EXHIBIT
10.12


 


EXECUTIVE
EMPLOYMENT AGREEMENT


 


AGREEMENT
by and between POGO PRODUCING COMPANY, a Delaware corporation (the “Company”)
and Paul G. Van Wagenen (the “Executive”), dated as of the 1st day of February,
2003.


 


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, which shall supersede both the Employment Agreement between
Company and Executive dated as of February 1, 2001 and extended and renewed
most recently as of February 1, 2002 and the Excess Benefits Letter Agreement
between the Company and the Executive dated as of March 2, 1995.


 


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. 
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. 
A determination by the Company to extend the term for one year 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.  Upon a Change of Control the Employment
Period shall be extended to the fifth anniversary of the Change of Control.


 


2.                                       Change
of Control.  For the purpose of this Agreement, a “Change
of Control” shall mean:


 


(a)                                  The
acquisition by any Person of beneficial ownership of Outstanding Company Voting
Securities (including any such acquisition of beneficial ownership deemed to
have occurred pursuant to Rule 13d-5 under the Exchange Act) if, immediately
thereafter, such Person is the beneficial owner of 20% or more of either (i)
the then Outstanding Company Common Stock or (ii) the then Outstanding Company
Voting Securities, unless such acquisition is made (a) directly from the
Company in a transaction approved by a majority of the members of the Incumbent
Board, (b) by any employee benefit plan (or related trust) sponsored or 


 

















 


maintained by the Company or any
corporation controlled by the Company, or (c) by a parent corporation resulting
from a Business Corporation (other than the Company) pursuant to a Business
Combination if, following such Business Combination, the conditions specified
in clauses (i), (ii) and (iii) of subsection (c) of this Section 2 are
satisfied;


 


(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, except that any such individual shall not be considered a
member of the Incumbent Board if his or her initial assumption of office occurs
as a result of either an actual or threatened election contest (as such term is
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;


 


(c)                                  Approval
by the shareholders of the Company of a Business Combination (or if there is no
such approval by shareholders, consummation of such Business Combination)
unless, immediately following such Business Combination, (i) more than 60% of,
respectively, the then outstanding shares of common stock of the parent
corporation resulting from such Business Combination and the combined voting
power of the then outstanding voting securities of such parent corporation
entitled to vote generally in the election of directors will be (or 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 Business Combination in substantially the same
proportions as their ownership immediately prior to such Business Combination
of the Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (other than any employee benefit plan (or
related trust) of the Company or any parent corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or more,
respectively, of the then outstanding shares of common stock of the parent
corporation resulting from such Business Combination 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 parent corporation resulting from
such Business Combination were members of the Incumbent Board immediately prior
to the consummation of such Business Combination; or


 


(d)                                 Approval
by the shareholders of the Company of (i) a complete liquidation or dissolution
of the Company or (ii) a Major Asset Disposition (or if there is no such
approval by shareholders, consummation of such Major Asset Disposition) unless,
immediately following such Major Asset Disposition, (A) individuals and
entities that were beneficial owners of the Outstanding Company Common Stock
and the Outstanding Company Voting Securities immediately prior to such Major
Asset Disposition beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding shares of voting stock of the Company (if
it continues to exist) and of the Acquiring Entity; (B) no Person, other than
any employee benefit plan (or related trust) of the Company or such entity
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities of the Company (if it continues to exist)
and of the Acquiring 


 


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Entity and (C) at least a majority of the
members of the board of directors of the Company (if it continues to exist) and
of the Acquiring Entity were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board providing for such
Major Asset Disposition.


 


For purposes of the foregoing definition,


 


(1)  the term
“Person” means an individual, entity or group;


 


(2)  the term “group” is used as it is defined
for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934 (the
“Exchange Act”);


 


(3)  the terms “beneficial owner”, “beneficially
ownership” and “beneficially own” are used as defined for purposes of Rule
13d-3 under the Exchange Act;


 


(4)  the term “Business Combination” means (x) a
merger or consolidation involving the Company or its stock or (y) an
acquisition by the Company, directly or through one or more subsidiaries, of
another entity or its stock or assets;


 


(5)  the term “Outstanding Company Common Stock”
shall mean the outstanding shares of Common Stock, par value $1 per share, of
the Company;


 


(6)  the term “Outstanding Company Voting
Securities” means outstanding voting securities of the Company entitled to vote
generally in the election of directors; and any specified percentage or portion
of the Outstanding Company Voting Securities (or of other voting stock or
voting securities) shall be determined based on the relative combined voting
power of such securities;


 


(7)  the term “parent corporation resulting from
a Business Combination” means the Company if its stock is not acquired or
converted in the Business Combination and otherwise means the entity which as a
result of such Business Combination owns the Company or all or substantially
all of the Company’s assets either directly or through one or more
subsidiaries;


 


(8)  the term “Major Asset Disposition” means the
sale or other disposition in one transaction or a series of related
transactions of 60% or more of the assets of the Company and its subsidiaries
on a consolidated basis; and any specified percentage or portion of the assets
of the Company shall be based on fair market value, as determined by a majority
of the members of the Incumbent Board; and


 


(9)  “Acquiring Entity” means the entity that
acquires the largest portion of the assets sold or otherwise disposed of in a
Major Asset Disposition (or the entity, if any, that owns a majority of the
outstanding voting stock of such acquiring entity entitled to vote generally in
the election of directors or members of a comparable governing body).


 


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.


 


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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 (x) prior to a Change of Control, 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 or the most recent Renewal Date and
(y) upon and after a Change of Control, the Executive’s position shall be at
least commensurate in all respects (disregarding a change or changes that are
in the aggregate de minimis) with the most significant of those held, exercised
and assigned at any time during the 180-day period immediately preceding the
Applicable Date and (B) the Executive’s services shall be performed at the
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 25
miles from such location.  For purposes
of this Agreement, “Applicable Date” shall mean, at any time of determination,
the latest to have occurred of the Effective Date, the most recent Renewal
Date, or any date on which a Change of Control has occurred.


 


(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
Nominating and Corporate Governance 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.  Following a Change of Control, Annual Base
Salary shall be increased not less frequently than annually in an amount not
less than the percentage increase, if any, in the United States Department of
Labor’s U.S. Consumer Price Index – All Items (All Urban Consumers) from the
last day of the last full month preceding the Change of Control to the last
month preceding the date of increase.  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 


 


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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.


 


(iv)                              Excess
Retirement Benefit Payments.  In addition to the benefits available
pursuant to Section 4(b)(iii):


 


(A)                              Upon
the termination of the Executive’s services with the Company for any reason
other than death, the Company shall pay to the Executive a monthly benefit for
life (or the lump-sum equivalent thereof with the consent of the Executive’s
spouse), in an amount equal to the monthly annuity payment that the Executive
would be entitled to receive under the Retirement Plan for Pogo Producing
Company (or any successor thereto) (the “Retirement Plan”) if the limitations
on retirement benefits under Sections 415 and 401(a)(17) of the Internal
Revenue Code of 1986, as amended (the “Code”), were not applicable, less the
monthly annuity payment actually payable to the Executive under the Retirement
Plan.  Such monthly benefit will
commence on the same date that the Executive’s “Retirement Allowance” (as
defined in the Retirement Plan) commences under the Retirement Plan, will be calculated
using the actuarial assumptions utilized under the Retirement Plan and will be
calculated as if cash bonus payments to the Executive were includible as
“considered compensation” under the Retirement Plan; and


 


(B)                                Upon
the death of the Executive while in the service of the Company or after
termination of Service with the Company, the Company shall pay to the
Executive’s spouse, if she survives the Executive and is eligible for a
“Spouse’s Allowance” (as defined in the Retirement Plan) under the Retirement
Plan, a monthly lifetime benefit (or the lump-sum equivalent thereof), in an
amount equal to the monthly installment that she would be entitled to receive
as a Spouse’s Allowance under the Retirement 


 


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Plan
if the limitations on retirement benefits provided in Sections 415 and
401(a)(17) of the Code were not applicable, less the monthly annuity payment
actually payable to her as a Spouse’s Allowance under the Retirement Plan. Such
monthly benefit shall commence on first day of the month following the
Executive’s death, will be calculated using the actuarial assumptions utilized
under the Retirement Plan and will be calculated as if cash bonus payments to
the Executive were includible as “considered compensation” under the Retirement
Plan.


 


(v)                                 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.


 


(vi)                              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.


 


(vii)                           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.


 


(viii)                        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.


 


(ix)                                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 


 


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for
the Executive at any time during the 90-day period immediately preceding the
Applicable Date.


 


(x)                                   Stock
Options.  In addition to Annual Base Salary and annual
bonus, the Executive may be awarded a stock option grant at the discretion of
the Company for any fiscal year ending during the Employment Period.


 


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 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 final and non-appealable
conviction by a court of competent jurisdiction 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 30-day period
immediately following the first anniversary of the date a Change of Control
occurs.  The Company shall inform the
Executive promptly following the occurrence of a Change of Control of the date
on which the Change of Control occurred, with such supporting detail as may be
necessary to establish such date.  If,
in the reasonable judgment of Executive, there exists uncertainty as to the date
on which a Change of Control occurred and in the absence of agreement between
the Company and the Executive as to such date, the Executive shall be entitled,
for purposes of determining the Window Period, to treat the Change of Control
as having occurred on such date as the Executive reasonably determines, it
being the intention of the parties that Executive not be deprived of
substantive rights hereunder by reason of uncertainties or disputes regarding
the date on which a Change of Control occurred.  Anything in 


 


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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;


 


(v)                                 any
failure by the Company to comply with and satisfy Section 11(c) of this
Agreement; or


 


(vi)                              following
a Change of Control, any failure to provide both an annual bonus (in cash
and/or property) and stock option grant no less favorable to Executive than the
single highest bonus and grant provided to the Executive during the 24 months
immediately prior to a Change of Control, appropriately increased to reflect
annual salary increases provided for in Section 4(b)(i) and/or additional
positions or responsibilities.


 


An
extension of the Employment Period pursuant to Section 1(b) will not, in
itself, impair or render invalid or defective a Notice of Termination given in
connection with termination of employment for Good Reason based on whole or in
part on facts or circumstances occurring prior to the extension.


 


(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” 


 


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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)                                  Prior
to a Change of Control:  Good
Reason;  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 for Good Reason:


 


(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


 


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


 


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(y) any
bonus described in Section 4(b)(ii) paid or payable in respect of the most
recently completed fiscal year of the Company or, if no such bonus has been
paid or is payable in respect of such year, any bonus described in
Section 4(b)(ii) paid or payable in respect of the next preceding fiscal
year; and, provided further, that such amount shall be reduced by the present
value (determined as provided in Section 280G(d)(4) of 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 Retirement Plan during the
90-day period immediately preceding the Applicable Date) of the benefit payable
under the Retirement Plan and/or Section 4(b)(iv) hereof 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
3-year period following termination of employment, 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 Section 4(b)(iv) (the
amount of such benefit shall be hereinafter referred to as the “Supplemental
Retirement Amount”);


 


D.                                    a
separate sum equal to the amount of any unvested and unpaid cash bonuses
awarded to the Executive;


 


(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)(v) 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 


 


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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;


 


(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 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”);


 


(iv)                              effective
as of the Date of Termination, immediate vesting and exercisability of, and
termination of any restrictions on sale or transfer (other than any such
restriction arising by operation of law) with respect to, each and every stock
option, restricted stock award, restricted stock unit award and other
equity-based award and performance award that is outstanding as of the Date of
Termination;


 


(v)                                 the
Company shall timely pay to the Executive and/or his spouse any benefits due
pursuant to the Retirement Plan and/or Section 4(b)(iv).


 


(b)                                 Following
a Change of Control:  During the Window
Period; Good Reason;  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 following a Change of Control, the Executive shall terminate
employment for Good Reason following a Change of Control or the Executive shall
terminate employment without any reason during the Window Period, then the
Company shall pay or provide to the Executive all the amounts and benefits set
forth in Section 6(a) above; provided however, that:


 


(i)                                     instead
of the Severance Amount payable pursuant to Section 6(a)(i)(B) above, the
company shall pay to the Executive a Severance Amount equal to the product of:


 


(1) five,
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 or, if no such bonus has been paid or is
payable in respect of such


 


11

















 


year,
any bonus described in Section 4(b)(ii) paid or payable in respect of the
next preceding fiscal year; and


 


(ii)                                  instead
of the Supplemental Retirement Amount payable pursuant to Section 6(a)(i)(C)
above, the Company shall pay to the Executive 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 Retirement Plan during the 90-day period immediately preceding
the Applicable Date) of the benefit payable under the Retirement Plan and
Section 4(b)(iv) 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 5-year period
following termination of employment, 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 Section 4(b)(iv);


 


(iii)                               in
addition to the amounts payable pursuant to Sections 6(a)(i)(A) and 6(a)(i),
the Company shall pay to the Executive a separate lump-sum amount equal to the
value of the equity awards that the Executive would have received during the
five years following termination, determined in accordance with Exhibit A
attached hereto; and


 


(iv)                              the
Company shall timely pay to the Executive and/or his spouse any benefits due
pursuant to the Retirement Plan and/or Section 4(b)(iv).


 


(c)                                  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, (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 and (iii) timely payment to the Executive
and/or his spouse of any benefits due pursuant to the Retirement Plan and/or
Section 4(b)(iv).  Upon the death
of the Executive occurring after the termination of the Executive’s employment,
the Company shall timely pay to the Executive’s spouse benefits due, if any,
pursuant to the Retirement Plan and Section 4(b)(iv).


 


(d)                                 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)),
(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 


 


12

















 


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”) and (iii) timely payment to the Executive and/or his spouse of any
benefits due pursuant to the Retirement Plan and/or Section 4(b)(iv)..


 


(e)                                  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 and the obligation to
make timely payment to the Executive and/or his spouse of any benefits due
pursuant to the Retirement Plan and/or Section 4(b)(iv).  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, the timely payment or provision of Other Benefits and the timely
payment to the Executive and/or his spouse of any benefits due pursuant to the
Retirement Plan and/or Section 4(b)(iv). 
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(c) and 6(d) 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 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), 6(c) and 6(d) 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 or his
spouse 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 or
his spouse is the prevailing party, the Company agrees 


 


13

















 


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) or 6(b) 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 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 the Company’s then
current independent public accountants (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.  The Accounting Firm shall furnish the
Executive with a written opinion that reporting the Excise Tax, or the failure
to report the Excise Tax, as applicable, on the Executive’s applicable federal
income tax return in accordance with the determination made by the Accounting
Firm pursuant to this Section 9(b) should not result in the 


 


14

















 


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 and reasonably acceptable to the Executive,


 


(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 


 


15

















 


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.  Except for mental impressions retained by
the Executive, 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).  Except for mental impressions of
confidential information retained by the Executive and utilized in the ordinary
course of business by the Executive in any subsequent employment, after
termination of 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.


 


16

















 


(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.  If a
Business Combination is consummated that would have resulted in a Change of
Control but for the satisfaction of the conditions specified in clauses (i),
(ii) and (iii) of Section 2(c) and if the parent corporation resulting from the
Business Combination is other than the Company (hereinafter a “New Parent”),
then, as a condition to consummation of this Business Combination, the New
Parent shall be considered a successor for purposes of this Section 11.


 


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:


 


Paul
G. Van Wagenen


P.O.
Box 2504


Houston,
Texas 77252-2504


 


If
to the Company:


 


Pogo
Producing Company


P.O.
Box 2504


Houston,
Texas 77252-2504


Attention:
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.


 


17

















 


(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.


 


(g)                                 This
Agreement supersedes the Employment Agreement between Company and the Executive
dated as of February 1, 2001 and extended and renewed most recently as of
February 1, 2002, which shall no longer be of any force or effect.


 


(h)                                 This
Agreement supersedes the Excess Benefits Letter Agreement between the Company
and the Executive dated as of March 2, 1995.


 


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/ PAUL G. VAN WAGENEN

  	
   

  	 

	
   

  	
  Paul G. Van Wagenen

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  POGO
  PRODUCING COMPANY

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  By

  	
  /s/ JOHN O. McCOY, JR.

  	
   

  
	
   

  	
   

  	
  John O. McCoy, Jr.

  	 

					



 


18

















 


EXHIBIT
A


 


For
purposes of Section 6(b), the value of the option grants that the Executive
would have received in the five years following termination shall be determined
by multiplying the Black-Scholes value of the Executive’s most recent annual
grant of stock options (or, if greater, the most recent annual grant prior to a
Change of Control) by a factor of four, using the highest Black-Scholes
valuation during the period beginning one-year period prior to the Change of
Control and ending on the date of the Executive’s termination; provided,
however, that if the Executive has been promoted and/or has received a salary
increase since the date of the last annual option grant that would otherwise be
determinative under this provision, the value shall be adjusted upward to
reflect the anticipated increase in grant size associated with the promotion
and/or salary increase, and the value shall also be adjusted upward to reflect
at least the minimum annual salary increases provided for in Section 4(b)(i).


 


The
assumptions used to determine the Black-Scholes value will be consistent with
Company practice.  The assumptions used
to value the most recent option grant are as follows:


 


	
  Volatility:

  	
   

  	
  33.9%

  
	
  Risk-Free Rate of Return:

  	
   

  	
  4.14% (the rate of interest on 10 year
  treasury bonds as of the date of grant)

  
	
  Dividend Opportunity:

  	
   

  	
  $.20/share

  
	
  Term:

  	
   

  	
  10 years

  



 


19