EXECUTIVE EMPLOYMENT AGREEMENT
AGREEMENT by and between POGO PRODUCING COMPANY, a Delaware
corporation (the "Company") and J. DON MCGREGOR (the "Executive"), dated as of
the 1st day of February, 1999.
The Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the continued dedication of the Executive,
and to provide the Executive with compensation and benefits arrangements which
are competitive with those of other corporations and which ensure that the
compensation and benefits expectations of the Executive will be satisfied. The
Board also believes it is imperative to diminish the inevitable distraction of
the Executive by virtue of the personal uncertainties and risks created by a
pending or threatened Change of Control and to encourage the Executive's full
attention and dedication to the Company currently and in the event of any
threatened or pending Change of Control, and to insure the continuation of
favorable compensation and benefits upon a Change of Control. Therefore, in
order to accomplish these objectives, the Board has caused the Company to enter
into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS;
1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall mean the
date of this Agreement.
(b) The "Employment Period" shall mean the period commencing on
the Effective Date and ending on the second anniversary of such date; provided,
however, that on each annual anniversary of the Effective Date (the "Renewal
Date"), the Employment Period shall be reviewed, to determine whether, in the
discretion of the Company, it should be extended for one additional year so as
to terminate two years from such Renewal Date. Any such one year extension
shall be effective only if, prior to the Renewal Date, the Company shall give
notice to the Executive that the Employment Period shall be so extended.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change
of Control" shall mean:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting Securities").
Notwithstanding anything in this Agreement to the contrary, the
following shall not constitute a Change of Control:
(i) any acquisition directly from the Company (excluding an
acquisition by virtue of the exercise of a conversion privilege),
(ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company, or
(iv) any acquisition by State Farm Mutual Automobile Insurance
Company and certain affiliates ("State Farm") or Klingenstein, Fields & Co.,
L.P. ("Klingenstein") ("Specified Stockholders") of beneficial ownership of
Outstanding Company Voting Securities resulting in an accumulation of said
securities up to and including the following amounts:
A. In the case of State Farm, 30% of Outstanding Voting
Securities, and
B. In the case of Klingenstein, 30% of Outstanding
Voting Securities, or
(v) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following such reorganization,
merger or consolidation, the conditions described in clauses (i), (ii) and (iii)
of subsection (c) of this Section 2 are satisfied; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation, (i) more than 60% of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who
where the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same proportions as
their ownership,
-2-
immediately prior to such reorganization, merger or consolidation, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person [excluding the Company, any Specified
Stockholder, any employee benefit plan (or related trust) of the Company or
such corporation resulting from such reorganization, merger or consolidation
and any Person beneficially owning, immediately prior to such reorganization,
merger or consolidation, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or Outstanding Voting Securities, as the
case may be] beneficially owns, directly or indirectly, 20% or more,
respectively, of the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation or
the combined voting power of the then outstanding voting securities of such
corporation, entitled to vote generally in the election of directors and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation were
members of the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger or consolidation; or
(d) Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company, other than
to a corporation with respect to which following such sale or other disposition
(A) more than 60% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such
sale or other disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no Person
[excluding the Company, any Specified Stockholder, any employee benefit plan (or
related trust) of the Company or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or
indirectly, 20% or more of the Outstanding Company Common Stock or Outstanding
Company Voting Securities, as the case may be] beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the election
of directors and (C) at least a majority of the members of the board of
directors of such corporation where members of the Incumbent Board at the time
of the execution of the initial agreement or action of the Board providing for
such sale or other disposition of assets of the Company.
3. EMPLOYMENT AGREEMENT. The Company hereby agrees to continue the
Executive in its employ in accordance with the terms and provisions of this
Agreement, for the Employment Period.
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 90-day period
immediately preceding the later of the Effective Date, the most recent Renewal
Date or a Change of Control, if any, (the "Applicable Date") and (B) the
Executive's services shall be performed at the
-3-
location where the Executive was employed immediately preceding the
Applicable Date or any office which is the headquarters of the Company and is
less than 35 miles from such location.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company. During the Employment Period
it shall not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement; provided Executive may not serve on
the board of a publicly traded for profit corporation or similar body of a
publicly traded for profit business organized in other than corporate form
without the consent of the Compensation Committee of the Board of Directors of
the Company. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Executive prior to the Applicable
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Applicable Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) COMPENSATION. (i) BASE SALARY. During the Employment
Period, the Executive shall receive an annual base salary ("Annual Base
Salary"), which shall be paid on a monthly basis, at least equal to twelve times
the highest monthly base salary paid or payable to the Executive by the Company
and its affiliated companies in respect of the twelve-month period immediately
preceding the month in which the Applicable Date occurs. During the Employment
Period, the Annual Base Salary shall be reviewed at least annually and may be
increased at any time and from time to time as shall be substantially consistent
with increases in base salary generally awarded in the ordinary course of
business to other executives of the Company and its affiliated companies. Any
increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. As used in this Agreement,
the term "affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
(ii) ANNUAL BONUS. In addition to Annual Base Salary,
the Executive may be awarded at the discretion of the Company for any fiscal
year ending during the Employment Period, a bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other executives of the Company and its affiliated
companies. Such plans, practices, policies and programs shall provide the
Executive with incentive opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if any, that such
distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, equal to the most favorable of those provided by
the Company and its affiliated companies for the Executive under such plans,
practices, policies and programs as in effect at any time during the 90-day
period immediately preceding the Applicable Date.
-4-
(iv) WELFARE BENEFIT PLANS. During the Employment
Period, the Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life, group life, accidental
death and travel accident insurance plans and programs) to the extent applicable
generally to other executives of the Company and its affiliated companies. Such
plans, practices, policies and programs shall provide the Executive with
benefits which are equal, in the aggregate, to the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the 90-day period immediately preceding the Applicable Date.
(v) EXPENSES. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Company and its affiliated companies
in effect for the Executive at any time during the 90-day period immediately
preceding the Applicable Date.
(vi) FRINGE BENEFITS. During the Employment Period, the
Executive shall be entitled to fringe benefits in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 90-day
period immediately preceding the Applicable Date.
(vii) OFFICE AND SUPPORT STAFF. During the Employment
Period, the Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to personal secretarial and other
assistance, at least equal to the most favorable of the foregoing provided to
the Executive by the Company and its affiliated companies at any time during the
90-day period immediately preceding the Applicable Date.
(viii) VACATION. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the most
favorable plans, policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at any time during the
90-day period immediately preceding the Applicable Date.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(c) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician selected by
-5-
the Company or its insurers and acceptable to the Executive or the Executive's
legal representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) CAUSE. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean (i) a material violation by the Executive of the
Executive's obligations under Section 4(a) of this Agreement (other than as a
result of incapacity due to physical or mental illness) which is willful and
deliberate on the Executive's part, which is committed in bad faith or without
reasonable belief that such violation is in the best interests of the Company
and which is not remedied in a reasonable period of time after receipt of
written notice from the Company specifying such violation or (ii) the conviction
of the Executive of a felony involving moral turpitude.
(c) GOOD REASON; WINDOW PERIOD; OTHER TERMINATIONS. The
Executive's employment may be terminated (i) during the Employment Period by the
Executive for Good Reason, (ii) during the Window Period by the Executive
without any reason or (iii) by Executive other than (A) for Good Reason or (B)
during a Window Period.
For purposes of this Agreement, the "Window Period" shall mean the
180-day period immediately following the date a Change of Control occurs.
Anything in this Agreement to the contrary notwithstanding, if a Change of
Control occurs and if the Executive's employment with the Company is terminated
prior to the date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment or cessation
of status as an officer (i) was at the request of a third party who has taken
steps reasonably calculated to effect the Change of Control or (ii) otherwise
arose in connection with or anticipation of the Change of Control, then for all
purposes of this Agreement the "date a Change of Control occurs" shall mean the
date immediately prior to the date of such termination of employment or
cessation of status as an officer.
For purposes of this Agreement, "Good Reason" shall mean
(i) the assignment to the Executive of any duties inconsistent
with the Executive's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by
Section 4(a) of this Agreement, or any other action by the Company which results
in a diminution in such position, authority, duties or responsibilities
excluding for this purpose an insubstantial or inadvertent action which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an insubstantial or
inadvertent failure which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than that described in Section 4(a)(i)(B) hereof;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
-6-
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for
Cause, or by the Executive without any reason during the Window Period or for
Good Reason, shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 12(c) of this Agreement. For purposes
of this Agreement, a "Notice of Termination" means a written notice which
(i) indicates the specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen days after the
giving of such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance which contributes to
a showing of Good Reason or Cause shall not waive any right of the Executive or
the Company hereunder or preclude the Executive or the Company from asserting
such fact or circumstance in enforcing the Executive's or the Company's right
hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive during the Window Period or for Good Reason, the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be, (ii) if the Executive's employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination, (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be, and (iv) if the Executive's employment is
terminated by the Executive other than for Good Reason or during a Window
Period, the date of the receipt of the Notice of Termination or any later date
specified therein.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) GOOD REASON OR DURING THE WINDOW PERIOD; OTHER THAN FOR
CAUSE, DEATH OR DISABILITY. If, during the Employment Period, the Company shall
terminate the Executive's employment other than for Cause or Disability or the
Executive shall terminate employment either for Good Reason or without any
reason during the Window Period:
(i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore paid and (2) any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon) and any accrued vacation pay, in each case to the
extent not theretofore paid (the sum of the amounts described in clauses (1) and
(2) shall be hereinafter referred to as the "Accrued Obligations"); and
-7-
B. the amount (such amount shall be hereinafter referred
to as the "Severance Amount") equal to the product of (1) three and (2) the sum
of (x) the Executive's Annual Base Salary and (y) any bonus described in Section
4(b)(ii) paid or payable in respect of the most recently completed fiscal year
of the Company; and, provided further, that such amount shall be reduced by the
present value (determined as provided in Section 280G(d)(4) of the Internal
Revenue Code of 1986, as amended (the "Code")) of any other amount of severance
relating to salary or bonus continuation to be received by the Executive upon
termination of employment of the Executive under any severance plan, severance
policy or severance arrangement of the Company; and
C. a separate lump sum supplemental retirement benefit
equal to the difference between (1) the actuarial equivalent (utilizing for this
purpose the actuarial assumptions utilized with respect to the Employees
Retirement Plan for Pogo Producing Company (or any successor plan thereto) (the
"Retirement Plan") during the 90-day period immediately preceding the Applicable
Date) of the benefit payable under the Retirement Plan and any supplemental
and/or excess retirement plan of the Company and its affiliated companies
providing benefits for the Executive (the "SERP") which the Executive would
receive if the Executive's employment continued at the compensation level
provided for in Sections 4(b)(i) and 4(b)(ii) of this Agreement for the
remainder of the Employment Period, assuming for this purpose that all accrued
benefits are fully vested and that benefit accrual formulas are no less
advantageous to the Executive than those in effect during the 90-day period
immediately preceding the Applicable Date, and (2) the actuarial equivalent
(utilizing for this purpose the actuarial assumptions utilized with respect to
the Retirement Plan during the 90-day period immediately preceding the
Applicable Date) of the Executive's actual benefit (paid or payable), if any,
under the Retirement Plan and the SERP (the amount of such benefit shall be
hereinafter referred to as the "Supplemental Retirement Amount"); and
(ii) for the remainder of the Employment Period, or such longer
period as any plan, program, practice or policy may provide, the Company shall
continue benefits to the Executive and/or the Executive's family at least equal
to those which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 4(b)(iv) of this Agreement
if the Executive's employment had not been terminated in accordance with the
most favorable plans, practices, programs or policies of the Company and its
affiliated companies as in effect and applicable generally to other executives
and their families during the 90-day period immediately preceding the Applicable
Date, provided, however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits described
herein shall be secondary to those provided under such other plan during such
applicable period of eligibility (such continuation of such benefits for the
applicable period herein set forth shall be hereinafter referred to as "Welfare
Benefit Continuation"). For purposes of determining eligibility of the
Executive for retiree benefits pursuant to such plans, practices, programs and
policies, the Executive shall be considered to have remained employed until the
end of the Employment Period and to have retired on the last day of such period;
and
(iii) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive and/or the Executive's family any
other amounts or benefits required to
-8-
be paid or provided or which the Executive and/or the Executive's family is
eligible to receive pursuant to this Agreement and under any plan, program,
policy or practice or contract or agreement of the Company and its affiliated
companies as in effect and applicable generally to other executives and their
families during the 90-day period immediately preceding the Applicable Date
(such other amounts and benefits shall be hereinafter referred to as the
"Other Benefits").
(b) DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for (i) payment of Accrued
Obligations (which shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination) and
the timely payment or provision of the Welfare Benefit Continuation and Other
Benefits and (ii) payment to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination of
an amount equal to the sum of the Severance Amount and the Supplemental
Retirement Amount.
(c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for (i) payment of Accrued Obligations (which shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination) and
the timely payment or provision of the Welfare Benefit Continuation and Other
Benefits (excluding, in each case, Disability Benefits (as defined below)) and
(ii) payment to the Executive in a lump sum in cash within 30 days of the Date
of Termination of an amount equal to the greater of (A) the sum of the Severance
Amount and the Supplemental Retirement Amount and (B) the present value
(determined as provided in Section 280G(d)(4) of the Code) of any cash amount to
be received by the Executive as a disability benefit pursuant to the terms of
any long term disability plan, policy or arrangement of the Company and its
affiliated companies, but not including any proceeds of disability insurance
covering the Executive to the extent paid for on a contributory basis by the
Executive (which shall be paid in any event as an Other Benefit) (the benefits
included in this clause (B) shall be hereinafter referred to as the "Disability
Benefits").
(d) CAUSE; BY EXECUTIVE OTHER THAN FOR GOOD REASON AND OTHER
THAN DURING A WINDOW PERIOD. If the Executive's employment shall be terminated
for Cause during the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to pay to the
Executive Annual Base Salary through the Date of Termination plus the amount of
any compensation previously deferred by the Executive, in each case to the
extent theretofore unpaid. If the Executive terminates employment during the
Employment Period, excluding a termination either for Good Reason or without any
reason during the Window Period, this Agreement shall terminate without further
obligations to the Executive, other than for Accrued Obligations and the timely
payment or provision of Other Benefits. In such case, all Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination.
7. NON-EXCLUSIVITY OF RIGHTS. Except as provided in
Section 6(a)(ii), 6(b) and 6(c) of this Agreement, nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
-9-
affiliated companies and for which the Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
8. FULL SETTLEMENT; RESOLUTION OF DISPUTES. (a) The Company's
obligation to make payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement and, except as provided in Section 6(a)(ii) of this
Agreement, such amounts shall not be reduced whether or not the Executive
obtains other employment. If there is any contest by the Company concerning the
Payments or benefits to be provided to the Executive hereunder whether through
litigation, arbitration or mediation, or with respect to the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof, and the Executive is the prevailing party, the
Company agrees to pay promptly upon conclusion of the contest all legal fees and
expenses which the Executive may reasonably have incurred.
(b) If there shall be any dispute between the Company and the
Executive (i) in the event of any termination of the Executive's employment by
the Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by the Executive, whether Good Reason existed, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that
Good Reason did not exist, the Company shall pay all amounts, and provide all
benefits, to the Executive and/or the Executive's family or other beneficiaries,
as the case may be, that the Company would be required to pay or provide
pursuant to Section 6(a) hereof as though such termination were by the Company
without Cause or by the Executive with Good Reason; provided, however, that the
Company shall not be required to pay any disputed amounts pursuant to this
paragraph except upon receipt of an undertaking (which need not be secured) by
or on behalf of the Executive to repay all such amounts to which the Executive
is ultimately adjudged by such court not to be entitled.
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this
Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment or distribution by the Company to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 9) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed
-10-
with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including whether and
when Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by Arthur Andersen LLP (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 9, shall be paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claims by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which it gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in writing
prior to the expiration of such period that it desires to contest such claim,
the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
-11-
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section (c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 9(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 9(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall be
offset, to the extent thereof, the amount of Gross-Up Payment required to be
paid.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of
-12-
the Executive's employment with the Company, the Executive shall not, without
the prior written consent of the Company or as may otherwise be required by
law or legal process, communicate or divulge any such information, knowledge
or data to anyone other than the Company and those designated by it. In no
event shall an asserted violation of the provisions of this Section 10
constitute a basis for deferring or withholding any amounts otherwise payable
to the Executive under this Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be an unfunded obligation
of the Company.
(b) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO PRINCIPLES
OF CONFLICT OF LAWS. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(c) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
IF TO THE EXECUTIVE:
J. Don McGregor
P.O. Box 2504
Houston, Texas 77252-2504
-13-
IF TO THE COMPANY:
Pogo Producing Company
P.O. Box 2504
Houston, Texas 77252-2504
Attention: Senior Vice President and
Chief Administrative Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(e) The Company may withhold from any amounts payable under
this Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(f) The Executive's or the Company's failure to insist upon
strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this
Agreement, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.
/s/ J. DON MCGREGOR
--------------------------------
POGO PRODUCING COMPANY
By: /s/ PAUL G. VAN WAGENEN
-----------------------------
-14-