive's Compensation.
(i) "Targeted EIP Award" shall mean Executive's Incentive
Target as set forth under the EIP in effect for the year with respect to which
such award is being determined, if any, or
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<PAGE>
for the last preceding year in which an EIP was in effect, expressed as a dollar
amount based on such Executive's annual salary for such year.
(j) "Termination for Cause" shall mean termination of
Executive's employment by the Company (or its subsidiaries) by reason of
Executive's (i) gross negligence in the performance of his duties, (ii) willful
and continued failure to perform his duties, (iii) willful engagement in conduct
which is materially injurious to the Company or its subsidiaries (monetarily or
otherwise) or (iv) conviction of a felony or a misdemeanor involving moral
turpitude.
(k) "Welfare Benefit Coverages" shall mean the medical,
dental, life insurance, accidental death and dismemberment and long-term
disability coverages provided by the Company to its active employees.
2. Services. Executive agrees that he will render services to the
Company (as well as any subsidiary thereof or successor thereto) during the
period of his employment to the best of his ability and in a prudent and
businesslike manner and that he will devote substantially the same time, efforts
and dedication to his duties as heretofore devoted.
3. Severance Benefits. If Executive's employment by the Company or any
subsidiary thereof or successor thereto shall be subject to an Involuntary
Termination which occurs within two years after the date upon which a Change of
Control occurs, then Executive shall be entitled to receive, as additional
compensation for services rendered to the Company (including its subsidiaries),
the following severance benefits:
(a) A lump sum cash payment in an amount equal to Executive's
Severance Amount.
(b) A lump sum cash payment in an amount equal to the
remaining portion of any award to Executive under any prior years' EIP. Further,
if Executive's Involuntary Termination occurs on or after the date an award has
been earned under the EIP, but prior to the date such award is paid, Executive
shall receive an additional lump sum cash payment in an amount equal to his
Targeted EIP Award.
(c) Executive shall be entitled to continue the Welfare
Benefit Coverages for himself and, where applicable, his eligible dependents
following his Involuntary Termination for up to thirty-six months, as long as
Executive continues either to pay the premiums paid by active employees of the
Company for such coverages or to pay the actual (nonsubsidized) cost of such
coverages for which the Company does not subsidize for active employees. Such
benefit rights shall apply only to those Welfare Benefit Coverages which the
Company has in effect from time to time for active employees, and the applicable
payments shall adjust as premiums for active employees of the Company or actual
costs, whichever is applicable, change. Welfare Benefit Coverage(s) shall
immediately end upon Executive's obtainment of new employment and eligibility
for similar Welfare Benefit Coverage(s) (with Executive being obligated
hereunder to promptly report such eligibility to the Company). Nothing herein
shall be deemed to adversely affect in any way the additional rights, after
consideration of this extension period, of Executive and his eligible dependents
to health care
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<PAGE>
continuation coverage as required pursuant to Part 6 of Title I of the Employee
Retirement Income Security Act of 1974, as amended.
(d) Executive shall be entitled to receive out-placement
services in connection with obtaining new employment up to a maximum cost of
$6,000.
(e) The severance benefits payable under this Agreement shall
be paid to an Executive on or before the fifth day after the last day of
Executive's employment with the Company. Any severance benefits paid pursuant to
this Paragraph will be deemed to be a severance payment and not compensation for
purposes of determining benefits under the Company's qualified plans and shall
be subject to any required tax withholding.
4. Interest on Late Benefit Payments. If any payment provided for in
Paragraph 3(a) or 3(b) hereof is not made when due, the Company shall pay to
Executive interest on the amount payable from the date that such payment should
have been made under such paragraph until such payment is made, which interest
shall be calculated at the prime or base rate of interest announced by Texas
Commerce Bank N.A. (or any successor thereto) at its principal office in
Houston, Texas and shall change when and as any such change in such prime or
base rate shall be announced by such bank.
5. Certain Additional Payments by the Company. Notwithstanding anything
in this Agreement to the contrary, if the severance benefits provided for in
Paragraph 3, together with any other payments which Executive has the right to
receive from the Company, would constitute a "parachute payment " (as defined in
Section 280G(b)(2) of the Code), the severance benefits provided hereunder shall
be either (a) reduced (but not below zero) so that the present value of such
total amounts received by Executive from the Company will be one dollar ($1.00)
less than three times Executive's base amount (as defined in Section 280G of the
Code) and so that no portion of such amounts received by Executive shall be
subject to the excise tax imposed by Section 4999 of the Code or (b) paid in
full, whichever produces the better net after-tax position to Executive (taking
into account any applicable excise tax under Section 4999 of the Code and any
applicable income tax). The Company and Executive shall make an initial
determination as to whether a reduction is required and, if so required, the
amount of any such reduction. Executive shall notify the Company immediately in
writing of any claim by the Internal Revenue Service which, if successful, would
require the Company to make a reduction (or a further reduction in excess of
that, if any, initially determined by the Company and Executive) within five
days of the receipt of such claim. The Company shall notify Executive in writing
at least five days prior to the due date of any response required with respect
to such claim if it plans to contest the claim. If the Company decides to
contest such claim, Executive shall cooperate fully with the Company in such
action; provided, however, the Company shall bear and pay directly or indirectly
all costs and expenses (including additional interest and penalties) incurred in
connection with such action. If, as a result of the Company's action with
respect to a claim, the amount of the reduction is found to have been in excess
of the correct reduction amount, the Company shall promptly pay to Executive the
difference between such amounts with respect to such claim.
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<PAGE>
6. General.
(a) Term. The effective date of this Agreement is February 9,
1998. The initial term of this Agreement shall be the period beginning on said
effective date and ending on the two-year anniversary of said effective date. At
any time during the initial term of this Agreement or within sixty days after
the expiration thereof and within sixty days after each successive two-year
period of time thereafter that this Agreement is in effect, the Company shall
have the right to review this Agreement, and in its sole discretion either
continue and extend this Agreement, terminate this Agree ment, and/or offer
Executive a different agreement. The Board (excluding any member of the Board
who is covered by this Agreement or by a similar agreement with the Company)
will vote on whether to so extend, terminate, and/or offer Executive a different
agreement and will notify Executive of such action before the end of said
sixty-day time period mentioned above. This Agreement shall remain in effect
until so terminated and/or modified by the Company. Failure of the Board to take
any action within said sixty-day time period shall be considered as an extension
of this Agreement for an additional two-year period of time. Notwithstanding
anything to the contrary contained in this "sunset provision," it is agreed that
if a Change of Control occurs while this Agreement is in effect, then this
Agreement shall not be subject to termination or modification under this "sunset
provision," and shall remain in force for a period of two years after such
Change of Control, and if within said two years the contingency factors occur
which would entitle Executive to the benefits as provided herein, this Agreement
shall remain in effect in accordance with its terms. If, within such two years
after a Change of Control, the contingency factors that would entitle Executive
to said benefits do not occur, thereupon this two-year "sunset provision" shall
again be applicable with the sixty-day time period for Board action to
thereafter commence at the expiration of said two years after such Change of
Control and on each two-year anniversary date thereafter.
(b) Indemnification. If Executive shall obtain any money
judgment or otherwise prevail with respect to any litigation brought by
Executive or the Company to enforce or interpret any provision contained herein,
the Company, to the fullest extent permitted by applicable law, hereby
indemnifies Executive for his reasonable attorneys' fees and disbursements
incurred in such litigation and hereby agrees (i) to pay in full all such fees
and disbursements and (ii) to pay prejudgment interest on any money judgment
obtained by Executive from the earliest date that payment to him should have
been made under this Agreement until such judgment shall have been paid in full,
which interest shall be calculated at the prime or base rate of interest
announced by Texas Commerce Bank N.A. (or any successor thereto) at its
principal office in Houston, Texas, and shall change when and as any such change
in such prime or base rate shall be announced by such bank.
(c) Payment Obligations Absolute. The Company's obligation to
pay (or cause one of its subsidiaries to pay) Executive the amounts and to make
the arrangements provided herein shall be absolute and unconditional and shall
not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company
(including its subsidiaries) may have against him or anyone else. All amounts
payable by the Company (including its subsidiaries hereunder) shall be paid
without notice or demand. Executive shall not be obligated to seek other
employment in mitigation of the amounts payable or arrangements made under any
provision of this Agreement, and, except as provided in Paragraph 3(c) hereof,
the obtaining of any such other employment shall in no event effect any
reduction of the Company's
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<PAGE>
obligations to make (or cause to be made) the payments and arrangements required
to be made under this Agreement.
(d) Successors. This Agreement shall be binding upon and inure
to the benefit of the Company and any successor of the Company, by merger or
otherwise. This Agreement shall also be binding upon and inure to the benefit of
Executive and his estate. If Executive shall die prior to full payment of
amounts due pursuant to this Agreement, such amounts shall be payable pursuant
to the terms of this Agreement to his estate.
(e) Severability. Any provision in this Agreement which is
prohibited or unenforceable in any jurisdiction by reason of applicable law
shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating or affecting the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
(f) Non-Alienation. Executive shall not have any right to
pledge, hypothecate, anticipate or assign this Agreement or the rights
hereunder, except by will or the laws of descent and distribution.
(g) Notices. Any notices or other communications provided for
in this Agreement shall be sufficient if in writing. In the case of Executive,
such notices or communications shall be effectively delivered if hand delivered
to Executive at his principal place of employment or if sent by registered or
certified mail to Executive at the last address he has filed with the Company.
In the case of the Company, such notices or communications shall be effectively
delivered if sent by registered or certified mail to the Company at its
principal executive offices.
(h) Controlling Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas. Further, Executive
agrees that any legal proceeding to enforce the provisions of this Agreement
shall be brought in Houston, Harris County, Texas, and hereby waives his right
to any pleas regarding subject matter or personal jurisdiction and venue.
(i) Release. As a condition to the receipt of any benefit
under Paragraph 3 hereof, Executive shall first execute a release, in the form
established by the Company, releasing the Company, its shareholders, partners,
officers, directors, employees and agents from any and all claims and from any
and all causes of action of any kind or character, including but not limited to
all claims or causes of action arising out of Executive's employment with the
Company or the termination of such employment.
(j) Full Settlement. If Executive is entitled to and receives
the benefits provided hereunder, performance of the obligations of the Company
hereunder will constitute full settlement of all claims that Executive might
otherwise assert against the Company on account of his termination of
employment.
(k) Unfunded Obligation. The obligation to pay amounts under
this Agreement is an unfunded obligation of the Company (including its
subsidiaries), and no such obligation shall
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<PAGE>
create a trust or be deemed to be secured by any pledge or encumbrance on any
property of the Company (including its subsidiaries).
(l) Not a Contract of Employment. This Agreement shall not be
deemed to constitute a contract of employment, nor shall any provision hereof
affect (i) the right of the Company (or its subsidiaries) to discharge Executive
at will or (ii) the terms and conditions of any other agreement between the
Company and Executive except as provided herein.
(m) Number and Gender. Wherever appropriate herein, words used
in the singular shall include the plural and the plural shall include the
singular. The masculine gender where appearing herein shall be deemed to include
the feminine gender.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the 1st day of March, 1998.
"EXECUTIVE"
/s/ Carl B. King
"COMPANY"
SEAGULL ENERGY CORPORATION
By: /s/ William L. Transier
Name: William L. Transier
Title: Senior Vice President and
Chief Financial Officer
VEHOU02:96803.1
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<PAGE>
AMENDMENT TO
SEVERANCE AGREEMENT
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") and Carl B. King
("Executive") have entered into a severance agreement effective as of February
9, 1998 (the "Agreement"); and
WHEREAS, the Company and Executive desire to amend the Agreement in certain
respects;
NOW, THEREFORE, the Agreement shall be amended as follows, effective as
of July 15, 1998:
1. Paragraph 5 of the Agreement shall be deleted and the following
shall be substituted therefor:
"5. Certain Additional Payments by the Company.
Notwithstanding anything to the contrary in this Agreement, in the
event that any payment or distribution by the Company to or for the
benefit of Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (a
"Payment"), would be subject to the excise tax imposed by Section 4999
of the Code or any interest or penalties with respect to such excise
tax (such excise tax, together with any such interest or penalties, are
hereinafter collectively referred to as the "Excise Tax"), the Company
shall pay to Executive an additional payment (a "Gross-up Payment") in
an amount such that after payment by Executive of all taxes (including
any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed on any Gross-up Payment, Executive
retains an amount of the Gross-up Payment equal to the Excise Tax
imposed upon the Payment. The Company and Executive shall make an
initial determination as to whether a Gross-up Payment is required and
the amount of any such Gross-up Payment. Executive shall notify the
Company in writing of any claim by the Internal Revenue Service which,
if successful, would require the Company to make a Gross-up Payment (or
a Gross-up Payment in excess of that, if any, initially determined by
the Company and Executive) within ten days of the receipt of such
claim. The Company shall notify Executive in writing at least ten days
prior to the due date of any response required with respect to such
claim if it plans to contest the claim. If the Company decides to
contest such claim, Executive shall cooperate fully with the Company in
such action; provided, however, the Company shall bear and pay directly
or indirectly all costs and expenses (including additional interest and
penalties) incurred in connection with such action and shall indemnify
and hold Executive harmless, on an after-tax basis, for any Excise Tax
or income tax, including interest and penalties with respect thereto,
imposed as a result of the Company's action. If, as a result of the
Company's action with respect to a claim, Executive receives a refund
of any amount paid by the Company with respect to such claim, Executive
shall promptly pay such refund to the
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<PAGE>
Company. If the Company fails to timely notify Executive whether it
will contest such claim or the Company determines not to contest such
claim, then the Company shall immediately pay to Executive the portion
of such claim, if any, which it has not previously paid to Executive."
2. As amended hereby, the Agreement is specifically ratified and
reaffirmed.
EXECUTED this 10 day of August, 1998.
"EXECUTIVE"
/s/ Carl B. King
"COMPANY"
SEAGULL ENERGY CORPORATION
By: /s/ Jack M. Robertson
Name: Jack M. Robertson
Title: Vice President,
Human Resources
VEHOU02:114735.1
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<PAGE>
SECOND AMENDMENT TO
SEVERANCE AGREEMENT
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") and Carl B. King
("Executive") have entered into a severance agreement effective as of February
9, 1998 (the "Agreement"); and
WHEREAS, the Company and Executive desire to amend the Agreement in
certain respects;
NOW, THEREFORE, the Agreement shall be amended as follows, effective as
of September 16, 1998:
1. Paragraph 1(b) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(b) 'Change of Control' means the occurrence of one of the
following events:
(i) The Company (A) shall not be the surviving entity
in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity other than a
previously wholly-owned subsidiary of the Company) or (B) is
to be dissolved and liquidated, and as a result of or in
connection such transaction, the persons who were directors of
the Company before such transaction shall cease to constitute
a majority of the Board;
(ii) Any person or entity, including a 'group' as
contemplated by Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended, acquires or gains ownership or
control (including, without limitation, power to vote) of 20%
or more of the outstanding shares of the Company's voting
stock (based upon voting power), and as a result of or in
connection with such transaction, the persons who were
directors of the Company before such transaction shall cease
to constitute a majority of the Board; or
(iii) The Company sells all or substantially all of
the assets of the Company to any other person or entity (other
than a wholly-owned subsidiary of the Company) in a
transaction that requires shareholder approval pursuant to the
Texas Business Corporation Act."
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<PAGE>
2. Paragraph 1(g) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(g) 'Retirement' shall mean Executive's voluntary resignation
on or after the date he reaches age sixty-five (other than a
resignation within sixty days after the date Executive receives notice
of a Change in Duties or a resignation at the request of the Company)."
3. Paragraph 1(j) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(j) 'Termination for Cause' shall mean termination of
Executive's employment by the Company (or its subsidiaries) by reason
of Executive's gross negligence, gross neglect or willful misconduct in
the performance of his duties or Executive's final conviction of a
felony or of a misdemeanor involving moral turpitude, excluding
misdemeanor convictions relating to the operation of a motor vehicle."
4. Paragraph 3(d) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(d) Executive shall be entitled to receive out-placement
services in connection with obtaining new employment up to a maximum
cost of $6,000, or an equivalent cash payment, if Executive either has
or is not seeking new employment."
5. Paragraph 4 of the Agreement shall be deleted and the following
shall be substituted therefor:
"4. Interest on Late Benefit Payments. If any payment provided
for in Paragraph 3(a) or 3(b) hereof is not made when due, the Company
shall pay to Executive interest on the amount payable from the date
that such payment should have been made under such paragraph until such
payment is made, which interest shall be calculated at a rate equal to
two percentage points over the prime or base rate of interest announced
by Chase Bank of Texas, N.A. (or any successor thereto) at its
principal office in Houston, Texas and shall change when and as any
such change in such prime or base rate shall be announced by such
bank."
6. Paragraph 6(b) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(b) Indemnification. If Executive shall obtain any money
judgment or otherwise prevail with respect to any litigation brought by
Executive or the Company to enforce or interpret any provision
contained herein, the Company, to the fullest
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<PAGE>
extent permitted by applicable law, hereby indemnifies Executive for
his reasonable attorneys' fees and disbursements incurred in such
litigation and hereby agrees (i) to pay in full all such fees and
disbursements and (ii) to pay prejudgment interest on any money
judgment obtained by Executive from the earliest date that payment to
him should have been made under this Agreement until such judgment
shall have been paid in full, which interest shall be calculated at a
rate equal to two percentage points over the prime or base rate of
interest announced by Chase Bank of Texas, N.A. (or any successor
thereto) at its principal office in Houston, Texas, and shall change
when and as any such change in such prime or base rate shall be
announced by such bank."
7. As amended hereby, the Agreement is specifically ratified and
reaffirmed.
EXECUTED this 23 day of October, 1998.
"EXECUTIVE"
/s/ Carl B. King
"COMPANY"
SEAGULL ENERGY CORPORATION
By: /s/ William L. Transier
Name: William L. Transier
Title: Executive Vice President and Chief
Financial Officer
VEHOU02:121318.1
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THIRD AMENDMENT TO
SEAGULL ENERGY CORPORATION
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company"), has heretofore
adopted and currently maintains the SEAGULL ENERGY CORPORATION EXECUTIVE
SUPPLEMENT RETIREMENT PLAN (the "Plan"); and
WHEREAS, the Company desires to amend the Plan;
NOW, THEREFORE, the Plan shall be amended as follows, effective as of
August 24, 1998;
1. The following sentence shall be added to Paragraph (1) of Section
1.01 of the Plan:
"Notwithstanding the foregoing, for purposes of recognizing the expense
of a Member's benefit under the Plan, the Member's benefit shall be
deemed to accrue in accordance with the Vesting Schedule set forth in
the Member's Membership Agreement."
2. Paragraph (8) of Section 1.01 of the Plan shall be deleted and the
following shall be substituted therefor:
"(8) Compensation: Except as otherwise provided in a Member's Membership
Agreement, the total of all amounts paid by the Company to or for the
benefit of a Member for services rendered or labor performed while a
Member, including elective contributions made on a Member's behalf by the
Company that are not includable in income under section 125 or section
402(e)(3) of the Code and elective deferrals of compensation other than
incentive bonuses under a nonqualified deferred compensation program, but
excluding non-cash remuneration, income incurred as a result of the
exercise of stock options or stock appreciation rights, incentive bonuses
or other supplemental pay (whether paid in cash or in kind) and, except as
expressly included herein, Company contributions to any other deferred
compensation program."
3. The following new paragraphs (18A), (18B) and (18C) shall be added
to Section 1.01 of the Plan:
Trust: The trust, if any, established under the Trust Agreement.
(18B) Trust Agreement: The agreement, if any, entered into between
the Company and the Trustee pursuant Article II.
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(18C) Trust Fund: The funds and properties, if any, held pursuant
to the provisions of the Trust Agreement, together with all
income, profit, and increments thereto."
4. The following new paragraph shall be added to Article II of the
Plan:
"The Committee in its sole discretion, may establish the Trust
and direct the Company to enter into the Trust Agreement. In such
event, the Company shall remain the owner of all assets in the Trust
Fund and the assets shall be subject to the claims of the Company's
creditors if the Company ever becomes insolvent. For purposes hereof,
the Company shall be considered 'insolvent' if (a) the Company is
unable to pay its debts as they become due, or (b) the Company is
subject to a pending proceeding as a debtor under the United Sates
Bankruptcy Code (or any successor federal statute). The chief executive
officer of the Company and its board of directors shall have the duty
to inform the Trustee in writing if the Company becomes insolvent. When
so informed, the Trustee shall suspend payments to the Members and hold
the assets for the benefit of the Company's general creditors. If the
Trustee receives a written allegation that the Company is insolvent,
the Trustee shall suspend payments to the Members and hold the Trust
Fund for the benefit of the Company's general creditors, and shall
determine whether the Company is insolvent. If the Trustee determines
that the Company is not insolvent, the Trustee shall resume payments to
the Members. No Member or beneficiary shall have any preferred claim
to, or any beneficial ownership interest in, any assets of the Trust
Fund."
5. Section 5.02 of the Plan shall be deleted and the following shall be
substituted therefor:
"5.02 Competition with the Company Except as otherwise provided in a
Member's Membership Agreement, if a Member engages in competitive
activities against the Company and its subsidiaries to the material
detriment of the Company and its subsidiaries following his termination
of employment, he shall forfeit all right and entitlement to any amount
of Accrued Benefit under the Plan (regardless of whether payment of
same has commenced) at the time he engages in such competitive
activities."
6. The first sentence of Section 7.01 of the Plan shall be deleted and
the following shall be substituted therefor:
"The Company reserves the right to amend the Plan at any time;
provided, however, that no such amendment shall deprive any Member of
any Accrued Benefit under the Plan to the extent that such Member has a
Vested Interest in such Accrued Benefit."
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<PAGE>
7. As amended hereby, the Plan is specifically ratified and reaffirmed.
EXECUTED effective as of August 24, 1998.
SEAGULL ENERGY CORPORATION
By: /s/ William L. Transier
Name: William L. Transier
Title: Executive Vice President and
Chief Finanical Officer
VEHOU02:123718.1
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THIRD AMENDMENT TO
SEAGULL ENERGY CORPORATION
SUPPLEMENTAL BENEFIT PLAN
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") has heretofore
adopted the SEAGULL ENERGY CORPORATION SUPPLEMENTAL BENEFIT PLAN (the
"Plan"); and
WHEREAS, the Company desires to amend the Plan;
NOW, THEREFORE, the Plan shall be amended as follows, effective as of
August 24, 1998:
1. The following new Section 3.3A shall be added to Article III of the
Plan:
"3.3A Amount of Additional Benefits. As of any day during a
Plan Year, a Participant's Accounts shall be credited with such
additional amounts as may be determined by the Committee in its sole
discretion or as shall be otherwise contemplated by the terms of any
written agreement between a Participant and the Company that is
approved by the Committee or the Directors."
2. Article V of the Plan shall be deleted and the following shall be
substituted therefor:
"ARTICLE V
FORM AND TIMING OF BENEFITS
Upon the termination of a Participant's employment or, if
later, the termination of a Participant's consulting relationship with
the Company, his benefit under this Plan shall be paid to him (or his
beneficiary) in a lump sum in cash as soon as practicable following
such termination. Notwithstanding the preceding sentence, in the event
of a change of control that is not approved, recommended and supported
by at least two-thirds of the Directors that were also Directors prior
to the occurrence of any such change of control in actions taken prior
to, and with respect to, such change of control, each Participant's
benefit under this Plan shall be paid to him (or his beneficiary) in a
lump sum in cash as soon as practicable, but no later than thirty days
following the date on which such change of control occurs. If a
Participant has elected to have his Accounts credited with Phantom
Stock pursuant to Section 3.4(c), the Participant shall be paid an
amount equal to the value of his Accounts as of the last day of the
calendar month preceding his termination or the change of control as
described in the preceding sentence, based upon the average of the
closing prices of common stock of the Company on the twenty trading
days preceding such date. If
-1-
<PAGE>
a Participant's termination occurs by reason of death, his benefit
under this Plan shall be paid to the same recipient or recipients as
are paid his benefits under the Thrift Plan."
3. Section 6.4 of the Plan shall be deleted.
4. As amended hereby, the Plan is specifically ratified and reaffirmed.
EXECUTED effective as of August 24, 1998.
SEAGULL ENERGY CORPORATION
By: /s/ William L. Transier
Name: William L. Transier
Title: Executive Vice President and
Chief Financial Officer
VEHOU02:123720.1
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 13,884
<SECURITIES> 0
<RECEIVABLES> 109,078
<ALLOWANCES> 0
<INVENTORY> 18,840
<CURRENT-ASSETS> 159,187
<PP&E> 2,341,234
<DEPRECIATION> 1,105,398
<TOTAL-ASSETS> 1,441,463
<CURRENT-LIABILITIES> 183,019
<BONDS> 622,314
0
0
<COMMON> 6,426
<OTHER-SE> 556,041
<TOTAL-LIABILITY-AND-EQUITY> 1,441,463
<SALES> 318,953
<TOTAL-REVENUES> 318,953
<CGS> 27,127
<TOTAL-COSTS> 392,210
<OTHER-EXPENSES> (2,027)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,490
<INCOME-PRETAX> (115,504)
<INCOME-TAX> (31,001)
<INCOME-CONTINUING> (84,503)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,031)
<CHANGES> 0
<NET-INCOME> (85,534)
<EPS-PRIMARY> (1.36)
<EPS-DILUTED> (1.36)
</TABLE>
