EXHIBIT
10.18


 


EXECUTIVE
EMPLOYMENT AGREEMENT


 


AGREEMENT by and between
POGO PRODUCING COMPANY, a Delaware corporation (the “Company”) and James P.
Ulm, II (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 the Employment Agreement between Company
and Executive dated as of February 1, 2000 and extended and renewed most
recently as of February 1, 2002.


 


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 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 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


 


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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).


 


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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 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.  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.


 


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(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)                              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


 


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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 180-day period immediately following 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 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


 


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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


 


(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:


 


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(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


 


(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 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 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


 


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Applicable Date) of the Executive’s actual benefit
(paid or payable), if any, under the Retirement Plan (the amount of such
benefit shall be hereinafter referred to as the “Supplemental Retirement
Amount”); and


 


(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)(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;


 


(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”); and


 


(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 any other
equity based award and performance award that is outstanding as of the Date of
Termination.


 


(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.


 


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(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, 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 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 


 


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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 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 imposition of a
negligence or similar penalty.  Any
determination by the Accounting Firm shall


 


11

















 


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 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 


 


12

















 


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.


 


(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 


 


13

















 


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:


 


James P. Ulm, II


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.


 


(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.


 


14

















 


(g)                                 This
Agreement supersedes the Employment Agreement between Company and the Executive
dated as of February 1, 2000 and extended and renewed most recently as of
February 1, 2002, which shall no longer be of any force or effect.


 


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/ JAMES P. ULM, II

  	
   

  
	
   

  	
  James P. Ulm, II

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  POGO PRODUCING COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ JOHN O. McCOY, JR.

  	
   

  
	
   

  	
   

  	
  John O. McCoy,
  Jr.

  	
   

  
					



 


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