-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, i8NlnuMzwTrZlGC4bWwV/57Wkq0MaQY1GL8IKAvbM77VTxhCEuAR6ztLam8GMBMg t8gga9GATsa6VJsW4uXfwg== 0000950129-95-000497.txt : 19950516 0000950129-95-000497.hdr.sgml : 19950516 ACCESSION NUMBER: 0000950129-95-000497 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEAGULL ENERGY CORP CENTRAL INDEX KEY: 0000320321 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION & DISTRIBUTION [4923] IRS NUMBER: 741764876 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08094 FILM NUMBER: 95539713 BUSINESS ADDRESS: STREET 1: 1001 FANNIN STE 1700 CITY: HOUSTON STATE: TX ZIP: 77002-6714 BUSINESS PHONE: 7139514700 MAIL ADDRESS: STREET 1: 1001 FANNIN, SUITE 1700 CITY: HOUSTON STATE: TX ZIP: 77002-6714 FORMER COMPANY: FORMER CONFORMED NAME: SEAGULL PIPELINE CORP DATE OF NAME CHANGE: 19830815 10-Q 1 FORM 10-Q FOR 03/31/95 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to _____________________ Commission file number 1-8094 SEAGULL ENERGY CORPORATION (Exact name of registrant as specified in its charter) Texas 74-1764876 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1001 Fannin, Suite 1700, Houston, Texas 77002-6714 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) (713) 951-4700 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) None - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- -----. APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. CLASS OUTSTANDING AT APRIL 25, 1995 ----- ----------------------------- Common Stock, $.10 par value 36,123,702 2 SEAGULL ENERGY CORPORATION AND SUBSIDIARIES INDEX
PAGE PART I. FINANCIAL INFORMATION NUMBER ------ Presentation of Financial Information . . . . . . . . . . . . . . . . . . . . . . . . 3 Consolidated Statements of Earnings - Three Months Ended March 31, 1995 and 1994 (Unaudited) . . . . . . . . . . . . . . . . . . . . . 4 Consolidated Balance Sheets - March 31, 1995 and December 31, 1994 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . 5 Consolidated Statements of Cash Flows - Three Months Ended March 31, 1995 and 1994 (Unaudited) . . . . . . . . . . . . . . . . . . . . . 6 Notes to Consolidated Financial Statements (Unaudited) . . . . . . . . . . . . . . . 7 Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) . . . . . . . . . . . . . . . . . . 9 PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2 3 PART I. FINANCIAL INFORMATION PRESENTATION OF FINANCIAL INFORMATION In the opinion of management, the following unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of Seagull Energy Corporation and Subsidiaries (the "Company" or "Seagull") as of March 31, 1995, and the results of its operations and cash flows for the three months ended March 31, 1995 and 1994. As discussed in Note 1 to the Company's Consolidated Financial Statements, Seagull adopted Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," effective March 31, 1995. Under SFAS No. 121, the Company recorded a non-cash impairment of gas and oil properties as a separate line item in the accompanying consolidated statement of earnings for the three months ended March 31, 1995. All other adjustments made are of a normal, recurring nature. The results of operations for the three months ended March 31, 1995 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, 1994. 3 4 ITEM 1. FINANCIAL STATEMENTS SEAGULL ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Dollars in Thousands Except Per Share Amounts) (Unaudited)
Three Months Ended March 31, ---------------------------- 1995 1994 ----------- ----------- Revenues: Exploration and production................................... $ 49,409 $ 81,418 Pipeline and marketing....................................... 9,151 9,379 Alaska transmission and distribution......................... 36,290 36,266 ----------- ----------- 94,850 127,063 Costs of Operations: Alaska transmission and distribution cost of gas sold........ 18,565 19,250 Operations and maintenance................................... 28,928 29,781 Exploration charges.......................................... 9,882 4,183 Depreciation, depletion and amortization..................... 34,811 39,020 Impairment of gas and oil properties......................... 44,376 - ----------- ----------- 136,562 92,234 ----------- ----------- Operating Profit (Loss)........................................ (41,712) 34,829 Other (Income) Expense: General and administrative................................... 2,654 2,991 Interest expense............................................. 13,997 11,545 Interest income and other.................................... (563) (107) ----------- ----------- 16,088 14,429 ----------- ----------- Earnings (Loss) Before Income Taxes............................ (57,800) 20,400 Income Taxes (Benefit)......................................... (19,250) 7,485 ----------- ----------- Net Earnings (Loss)............................................ $ (38,550) $ 12,915 =========== =========== Earnings (Loss) Per Share...................................... $ (1.07) $ 0.35 =========== =========== Weighted Average Number of Common Shares Outstanding............ 36,105,702 36,928,418 =========== ===========
See Accompanying Notes to Unaudited Consolidated Financial Statements. 4 5 SEAGULL ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (Unaudited)
March 31, December 31, 1995 1994 ---------- ------------ ASSETS Current Assets: Cash and cash equivalents..................................... $ 11,139 $ 6,432 Accounts receivable, net...................................... 75,980 101,346 Inventories................................................... 5,314 4,530 Prepaid expenses and other.................................... 5,227 7,055 ---------- ---------- Total Current Assets........................................ 97,660 119,363 Property, Plant and Equipment - at cost (successful efforts method for gas and oil properties)........ 1,604,147 1,592,152 Accumulated Depreciation, Depletion and Amortization........... 544,960 467,845 ---------- ---------- 1,059,187 1,124,307 Other Assets.................................................... 55,177 55,880 ---------- ---------- Total Assets.................................................... $1,212,024 $1,299,550 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable.............................................. $ 89,399 $ 97,315 Accrued expenses.............................................. 20,137 31,598 Prepaid gas and oil sales..................................... 1,366 2,732 Current maturities of long-term debt.......................... 1,549 1,549 ---------- ---------- Total Current Liabilities................................... 112,451 133,194 Long-Term Debt.................................................. 614,546 620,805 Other Noncurrent Liabilities.................................... 55,293 57,737 Deferred Income Taxes........................................... 26,511 46,713 Shareholders' Equity: Common Stock, $.10 par value; authorized 100,000,000 shares; issued 36,432,514 shares................. 3,643 3,643 Additional paid-in capital.................................... 324,984 324,820 Retained earnings............................................. 85,409 123,959 Foreign currency translation adjustment....................... (2,347) (2,684) Less - note receivable from employee stock ownership plan............................................... (5,502) (5,502) Less - 308,812 shares (1995) and 326,812 shares (1994) of Common Stock held in Treasury, at cost.................... (2,964) (3,135) ---------- ---------- Total Shareholders' Equity.................................. 403,223 441,101 Commitments and Contingencies................................... ---------- ---------- Total Liabilities and Shareholders' Equity...................... $1,212,024 $1,299,550 ========== ==========
See Accompanying Notes to Unaudited Consolidated Financial Statements. 5 6 SEAGULL ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited)
Three Months Ended March 31, ----------------------- 1995 1994 -------- --------- Operating Activities: Net earnings (loss)........................................... $(38,550) $ 12,915 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation, depletion and amortization.................... 35,655 39,724 Impairment of gas and oil properties........................ 44,376 - Amortization of deferred financing costs.................... 852 1,043 Deferred income taxes....................................... (19,497) 5,380 Dry hole expense............................................ 4,935 1,279 Distributions in excess of earnings from equity investments........................................ 162 856 Other....................................................... (367) (12) -------- --------- 27,566 61,185 Changes in operating assets and liabilities, net of acquisitions: Decrease (Increase) in accounts receivable................ 25,342 (1,993) Decrease (Increase) in inventories, prepaid expenses and other....................................... (2,922) 2,056 Decrease in accounts payable.............................. (7,490) (2,140) Decrease in prepaid gas and oil sales..................... (1,366) (2,593) Decrease in accrued expenses and other.................... (8,349) (14,298) -------- --------- Net Cash Provided By Operating Activities.............. 32,781 42,217 Investing Activities: Capital expenditures.......................................... (19,298) (23,548) Acquisitions, net of cash acquired............................ - (196,031) Proceeds from sales of property, plant and equipment.......... 153 98 -------- --------- Net Cash Used In Investing Activities.................. (19,145) (219,481) Financing Activities: Proceeds from revolving lines of credit and other borrowings.. 180,683 317,592 Principal payments on revolving lines of credit and other borrowings............................................. (186,957) (137,774) Fees paid to acquire financing................................ (125) (13) Proceeds from sales of common stock........................... - 84 Other......................................................... (1,426) (333) -------- --------- Net Cash Provided by (Used in) Financing Activities.... (7,825) 179,556 Effect of Exchange Rate Changes on Cash......................... (1,104) (104) -------- --------- Increase In Cash And Cash Equivalents.................. 4,707 2,188 Cash And Cash Equivalents At Beginning Of Period................ 6,432 5,572 -------- --------- Cash And Cash Equivalents At End Of Period...................... $ 11,139 $ 7,760 ======== =========
See Accompanying Notes to Unaudited Consolidated Financial Statements. 6 7 SEAGULL ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - -------------------------------------------------- Supplemental Disclosures of Cash Flow Information.
- ---------------------------------------------------------------------------------------------------- (Dollars in Thousands) Three Months Ended March 31, ----------------------------------- 1995 1994 ----------------------------------- Cash paid during the period for: Interest, net of amount capitalized....................... $ 19,559 $ 15,610 Income taxes.............................................. $ 88 $ 105 - ----------------------------------------------------------------------------------------------------
Gas and Oil Properties. Effective March 31, 1995, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". This SFAS requires that an impairment loss be recognized when the carrying amount of an asset exceeds the sum of the estimated future cash flow (undiscounted) of the asset. Under SFAS No. 121, the Company reviewed the impairment of gas and oil properties on a depletable unit basis. For each depletable unit determined to be impaired, an impairment loss equal to the difference between the carrying value and the fair value of the depletable unit was recognized. Fair value, on a depletable unit basis, was estimated to be the present value of expected future cash flows computed by applying estimated future gas and oil prices, as determined by management, to estimated future production of gas and oil reserves over the economic lives of the reserves. As a result of the adoption of SFAS No. 121, the Company recognized a non-cash pre-tax charge against earnings during the first quarter of $44.4 million. Prior to March 31, 1995, the Company determined the impairment of proved gas and oil properties on a world-wide basis. Using the world-wide basis, if the net capitalized costs exceeded the estimated future undiscounted after-tax net cash flows from proved gas and oil reserves using period-end pricing, such excess costs would be charged to expense. Earnings Per Share. The weighted average number of common shares outstanding for the computation of earnings per share for the quarter ended March 31, 1994 gives effect to the assumed exercise of dilutive stock options as of the beginning of the period. The effect of the assumed exercise of stock options as of the beginning of the period has an anti-dilutive effect on the computation of earnings per share for the quarter ended March 31, 1995 and has therefore not been included in the weighted average number of common shares outstanding. NOTE 2. COMMITMENTS AND CONTINGENCIES The Company is a party to ongoing litigation in the normal course of business. Management regularly analyzes current information and, as necessary, provides accruals for probable liabilities on the eventual disposition of these matters. While the outcome of lawsuits or other proceedings against the Company cannot be predicted with certainty, management believes that the effect on its financial condition and results of operations, if any, will not be material. 7 8 SEAGULL ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3. SUBSEQUENT EVENTS Subsequent to March 31, 1995, the Company announced plans to reduce the Company's workforce and consolidate operations into a smaller number of locations. Company-wide, 90-95 of about 770 positions will be eliminated in the combined workforce reduction and consolidation. During the quarter ending June 30, 1995, the Company will record estimated one-time pre-tax charges of approximately $8 million to account for the expenses involved in the workforce reduction and consolidation. Subsequent to March 31, 1995, the Company also announced plans to dispose of its interests in 17 gas gathering pipelines (including one partnership), one liquid hydrocarbons pipeline and one gas processing plant. These operations represent a substantial portion of the Company's pipeline and marketing segment. The Company expects to record a gain on the sale of these pipeline assets in the quarter the transaction is closed. For the three months ended March 31, 1995, the pipeline assets to be disposed of contributed $1.3 million to the operating profit of the pipeline and marketing segment. At March 31, 1995, the pipeline assets to be disposed of had a net carrying value of approximately $10.7 million. The Company also announced plans to dispose of all of the shares of its subsidiary that holds its 50% interest in Cavallo Pipeline Company ("Cavallo"). Seagull also operates Cavallo. For the three months ended March 31, 1995, Cavallo contributed $0.3 million to the operating profit of the pipeline and marketing segment and Seagull's investment in Cavallo amounted to approximately $4.3 million at March 31, 1995. Subsequent to March 31, 1995, the Company also announced plans to monetize the Section 29 tax credits available to certain gas and oil properties. The proceeds from the sale of certain pipeline assets, Cavallo and the monetization of tax credits of certain gas and oil properties will be used to pay down the Company's borrowings under its revolving credit facility. These transactions will also reduce the available borrowing base under the Company's revolving credit facility. 8 9 ITEM 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) GENERAL The following discussion is intended to assist in an understanding of the Company's financial position and results of operations for each of the quarters ended March 31, 1995 and 1994. The Company's accompanying unaudited financial statements and the notes thereto contain detailed information that should be referred to in conjunction with the following discussion. RESULTS OF OPERATIONS
CONSOLIDATED HIGHLIGHTS - ---------------------------------------------------------------------------------------------------- (Dollars in Thousands Except Per Share Amounts) Three Months Ended March 31, -------------------------------------- Percent 1995 1994 Change -------------------------------------- Revenues: Exploration and production............................... $ 49,409 $ 81,418 - 39 Pipeline and marketing .................................. 9,151 9,379 - 2 Alaska transmission and distribution..................... 36,290 36,266 - - ---------------------------------------------------------------------------------------------------- $ 94,850 $ 127,063 - 25 ==================================================================================================== Operating Profit (Loss): Exploration and production .............................. $ (54,718) $ 22,175 -347 Pipeline and marketing................................... 2,555 3,207 - 20 Alaska transmission and distribution..................... 10,451 9,447 + 11 - ---------------------------------------------------------------------------------------------------- $ (41,712) $ 34,829 -220 ==================================================================================================== Net Earnings (Loss)........................................ $ (38,550) $ 12,915 -398 Earnings (Loss) Per Share.................................. (1.07) 0.35 -406 Net Cash Provided by Operating Activities Before Changes in Operating Assets and Liabilities...................... 27,566 61,185 - 55 Net Cash Provided by Operating Activities.................. 32,781 42,217 - 22 Weighted Average Number of Common Shares Outstanding (in thousands)........................................... 36,106 36,928 - 2 ====================================================================================================
The decrease in net earnings for the first quarter of 1995 was due to the decrease in operating profit and increase in interest expense, which was partially offset by a decrease in income taxes (see "Other (Income) Expense" section below). The decrease in operating profit was primarily due to the Exploration and Production ("E&P") segment's 39% decrease in revenues and impairment of gas and oil properties of $44.4 million. Revenues and operating profit are discussed in the respective segment sections. Net cash provided by operating activities before changes in operating assets and liabilities decreased in the 1995 quarter versus 1994 primarily due to the decrease in E&P revenues. The decrease in E&P revenues was due primarily to a 34% decrease in the price of natural gas and a decrease in natural gas production. The decrease in natural gas production was primarily a result of voluntary curtailments due to natural gas prices being below acceptable levels. 9 10 ITEM 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) CONSOLIDATED HIGHLIGHTS, CONTINUED Subsequent to March 31, 1995, the Company announced plans to reduce the Company's workforce and consolidate operations into a smaller number of locations. Company-wide, 90-95 of about 770 positions will be eliminated in the combined workforce reduction and consolidation. The Company will record estimated one-time pre-tax charges of approximately $8 million in the second quarter of 1995 to account for the expenses involved in the workforce reduction and consolidation. Subsequent to March 31, 1995, the Company also announced plans to dispose of its interests in 17 gas gathering pipelines (including one partnership), one liquid hydrocarbons pipeline and one gas processing plant. These operations represent a substantial portion of the Company's pipeline and marketing segment. The Company expects to record a gain on the sale of these pipeline assets in the quarter the transaction is closed. The Company also announced plans to dispose of all of the shares of its subsidiary that holds its 50% interest in Cavallo Pipeline Company ("Cavallo"). Seagull also operates Cavallo. See "Pipeline and Marketing" section below. Subsequent to March 31, 1995, the Company also announced plans to monetize the Section 29 tax credits available to certain gas and oil properties. The proceeds from the sale of certain pipeline assets, Cavallo and the monetization of tax credits of certain gas and oil properties will be used to pay down the Company's borrowings under its revolving credit facility. These transactions will also reduce the available borrowing base under the Company's revolving credit facility. 10 11 ITEM 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED)
EXPLORATION AND PRODUCTION - ---------------------------------------------------------------------------------------------------- (Dollars in Thousands Except Per Unit Amounts) Three Months Ended March 31, -------------------------------------- Percent 1995 1994 Change -------------------------------------- Revenues: Natural Gas............................................ $ 43,662 $ 75,071 - 42 Oil and Condensate..................................... 5,183 5,504 - 6 Natural Gas Liquids.................................... 780 612 + 27 Other................................................. (216) 231 -194 - --------------------------------------------------------------------------------------------------- 49,409 81,418 - 39 Lifting Costs............................................ 15,003 16,221 - 8 General Operating Expense................................ 3,046 2,990 + 2 Exploration Charges...................................... 9,882 4,183 +136 Depreciation, Depletion and Amortization................. 31,820 35,849 - 11 Impairment of Gas and Oil Properties..................... 44,376 - NA - --------------------------------------------------------------------------------------------------- Operating Profit (Loss) $(54,718) $ 22,175 -347 =================================================================================================== OPERATING DATA (1): Net Daily Production (2): Natural Gas (MMcf) .................................... 343.4 387.2 - 11 Oil and Condensate (Bbl) .............................. 3,510 4,462 - 21 Natural Gas Liquids (Bbl).............................. 850 894 - 5 Combined (MMcfe) (3) .................................. 369.6 419.3 - 12 Average Sales Prices: Natural Gas ($ per Mcf) ............................... 1.41 2.15 - 34 Oil and Condensate ($ per Bbl) ........................ 16.40 13.71 + 20 Natural Gas Liquids ($ per Bbl) ....................... 10.21 7.61 + 34 Combined ($ per Mcfe) (3).............................. 1.49 2.16 - 31 Lifting Costs ($ per Mcfe): Lease Operating........................................ 0.27 0.23 + 17 Workovers.............................................. 0.03 0.03 - Production Taxes....................................... 0.05 0.07 - 29 Transportation......................................... 0.08 0.08 - Ad Valorem Taxes....................................... 0.03 0.02 + 50 Total.................................................. 0.46 0.43 + 7 DD&A Rate ($ per Mcfe)................................... 0.96 0.95 + 1 ===================================================================================================
(1) Domestic and Canadian operations combined. (2) Natural gas stated in million cubic feet ("MMcf") or thousand cubic feet ("Mcf"); oil and condensate and natural gas liquids stated in barrels ("Bbl"). (3) MMcfe and Mcfe represent the equivalent of one million and one thousand cubic feet of natural gas, respectively. Oil and condensate and natural gas liquids are converted to gas at a ratio of one barrel of liquids per six Mcf of gas, based on relative energy content. 11 12 ITEM 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) EXPLORATION AND PRODUCTION, Continued The decrease in operating profit of the E&P segment for the first quarter of 1995 as compared to the 1994 period was primarily due to a 39% decrease in revenues, an increase in exploration charges and a charge for impairment of gas and oil properties, which was partially offset by decreased depreciation, depletion and amortization ("DD&A") expense and lifting costs. The decrease in E&P revenues for the first quarter of 1995 as compared to 1994 was primarily the result of a 34% decrease in the Company's average realized price of natural gas due to several factors beyond the control of the Company (warm weather, new gas supply, utilization of competitive fuels). Revenues also decreased as a result of voluntary production curtailments due to the lower natural gas prices. There were no voluntary curtailments in the same period in 1994. DD&A expense and lifting costs decreased as a result of the significant decrease in production. Exploration charges increased for the 1995 quarter due to a significant increase in seismic and dry hole costs. The increase in seismic costs is primarily due to an increase in 3-D seismic surveys on offshore blocks. Two of six exploratory wells drilled were successful and six wells, four of which were in Canada, were drilling or being evaluated as of mid-April 1995 in comparison to two successes out of three exploratory wells drilled for the 1994 period. Effective March 31, 1995, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". As a result of the adoption of SFAS No. 121, the Company recognized a non-cash pre-tax charge against earnings during the first quarter of $44.4 million. As a result of the impairment, the Company's average DD&A rate per equivalent unit of production is expected to decrease from $0.96 per Mcfe for the first quarter of 1995 to approximately $0.86 per Mcfe for the remainder of 1995. If natural gas prices remain at their first quarter 1995 levels, E&P operating results are expected to continue to be substantially lower than the previous year. As in the past, the Company will curtail production whenever prices are deemed to be below acceptable levels. As E&P operating profit represented nearly half of the Company's operating profit for the year ended December 31, 1994, a substantial decrease in E&P operating results will have a significant impact on the Company's total operating results. The Company's operating profit from pipeline and marketing is expected to decrease from the year ended December 31, 1994 based on the anticipated sale of certain of the pipeline assets (see "Pipeline and Marketing" section below), however, the Company expects to record a gain on the sale of the pipeline assets in the quarter the transaction is closed. Operating profit for the Alaska transmission and distribution segment is not expected to change significantly in 1995. However, the Company expects its interest costs to increase in 1995 due to the effect of higher rates for the entire year. 12 13 ITEM 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED)
PIPELINE AND MARKETING - ---------------------------------------------------------------------------------------------------- (Dollars in Thousands) Three Months Ended March 31, -------------------------------------- Percent 1995 1994 Change -------------------------------------- OPERATING PROFIT: Pipelines................................................. $1,523 $1,583 - 4 Marketing and Supply...................................... 344 1,352 - 75 Gas Processing............................................ 258 (356) +172 Operating and Construction Services....................... 430 628 - 32 - ---------------------------------------------------------------------------------------------------- $2,555 $3,207 - 20 ==================================================================================================== OPERATING DATA: Average Daily Volumes (MMcf): Gas Gathering........................................... 229 279 - 18 Partnership Systems (net)............................... 112 109 + 3 Marketing and Supply.................................... 517 607 - 15 Gas Processing: Average Daily Inlet Volumes (MMcf)...................... 274 285 - 4 Average Daily Net Production (Bbl)...................... 4,451 2,441 + 82 ====================================================================================================
Subsequent to March 31, 1995, the Company announced plans to dispose of its interests in 17 gas gathering pipelines (including one partnership), one liquid hydrocarbons pipeline and one gas processing plant. These operations represent a substantial portion of the Company's pipeline and marketing segment. For the three months ended March 31, 1995, the pipeline assets to be disposed of contributed $1.3 million to the operating profit of the pipeline and marketing segment. At March 31, 1995, the pipeline assets to be disposed of had a net carrying value of approximately $10.7 million. The Company also announced plans to dispose of all of the shares of its subsidiary that holds its 50% interest in Cavallo. Seagull also operates Cavallo. For the three months ended March 31, 1995, Cavallo contributed $0.3 million to the operating profit of the pipeline and marketing segment and Seagull's investment in Cavallo amounted to approximately $4.3 million at March 31, 1995. The Company is retaining the marketing and supply and operating and construction services areas as well as certain assets in the pipelines and gas processing areas. In the pipeline and marketing segment, operating profit for the first quarter of 1995 declined in comparison to the 1994 period due to declines in the marketing and supply and operating and construction services areas which more than offset improvements in the gas processing area. Operating profit in the marketing and supply area declined primarily due to a 15% reduction in third party volumes delivered for marketing, a 38% decrease in the margin received on third party marketing sales and a significant decrease in the marketing fees received from the sale of gas produced by the E&P segment due to lower gas prices and voluntary curtailments. In the gas processing area, operating profit improved in 1995 due to an increase in the average daily net production of one of the Company's gas processing plants due to the resumption of ethane recovery subsequent to the first quarter of 1994. In the first quarter of 1994, Seagull completed a gas pipeline construction project the Company began in mid-1993. The Company also recognized additional operating profit of $250,000 during the first quarter of 1995 when the warranty period for this project expired. Historically, the Company has not been engaged in pipeline construction projects on a consistently recurring basis. Seagull is currently conducting marketing efforts and anticipates it will generate new projects. 13 14 ITEM 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED)
ALASKA TRANSMISSION AND DISTRIBUTION - ---------------------------------------------------------------------------------------------------- (Dollars in Thousands Except Per Unit Amounts) Three Months Ended March 31, ------------------------------------ Percent 1995 1994 Change ----------------------------------- Revenues................................................... $36,290 $36,266 - Cost of Gas Sold........................................... 18,565 19,250 - 4 Operations and Maintenance Expense......................... 5,317 5,620 - 5 Depreciation, Depletion and Amortization................... 1,957 1,949 - - ---------------------------------------------------------------------------------------------------- Operating Profit $10,451 $ 9,447 + 11 ==================================================================================================== OPERATING DATA: Degree Days (*) ........................................... 4,177 3,887 + 7 Volumes (Bcf): Gas Sold................................................. 10.5 11.1 - 5 Gas Transported ......................................... 3.6 2.4 + 50 Combined................................................. 14.1 13.5 + 4 Margins ($ per Mcf): Gas Sold................................................. 1.54 1.45 + 6 Gas Transported ......................................... 0.42 0.39 + 8 Combined................................................. 1.26 1.26 - ====================================================================================================
(*) 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 quarter ended March 31, 1995 increased $1.0 million from that of the prior year quarter primarily due to colder weather in the utility's service area and a 2% increase in the number of customers. In the first quarter of 1995, two large utility customers that previously purchased gas from ENSTAR Alaska began purchasing gas directly from gas producers. ENSTAR Alaska currently transports the customers' gas supplies for a fee that is comparable to the margin (revenues net of the associated cost of gas sold) it previously earned. Accordingly, operating profit for the Alaska transmission and distribution segment was basically unaffected by this change. This segment's business is seasonal with approximately 65% of its sales made in the first and fourth quarters of each year. 14 15 ITEM 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED)
OTHER (INCOME) EXPENSE - ---------------------------------------------------------------------------------------------------- (Dollars in Thousands) Three Months Ended March 31, ------------------------------------ Percent 1995 1994 Change ----------------------------------- General and Administrative...................................... $ 2,654 $ 2,991 - 11 Interest Expense................................................ 13,997 11,545 - 21 Interest Income and Other....................................... (563) (107) +426 - ---------------------------------------------------------------------------------------------------- $16,088 $14,429 + 11 ====================================================================================================
General and administrative expenses declined in 1995 due primarily to lower accrued incentive compensation expense for the first quarter 1995, partially offset by an increase in costs associated with three compensation plans, one for outside directors, one for key managers, and the other for all Seagull employees, that are tied directly to the price of Seagull Common Stock. The closing price of Seagull Common Stock increased 3% in the first quarter of 1995 from $19.125 at December 31, 1994 to $19.75 on March 31, 1995, compared to a 6% decrease in the 1994 period. Interest expense increased in the first quarter of 1995 as a result of an increase in the overall level of interest rates since the 1994 quarter. The average interest rate on the Company's U.S. revolving credit was 6.8% for the first quarter of 1995 versus 4.4% for the first quarter of 1994. INCOME TAXES The decrease in income taxes in the 1995 quarter was primarily a result of the decrease in earnings before income taxes for the period. 15 16 ITEM 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) LIQUIDITY AND CAPITAL RESOURCES
CAPITAL EXPENDITURES - ---------------------------------------------------------------------------------------------------- (Dollars in Thousands) Three Months Ended March 31, ------------------------------------ Percent 1995 1994 Change ----------------------------------- Exploration and Production: Lease acquisitions......................................... $ 527 $ 1,884 - 72 Exploration ............................................... 10,222 3,172 +222 Development ............................................... 7,003 16,238 - 57 - ---------------------------------------------------------------------------------------------------- 17,752 21,294 - 17 Pipeline and Marketing....................................... 137 391 - 65 Alaska Transmission and Distribution......................... 1,012 1,385 - 27 Corporate.................................................... 397 478 - 17 - ---------------------------------------------------------------------------------------------------- $19,298 $23,548 - 18 ====================================================================================================
Total capital expenditures for the first quarter of 1995 decreased $4.2 million from those for the 1994 quarter. Current plans for 1995 call for capital expenditures of approximately $122 million, including about $112 million in exploration and production. As the Company funds capital expenditures from internally generated funds, the Company will reduce or increase capital expenditures as economic conditions dictate. The Company has a revolving credit line (the "U.S. Credit Agreement") with a maximum commitment of $725 million. The amount of senior indebtedness available to the Company under the provisions of the U.S. Credit Agreement is subject to a borrowing base (the "Borrowing Base") based upon the proved reserves of the Company's exploration and production segment and the financial performance of the Company's other business segments. The Borrowing Base is generally determined annually, but may be redetermined, at the option of either Seagull or the banks, one additional time each year, and will be redetermined upon the sale of certain assets included in the Borrowing Base. Currently, the available commitment under the U.S. Credit Agreement is subject to a $625 million Borrowing Base and is determined after consideration of outstanding borrowings under Seagull's other senior debt facilities. As of April 28, 1995, borrowings outstanding under the U.S. Credit Agreement were $237.0 million, leaving immediately available unused commitments of approximately $176.3 million, net of outstanding letters of credit of $2.9 million, $100 million of borrowings outstanding under the Company's senior notes, the nominated borrowing availability of $95 million under the Canadian Credit Agreement discussed below, and $13.8 million of borrowings outstanding under Seagull's money market facilities. 16 17 ITEM 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) LIQUIDITY AND CAPITAL RESOURCES, CONTINUED The anticipated proceeds from the sale of certain pipeline assets, Cavallo and the monetization of tax credits of certain gas and oil properties will be used to pay down the Company's borrowings under the U.S. Credit Agreement. The sale of certain pipeline assets, Cavallo and the monetization of tax credits of certain gas and oil properties will also reduce the available Borrowing Base under the U.S. Credit Agreement. The effect of lower natural gas prices on the estimated cash flow of the Company's proved reserves will also result in a reduction of the Borrowing Base. However, management believes that the Company's capital resources will be sufficient to finance current and forecasted operations. During the first quarter of 1995, the Company made a capital contribution of approximately $73 million to a wholly owned subsidiary, Seagull Energy Canada Ltd. ("Seagull Canada"). The Company funded the capital contribution by an additional borrowing under the U.S. Credit Agreement. Seagull Canada used the proceeds to repay a portion of the balance outstanding under its $175 million reducing revolving credit facility (the "Canadian Credit Agreement") and concurrently elected to reduce the nominated maximum borrowing available under the Canadian Credit Agreement from $160 million to $95 million. The Canadian Credit Agreement provides for dual currency borrowings in U.S. and Canadian dollars and has a flexible nominated maximum borrowing availability which amount is taken into consideration in the calculation of availability under the U.S. Credit Agreement, and which may be increased or decreased by Seagull Canada at its discretion. In addition to the facilities discussed above, Seagull has money market facilities with two major U.S. banks with a combined maximum commitment of $70 million. These lines of credit bear interest at rates made available by the banks at their discretion and may be canceled at either Seagull's or the banks' discretion. The lines are subject to annual renewal. 17 18 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: * 3.1 Bylaws of the Company, as amended through March 17, 1995. * 4.1 $5,000,000 Revolving Credit Agreement between Alaska Pipeline Company and The First National Bank of Anchorage dated March 15, 1995. *#10.1 Fourth Amendment to the Seagull Thrift Plan dated September 1, 1994. *27.1 Financial Data Schedule.
(b) There were no reports on Form 8-K filed during the three months ended March 31, 1995. ___________________________ * Filed herewith. # Identifies management contracts and compensatory plans or arrangements 18 19 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/ Robert W. Shower -------------------------------- Robert W. Shower Executive Vice President and Chief Financial Officer (Principal Financial Officer) Date: May 11, 1995 By: /s/ Rodney W. Bridges --------------------------------- Rodney W. Bridges Vice President and Controller (Principal Accounting Officer) Date: May 11, 1995 19 20 INDEX TO EXHIBITS Exhibits: * 3.1 Bylaws of the Company, as amended through March 17, 1995. * 4.1 $5,000,000 Revolving Credit Agreement between Alaska Pipeline Company and The First National Bank of Anchorage dated March 15, 1995. *#10.1 Fourth Amendment to the Seagull Thrift Plan dated September 1, 1994. *27.1 Financial Data Schedule. * Filed herewith. # Identifies management contracts and compensatory plans or arrangements EX-3.1 2 BYLAWS OF THE COMPANY 1 EXHIBIT 3.1 AMENDED AND RESTATED BYLAWS OF SEAGULL ENERGY CORPORATION A Texas Corporation Last Amended and Restated: January 31, 1990 Last Amended: March 17, 1995 (As required by Item 601 of Regulation S-K, the 1995 amendment is included in the text as if the Board had restated the Amended and Restated Bylaws to incorporate the change.) 2 AMENDED AND RESTATED BYLAWS OF SEAGULL ENERGY CORPORATION A Texas Corporation ARTICLE I REGISTERED OFFICE The registered office of the Corporation required by the Texas Business Corporation Act (the "TBCA") to be maintained in the State of Texas shall be 1001 Fannin, Suite 1700, Houston, Texas 77002 or such other office (which need not be a place of business of the Corporation) as may be designated from time to time by the Board of Directors in the manner provided by law. ARTICLE II SHAREHOLDERS Section 1. Place of Meetings. All meetings of the shareholders shall be held at the principal place of business of the Corporation or at such other place within or without the State of Texas as shall be specified or fixed in the notices or waivers of notice thereof; provided that any or all shareholders may participate in any such meeting by means of conference telephone or similar communications equipment pursuant to Article II, Section 12 of these bylaws. Section 2. Quorum; Required Vote for Shareholder Action; Adjournment of Meetings. (a) Quorum. A quorum shall be present at a meeting of shareholders if the holders of a majority of the shares entitled to vote are represented at the meeting in person or by proxy, unless otherwise provided in the Articles of Incorporation in accordance with the TBCA. Once a quorum is present at a meeting of shareholders, the shareholders represented in person or by proxy at the meeting may conduct such business as may be properly brought before the meeting until it is adjourned, and the subsequent withdrawal from the meeting of any shareholder or the refusal of any shareholder represented in person or by proxy to vote shall not affect the presence of a quorum at the meeting. (b) Voting on Matters Other Than the Election of Directors. With respect to any matter, other than the election of directors or a matter for which the affirmative vote of the holders of a specified portion of the shares entitled to vote is required by the TBCA, the affirmative vote of the holders of a majority of the shares entitled to vote on that matter and represented in person or by proxy at a meeting of shareholders at which a quorum is present shall -1- 3 be the act of the shareholders, unless otherwise provided in the Articles of Incorporation or these bylaws in accordance with the TBCA. (c) Voting in the Election of Directors. Unless otherwise provided in the Articles of Incorporation or these bylaws in accordance with the TBCA, directors shall be elected by a plurality of the votes cast by the holders of shares entitled to vote in the election of directors at a meeting of shareholders at which a quorum is present. (d) Adjournment. Notwithstanding the other provisions of the Articles of Incorporation or these bylaws, the chairman of the meeting or the holders of a majority of the shares entitled to vote that are represented in person or by proxy at any meeting of shareholders, whether or not a quorum is present, shall have the power to adjourn such meeting from time to time, without any notice other than announcement at the meeting of the time and place of the holding of the adjourned meeting. If such meeting is adjourned by the shareholders, such time and place shall be determined by a vote of the holders of a majority of the shares entitled to vote that are represented in person or by proxy at such meeting. Upon the resumption of such adjourned meeting, any business may be transacted that might have been transacted at the meeting as originally called. Section 3. Annual Meetings. An annual meeting of the shareholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, within or without the State of Texas, on such date and at such time as the Board of Directors shall fix and set forth in the notice of the meeting, which date shall be within 13 months subsequent to the most recent annual meeting of shareholders. Section 4. Special Meetings. Unless otherwise provided in the Articles of Incorporation, special meetings of the shareholders for any proper purpose or purposes may be called at any time by (a) the Chairman of the Board (if any), the President, the Board of Directors, or such other person or persons as may be authorized in the Articles of Incorporation or (b) unless the Articles of Incorporation provide otherwise, the holders of at least ten percent of all the shares entitled to vote at the proposed special meeting. If not otherwise stated in or fixed in accordance with the remaining provisions hereof, the record date for determining shareholders entitled to call a special meeting is the date any shareholder first signs the notice of that meeting. Only business within the purpose or purposes described in the notice (or waiver thereof) required by these bylaws may be conducted at a special meeting of the shareholders. Section 5. Closing Share Transfer Records; Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive a distribution by the Corporation (other than a distribution involving a purchase or redemption by the Corporation of any of its own shares) or a share dividend, or in order to make a determination of shareholders for any other purpose (other than determining -2- 4 shareholders entitled to consent to action by shareholders proposed to be taken without a meeting of shareholders), the Board of Directors of the Corporation may provide that the share transfer records shall be closed for a stated period but not to exceed, in any case, 60 days. If the share transfer records shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such records shall be closed for at least ten days immediately preceding such meeting. In lieu of closing the share transfer records, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 60 days and, in the case of a meeting of shareholders, not less than ten days, prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the share transfer records are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive a distribution (other than a distribution involving a purchase or redemption by the Corporation of any of its own shares) or a share dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such distribution or share dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided herein, such determination shall also apply to any adjournment thereof except where the determination has been made through the closing of share transfer records and the stated period of closing has expired. Section 6. Notice of Meetings. Written or printed notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary or the officer or person calling the meeting, to each shareholder entitled to vote at such meeting. If mailed, any such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the share transfer records of the Corporation, with postage thereon prepaid. Any notice required to be given to any shareholder, under any provision of the TBCA or the Articles of Incorporation or these bylaws need not be given to the shareholder if (a) notice of two consecutive annual meetings and all notices of meetings held during the period between those annual meetings, if any, or (b) all (but in no event less than two) payments of distributions or interest on securities during a 12-month period have been mailed to that person by first-class mail, addressed to him at his address as shown on the share transfer records of the Corporation, and have been returned undeliverable. Any action or meeting taken or held without notice to such person shall have the same force and effect as if the notice had been duly given and, if the action taken by the Corporation is reflected in any articles or document filed with the Secretary of State, those articles or that document may state that notice was duly given to all persons to whom notice -3- 5 was required to be given. If such a person delivers to the Corporation written notice setting forth his then current address, the requirement that notice be given to that person shall be reinstated. Section 7. Voting List. The officer or agent having charge of the share transfer records of the Corporation shall make, at least ten days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten days prior to such meeting, shall be kept on file at the registered office or principal place of business of the Corporation and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original share transfer records shall be prima-facie evidence as to who are the shareholders entitled to examine such list or transfer records or to vote at any meeting of shareholders. Failure to comply with the requirements of this Section shall not affect the validity of any action taken at such meeting. Section 8. Proxies. A shareholder may vote either in person or by proxy executed in writing by the shareholder. A telegram, telex, cablegram or similar transmission by the shareholder, or a photographic, photostatic, facsimile or similar reproduction of a writing executed by the shareholder shall be treated as an execution in writing for purposes of this Section. Proxies for use at any meeting of shareholders or in connection with the taking of any action by written consent shall be filed with the Secretary, or such other officer as the Board of Directors may from time to time determine by resolution, before or at the time of the meeting or execution of the written consent, as the case may be. All proxies shall be received and taken charge of and all ballots shall be received and canvassed by the secretary of the meeting who shall decide all questions touching upon the qualification of voters, the validity of the proxies, and the acceptance or rejection of votes, unless an inspector or inspectors shall have been appointed by the chairman of the meeting, in which event such inspector or inspectors shall decide all such questions. No proxy shall be valid after 11 months from the date of its execution unless otherwise provided in the proxy. A proxy shall be revocable unless the proxy form conspicuously states that the proxy is irrevocable and the proxy is coupled with an interest. Proxies coupled with an interest shall include the appointment as proxy of any of the persons set forth in the TBCA, including without limitation: (a) a pledgee; (b) a person who purchased or agreed to purchase, or owns or holds an option to purchase, the shares; (c) a creditor of the Corporation who extended it credit under terms requiring the appointment; (d) an employee of the Corporation whose employment contract requires the appointment; or -4- 6 (e) a party to a voting agreement executed under Section B, Article 2.30 of the TBCA. Should a proxy designate two or more persons to act as proxies, unless such instrument shall provide to the contrary, a majority of such persons present at any meeting at which their powers thereunder are to be exercised shall have and may exercise all the powers of voting or giving consents thereby conferred, or if only one be present, then such powers may be exercised by that one; or, if an even number attend and a majority do not agree on any particular issue, the Corporation shall not be required to recognize such proxy with respect to such issue if such proxy does not specify how the shares that are the subject of such proxy are to be voted with respect to such issue. Section 9. Voting; Inspectors; Elections. Unless otherwise required by law or provided in the Articles of Incorporation, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. If the Articles of Incorporation provide for more or less than one vote per share for all the outstanding shares or for the shares of any class or series on any matter, every reference in these bylaws or in the Article of Incorporation (unless expressly stated otherwise therein), in connection with such matter, to a specified portion of such shares shall mean such portion of the votes entitled to be cast in respect of such shares by virtue of the provisions of such Articles of Incorporation. All voting, except as required by the Articles of Incorporation or where otherwise required by law, may be by a voice vote; provided, however, that a vote by ballot shall be taken upon demand therefor by shareholders holding issued and outstanding shares representing a majority of the voting power present in person or by proxy at any meeting. Every vote by ballot shall be taken by written ballots, each of which shall state the name of the shareholder or proxy voting and such other information as may be required under the procedure established for the meeting. At any meeting at which a vote is taken by ballots, the chairman of the meeting may appoint one or more inspectors, each of whom shall subscribe an oath or affirmation to execute faithfully the duties of inspector at such meeting with strict impartiality and according to the best of his ability. Such inspector shall receive the ballots, count the votes and make and sign a certificate of the result thereof. The chairman of the meeting may appoint any person to serve as inspector, except no candidate for the office of director shall be appointed as an inspector. At each election of directors each shareholder entitled to vote thereat shall, unless otherwise provided by law or by the Articles of Incorporation, have the right to vote the number of shares owned by him for as many persons as there are to be elected and for whose election he has a right to vote. Section 10. Conduct of Meetings. All meetings of the shareholders shall be presided over by the chairman of the meeting, who shall be the Chairman of the Board (if any), or if he is not present, the President, or if neither the Chairman of the Board (if any) nor President is present, a chairman elected at the meeting. The Secretary of the Corporation, if present, shall act as -5- 7 secretary of such meetings, or if he is not present, an Assistant Secretary (if any) shall so act; if neither the Secretary nor an Assistant Secretary (if any) is present, then a secretary shall be appointed by the chairman of the meeting. The chairman of any meeting of shareholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him in order. Unless the chairman of the meeting shall otherwise determine or otherwise conduct the meeting, the order of business shall be as follows: (a) Calling of meeting to order. (b) Election of a chairman, and the appointment of a secretary, if necessary. (c) Presentation of proof of the due calling of the meeting. (d) Presentation and examination of proxies and determination of a quorum. (e) Reading and settlement of the minutes of the previous meeting. (f) Reports of officers and committees. (g) The election of directors, if an annual meeting or a meeting called for that purpose. (h) Other business. (i) Adjournment. Section 11. Treasury Shares. Neither the Corporation nor any other person shall vote, directly or indirectly, at any meeting, shares of the Corporation's own stock owned by the Corporation, shares of the Corporation's own stock owned by another corporation the majority of the voting stock of which is owned or controlled by the Corporation, and shares of the Corporation's own stock held by the Corporation in a fiduciary capacity; and such shares shall not be counted in determining the total number of outstanding shares at any given time. Section 12. Action by Written Consent or Telephone Conference. Any action required or permitted to be taken at any annual or special meeting of shareholders may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holder or holders of all the shares entitled to vote with respect to the action that is the subject of the consent. Every written consent shall bear the date of signature of each shareholder who signs the consent. No written consent shall be effective to take the action that is the subject to the consent unless, within 60 days after the date of the earliest dated consent delivered to the Corporation in the manner required by this Section, a consent or consents signed by the holder or holders of all shares entitled to vote with respect to the action that is the subject of the consent are delivered to the Corporation by delivery to its registered office, its principal place of business, or an officer or agent of the Corporation having custody of the books in which proceedings of meetings of shareholders are recorded. Delivery shall be by hand or certified or registered mail, return receipt requested. Delivery to the Corporation's principal place of business shall be addressed to the President or chief executive officer. -6- 8 A telegram, telex, cablegram or similar transmission by a shareholder, or a photostatic, facsimile or similar reproduction of a writing signed by a shareholder, shall be regarded as signed by the shareholder for purposes of this Section. If any action by shareholders is taken by written consent, any articles or documents filed with the Secretary of State as a result of the taking of the action shall state, in lieu of any statement required by the TBCA concerning any vote of shareholders, that written consent has been given in accordance with the provisions of the TBCA and that any written notice required by the TBCA has been given. Subject to the provisions of the TBCA, the Articles of Incorporation or these bylaws for notice of meetings, and unless otherwise restricted by the Articles of Incorporation, shareholders may participate in and hold a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such meeting shall constitute attendance and presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. Section 13. Fixing Record Dates for Consents to Action. Whenever action by shareholders is proposed to be taken by consent in writing without a meeting of shareholders, the Board of Directors may fix a record date for the purpose of determining shareholders entitled to consent to that action, which record date shall not precede, and shall not be more than ten days after, the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors and the prior action of the Board of Directors is not required by law, the Articles of Incorporation or these bylaws, the record date for determining shareholders entitled to consent to action in writing without a meeting shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office, its principal place of business, or an officer or agent of the Corporation having custody of the books in which proceedings of meetings of shareholders are recorded. Delivery shall be by hand or by certified or registered mail, return receipt requested. Delivery to the Corporation's principal place of business shall be addressed to the President or the chief executive officer of the Corporation. If no record date shall have been fixed by the Board of Directors and prior action of the Board of Directors is required by the TBCA, the Articles of Incorporation or these bylaws, the record date for determining shareholders entitled to consent to action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts a resolution taking such prior action. Section 14. Business to Be Brought Before the Annual Meeting. To be properly brought before an annual meeting of shareholders, business must be either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a shareholder of the Corporation who is a -7- 9 shareholder of record at the time of giving of notice provided for in this Section, who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in this Section. In addition to any other applicable requirements, for business to be brought before an annual meeting by a shareholder of the Corporation, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 90 days prior to the anniversary date of the immediately preceding annual meeting of shareholders of the Corporation. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposed to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as the appear on the Corporation's books, of the shareholder proposing such business, (iii) the acquisition date, the class and the number of shares of voting stock of the Corporation that are owned beneficially by the shareholder, (iv) any material interest of the shareholder in such business and (v) a representation that the shareholder intends to appear in person or by proxy at the meeting to bring the proposed business before the meeting. Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section. The chairman of the annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section, and if the chairman should so determine, the chairman shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Section, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section. Notwithstanding any provision to the contrary set forth above, the provisions of this Section 14 shall be effective only with respect to annual meetings of shareholders held after December 31, 1995. (Section added by Amendment on March 17, 1995.) ARTICLE III BOARD OF DIRECTORS Section 1. Power; Number; Term of Office. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors and subject to the restrictions imposed by law or the Articles of Incorporation, they may exercise all the powers of the Corporation. The authorized number of directors that shall constitute the entire Board of Directors shall not be less than eight nor more than fifteen, and shall be determined from time to time by resolution of the Board of Directors (provided that no decrease in the number of directors that would have the effect of shortening the term of an incumbent director may be made by the Board -8- 10 of Directors). During any period that the authorized number of directors is nine or more, the Board of Directors shall be divided into three classes: Class I, Class II and Class III, and the remainder of this paragraph shall be effective. The number of directors in each class shall be the whole number contained in the quotient arrived at by dividing the authorized number of directors by three and if a fraction is also contained in such quotient, then if such fraction is 1/3, the extra director shall be a member of Class III, and if the fraction is 2/3, one of the directors shall be a member of Class III and the other shall be a member of Class II. Except as otherwise provided in Section 8 of this Article III, each director elected at an annual meeting shall serve for a term ending on the third annual meeting following the meeting at which such director was elected; provided, however, that the directors first elected to Class I shall serve for a term ending on the annual meeting immediately following the annual meeting at which such directors were first elected, the directors first elected to Class II shall serve for a term ending on the second annual meeting following the meeting at which such directors were first elected and the directors first elected to Class III shall serve a full term as hereinabove provided. The foregoing notwithstanding, each director shall serve until his successor shall have been duly elected and qualified or until his earlier death, resignation or removal. For purposes of this paragraph, reference to the first election of directors shall signify the first election of directors at an annual meeting after January 1, 1986. At each annual election held after January 1, 1986, the directors chosen to succeed those whose terms then expire shall be identified as being of the same class as the directors they succeed. If for any reason the number of directors in the various classes shall not conform with the formula set forth in this paragraph, the Board of Directors may redesignate any director into a different class in order that the balance of directors in such classes shall conform thereto; provided, however, that no such redesignation may have the effect of reducing the term to which a director was elected. If the Board of Directors shall not be classified as set forth above, each director shall hold office for the term for which he is elected, and until his successor shall have been elected and qualified or until his earlier death, resignation or removal. Unless otherwise provided in the Articles of Incorporation, directors need not be residents of the State of Texas nor shareholders of the Corporation. Section 2. Quorum; Required Vote for Director Action. Unless otherwise required by law or provided in the Articles of Incorporation or these bylaws, a majority of the total number of directors fixed in the manner provided in these bylaws shall constitute a quorum for the transaction of business of the Board of Directors, and the act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Section 3. Meetings; Order of Business. Meetings of the Board of Directors may be held at such place or places as shall be determined from time to time by resolution of the Board of Directors. At all meetings of the Board of Directors business shall be transacted in such order as shall from time to time be determined by the Chairman of the Board (if any), or in his absence by the President (if the President is a director), or by resolution of the Board of Directors. -9- 11 Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. Section 4. First Meeting. In connection with any annual meeting of shareholders at which directors were elected, the Board of Directors may, if a quorum is present, hold its first meeting for the transaction of business immediately after and at the same place as such annual meeting of the shareholders. Notice of such meeting at such time and place shall not be required. Section 5. Regular Meetings. Regular meetings of the Board of Directors shall be held at such times and places as shall be designated from time to time by resolution of the Board of Directors. Notice of such regular meetings shall not be required. Section 6. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board (if any), the President or, on the written request of any one director, by the Secretary, in each case on at least 24 hours personal, written, telegraphic, cable or wireless notice to each director. Such notice, or any waiver thereof pursuant to Article VIII, Section 3 hereof, need not state the purpose or purposes of such meeting, except as may otherwise be required by law or provided for by the Articles of Incorporation or these bylaws. Section 7. Removal. At any meeting of shareholders at which a quorum of shareholders is present called expressly for that purpose, any director may be removed, but only for cause, by vote of the holders of a majority of the shares then entitled to vote for the election of such director; provided that, in the case shareholders have the right to accumulate votes for the election of directors, if less than the entire Board is to be removed, no director may be removed if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire Board of Directors or if there be classes of directors at an election of the class of directors of which such director is a part. Section 8. Vacancies; Increases in the Number of Directors. Any vacancy occurring in the Board of Directors may be filled in accordance with the following paragraph of this Section 8 or may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors. Except as otherwise provided below, a director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. Any vacancy occurring in the Board of Directors or any directorship to be filled by reason of an increase in the number of directors (i) may be filled by election at an annual or special meeting of shareholders called for that purpose or (ii) may be filled by the Board of Directors; provided that, with respect to any directorship to be filled by the Board of Directors by reason of an increase in the number of directors, (A) such directorship shall be for a term of office continuing only until the next election of one or more directors by the shareholders and (B) the Board of Directors may not fill more than two such directorships during the period between any -10- 12 two successive annual meetings of shareholders. If the Board of Directors is classified, any director elected to fill a directorship created by reason of an increase in the number of directors at any annual or special meeting of shareholders shall be elected for a term coterminous with the remaining term of the other members of the class to which he has been designated in accordance with the provisions of these Bylaws. Section 9. Compensation. Unless restricted by the Articles of Incorporation, the Board of Directors shall have the authority to fix the compensation, if any, of directors. Section 10. Presumption of Assent. A director who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. Section 11. Approval or Ratification of Acts or Contracts by Shareholders. The Board of Directors in its discretion may submit any act or contract for approval or ratification at any annual meeting of the shareholders, or at any special meeting of the shareholders called for the purpose of considering any such act or contract, and any act or contract that shall be approved or be ratified by the vote of the shareholders holding a majority of the issued and outstanding shares of stock of the Corporation entitled to vote and represented in person or by proxy at such meeting (provided that a quorum is present), shall be as valid and as binding upon the Corporation and upon all the shareholders as if it shall have been approved or ratified by every shareholder of the Corporation. Section 12. Action by Written Consent or Telephone Conference. Any action permitted or required by the TBCA, the Articles of Incorporation or these bylaws to be taken at a meeting of the Board of Directors or any committee designated by the Board of Directors may be taken without a meeting if a consent in writing, setting forth the action to be taken, is signed by all the members of the Board of Directors or committee, as the case may be. Such consent shall have the same force and effect as a unanimous vote at a meeting and may be stated as such in any document or instrument filed with the Secretary of State, and the execution of such consent shall constitute attendance or presence in person at a meeting of the Board of Directors or any such committee, as the case may be. Subject to the requirements of the TBCA, the Articles of Incorporation or these bylaws for notice of meetings, unless otherwise restricted by the Articles of Incorporation, members of the Board of Directors, or members of any committee designated by the Board of Directors, may participate in and hold a meeting of the Board of Directors or any committee of directors, as the case may be, by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such meeting shall constitute attendance and presence in person -11- 13 at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. Section 13. Nominations for Election as a Director. Only persons who are nominated in accordance with the procedures set forth in these bylaws and qualify for nomination pursuant to Section 1 of Article III shall be eligible for election by shareholders as, and to serve as, directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of shareholders (a) by or at the direction of the Board of Directors or (b) by any shareholder of the Corporation who is a shareholder of record at the time of giving of notice provided for in this Section, who shall be entitled to vote for the election of directors at the meeting and who complies with the notice procedures set forth in this Section. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a shareholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation (i) with respect to an election to be held at the annual meeting of the shareholders of the Corporation, not less than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of shareholders of the Corporation, and (ii) with respect to an election to be held at a special meeting of shareholders of the Corporation for the election of directors not later than the close of business on the tenth (10th) day following the day on which notice of the date of the special meeting was mailed to shareholders of the Corporation as provided in these bylaws or public disclosure of the date of the special meeting was made, whichever first occurs. Such shareholder's notice to the Secretary shall set forth (x) as to each person whom the shareholder proposes to nominate for election or re-election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person's written consent to being named in the proxy statement as a nominee and to serve as a director if elected), and (y) as to the shareholder giving the notice (i) the name and address, as they appear on the Corporation's books, of such shareholder and (ii) the class and number of shares of voting stock of the Corporation which are beneficially owned by such shareholder. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a shareholder's notice of nomination which pertains to the nominee. In the event that a person is validly designated as a nominee to the Board of Directors in accordance with the procedures set forth in this Section and shall thereafter become unable or unwilling to stand for election to the Board of Directors, the Board of Directors or the shareholder who proposed such nominee, as the case may be, may designate a substitute nominee. Other than directors chosen pursuant to the provisions of Section 8 of Article III, no person shall be eligible to serve as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section. -12- 14 The presiding officer of the meeting of shareholders shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by these bylaws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section. Notwithstanding any provision to the contrary set forth above, the provisions of this Section 13 shall be effective only with respect to annual meetings of shareholders held after December 31, 1995. (Section added by Amendment on March 17, 1995.) ARTICLE IV COMMITTEES Section 1. Designation; Powers. The Board of Directors, by resolution adopted by a majority of the full Board of Directors, may designate from among its members one or more committees, each of which shall be comprised of one or more of its members, and may designate one or more of its members as alternate members of any committee, who may, subject to any limitations imposed by the Board of Directors, replace absent or disqualified members at any meeting of that committee. Any such committee, to the extent provided in such resolution or in the Articles of Incorporation or bylaws shall have and may exercise all of the authority of the Board of Directors, subject to the limitations set forth in the TBCA or below. No committee of the Board of Directors shall have the authority of the Board of Directors in reference to: (1) amending the Articles of Incorporation, except that a committee may, to the extent provided in the resolution designating that committee or in the Articles of Incorporation or these bylaws, exercise the authority of the Board of Directors vested in it in accordance with Article 2.13 of the TBCA; (2) proposing a reduction in the stated capital of the Corporation in the manner permitted by Article 4.12 of the TBCA; (3) approving a plan of merger or share exchange of the Corporation; (4) recommending to the shareholders the sale, lease or exchange of all or substantially all of the property and assets of the Corporation otherwise than in the usual and regular course of its business; -13- 15 (5) recommending to the shareholders a voluntary dissolution of the Corporation or a revocation thereof; (6) amending, altering or repealing the bylaws of the Corporation or adopting new bylaws of the Corporation; (7) filling vacancies in the Board of Directors; (8) filling vacancies in or designating alternate members of any such committee; (9) filling any directorship to be filled by reason of an increase in the number of directors; (10) electing or removing officers of the Corporation or members or alternate members of any such committee; (11) fixing the compensation of any member or alternate members of such committee; or (12) altering or repealing any resolution of the Board of Directors that by its terms provides that it shall not be so amendable or repealable. Unless the resolution designating a particular committee, the Articles of Incorporation or these bylaws expressly so provide, no committee of the Board of Directors shall have the authority to authorize a distribution (as such term is defined in the TBCA) or to authorize the issuance of shares of the Corporation. Section 2. Procedure; Meetings; Quorum. Any committee designated pursuant to Section 1 of this Article shall choose its own chairman and secretary, shall keep regular minutes of its proceedings and report the same to the Board of Directors when requested, shall fix its own rules or procedures, and shall meet at such times and at such place or places as may be provided by such rules, or by resolution of such committee or of the Board of Directors. At every meeting of any such committee, the presence of a majority of all the members thereof shall constitute a quorum, and the affirmative vote of a majority of the members present shall be necessary for the adoption by it of any resolution. Section 3. Dissolution. The Board of Directors may dissolve any committee at any time, unless otherwise provided in the Articles of Incorporation or these bylaws. -14- 16 ARTICLE V OFFICERS Section 1. Number, Titles and Term of Office. The officers of the Corporation shall be a President and a Secretary and such other officers as the Board of Directors may from time to time elect or appoint, including, without limitation, a Chairman of the Board, one or more Vice Presidents (any one or more of whom may be designated Executive Vice President or Senior Vice President), a Treasurer, one or more Assistant Treasurers and one or more Assistant Secretaries. Each officer shall hold office until his successor shall be duly elected and shall qualify or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. Any number of offices may be held by the same person. Except for the Chairman of the Board, if any, no officer need be a director. Section 2. Salaries. The salaries or other compensation, if any, of the officers and agents of the Corporation shall be fixed from time to time by the Board of Directors. Section 3. Removal. Any officer or agent or member of a committee elected or appointed by the Board of Directors may be removed, either with or without cause, by the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent or member of a committee shall not of itself create contract rights. Section 4. Vacancies. Any vacancy occurring in any office of the Corporation may be filled by the Board of Directors. Section 5. Powers and Duties of the Chief Executive Officer. The President shall be the chief executive officer of the Corporation unless the Board of Directors designates the Chairman of the Board (if any) or other officer as chief executive officer. Subject to the control of the Board of Directors, the chief executive officer shall have general executive charge, management and control of the properties, business and operations of the Corporation with all such powers as may be reasonably incident to such responsibilities; he may agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Corporation and may sign all certificates for shares of capital stock of the Corporation; and he shall have such other powers and duties as designated in accordance with these bylaws and as from time to time may be assigned to him by the Board of Directors. -15- 17 Section 6. Powers and Duties of the Chairman of the Board. The Chairman of the Board (if any) shall preside at all meetings of the shareholders and of the Board of Directors; and the Chairman shall have such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the Board of Directors. Section 7. Powers and Duties of the President. Unless the Board of Directors otherwise determines, the President shall have the authority to agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Corporation; and, unless the Board of Directors otherwise determines, he shall, in the absence of the Chairman of the Board or if there be no Chairman of the Board, preside at all meetings of the shareholders and (should he be a director) of the Board of Directors; and the President shall have such other powers and duties as designated in accordance with these bylaws and as from time to time may be assigned to him by the Board of Directors. Section 8. Vice Presidents. The Vice President(s), if any, shall perform such duties and have such powers as the Board of Directors may from time to time prescribe. In addition, in the absence of the Chairman of the Board (if any) or President, or in the event of their inability or refusal to act, (i) a Vice President designated by the Board of Directors or (ii) in the absence of such designation, the Vice President who is present and who is senior in terms of time as a Vice President of the Corporation, shall perform the duties of the Chairman of the Board (if any), or the President, as the case may be, and when so acting shall have all the powers of and be subject to all the restrictions upon the Chairman of the Board (if any), or the President; provided that he shall not preside at meetings of the Board of Directors unless he is a director. Section 9. Treasurer. The Treasurer, if any, shall have responsibility for the custody and control of all the funds and securities of the Corporation, and he shall have such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the Board of Directors. He shall perform all acts incident to the position of Treasurer subject to the control of the chief executive officer and the Board of Directors; and the Treasurer shall, if required by the Board of Directors, give such bond for the faithful discharge of his duties in such form as the Board of Directors may require. Section 10. Assistant Treasurers. Each Assistant Treasurer, if any, shall have the usual powers and duties pertaining to his office, together with such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the chief executive officer or the Board of Directors or the Treasurer. The Assistant Treasurers shall exercise the powers of the Treasurer during that officer's absence or inability or refusal to act. Section 11. Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors, and the minutes of all meetings of the shareholders, in books provided for that purpose; he shall attend to the giving and serving of all notices; he may in the name of the Corporation affix the seal (if any) of the Corporation to all contracts of the Corporation and attest -16- 18 thereto; he may sign with the other appointed officers all certificates for shares of capital stock of the Corporation; he shall have charge of the certificate books, transfer books and stock ledgers, and such other books and papers as the Board of Directors may direct, all of which shall at all reasonable times be open to inspection of any director upon application at the office of the Corporation during business hours; he shall have such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the chief executive officer or the Board of Directors; and he shall in general perform all duties incident to the office of Secretary, subject to the control of the chief executive officer and the Board of Directors. Section 12. Assistant Secretaries. Each Assistant Secretary, if any, shall have the usual powers and duties pertaining to his office, together with such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the chief executive officer or the Board of Directors or the Secretary. The Assistant Secretaries shall exercise the powers of the Secretary during that officer's absence or inability or refusal to act. Section 13. Action With Respect to Securities of Other Corporations. Unless otherwise directed by the Board of Directors, each of the chief executive officer and the Treasurer (if any), or either of them, shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of shareholders of or with respect to any action of shareholders of any other corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation. ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS Section 1. Right to Indemnification. Subject to the limitations and conditions as provided in this Article VI, each person who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative (hereinafter a "proceeding"), or any appeal in such a proceeding or any inquiry or investigation that could lead to such a proceeding, by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or while a director or officer of the Corporation is or was serving at the request of the Corporation as a director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise shall be indemnified by the Corporation to the fullest extent permitted by the TBCA, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment) against judgments, -17- 19 penalties (including excise and similar taxes and punitive damages), fines, settlements and reasonable expenses (including, without limitation, attorneys' fees) actually incurred by such person in connection with such proceeding, and indemnification under this Article VI shall continue as to a person who has ceased to serve in the capacity which initially entitled such person to indemnity hereunder. The rights granted pursuant to this Article VI shall be deemed contract rights, and no amendment, modification or repeal of this Article VI shall have the effect of limiting or denying any such rights with respect to actions taken or proceedings arising prior to any such amendment, modification or repeal. It is expressly acknowledged that the indemnification provided in this Article VI could involve indemnification for negligence or under theories of strict liability. Section 2. Advance Payment. The right to indemnification conferred in this Article VI shall include the right to be paid or reimbursed by the Corporation the reasonable expenses incurred by a person of the type entitled to be indemnified under Section 1 who was, is or is threatened to be made a named defendant or respondent in a proceeding in advance of the final disposition of the proceeding and without any determination as to the person's ultimate entitlement to indemnification; provided, however, that the payment of such expenses incurred by any such person in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of a written affirmation by such director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification under this Article VI and a written undertaking, by or on behalf of such person, to repay all amounts so advanced if it shall ultimately be determined that such indemnified person is not entitled to be indemnified under this Article VI or otherwise. Section 3. Indemnification of Employees and Agents. The Corporation, by adoption of a resolution of the Board of Directors, may indemnify and advance expenses to an employee or agent of the Corporation to the same extent and subject to the same conditions under which it may indemnify and advance expenses to directors and officers under this Article VI; and, the Corporation may indemnify and advance expenses to persons who are not or were not directors, officers, employees or agents of the Corporation but who are or were serving at the request of the Corporation as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise against any liability asserted against him and incurred by him in such a capacity or arising out of his status as such a person to the same extent that it may indemnify and advance expenses to directors under this Article VI. Section 4. Appearance as a Witness. Notwithstanding any other provision of this Article VI, the Corporation may pay or reimburse expenses incurred by a director or officer in connection with his or her appearance as a witness or other participation in a proceeding at a time when he or she is not a named defendant or respondent in the proceeding. -18- 20 Section 5. Nonexclusivity of Rights. The right to indemnification and the advancement and payment of expenses conferred in this Article VI shall not be exclusive of any other right which a director or officer or other person indemnified pursuant to Section 3 of this Article VI may have or hereafter acquire under any law (common or statutory), provision of the Articles of Incorporation of the Corporation or these bylaws, agreement, vote of shareholders or disinterested directors or otherwise. Section 6. Insurance. The Corporation may purchase and maintain insurance, at its expense, to protect itself and any person who is or was serving as a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, proprietorship, employee benefit plan, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under this Article VI. Section 7. Shareholder Notification. To the extent required by law, any indemnification of or advance of expenses to a director or officer in accordance with this Article VI shall be reported in writing to the shareholders with or before the notice or waiver of notice of the next shareholders' meeting or with or before the next submission to shareholders of a consent to action without a meeting and, in any case, within the 12-month period immediately following the date of the indemnification or advance. Section 8. Savings Clause. If this Article VI or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify and hold harmless each director, officer or any other person indemnified pursuant to this Article VI as to costs, charges and expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative to the full extent permitted by any applicable portion of this Article VI that shall not have been invalidated and to the fullest extent permitted by applicable law. ARTICLE VII CAPITAL STOCK Section 1. Certificates of Stock. The certificates for shares of the capital stock of the Corporation shall be in such form, not inconsistent with that required by law and the Articles of Incorporation, as shall be approved by the Board of Directors. The Chairman of the Board (if any), President or a Vice President (if any) shall cause to be issued to each shareholder one or more certificates, which shall be signed by the Chairman of the Board (if any), President or a Vice President (if any) and the Secretary or an Assistant Secretary (if any) or the Treasurer or an Assistant Treasurer (if any) certifying the number of shares (and, if the stock of the Corporation -19- 21 shall be divided into classes or series, the class and series of such shares) owned by such shareholder in the Corporation; provided, however, that any of or all the signatures on the certificate may be facsimile. If the Board of Directors shall have provided for a seal, such certificates shall bear such seal or a facsimile thereof. The stock record books and the blank stock certificate books shall be kept by the Secretary, or at the office of such transfer agent or transfer agents as the Board of Directors may from time to time by resolution determine. In case any officer, transfer agent or registrar who shall have signed or whose facsimile signature or signatures shall have been placed upon any such certificate or certificates shall have ceased to be such officer, transfer agent or registrar before such certificate is issued by the Corporation, such certificate may nevertheless be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The stock certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued and shall exhibit the holder's name and number of shares. Each certificate shall conspicuously bear any legend required pursuant to Article 2.19 or Article 2.22 of the TBCA, as well as any other legend required by law. Section 2. Transfer of Shares. The shares of stock of the Corporation shall be transferable only on the books of the Corporation by the holders thereof in person or by their duly authorized attorneys or legal representatives, upon surrender and cancellation of certificates for a like number of shares (or upon compliance with the provisions of Section 5 of this Article VII, if applicable). Upon such surrender to the Corporation or a transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer (or upon compliance with the provisions of Section 5 of this Article VII, if applicable) and of compliance with any transfer restrictions applicable thereto contained in an agreement to which the Corporation is a party or of which the Corporation has knowledge by reason of legend with respect thereto placed on any such surrendered stock certificate, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 3. Ownership of Shares. Unless otherwise provided in the TBCA, and subject to the provisions of Chapter 8 - Investment Securities of the Texas Business & Commerce Code: (i) the Corporation may regard the person in whose name any shares issued by the Corporation are registered in the share transfer records of the Corporation at any particular time (including, without limitation, as of a record date fixed pursuant to Article 2.26B or 2.26C of the TBCA) as the owner of those shares at that time for purposes of voting those shares, receiving distributions thereon or notices in respect thereof, transferring those shares, exercising rights of dissent with respect to those shares, exercising or waiving any preemptive right with respect to those shares, entering into agreements with respect to those shares in accordance with Article 2.22 or 2.30 of the TBCA, or giving proxies with respect to those shares; and -20- 22 (ii) neither the Corporation nor any of its officers, directors, employees, or agents shall be liable for regarding that person as the owner of those shares at that time for those purposes, regardless of whether that person does not possess a certificate for those shares. Section 4. Regulations Regarding Certificates. The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issuance, transfer and registration or the replacement of certificates for shares of capital stock of the Corporation. Section 5. Lost, Stolen, Destroyed or Mutilated Certificates. The Board of Directors may determine the conditions upon which a new certificate of stock may be issued in place of a certificate that is alleged to have been lost, stolen, destroyed or mutilated; and may, in its discretion, require the owner of such certificate or his legal representative to give bond, with sufficient surety, to indemnify the Corporation and each transfer agent and registrar against any and all losses or claims which may arise by reason of the issuance of a new certificate in the place of the one so lost, stolen, destroyed or mutilated. ARTICLE VIII MISCELLANEOUS PROVISIONS Section 1. Fiscal Year. The fiscal year of the Corporation shall be such as established from time to time by the Board of Directors. Section 2. Corporate Seal. The Board of Directors may provide a suitable seal, containing the name of the Corporation. The Secretary shall have charge of the seal (if any). If and when so directed by the Board of Directors, duplicates of the seal may be kept and used by the Treasurer, if any, or by any Assistant Secretary or Assistant Treasurer. Section 3. Notice and Waiver of Notice. Whenever any notice is required to be given by law, the Articles of Incorporation or these bylaws, except with respect to notices of meetings of shareholders (with respect to which the provisions of Article II, Section 6 apply) and except with respect to notices of special meetings of directors (with respect to which the provisions of Article VIII, Section 6 apply), said notice shall be deemed to be sufficient if given (a) by telegraphic, cable or wireless transmission or (b) by deposit of same in a post office box in a sealed prepaid wrapper addressed to the person entitled thereto at his address as it appears on the records of the Corporation, and such notice shall be deemed to have been given on the day of such transmission or mailing, as the case may be. Whenever notice is required to be given by law, the Articles of Incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. -21- 23 Section 4. Resignations. Any director, member of a committee or officer may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time be specified, at the time of its receipt by the chief executive officer or Secretary. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation. Section 5. Facsimile Signatures. In addition to the provisions for the use of facsimile signatures elsewhere specifically authorized in these bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors. Section 6. Books and Records. The Corporation shall keep books and records of account and shall keep minutes of the proceedings of its shareholders, its Board of Directors and each committee of its Board of Directors. The Corporation shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of the original issuance of shares issued by the Corporation and a record of each transfer of those shares that have been presented to the Corporation for registration of transfer. Such records shall contain the names and addresses of all past and current shareholders of the Corporation and the number and class of shares issued by the Corporation held by each of them. Any books, records, minutes and share transfer records may be in written form or in any other form capable of being converted into written form within a reasonable time. ARTICLE IX AMENDMENTS Section 1. Except as set forth below in Section 2, the Bylaws of the Corporation may be altered, amended or repealed or new Bylaws may be adopted by (i) the affirmative vote of the holders of the majority of the outstanding shares of capital stock entitled to vote thereon at any annual meeting, or at any special meeting, if notice of the proposed amendment is contained in the notice of said special meeting, or by (ii) the affirmative vote of a majority of the full Board of Directors. Section 2. Notwithstanding the provisions of Section 1, the affirmative vote of the holders of at least two-thirds of the outstanding shares of capital stock of the Corporation entitled to vote thereon at a meeting called for that purpose shall be required to alter, amend or repeal, or to adopt any provision inconsistent with, Section 1, Article III; Section 7, Article III; Section 8, Article III or this Article IX of the Corporation's Bylaws. -22- EX-4.1 3 1ST NATIONAL BANK OF ANCHORAGE REVOLVING CREDIT 1 EXHIBIT 4.1 THE FIRST NATIONAL BANK OF ANCHORAGE REVOLVING CREDIT AGREEMENT AMOUNT: $5,000,000.00 EXPIRES: March 31, 1996 ALASKA PIPELINE COMPANY ("borrower") and The First National Bank of Anchorage ("bank") agree as follows respecting the terms and conditions upon which bank will make loans, and borrower may borrow and re-borrow, to finance borrower's working capital needs or other general corporate purposes: I. DEFINITIONS. AS USED IN THIS AGREEMENT: A. "Borrower's deposit account" means demand account number 02112290 maintained by borrower at bank's NORTHERN LIGHTS branch. II. LOANS. A. Prior to the expiration date stated above (or any earlier termination of this agreement) bank will, subject to the terms and conditions of this agreement, loan borrower such amounts as borrower may request from time to time. Each such loan: i. will be payable by borrower 45 days after the loan is made or sooner; ii. will bear interest at an annual rate that is the bank's BASE RATE (as determined by bank from time to time), and accrued interest will be payable by borrower at maturity and at the time a subsequent loan is made; iii. will be first applied to pay any outstanding principal and accrued interest on a previous loan made pursuant to this agreement; iv. will be evidenced by a negotiable promissory note, in the amount of the loan and promising payment with interest as above provided, in a form commonly used by bank which borrower will execute and deliver to bank when the loan is made; and v. will be disbursed by credit to borrower's deposit account. B. Bank will have no obligation to make any loan i. sooner than 3 banking day(s) after borrower's oral or written request, specifying the amount of the loan requested is made to a lending officer at bank's CORPORATE LENDING Office; ii. at a time when there exists a condition of default [Section VI]; iii. if borrower fails to furnish bank such approvals, opinions, documents or other assurances or information as bank may reasonably request for purposes of determining that no condition of default exists. III. SECURITY. A. Borrower's obligations under this agreement, including the obligation of payment, will beunsecured. IV. BORROWER'S REPRESENTATIONS AND WARRANTIES. A. Borrower represents and warrants to bank as follows: i. the making of this agreement, all borrowing contemplated by this agreement, and borrower's performance of this agreement have been duly authorized and approved by all persons whose action or consent is required to make the agreement, and all obligations of borrower which may arise pursuant to the agreement, binding upon and fully enforceable against borrower; ii. there is no law, rule, regulation, order, writ, judgment, contract or agreement having any applicability to borrower, the conduct of borrower's business, or borrower's property (a) with respect to which borrower is not in compliance, or (b) which will be contravened by the making of this agreement, the borrowing contemplated by this agreement, or borrower's performance of this agreement; iii. borrower has paid all taxes, fees, imports, duties and charges levied, assessed or imposed against it or any of its property; iv. there is no litigation pending or threatened against borrower that could have a materially adverse affect upon borrower's ability to perform its obligations under this agreement; and v. borrower has all permits, licenses, certificates of authority, patents, trademarks, copyrights, franchises and other rights necessary to the conduct of its business. 2 Page 2 of 3 IV. BORROWER'S REPRESENTATIONS AND WARRANTIES CONT. B. The representations and warranties expressed at A of this section are of a continuing nature. They shall be deemed to be repeated by borrower, and their truthfulness shall be deemed to be reaffirmed by borrower, each time borrower requests bank to make a loan under this agreement, and bank will have no obligation to make loans if any of the above statements is or has become incorrect. Borrower will promptly notify bank in writing of any fact or event that may cause any of the foregoing statements to be untrue or incomplete. Until bank receives such notification it may (but need not) rely on the correctness of each of the above statements. V. BORROWER'S COVENANTS. Until this agreement has terminated and borrower has paid all indebtedness for loans made pursuant to this agreement, A. Borrower will at all times i. preserve and maintain its legal existence and right to carry on its business; ii. operate its business continuously in an efficient, responsible and economic manner and in compliance with all laws applicable to the business; iii. timely perform all covenants and satisfy all conditions contained in any security agreement and any other instrument or other writing given in connection with this agreement; iv. make and maintain, in accordance with generally accepted accounting practices, complete and accurate records and accounts reflecting all business and financial transactions; and allow bank to inspect its records and accounts at reasonable times upon reasonable request by bank; v. keep bank currently informed of its financial condition and notify bank promptly of any fact or event that will or might cause a materially unfavorable change in its condition or impair its ability to perform any of its obligations; vi. deliver to bank such written reports and other information as bank may request from time to time, including, without limitation, balance sheetsand income statements prepared in accordance with generally accepted accounting principals consistently applied, within 90 DAYS after close of each fiscal year; vii. maintain insurance with financially sound and reputable companies against such risks, and in such amounts, as prudent persons engaged in the same business would maintain; viii. upon demand by bank reimburse bank for any expense incurred by bank in connection with the making of any loan hereunder, the perfection, defense or protection of the bank's interest in property security, or bank's enforcement of its rights or remedies hereunder. B. Borrower will not, without bank's prior written consent; i. change the character of its business or engage in any other business that is not reasonable related to its current business; VI. DEFAULT. All indebtedness of borrower to bank shall become immediately due and payable at the election of bank upon the happening of any of the following events: A. Borrower's failure to pay when due any indebtedness or other liability of borrower to bank; B. Borrower's failure to perform any covenant or fulfill any condition contained in this agreement or any other instrument given to bank in connection with or pursuant to this agreement; C. Bank's discovery that any statement made by borrower to bank concerning borrower's financial condition or ability or with respect to the security, or any warranty or representation made by borrower in or pursuant to this agreement, was false; D. Bank in good faith believes that the prospect of borrower's payment or other performance is impaired. Upon default, whether before or after acceleration, bank shall have no obligation to make any loan and shall have every right and remedy which is accorded to it by this agreement or any other instrument or writing given to it by borrower pursuant to this agreement, or which is otherwise available to it by law. Such rights and remedies shall be cumulative and may be exercised by bank concurrently or separately. 3 Page 3 of 3 VII. WAIVER. The exercise of any right or remedy available to a party shall not constitute a waiver of any other right or remedy. Failure or delay in exercising a right or remedy shall not constitute a waiver of such right or remedy or of any default of the other party. Only waivers in writing and signed by the party shall be effective, and no waiver shall operate as a waiver of any other default or of a like default on a future occasion. VIII. GENERAL. A. No provision of this agreement shall create rights in favor of, or be enforceable for the benefit of any person except bank, borrower or the holder of a note given by borrower pursuant to this agreement; B. Borrower's rights under this agreement are not assignable, and no purported assignment by borrower will be effective. Neither party may delegate the performance of its obligations to the other under this agreement; C. Any action bank (or its agents) may take in inquiring into, or in examining records, reports or other information concerning, borrower's affairs or financial condition will be taken exclusively for bank's own protection. Neither by taking, nor by refraining to take, any such action will bank have assumed or incurred any responsibility or liability to borrower, or to any officer, director, shareholder, member, partner, owner or creditor or borrower; D. This agreement, together with other instruments and writings given in connection with or pursuant to this agreement, constitutes a complete statement of the entire agreement of the parties and the rights and obligations of each of them; and E. Any amendment hereof must be stated in a writing signed by the parties. Dated: March 15, 1995 ------------------- BORROWER: ALASKA PIPELINE COMPANY By: /s/ R.F. BARNES, PRESIDENT ----------------------------------- By: /s/ TIMOTHY J. CASEY, CONTROLLER ----------------------------------- By: ----------------------------------- By: ----------------------------------- By: ----------------------------------- By: ----------------------------------- By: ----------------------------------- THE FIRST NATIONAL BANK OF ANCHORAGE By: /s/ BILL McGREW ----------------------------------- EX-10.1 4 FOURTH AMENDMENT TO SEAGULL THRIFT PLAN 1 EXHIBIT 10.1 FOURTH AMENDMENT TO SEAGULL THRIFT PLAN WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") has heretofore adopted and maintains the SEAGULL THRIFT PLAN (the "Plan") for the benefit of its eligible employees; and WHEREAS, the Company desires to amend the Plan; NOW, THEREFORE, the Plan is hereby amended as follows: I. Effective January 1, 1993: 1. The following new Paragraphs (16A), (17A), (19A) and (19B) shall be added to Section 1.01 of the Plan: "(16A) DIRECT ROLLOVER: A payment by the Plan to an Eligible Retirement Plan designated by a Distributee. (17A) DISTRIBUTEE: Each (A) Member entitled to an Eligible Rollover Distribution, (B) Member's surviving spouse with respect to the interest of such surviving spouse in an Eligible Rollover Distribution, and (C) former spouse of a Member who is an alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code, with regard to the interest of such former spouse in an Eligible Rollover Distribution. (19A) ELIGIBLE RETIREMENT PLAN: (A) With respect to a Distributee other than a surviving spouse, an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified plan described in section 401(a) of the Code, which under its provisions accepts such Distributee's Eligible Rollover Distribution and (B) with respect to a Distributee who is a surviving spouse, an individual retirement account described in section 408(a) of the Code or an individual retirement annuity described in section 408(b) of the Code. (19B) ELIGIBLE ROLLOVER DISTRIBUTION: Any distribution of all or any portion of the Accounts of a Distributee other than (A) a distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for 2 the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated beneficiary or for a specified period of ten years or more, (B) a distribution to the extent such distribution is required under section 401(a)(9) of the Code, (C) the portion of a distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities), (D) a loan treated as a distribution under section 72(p) of the Code and not excepted by section 72(p)(2), (E) a loan in default that is a deemed distribution, (F) any corrective distributions provided in Sections 3.07 and 4.04(b), and (G) any other distribution so designated by the Internal Revenue Service in revenue rulings, notices, and other guidance of general applicability." 2. The last sentence of Section 10.01(b) of the Plan shall be deleted and the following shall be substituted therefor: "No less than thirty days and no more than ninety days before his Benefit Commencement Date, the Committee shall inform the Member of his right to defer his Benefit Commencement Date and shall describe the Member's Direct Rollover election pursuant to Section 10.04 below." 3. Section 10.01(g) of the Plan shall be deleted and the following shall be substituted therefor: "Benefits shall be paid (or transferred pursuant to Section 10.04) in cash except that a Member (or his designated beneficiary or legal representative in the case of a deceased Member) may elect to have the portion of his Accounts invested in Fund A distributed (or transferred pursuant to Section 10.04) in full shares of Company Stock to the extent of the Member's pro rata portion of the shares of Company Stock held in Fund A with any balance of the Member's interest in Fund A (including fractional shares) to be paid or transferred in cash." 4. The following new Section 10.04 shall be added to Article X of the Plan: "10.04 DIRECT ROLLOVER ELECTION. (a) Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Section, a Distributee may elect, at the time and in the manner prescribed by the Committee, to have all or any portion of an Eligible Rollover Distribution (other than any portion attributable to the offset of an outstanding loan balance of such Member pursuant to the Plan's loan procedure) paid directly to an Eligible -2- 3 Retirement Plan specified by the Distributee in a Direct Rollover. The preceding sentence notwithstanding, a Distributee may elect a Direct Rollover pursuant to this Section only if such Distributee's Distributions during the Plan Year are reasonably expected to total $200 or more. Furthermore, if less than 100% of the Member's Eligible Rollover Distribution is to be a Direct Rollover, the amount of the Direct Rollover must be $500 or more. Prior to any Direct Rollover pursuant to this Section, the Distributee shall furnish the Committee with a statement from the plan, account, or annuity to which the benefit is to be transferred verifying that such plan, account, or annuity is, or is intended to be, an Eligible Retirement Plan. (b) No less than thirty days and no more than ninety days before his Benefit Commencement Date, the Committee shall inform the Distributee of his Direct Rollover right pursuant to this Section. A distribution or Direct Rollover of the Distributee's benefit may commence less than thirty days after such notice is given, provided that (1) the Committee clearly informs the Distributee that the Distributee has a right to a period of at least thirty days after receiving the notice to consider the decision of whether or not to elect a Direct Rollover and (2) the Distributee, after receiving the notice, affirmatively elects either a distribution or a Direct Rollover or a combination thereof." 5. The following sentence shall be added to the end Section 11.01(d) of the Plan: "Any withdrawal pursuant to this Article XI shall be subject to the Direct Rollover election described in Section 10.04." II. Effective August 5, 1993, the following shall be added to the end of Section 1.01(23) of the Plan: "Hours of Service shall also include any hours required to be credited by federal law other than the Act or the Code, but only under the conditions and to the extent so required by such federal law." III. Effective January 1, 1994, Section 1.01(15) of the Plan shall be deleted and the following shall be substituted therefor: "(15) COMPENSATION: The total of all wages, salaries, fees for professional service and other amounts received in cash or in kind by a Member for services actually rendered or labor performed for the Company while a Member to the extent such amounts are includable in gross income, excluding, however, bonuses, incentive or other supplemental pay, reimbursements and other expense allowances, cash and noncash fringe benefits, moving expenses, Company contributions to or payments from this or any other deferred compensation program, whether such program is qualified under section 401(a) of the Code or -3- 4 nonqualified, welfare benefits, amounts realized from the receipt or exercise of a stock option that is not an incentive stock option within the meaning of section 422 of the Code, amounts realized at the time property described in section 83 of the Code is freely transferable or no longer subject to a substantial risk of forfeiture, amounts realized as a result of an election described in section 83(b) of the Code, any amount realized as result of a disqualifying disposition within the meaning of section 421(a) of the Code and any other amounts that receive special tax benefits under the Code but are not hereinafter included; provided that, for the purposes of this definition, the following shall also be included: (A) elective contributions made on a Member's behalf by the Company that are not includable in income under section 125, section 402(e)(3), section 402(h) or section 403(b) of the Code, (B) compensation deferred under an eligible deferred compensation plan within the meaning of section 457(b) of the Code and (C) employee contributions described in section 414(h) of the Code that are picked up by the employing unit and are treated as employer contributions. The above notwithstanding, the Compensation of any Member taken into account for purposes of the Plan shall be limited to $150,000 for any Plan Year with such amount to be (i) adjusted automatically to reflect any amendments to section 401(a)(17) of the Code and any cost-of-living increases authorized by section 401(a)(17) of the Code, (ii) prorated for a Plan Year of less than twelve months and to the extent otherwise required by applicable law, and (iii) in the case of a Member who is either a five-percent owner of the Company (within the meaning of section 416(i)(1)(A)(iii) of the Code) or is one of the ten most Highly Compensated Employees for the Plan Year and who has a spouse and/or lineal descendants who are under the age of nineteen as of the end of a Plan Year who receive Compensation during such Plan Year, prorated and allocated among such Member, his spouse, and/or lineal descendants under the age of nineteen based on the Compensation for such Plan Year of each such individual." IV. As amended hereby, the Plan is specifically ratified and reaffirmed. EXECUTED this 1st day of September, 1994. SEAGULL ENERGY CORPORATION By /s/ ROBERT M. KING ----------------------- -4- EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1994 MAR-31-1995 11,139 0 75,980 0 5,314 97,660 1,604,147 544,960 1,212,024 112,451 0 3,643 0 0 399,580 1,212,024 94,850 94,850 18,565 136,562 2,091 0 13,997 (57,800) (19,250) (38,550) 0 0 0 (38,550) (1.07) (1.07)
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