**EXHIBIT10.18**

 

EXECUTIVEEMPLOYMENT AGREEMENT

 

AGREEMENT by and betweenPOGO 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 ofthe Company (the “Board”), has determined that it is in the best interests ofthe Company and its shareholders to assure that the Company will have thecontinued dedication of the Executive, and to provide the Executive withcompensation and benefits arrangements which are competitive with those ofother corporations and which ensure that the compensation and benefitsexpectations of the Executive will be satisfied.  The Board also believes it is imperative to diminish the inevitabledistraction of the Executive by virtue of the personal uncertainties and riskscreated by a pending or threatened Change of Control and to encourage theExecutive’s full attention and dedication to the Company currently and in theevent of any threatened or pending Change of Control, and to insure thecontinuation of favorable compensation and benefits upon a Change ofControl.  Therefore, in order toaccomplish these objectives, the Board has caused the Company to enter intothis Agreement, which shall supersede the Employment Agreement between Companyand Executive dated as of February 1, 2000 and extended and renewed mostrecently as of February 1, 2002.

 

NOW, THEREFORE, IT ISHEREBY AGREED AS FOLLOWS;

 

1.                                       CertainDefinitions.  (a) The “EffectiveDate” shall mean the date of this Agreement.

 

(b)                                 The“Employment Period” shall mean the period commencing on the Effective Date andending on the second anniversary of such date; provided, however, that on eachannual anniversary of the Effective Date (the “Renewal Date”), the EmploymentPeriod shall be reviewed, to determine whether, in the discretion of theCompany, it should be extended for one additional year so as to terminate twoyears from such Renewal Date.  Any suchone-year extension shall be effective only if, prior to the Renewal Date, theCompany shall give notice to the Executive that the Employment Period shall beso extended.

 

2.                                       Changeof Control.  For the purpose of thisAgreement, a “Change of Control” shall mean:

 

(a)                                  Theacquisition by any Person of beneficial ownership of Outstanding Company VotingSecurities (including any such acquisition of beneficial ownership deemed tohave occurred pursuant to Rule 13d–5 under the Exchange Act) if,immediately thereafter, such Person is the beneficial owner of 20% or more ofeither (i) the then Outstanding Company Common Stock or (ii) the thenOutstanding Company Voting Securities, unless such acquisition is made (a)directly from the Company in a transaction approved by a majority of themembers of the Incumbent Board, (b) by any employee benefit plan (or relatedtrust) sponsored or maintained by the Company or any corporation controlled bythe Company, or (c) by a parent corporation resulting from a BusinessCorporation (other than the Company) pursuant to a

 

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Business Combination if, following such Business Combination, theconditions specified in clauses (i), (ii) and (iii) of subsection (c) of thisSection 2 are satisfied;

 

(b)                                 Individualswho, as of the date hereof, constitute the Board (the “Incumbent Board”) ceasefor any reason to constitute at least a majority of the Board; provided,however, that any individual becoming a director subsequent to the date hereofwhose election, or nomination for election by the Company’s shareholders, wasapproved by a vote of at least a majority of the directors then comprising theIncumbent Board shall be considered as though such individual were a member ofthe Incumbent Board, except that any such individual shall not be considered amember of the Incumbent Board if his or her initial assumption of office occursas a result of either an actual or threatened election contest (as such term isused in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) orother actual or threatened solicitation of proxies or consents by or on behalfof a Person other than the Board;

 

(c)                                  Approvalby the shareholders of the Company of a Business Combination (or if there is nosuch 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 parentcorporation resulting from such Business Combination and the combined votingpower of the then outstanding voting securities of such parent corporationentitled to vote generally in the election of directors will be (or is) thenbeneficially owned, directly or indirectly, by all or substantially all of theindividuals and entities who were the beneficial owners, respectively, of theOutstanding Company Common Stock and Outstanding Company Voting Securitiesimmediately prior to such Business Combination in substantially the sameproportions as their ownership immediately prior to such Business Combinationof the Outstanding Company Common Stock and Outstanding Company VotingSecurities, as the case may be, (ii) no Person (other than any employee benefitplan (or related trust) of the Company or any parent corporation resulting fromsuch Business Combination) beneficially owns, directly or indirectly, 20% ormore, respectively, of the then outstanding shares of common stock of theparent corporation resulting from such Business Combination or the combinedvoting power of the then outstanding voting securities of such corporationentitled to vote generally in the election of directors and (iii) at least amajority of the members of the board of directors of the parent corporationresulting from such Business Combination were members of the Incumbent Boardimmediately prior to the consummation of such Business Combination; or

 

(d)                                 Approvalby the shareholders of the Company of (i) a complete liquidation or dissolutionof the Company or (ii) a Major Asset Disposition (or if there is no suchapproval by shareholders, consummation of such Major Asset Disposition) unless,immediately following such Major Asset Disposition, (A) individuals andentities that were beneficial owners of the Outstanding Company Common Stockand the Outstanding Company Voting Securities immediately prior to such MajorAsset Disposition beneficially own, directly or indirectly, more than 60% of,respectively, the then outstanding shares of common stock and the combinedvoting power of the then outstanding shares of voting stock of the Company (ifit continues to exist) and of the Acquiring Entity; (B) no Person, other thanany employee benefit plan (or related trust) of the Company or such entitybeneficially owns, directly or indirectly, 20% or more of, respectively, thethen outstanding shares of common stock and the combined voting power of thethen 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 theboard of directors of the Company (if it continues to exist) and of theAcquiring 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 Boardproviding for such Major Asset Disposition.

 

For purposes of theforegoing definition,

 

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

 

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

 

(3)                                  theterms “beneficial owner”, “beneficially ownership” and “beneficially own” areused as defined for purposes of Rule 13d–3 under the Exchange Act;

 

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

 

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

 

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

 

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

 

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

 

(9)                                  “AcquiringEntity” means the entity that acquires the largest portion of the assets soldor 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 entityentitled to vote generally in the election of directors or members of acomparable governing body).

 

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3.                                       EmploymentAgreement.  The Company hereby agreesto continue the Executive in its employ in accordance with the terms andprovisions of this Agreement, for the Employment Period.

 

4.                                       Termsof Employment.  (a)  Position and Duties.  (i) During the Employment Period,(A) the Executive’s position (including status, offices, titles andreporting requirements), authority, duties and responsibilities shall be atleast commensurate in all material respects with the most significant of thoseheld, exercised and assigned at any time during the 90–day period immediatelypreceding the Applicable Date and (B) the Executive’s services shall beperformed at the location where the Executive was employed immediatelypreceding the Applicable Date or any office which is the headquarters of theCompany and is less than 25 miles from such location.  For purposes of this Agreement, “Applicable Date” shall mean, atany 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 hasoccurred.

 

(ii)                                  Duringthe Employment Period, and excluding any periods of vacation and sick leave towhich the Executive is entitled, the Executive agrees to devote reasonableattention and time during normal business hours to the business and affairs ofthe Company.  During the EmploymentPeriod 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 educationalinstitutions and (C) manage personal investments, so long as suchactivities do not significantly interfere with the performance of theExecutive’s responsibilities as an employee of the Company in accordance withthis Agreement; provided Executive may not serve on the board of a publiclytraded for profit corporation or similar body of a publicly traded for profitbusiness organized in other than corporate form without the consent of theNominating and Corporate Governance Committee of the Board of Directors of theCompany.  It is expressly understood andagreed that to the extent that any such activities have been conducted by theExecutive prior to the Applicable Date, the continued conduct of suchactivities (or the conduct of activities similar in nature and scope thereto)subsequent to the Applicable Date shall not thereafter be deemed to interferewith the performance of the Executive’s responsibilities to the Company.

 

(b)                                 Compensation.  (i)  BaseSalary.  During the EmploymentPeriod, the Executive shall receive an annual base salary (“Annual BaseSalary”), which shall be paid on a monthly basis, at least equal to twelvetimes the highest  monthly base salarypaid or payable to the Executive by the Company and its affiliated companies inrespect of the twelve–month period immediately preceding the month inwhich the Applicable Date occurs. During the Employment Period, the Annual Base Salary shall be reviewedat least annually and may be increased at any time and from time to time asshall be substantially consistent with increases in base salary generallyawarded in the ordinary course of business to other executives of the Companyand its affiliated companies.  Anyincrease in Annual Base Salary shall not serve to limit or reduce any otherobligation to the Executive under this Agreement.  As used in this Agreement, the term “affiliated companies” shallinclude any company controlled by, controlling or under common control with theCompany.

 

(ii)                                  AnnualBonus.  In addition to Annual BaseSalary, the Executive may be awarded at the discretion of the Company for anyfiscal year ending during the Employment Period, a bonus.

 

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(iii)                               Incentive, Savingsand Retirement Plans.  During theEmployment Period, the Executive shall be entitled to participate in allincentive, savings and retirement plans, practices, policies and programsapplicable generally to other executives of the Company and its affiliatedcompanies.  Such plans, practices,policies and programs shall provide the Executive with incentive opportunities(measured with respect to both regular and special incentive opportunities, tothe extent, if any, that such distinction is applicable), savings opportunitiesand retirement benefit opportunities, in each case, equal to the most favorableof those provided by the Company and its affiliated companies for the Executiveunder such plans, practices, policies and programs as in effect at any timeduring the 90–day period immediately preceding the Applicable Date.

 

(iv)                              WelfareBenefit Plans.  During theEmployment Period, the Executive and/or the Executive’s family, as the case maybe, shall be eligible for participation in and shall receive all benefits underwelfare benefit plans, practices, policies and programs provided by the Companyand its affiliated companies (including, without limitation, medical,prescription, dental, disability, salary continuance, employee life, grouplife, accidental death and travel accident insurance plans and programs) to theextent applicable generally to other executives of the Company and itsaffiliated companies.  Such plans,practices, policies and programs shall provide the Executive with benefitswhich are equal, in the aggregate, to the most favorable of such plans,practices, policies and programs in effect for the Executive at any time duringthe 90–day period immediately preceding the Applicable Date.

 

(v)                                 Expenses.  During the Employment Period, the Executiveshall be entitled to receive prompt reimbursement for all reasonable expensesincurred by the Executive in accordance with the most favorable policies,practices and procedures of the Company and its affiliated companies in effectfor the Executive at any time during the 90-day period immediately precedingthe Applicable Date.

 

(vi)                              FringeBenefits.  During the EmploymentPeriod, the Executive shall be entitled to fringe benefits in accordance withthe most favorable plans, practices, programs and policies of the Company andits affiliated companies in effect for the Executive at any time during the 90–dayperiod immediately preceding the Applicable Date.

 

(vii)                           Office and Support Staff.  During the Employment Period, the Executiveshall be entitled to an office or offices of a size and with furnishings andother appointments, and to personal secretarial and other assistance, at leastequal to the most favorable of the foregoing provided to the Executive by theCompany and its affiliated companies at any time during the 90–day periodimmediately preceding the Applicable Date.

 

(viii)                        Vacation.  During the Employment Period, the Executiveshall be entitled to paid vacation in accordance with the most favorable plans,policies, programs and practices of the Company and its affiliated companies asin effect for the Executive at any time during the 90–day periodimmediately preceding the Applicable Date.

 

5.                                       Terminationof Employment.  (a)  Death or Disability.  The Executive’s employment shall terminateautomatically upon the Executive’s death during the Employment Period.  If the Company determines in good faith thatthe Disability of the Executive has occurred during the Employment Period(pursuant to the definition of Disability set forth below), it may give to theExecutive written notice in accordance with Section 12(c) of this Agreementof 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 dayafter receipt of such notice by the Executive (the “Disability EffectiveDate”), provided that, within the 30 days after such receipt, the Executiveshall not have returned to full–time performance of the Executive’sduties.  For purposes of this Agreement,“Disability” shall mean the absence of the Executive from the Executive’sduties with the Company on a full–time basis for 180 consecutive businessdays as a result of incapacity due to mental or physical illness which isdetermined to be total and permanent by a physician selected by the Company orits insurers and acceptable to the Executive or the Executive’s legalrepresentative (such agreement as to acceptability not to be withheldunreasonably).

 

(b)                                 Cause.  The Company may terminate the Executive’semployment during the Employment Period for Cause.  For purposes of this Agreement, “Cause” shall mean (i) amaterial violation by the Executive of the Executive’s obligations underSection 4(a) of this Agreement (other than as a result of incapacity dueto physical or mental illness) which is willful and deliberate on theExecutive’s part, which is committed in bad faith or without reasonable beliefthat such violation is in the best interests of the Company and which is notremedied in a reasonable period of time after receipt of written notice fromthe Company specifying such violation or (ii) the final and non-appealableconviction by a court of competent jurisdiction of the Executive of a felonyinvolving moral turpitude.

 

(c)                                  GoodReason; Window Period; Other Terminations. The Executive’s employment may be terminated (i) during theEmployment Period by the Executive for Good Reason, (ii) during the WindowPeriod 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 ofControl occurs.  The Company shallinform the Executive promptly following the occurrence of a Change of Controlof the date on which the Change of Control occurred, with such supportingdetail as may be necessary to establish such date.  If, in the reasonable judgment of Executive, there existsuncertainty as to the date on which a Change of Control occurred and in theabsence of agreement between the Company and the Executive as to such date, theExecutive shall be entitled, for purposes of determining the Window Period, totreat the Change of Control as having occurred on such date as the Executivereasonably determines, it being the intention of the parties that Executive notbe deprived of substantive rights hereunder by reason of uncertainties ordisputes regarding the date on which a Change of Control occurred.  Anything in this Agreement to the contrarynotwithstanding, if a Change of Control occurs and if the Executive’semployment with the Company is terminated prior to the date on which the Changeof Control occurs, and if it is reasonably demonstrated by the Executive thatsuch termination of employment or cessation of status as an officer (i) was atthe request of a third party who has taken steps reasonably calculated toeffect the Change of Control or (ii) otherwise arose in connection with oranticipation of the Change of Control, then for all purposes of this Agreementthe “date a Change of Control occurs” shall mean the date immediately prior tothe date of such termination of employment or cessation of status as anofficer.

 

For purposes of this Agreement, “Good Reason” shallmean

 

(i)                                     theassignment to the Executive of any duties inconsistent with the Executive’sposition (including status, offices, titles and reporting requirements),authority, duties or responsibilities as contemplated by Section 4(a) ofthis 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 aninsubstantial or inadvertent action which is remedied by the Company promptlyafter receipt of notice thereof given by the Executive;

 

(ii)                                  anyfailure by the Company to comply with any of the provisions ofSection 4(b) of this Agreement, other than an insubstantial or inadvertentfailure which is remedied by the Company promptly after receipt of notice thereofgiven by the Executive;

 

(iii)                               the Company’s requiringthe Executive to be based at any office or location other than that describedin Section 4(a)(i)(B) hereof;

 

(iv)                              anypurported termination by the Company of the Executive’s employment otherwise thanas expressly permitted by this Agreement; or

 

(v)                                 anyfailure by the Company to comply with and satisfy Section 11(c) of thisAgreement.

 

(d)                                 Noticeof Termination.  Any termination bythe Company for Cause, or by the Executive without any reason during the WindowPeriod or for Good Reason, shall be communicated by Notice of Termination tothe other party hereto given in accordance with Section 12(c) of thisAgreement.  For purposes of thisAgreement, a “Notice of Termination” means a written notice which(i) indicates the specific termination provision in this Agreement reliedupon, (ii) to the extent applicable, sets forth in reasonable detail thefacts and circumstances claimed to provide a basis for termination of theExecutive’s employment under the provision so indicated and (iii) if theDate of Termination (as defined below) is other than the date of receipt ofsuch notice, specifies the termination date (which date shall be not more thanfifteen days after the giving of such notice). The failure by the Executive or the Company to set forth in the Noticeof Termination any fact or circumstance which contributes to a showing of GoodReason or Cause shall not waive any right of the Executive or the Companyhereunder or preclude the Executive or the Company from asserting such fact orcircumstance in enforcing the Executive’s or the Company’s right hereunder.

 

(e)                                  Dateof Termination.  “Date ofTermination” means (i) if the Executive’s employment is terminated by theCompany for Cause, or by the Executive during the Window Period or for GoodReason, the date of receipt of the Notice of Termination or any later datespecified therein, as the case may be, (ii) if the Executive’s employmentis terminated by the Company other than for Cause or Disability, the Date ofTermination shall be the date on which the Company notifies the Executive ofsuch termination, (iii) if the Executive’s employment is terminated byreason of death or Disability, the Date of Termination shall be the date ofdeath 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 otherthan for Good Reason or during a Window Period, the date of the receipt of theNotice of Termination or any later date specified therein.

 

6.                                       Obligationsof the Company upon Termination.

 

(a)                                  GoodReason or during the Window Period; Other than for Cause, Death or Disability.  If, during the Employment Period, theCompany shall terminate the Executive’s employment other than for Cause orDisability or the Executive shall terminate employment either for Good Reasonor without any reason during the Window Period:

 

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(i)                                     theCompany shall pay to the Executive in a lump–sum in cash within 30 daysafter the Date of Termination the aggregate of the following amounts:

 

(A)                              thesum of (1) the Executive’s Annual Base Salary through the Date ofTermination to the extent not theretofore paid and (2) any compensationpreviously deferred by the Executive (together with any accrued interest orearnings thereon) and any accrued vacation pay, in each case to the extent nottheretofore paid (the sum of the amounts described in clauses (1) and (2) shallbe hereinafter referred to as the “Accrued Obligations”); and

 

(B)                                theamount (such amount shall be hereinafter referred to as the “Severance Amount”)equal to the product of:

 

(1)                                  three,and

 

(2)                                  thesum of

 

(x)                                   theExecutive’s Annual Base Salary, and

 

(y)                                 anybonus described in Section 4(b)(ii) paid or payable in respect of the mostrecently completed fiscal year of the Company or, if no such bonus has beenpaid or is payable in respect of such year, any bonus described inSection 4(b)(ii) paid or payable in respect of the next preceding fiscalyear; and, provided further, that such amount shall be reduced by the presentvalue (determined as provided in Section 280G(d)(4) of the InternalRevenue Code of 1986, as amended (the “Code”)) of any other amount of severancerelating to salary or bonus continuation to be received by the Executive upontermination of employment of the Executive under any severance plan, severancepolicy or severance arrangement of the Company; and

 

(C)                                aseparate lump–sum supplemental retirement benefit equal to the differencebetween (1) the actuarial equivalent (utilizing for this purpose theactuarial assumptions utilized with respect to the Employees Retirement Planfor Pogo Producing Company (or any successor plan thereto) (the “RetirementPlan”) during the 90–day period immediately preceding the ApplicableDate) of the benefit payable under the Retirement Plan which the Executivewould receive if the Executive’s employment continued at the compensation levelprovided for in Sections 4(b)(i) and 4(b)(ii) of this Agreement for theremainder of the Employment Period, assuming for this purpose that all accruedbenefits are fully vested and that benefit accrual formulas are no lessadvantageous to the Executive than those in effect during the 90–dayperiod immediately preceding the Applicable Date, and (2) the actuarialequivalent (utilizing for this purpose the actuarial assumptions utilized withrespect to the Retirement Plan during the 90–day period immediatelypreceding 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 suchbenefit shall be hereinafter referred to as the “Supplemental RetirementAmount”); and

 

(D)                               aseparate sum equal to the amount of any unvested and unpaid cash bonusesawarded to the Executive;

 

(ii)                                  forthe remainder of the Employment Period, or such longer period as any plan,program, practice or policy may provide, the Company shall continue benefits tothe Executive and/or the Executive’s family at least equal to those which wouldhave been provided to them in accordance with the plans, programs, practicesand policies described in Section 4(b)(iv) of this Agreement if theExecutive’s employment had not been terminated in accordance with the mostfavorable plans, practices, programs or policies of the Company and itsaffiliated companies as in effect and applicable generally to other executivesand their families during the 90–day period immediately preceding theApplicable Date, provided, however, that if the Executive becomes reemployedwith another employer and is eligible to receive medical or other welfarebenefits under another employer provided plan, the medical and other welfarebenefits described herein shall be secondary to those provided under such otherplan during such applicable period of eligibility (such continuation of suchbenefits for the applicable period herein set forth shall be hereinafterreferred to as “Welfare Benefit Continuation”).  For purposes of determining eligibility of the Executive forretiree benefits pursuant to such plans, practices, programs and policies, theExecutive shall be considered to have remained employed until the end of theEmployment Period and to have retired on the last day of such period;

 

(iii)                               to the extent nottheretofore paid or provided, the Company shall timely pay or provide to theExecutive and/or the Executive’s family any other amounts or benefits requiredto be paid or provided or which the Executive and/or the Executive’s family iseligible to receive pursuant to this Agreement and under any plan, program,policy or practice or contract or agreement of the Company and its affiliatedcompanies as in effect and applicable generally to other executives and theirfamilies during the 90–day period immediately preceding the ApplicableDate (such other amounts and benefits shall be hereinafter referred to as the“Other Benefits”); and

 

(iv)                              effectiveas of the Date of Termination, immediate vesting and exercisability of, andtermination of any restrictions on sale or transfer (other than any suchrestriction arising by operation of law) with respect to, each and every stockoption, restricted stock award, restricted stock unit award and any otherequity based award and performance award that is outstanding as of the Date ofTermination.

 

(b)                                 Death.  If the Executive’s employment is terminatedby reason of the Executive’s death during the Employment Period, this Agreementshall terminate without further obligations to the Executive’s legalrepresentatives under this Agreement, other than for (i) payment ofAccrued Obligations (which shall be paid to the Executive’s estate orbeneficiary, as applicable, in a lump–sum in cash within 30 days of theDate of Termination) and the timely payment or provision of the Welfare BenefitContinuation and Other Benefits, and (ii) payment to the Executive’sestate or beneficiary, as applicable, in a lump–sum in cash within 30days of the Date of Termination of an amount equal to the sum of the SeveranceAmount and the Supplemental Retirement Amount.

 

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(c)                                  Disability.  If the Executive’s employment is terminatedby reason of the Executive’s Disability during the Employment Period, thisAgreement shall terminate without further obligations to the Executive, otherthan for (i) payment of Accrued Obligations (which shall be paid to theExecutive in a lump–sum in cash within 30 days of the Date ofTermination) and the timely payment or provision of the Welfare BenefitContinuation and Other Benefits (excluding, in each case, Disability Benefits(as defined below)), and (ii) payment to the Executive in a lump–sumin cash within 30 days of the Date of Termination of an amount equal to thegreater of (A) the sum of the Severance Amount and the SupplementalRetirement Amount and (B) the present value (determined as provided inSection 280G(d)(4) of the Code) of any cash amount to be received by theExecutive as a disability benefit pursuant to the terms of any long termdisability plan, policy or arrangement of the Company and its affiliatedcompanies, but not including any proceeds of disability insurance covering theExecutive 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 includedin this clause (B) shall be hereinafter referred to as the “DisabilityBenefits”).

 

(d)                                 Cause;By Executive Other than for Good Reason And Other Than During a Window Period.  If the Executive’s employment shall beterminated for Cause during the Employment Period, this Agreement shallterminate without further obligations to the Executive other than theobligation to pay to the Executive Annual Base Salary through the Date ofTermination plus the amount of any compensation previously deferred by theExecutive, in each case to the extent theretofore unpaid.  If the Executive terminates employmentduring the Employment Period, excluding a termination either for Good Reason orwithout any reason during the Window Period, this Agreement shall terminatewithout further obligations to the Executive, other than for AccruedObligations, the timely payment or provision of Other Benefits.  In such case, all Accrued Obligations shallbe paid to the Executive in a lump–sum in cash within 30 days of the Dateof Termination.

 

7.                                       Non-exclusivityof Rights.  Except as provided inSection 6(a)(ii), 6(b) and 6(c) of this Agreement, nothing in thisAgreement shall prevent or limit the Executive’s continuing or futureparticipation in any plan, program, policy or practice provided by the Companyor any of its affiliated companies and for which the Executive may qualify, norshall anything herein limit or otherwise affect such rights as the Executivemay have under any contract or agreement with the Company or any of itsaffiliated companies.  Amounts which arevested benefits or which the Executive is otherwise entitled to receive underany plan, policy, practice or program of or any contract or agreement with theCompany or any of its affiliated companies at or subsequent to the Date ofTermination shall be payable in accordance with such plan, policy, practice orprogram or contract or agreement except as explicitly modified by thisAgreement.

 

8.                                       FullSettlement; Resolution of Disputes. (a) The Company’s obligation to make payments provided for in thisAgreement and otherwise to perform its obligations hereunder shall not beaffected by any set-off, counterclaim, recoupment, defense or other claim,right or action which the Company may have against the Executive orothers.  In no event shall the Executivebe obligated to seek other employment or take any other action by way ofmitigation of the amounts payable to the Executive under any of the provisionsof this Agreement and, except as provided in Section 6(a)(ii) of thisAgreement, such amounts shall not be reduced whether or not the Executiveobtains other employment.  If there isany contest by the Company concerning the Payments or benefits to be providedto the Executive hereunder whether through litigation, arbitration ormediation, or with respect to the validity or enforceability of, or liabilityunder, 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 promptlyupon conclusion of the contest all legal fees and expenses which the Executivemay reasonably have incurred.

 

(b)                                 Ifthere shall be any dispute between the Company and the Executive (i) inthe event of any termination of the Executive’s employment by the Company,whether such termination was for Cause, or (ii) in the event of anytermination of employment by the Executive, whether Good Reason existed, then,unless and until there is a final, nonappealable judgment by a court ofcompetent jurisdiction declaring that such termination was for Cause or thatGood Reason did not exist, the Company shall pay all amounts, and provide allbenefits, to the Executive and/or the Executive’s family or otherbeneficiaries, as the case may be, that the Company would be required to pay orprovide pursuant to Section 6(a) hereof as though such termination were bythe 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 tothis paragraph except upon receipt of an undertaking (which need not besecured) by or on behalf of the Executive to repay all such amounts to whichthe Executive is ultimately adjudged by such court not to be entitled.

 

9.                                       CertainAdditional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding, inthe event it shall be determined that any payment or distribution by theCompany to or for the benefit of the Executive (whether paid or payable ordistributed or distributable pursuant to the terms of this Agreement orotherwise, but determined without regard to any additional payments requiredunder this Section 9) (a “Payment”) would be subject to the excise taximposed by Section 4999 of the Code or any interest or penalties areincurred by the Executive with respect to such excise tax (such excise tax,together with any such interest and penalties, are hereinafter collectivelyreferred to as the “Excise Tax”), then the Executive shall be entitled toreceive an additional payment (a “Gross-Up Payment”) in an amount such thatafter payment by the Executive of all taxes (including any interest orpenalties 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 anamount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

 

(b)                                 Subjectto the provisions of Section 9(c), all determinations required to be madeunder this Section 9, including whether and when Gross-Up Payment isrequired and the amount of such Gross-Up Payment and the assumptions to beutilized in arriving at such determination, shall be made by the Company’s thencurrent independent public accountants (the “Accounting Firm”) which shallprovide detailed supporting calculations both to the Company and the Executivewithin 15 business days of the receipt of notice from the Executive that therehas been a Payment, or such earlier time as is requested by the Company.  In the event that the Accounting Firm isserving as accountant or auditor for the individual, entity or group effectingthe Change of Control, the Executive shall appoint another nationallyrecognized accounting firm to make the determinations required hereunder (whichaccounting firm shall then be referred to as the Accounting Firmhereunder).  All fees and expenses ofthe Accounting Firm shall be borne solely by the Company.  Any Gross-Up Payment, as determined pursuantto this Section 9, shall be paid by the Company to the Executive withinfive days of the receipt of the Accounting Firm’s determination.  The Accounting Firm shall furnish the Executivewith a written opinion that reporting the Excise Tax, or the failure to reportthe Excise Tax, as applicable, on the Executive’s applicable federal income taxreturn in accordance with the determination made by the Accounting Firmpursuant to this Section 9(b) should not result in the imposition of anegligence or similar penalty.  Anydetermination by the Accounting Firm shall

 

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be binding upon the Company and the Executive.  As a result of the uncertainty in theapplication of Section 4999 of the Code at the time of the initialdetermination by the Accounting Firm hereunder, it is possible that Gross-UpPayments which will not have been made by the Company should have been made(“Underpayment”), consistent with the calculations required to be madehereunder.  In the event that theCompany exhausts its remedies pursuant to Section 9(c) and the Executivethereafter is required to make a payment of any Excise Tax, the Accounting Firmshall determine the amount of the Underpayment that has occurred and any suchUnderpayment shall be promptly paid by the Company to or for the benefit of theExecutive.

 

(c)                                  TheExecutive shall notify the Company in writing of any claims by the InternalRevenue Service that, if successful, would require the payment by the Companyof the Gross-Up Payment.  Suchnotification shall be given as soon as practicable but no later than tenbusiness days after the Executive is informed in writing of such claim andshall apprise the Company of the nature of such claim and the date on whichsuch claim is requested to be paid.  TheExecutive shall not pay such claim prior to the expiration of the 30-day periodfollowing the date on which it gives such notice to the Company (or such shorterperiod ending on the date that any payment of taxes with respect to such claimis due).  If the Company notifies theExecutive in writing prior to the expiration of such period that it desires tocontest such claim, the Executive shall:

 

(i)                                     givethe Company any information reasonably requested by the Company relating tosuch claim,

 

(ii)                                  takesuch action in connection with contesting such claim as the Company shallreasonably request in writing from time to time, including, without limitation,accepting legal representation with respect to such claim by an attorneyreasonably selected by the Company and reasonably acceptable to the Executive,

 

(iii)                               cooperate with theCompany in good faith in order effectively to contest such claim, and

 

(iv)                              permitthe Company to participate in any proceedings relating to such claim;

 

provided, however, thatthe Company shall bear and pay directly all costs and expenses (includingadditional interest and penalties) incurred in connection with such contest andshall indemnify and hold the Executive harmless, on an after-tax basis, for anyExcise Tax or income tax (including interest and penalties with respectthereto) imposed as a result of such representation and payment of costs andexpenses.  Without limitation on the foregoingprovisions of this Section 9(c), the Company shall control all proceedingstaken in connection with such contest and, at its sole option, may pursue orforego any and all administrative appeals, proceedings, hearings andconferences with the taxing authority in respect of such claim and may, at itssole option, either direct the Executive to pay the tax claimed and sue for arefund or contest the claim in any permissible manner, and the Executive agreesto prosecute such contest to a determination before any administrativetribunal, in a court of initial jurisdiction and in one or more appellatecourts, as the Company shall determine; provided, however, that if the Companydirects the Executive to pay such claim and sue for a refund, the Company shalladvance the amount of such payment to the Executive, on an interest-free basisand shall indemnify and hold the Executive harmless, on an after-tax basis,from any Excise Tax or 

 

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income tax (includinginterest or penalties with respect thereto) imposed with respect to suchadvance or with respect to any imputed income with respect to such advance; andfurther provided that any extension of the statute of limitations relating topayment of taxes for the taxable year of the Executive with respect to whichsuch contested amount is claimed to be due is limited solely to such contestedamount.  Furthermore, the Company’scontrol of the contest shall be limited to issues with respect to which aGross-Up Payment would be payable hereunder and the Executive shall be entitledto settle or contest, as the case may be, any other issue raised by theInternal Revenue Service or any other taxing authority.

 

(d)                                 If,after the receipt by the Executive of an amount advanced by the Companypursuant to Section (c), the Executive becomes entitled to receive anyrefund with respect to such claim, the Executive shall (subject to theCompany’s complying with the requirements of Section 9(c)) promptly pay tothe Company the amount of such refund (together with any interest paid orcredited thereon after taxes applicable thereto).  If, after the receipt by the Executive of an amount advanced bythe Company pursuant to Section 9(c), a determination is made that theExecutive shall not be entitled to any refund with respect to such claim andthe Company does not notify the Executive in writing of its intent to contestsuch denial of refund prior to the expiration of 30 days after suchdetermination, then such advance shall be forgiven and shall not be required tobe repaid and the amount of such advance shall be offset, to the extentthereof, the amount of Gross-Up Payment required to be paid.

 

10.                                 ConfidentialInformation.  Except for mentalimpressions retained by the Executive, the Executive shall hold in a fiduciarycapacity 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 theExecutive during the Executive’s employment by the Company or any of itsaffiliated companies and which shall not be or become public knowledge (otherthan by acts by the Executive or representatives of the Executive in violationof this Agreement).  Except for mentalimpressions of confidential information retained by the Executive and utilizedin the ordinary course of business by the Executive in any subsequentemployment, after termination of the Executive’s employment with the Company,the Executive shall not, without the prior written consent of the Company or asmay otherwise be required by law or legal process, communicate or divulge anysuch information, knowledge or data to anyone other than the Company and thosedesignated by it.  In no event shall anasserted violation of the provisions of this Section 10 constitute a basisfor deferring or withholding any amounts otherwise payable to the Executiveunder this Agreement.

 

11.                                 Successors.  (a) This Agreement is personal to theExecutive and without the prior written consent of the Company shall not beassignable by the Executive otherwise than by will or the laws of descent anddistribution.  This Agreement shallinure to the benefit of and be enforceable by the Executive’s legal representatives.

 

(b)                                 ThisAgreement shall inure to the benefit of and be binding upon the Company and itssuccessors and assigns.

 

(c)                                  TheCompany will require any successor (whether direct or indirect, by purchase,merger, consolidation or otherwise) to all or substantially all of the businessand/or assets of the Company to assume expressly and agree to perform thisAgreement in the same manner and to the same extent that the Company would berequired to perform it if no such succession had taken place.  As used in this Agreement, “Company” shallmean the Company as 

 

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hereinbefore defined and any successor to its business and/or assets asaforesaid which assumes and agrees to perform this Agreement by operation oflaw, or otherwise.  If a BusinessCombination is consummated that would have resulted in a Change of Control butfor the satisfaction of the conditions specified in clauses (i), (ii) and (iii)of Section 2(c) and if the parent corporation resulting from the BusinessCombination is other than the Company (hereinafter a “New Parent”), then, as acondition to consummation of this Business Combination, the New Parent shall beconsidered a successor for purposes of this Section 11.

 

12.                                 Miscellaneous.  (a) This Agreement shall be an unfundedobligation of the Company.

 

(b)                                 ThisAgreement shall be governed by and construed in accordance with the laws of theState of Texas, without reference to principles of conflict of laws.  The captions of this Agreement are not partof the provisions hereof and shall have no force or effect.  This Agreement may not be amended ormodified otherwise than by a written agreement executed by the parties heretoor their respective successors and legal representatives.

 

(c)                                  Allnotices and other communications hereunder shall be in writing and shall begiven by hand delivery to the other party or by registered or certified mail,return receipt requested, postage prepaid, addressed as follows:

 

If to theExecutive:

 

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: ChiefAdministrative Officer

 

or to such other address as either party shall have furnished to theother in writing in accordance herewith. Notice and communications shall be effective when actually received bythe addressee.

 

(d)                                 Theinvalidity or unenforceability of any provision of this Agreement shall notaffect the validity or enforceability of any other provision of this Agreement.

 

(e)                                  TheCompany may withhold from any amounts payable under this Agreement suchFederal, state or local taxes as shall be required to be withheld pursuant toany applicable law or regulation.

 

(f)                                    TheExecutive’s or the Company’s failure to insist upon strict compliance with anyprovision hereof or any other provision of this Agreement or the failure toassert any right the Executive or the Company may have hereunder, including,without limitation, the right of the Executive to terminate employment for GoodReason pursuant to Section 5(c)(i)–(v) of this Agreement, shall notbe deemed to be a waiver of such provision or right or any other provision orright of this Agreement.

 

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

 

IN WITNESS WHEREOF, the Executive has hereunto set theExecutive’s hand and, pursuant to the authorization from its Board ofDirectors, the Company has caused these presents to be executed in its name onits 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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