1998 INCENTIVE PLAN
OF
POGO PRODUCING COMPANY
1. OBJECTIVES. The Pogo Producing Company 1998 Incentive Plan (the
"Plan") is designed to retain key employees, to encourage the sense of
proprietorship of such employees and to stimulate the active interest of such
persons in the development and financial success of Pogo Producing Company, a
Delaware corporation (the "Company"), and its Subsidiaries (as hereinafter
defined). These objectives are to be accomplished by making awards under the
Plan and thereby providing Participants (as hereinafter defined) with a
proprietary interest in the growth and performance of the Company and its
Subsidiaries.
2. DEFINITIONS. As used herein, the terms set forth below shall
have the following respective meanings:
"Award" means the grant of any form of nonqualified stock option or
stock appreciation right, stock award or cash award, whether granted singly, in
combination or in tandem, to a Participant who is an employee pursuant to any
applicable terms, conditions and limitations as the Committee may establish in
order to fulfill the objectives of the Plan.
"Award Agreement" means a written agreement between the Company and a
Participant that sets forth the terms, conditions and limitations applicable to
an Award.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" means the Compensation Committee of the Board or such
other committee of the Board as is designated by the Board to administer the
Plan.
"Common Stock" means the Common Stock, par value $1.00 per share, of
the Company.
"Fair Market Value" means, as of a particular date, (i) if shares of
Common Stock are listed on a national securities exchange, the mean between the
highest and lowest sales price per share of Common Stock on the consolidated
transaction reporting system for the principal such national securities exchange
on that date, or, if there shall have been no such sale so reported on that
date, on the last preceding date on which such a sale was so reported, (ii) if
shares of Common Stock are not so listed but are quoted on the NASDAQ National
Market System, the mean between the highest and lowest sales price per share of
Common Stock on the NASDAQ National Market System on that
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date, or, if there shall have been no such sale so reported on that date, on
the last preceding date on which such a sale was so reported or (iii) if the
Common Stock is not so listed or quoted, the mean between the closing bid and
asked price on that date, or, if there are no quotations available for such
date, on the last preceding date on which such quotations shall be available,
as reported by NASDAQ, or, if not reported by NASDAQ, by the National
Quotation Bureau, Inc.
"Participant" means an employee of the Company or any of its
Subsidiaries to whom an Award has been made under this Plan.
"Subsidiary" means any corporation of which the Company directly or
indirectly owns shares representing more than 50% of the voting power of all
classes or series of capital stock of such corporation which have the right to
vote generally on matters submitted to a vote of the shareholders of such
corporation.
3. ELIGIBILITY. Key employees of the Company and its Subsidiaries
eligible for an Award under this Plan are those who hold positions of
responsibility and whose performance, in the judgment of the Committee, can have
a significant effect on the success of the Company and its Subsidiaries.
4. COMMON STOCK AVAILABLE FOR AWARDS. There shall be available for
Awards granted wholly or partly in Common Stock (including rights or options
which may be exercised for or settled in Common Stock) during the term of this
Plan an aggregate of 500,000 shares of Common Stock. The Board and the
appropriate officers of the Company shall from time to time take whatever
actions are necessary to file required documents with governmental authorities
and stock exchanges and transaction reporting systems to make shares of Common
Stock available for issuance pursuant to Awards. Common Stock related to Awards
that are forfeited or terminated, expire unexercised, are settled in cash in
lieu of Stock or in a manner such that all or some of the shares covered by an
Award are not issued to a Participant, or are exchanged for Awards that do not
involve Common Stock, shall immediately become available for Awards hereunder.
The Committee may from time to time adopt and observe such procedures concerning
the counting of shares against the Plan maximum as it may deem appropriate.
5. ADMINISTRATION. This Plan shall be administered by the
Committee, which shall have full and exclusive power to interpret this Plan and
to adopt such rules, regulations and guidelines for carrying out this Plan as it
may deem necessary or proper, all of which powers shall be exercised in the best
interests of the Company and in keeping with the objectives of this Plan. The
Committee shall consist of at least two members of the Board. The Committee
may, in its discretion, provide for the extension of the exercisability of an
Award, accelerate the vesting or exercisability of an Award, eliminate or make
less restrictive any restrictions contained in an Award, waive any restriction
or other provision of this Plan or an Award or otherwise amend or modify an
Award in any manner that is either (i) not adverse to the Participant holding
such Award or (ii) consented to by such Participant. The Committee may correct
any defect or supply any omission or reconcile any inconsistency in this Plan or
in any Award in the manner and to the extent the Committee deems necessary
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or desirable to carry it into effect. Any decision of the Committee in the
interpretation and administration of this Plan shall lie within its sole and
absolute discretion and shall be final, conclusive and binding on all parties
concerned. No member of the Committee or officer of the Company to whom it
has delegated authority in accordance with the provisions of Paragraph 6 of
this Plan shall be liable for anything done or omitted to be done by him or
her, by any member of the Committee or by any officer of the Company in
connection with the performance of any duties under this Plan.
6. DELEGATION OF AUTHORITY. The Committee may delegate to the Chief
Executive Officer and to other senior officers of the Company its duties under
this Plan pursuant to such conditions or limitations as the Committee may
establish.
7. AWARDS. The Committee shall determine the type or types of
Awards to be made to each Participant under this Plan. Each Award made
hereunder shall be embodied in an Award Agreement, which shall contain such
terms, conditions and limitations as shall be determined by the Committee in its
sole discretion and shall be signed by the Participant and by the Chief
Executive Officer or the Chief Administrative Officer of the Company for and on
behalf of the Company. Awards may consist of those listed in this Paragraph 7
and may be granted singly, in combination or in tandem. Awards may also be made
in combination or in tandem with, in replacement of, or as alternatives to,
grants or rights under this Plan or any other employee plan of the Company or
any of its Subsidiaries, including the plan of any acquired entity. An Award
may provide for the granting or issuance of additional, replacement or
alternative Awards upon the occurrence of specified events, including the
exercise of the original Award granted to a Participant.
(a) STOCK OPTION. An Award may consist of a right to purchase a
specified number of shares of Common Stock at a specified price that is not
less than the greater of (i) 50% of the Fair Market Value of the Common
Stock on the date of grant and (ii) the par value of the Common Stock on
the date of grant.
(b) STOCK APPRECIATION RIGHT. An Award may consist of a right to
receive a payment, in cash or Common Stock, equal to the excess of the Fair
Market Value or other specified valuation of a specified number of shares
of Common Stock on the date the stock appreciation right ("SAR") is
exercised over a specified strike price, as set forth in the applicable
Award Agreement.
(c) STOCK AWARD. An Award may consist of Common Stock or may be
denominated in units of Common Stock. All or part of any stock award may
be subject to conditions established by the Committee, and set forth in the
Award Agreement, which may include, but are not limited to, continuous
service with the Company and its Subsidiaries, achievement of specific
business objectives, increases in specified indices, attaining specified
growth rates and other comparable measurements of performance. Such Awards
may be based on Fair Market Value or other specified valuations. The
certificates evidencing shares of Common Stock issued in connection with a
stock award shall contain appropriate legends and restrictions describing
the terms and conditions of the restrictions applicable thereto. As
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used herein, "Restricted Stock" means Common Stock that is restricted or
subject to forfeiture provisions.
(d) CASH AWARD. An Award may be denominated in cash with the amount
of the eventual payment subject to future service and such other
restrictions and conditions as may be established by the Committee, and set
forth in the Award Agreement, including, but not limited to, continuous
service with the Company and its Subsidiaries, achievement of specific
business objectives, increases in specified indices, attaining specified
growth rates and other comparable measurements of performance.
8. PAYMENT OF AWARDS.
(a) GENERAL. Payment of Awards may be made in the form of cash or
Common Stock or combinations thereof and may include such restrictions as
the Committee shall determine, including, in the case of Common Stock,
restrictions on transfer and forfeiture provisions.
(b) DEFERRAL. With the approval of the Committee, payments in
respect of Awards may be deferred, either in the form of installments or a
future lump sum payment. The Committee may permit selected Participants to
elect to defer payments of some or all types of Awards in accordance with
procedures established by the Committee. Any deferred payment, whether
elected by the Participant or specified by the Award Agreement or by the
Committee, may be forfeited if and to the extent that the Award Agreement
so provides.
(c) DIVIDENDS AND INTEREST. Dividends or dividend equivalent rights
may be extended to and made part of any Award denominated in Common Stock
or units of Common Stock, subject to such terms, conditions and
restrictions as the Committee may establish. The Committee may also
establish rules and procedures for the crediting of interest on deferred
cash payments and dividend equivalents for deferred payments denominated in
Common Stock or units of Common Stock.
(d) SUBSTITUTION OF AWARDS. At the discretion of the Committee, a
Participant may be offered an election to substitute an Award for another
Award or Awards of the same or different type.
9. STOCK OPTION EXERCISE. The price at which shares of Common Stock
may be purchased under a stock option shall be paid in full at the time of
exercise in cash or, if elected by the optionee, the optionee may purchase such
shares by means of tendering Common Stock or surrendering another Award,
including Restricted Stock, valued at Fair Market Value on the date of exercise,
or any combination thereof. The Committee shall determine acceptable methods
for tendering Common Stock or other Awards to exercise a stock option as it
deems appropriate. If permitted by the Committee, payment may be made by
successive exercises by the Participant. The Committee may provide for loans
from the Company to an employee to permit the exercise or purchase of
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Awards and may provide for procedures to permit the exercise or purchase of
Awards by use of the proceeds to be received from the sale of Common Stock
issuable pursuant to an Award. Unless otherwise provided in the applicable
Award Agreement, in the event shares of Restricted Stock are tendered as
consideration for the exercise of a stock option, a number of the shares
issued upon the exercise of the stock option, equal to the number of shares
of Restricted Stock used as consideration therefor, shall be subject to the
same restrictions as the Restricted Stock so submitted as well as any
additional restrictions that may be imposed by the Committee.
10. TAX WITHHOLDING. The Company shall have the right to deduct
applicable taxes from any Award payment and withhold, at the time of delivery or
vesting of cash or shares of Common Stock under this Plan, an appropriate amount
of cash or number of shares of Common Stock or a combination thereof for payment
of taxes required by law or to take such other action as may be necessary in the
opinion of the Company to satisfy all obligations for withholding of such taxes.
The Committee may also permit withholding to be satisfied by the transfer to the
Company of shares of Common Stock theretofore owned by the holder of the Award
with respect to which withholding is required. If shares of Common Stock are
used to satisfy tax withholding, such shares shall be valued based on the Fair
Market Value when the tax withholding is required to be made.
11. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION. The Board
may amend, modify, suspend or terminate this Plan for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose permitted
by law, except that no amendment or alteration that would impair the rights of
any Participant under any Award previously granted to such Participant shall be
made without such Participant's consent.
12. TERMINATION OF EMPLOYMENT. Upon the termination of employment by
a Participant, any unexercised, deferred or unpaid Awards shall be treated as
provided in the specific Award Agreement evidencing the Award. In the event of
such a termination, the Committee may, in its discretion, provide for the
extension of the exercisability of an Award, accelerate the vesting or
exercisability of an Award, eliminate or make less restrictive any restrictions
contained in an Award, waive any restriction or other provision of this Plan or
an Award or otherwise amend or modify the Award in any manner that is either (i)
not adverse to such Participant or (ii) consented to by such Participant.
13. ASSIGNABILITY. Unless otherwise determined by the Committee and
provided in the Award Agreement, no Award or any other benefit under this Plan
shall be assignable or otherwise transferable except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act,
or the rules thereunder. The Committee may prescribe and include in applicable
Award Agreements other restrictions on transfer. Any attempted assignment of an
Award or any other benefit under this Plan in violation of this Paragraph 13
shall be null and void.
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14. ADJUSTMENTS.
(a) The existence of outstanding Awards shall not affect in any
manner the right or power of the Company or its shareholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or
other changes in the capital stock of the Company or its business or any
merger or consolidation of the Company, or any issue of bonds, debentures,
preferred or prior preference stock (whether or not such issue is prior to,
on a parity with or junior to the Common Stock) or Common Stock or the
dissolution or liquidation of the Company, or any sale or transfer of all
or any part of its assets or business, or any other corporate act or
proceeding of any kind, whether or not of a character similar to that of
the acts or proceedings enumerated above.
(b) In the event of any subdivision or consolidation of outstanding
shares of Common Stock or declaration of a dividend payable in shares of
Common Stock or capital reorganization or reclassification or other
transaction involving an increase or reduction in the number of outstanding
shares of Common Stock, then (i) the number of shares of Common Stock
reserved under this Plan and covered by outstanding Awards denominated in
Common Stock or units of Common Stock, (ii) the exercise or other price in
respect of such Awards and (iii) the appropriate Fair Market Value and
other price determinations for such Awards hereof shall each be
proportionately adjusted by the Board to reflect such transaction. In the
event of any consolidation or merger of the Company with another
corporation or entity, or the adoption by the Company of a plan of exchange
affecting the Common Stock or any distribution to holders of Common Stock
of securities or property (other than normal cash dividends or dividends
payable in Common Stock), the Board shall make appropriate adjustments to
(i) the number of shares of Common Stock reserved under this Plan and
covered by outstanding Awards denominated in Common Stock or units of
Common Stock, (ii) the exercise or other price in respect of such Awards
and (iii) the appropriate Fair Market Value and other price determinations
for such Awards to give effect to such transaction; provided that such
adjustments shall only be such as necessary to maintain the proportionate
interest of the holders of the Awards and preserve, without exceeding, the
value of such Awards. In the event of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or
liquidation, the Board shall be authorized to issue or assume Awards by
means of substitution of new Awards, as appropriate, for previously issued
Awards or an assumption of previously issued Awards as part of such
adjustment.
15. RESTRICTIONS. No Common Stock or other form of payment shall be
issued with respect to any Award unless the Company shall be satisfied based on
the advice of its counsel that such issuance will be in compliance with
applicable federal and state securities laws. Certificates evidencing shares of
Common Stock delivered under this Plan may be subject to such stop transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations and other requirements of the Securities and Exchange
Commission, any securities exchange or transaction reporting system upon which
the Common Stock is then listed and any applicable federal
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and state securities laws. The Committee may cause a legend or legends to be
placed upon any such certificates to make appropriate reference to such
restrictions.
16. UNFUNDED PLAN. Insofar as it provides for Awards of cash, Common
Stock or rights thereto, this Plan shall be unfunded. Although bookkeeping
accounts may be established with respect to Participants who are entitled to
cash, Common Stock or rights thereto under this Plan, any such accounts shall be
used merely as a bookkeeping convenience. The Company shall not be required to
segregate any assets that may at any time be represented by cash, Common Stock
or rights thereto, nor shall this Plan be construed as providing for such
segregation, nor shall the Company nor the Board nor the Committee be deemed to
be a trustee of any cash, Common Stock or rights thereto to be granted under
this Plan. Any liability or obligation of the Company to any Participant with
respect to a grant of cash, Common Stock or rights thereto under this Plan shall
be based solely upon any contractual obligations that may be created by this
Plan and any Award Agreement, and no such liability or obligation of the Company
shall be deemed to be secured by any pledge or other encumbrance on any property
of the Company. Neither the Company nor the Board nor the Committee shall be
required to give any security or bond for the performance of any obligation that
may be created by this Plan.
17. GOVERNING LAW. This Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securities laws of the United States, shall be
governed by and construed in accordance with the laws of the State of Delaware.
18. EFFECTIVE DATE OF PLAN. This Plan shall be effective as of
October 27, 1998, the date (the "Effective Date") it was approved by the Board.
19. PERMITTED TRANSFERS. The Committee may, in its discretion,
authorize all or a portion of the Awards to be granted to a Participant to be on
terms which permit transfer by such Participant to the following "Permitted
Assignees:"
(a) any person who is a sibling of a Participant, a Parent of a
Participant, or the spouse of Participant or a descendant of
Participant, including any person adopted by Participant or by any of
Participant's descendants, and including the descendants of any such
adopted person, provided that the adoption is completed before the
adopted person is eighteen years of age;
(b) the trustees of any trust holding properties with respect to
which Permitted Assignees and Participant actuarially comprise more
than seventy-five percent (75%) of the beneficial ownership at the
time of the assignment, determined as provided below; and
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(c) any corporation or other business entity which is wholly
owned by Permitted Assignees and Participant at the time of the
assignment (directly or indirectly).
In making the determination whether Permitted Assignees actuarially comprise
more than seventy-five percent (75%) of the beneficial ownership of properties
held in a trust at the time of an assignment to the trustees of the trust, the
following beneficial interests in the trust shall be ignored:
(a) any beneficial interest of a person who is lawfully married
to a Permitted Assignee at the time of the assignment or who had been
married to a Permitted Assignee at the time of the Permitted
Assignee's death and has not remarried at the time of the assignment;
and
(b) any beneficial interest represented by the existence of any
power of appointment over the trust properties, even though the actual
exercise of the power of appointment may constitute an assignment.
The beneficial interests which are not ignored as provided above (the "Relevant
Interests") shall be divided into two categories, those which are held for
Permitted Assignees and those which are not, and each category shall be valued
as provided under section 2512(a) of the Internal Revenue Code of 1986, as
amended, as if the beneficial interests were then assigned, even if those
interests are not assignable. Permitted Assignees shall be deemed to comprise
more than seventy-five percent (75%) of the beneficial ownership of properties
held in a trust at the time of an assignment to the trustees of the trust if the
value of the Relevant Interests which are held for Permitted Assignees is more
than three times the value of the Relevant Interests which are not held for
Permitted Assignees.
Notwithstanding the foregoing, (x) there may be no consideration for any such
transfer, (y), if applicable, the Award Agreement pursuant to which such
Award is granted must be approved by the Committee, and must expressly
provide for transferability in a manner consistent with this Paragraph 19,
and (z) subsequent transfers of transferred Awards, shall be prohibited
except those in accordance with Paragraph 13. Following transfer, any such
Awards shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, provided that (i) in the event of
termination of employment, Paragraph 12 hereof shall continue to be applied
with respect to the original Participant, following which the Awards shall be
exercisable by the transferee only to the extent, and for the periods
specified in the Paragraph 12 and the applicable Award Agreement, (ii) the
original Participant shall remain subject to the withholding tax provisions
of Paragraph 10, and (iii) the Company shall have no duty or obligation to
provide notice to a transferee of any action or event affecting the rights of
the transferee under the Plan including, without limitation, any amendment,
modification, suspension or termination of the Plan pursuant to Paragraph 11,
the early termination of an Award pursuant to Paragraph 12, or adjustments to
the amount of the Awards pursuant to Paragraph 14.
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