EXHIBIT 10.14


 


AMENDED AND RESTATED


EXECUTIVE EMPLOYMENT AGREEMENT


 


 


AGREEMENT by and between POGO PRODUCING COMPANY,
a Delaware corporation (the “Company”) and J.
Don McGregor (the “Executive”), dated as of the first day of
February, 2005.


 


The Board of Directors of
the Company (the “Board”), has determined that it is in the best interests of
the Company and its shareholders to assure that the Company will have the
continued dedication of the Executive, and to provide the Executive with
compensation and benefits arrangements which are competitive with those of
other corporations and which ensure that the compensation and benefits
expectations of the Executive will be satisfied.  The Board also believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control
and to encourage the Executive’s full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to insure the continuation of favorable compensation and benefits upon a Change
of Control.  Therefore, in order to
accomplish these objectives, the Board has caused the Company to enter into this
Agreement, which shall supersede both the Employment Agreement between Company
and Executive dated as of February 1, 2003 and extended and renewed most
recently as of February 1, 2004.


 


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 August 1, 2006.  On August 1,
2005 and on each annual 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.  A
determination by the Company to extend the term for one year shall be effective
only if, prior to the Renewal Date, the Company shall give notice to the
Executive that the Employment Period shall be so extended.


 


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 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.


 


4





















 


(ii)                                  Annual
Bonus.  In addition to Annual Base
Salary, the Executive may be awarded at the discretion of the Company for any
fiscal year ending during the Employment Period, a bonus.


 


(iii)                               Incentive,
Savings and Retirement Plans.  During
the Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other executives of the Company and its affiliated
companies.  Such plans, practices,
policies and programs shall provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, equal to the most favorable
of those provided by the Company and its affiliated companies for the Executive
under such plans, practices, policies and programs as in effect at any time
during the 90-day period immediately preceding the Applicable Date.


 


(iv)                              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





















 


5.                                       Termination of Employment.


 


(a)                                  Death
or Disability.  The Executive’s
employment shall terminate automatically upon the Executive’s death during the
Employment Period.  If the Company
determines in good faith that the Disability of the Executive has occurred
during the Employment Period (pursuant to the definition of Disability set
forth below), it may give to the Executive written notice in accordance with Section 12(c)
of this Agreement of its intention to terminate the Executive’s
employment.  In such event, the Executive’s
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the “Disability Effective Date”),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive’s duties.  For purposes of this Agreement, “Disability”
shall mean the absence of the Executive from the Executive’s duties with the
Company on a full-time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive’s legal representative (such
agreement as to acceptability not to be withheld unreasonably).


 


(b)                                 Cause.  The Company may terminate the Executive’s
employment during the Employment Period for Cause.  For purposes of this Agreement, “Cause” shall
mean (i) a material violation by the Executive of the Executive’s
obligations under Section 4(a) of this Agreement (other than as a result
of incapacity due to physical or mental illness) which is willful and
deliberate on the Executive’s part, which is committed in bad faith or without
reasonable belief that such violation is in the best interests of the Company
and which is not remedied in a reasonable period of time after receipt of
written notice from the Company specifying such violation or (ii) the
final and non-appealable conviction by a court of competent jurisdiction of the
Executive of a felony involving moral turpitude.


 


(c)                                  Good
Reason; Window Period; Other Terminations. 
The Executive’s employment may be terminated (i) during the
Employment Period by the Executive for Good Reason, (ii) during the Window
Period by the Executive without any reason or (iii) by Executive other than (A)
for Good Reason or (B) during a Window Period.


 


For purposes of this
Agreement, the “Window Period” shall mean the 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.


 


6





















 


For purposes of this
Agreement, “Good Reason” shall mean


 


(i)                                     the
assignment to the Executive of any duties inconsistent with the Executive’s
position (including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section 4(a) of
this Agreement, or any other action by the Company which results in a
diminution in such position, authority, duties or responsibilities excluding
for this purpose an insubstantial or inadvertent action which is remedied by
the Company promptly after receipt of notice thereof given by the Executive;


 


(ii)                                  any
failure by the Company to comply with any of the provisions of Section 4(b)
of this Agreement, other than an insubstantial or inadvertent failure which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;


 


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


 


(iv)                              any
purported termination by the Company of the Executive’s employment otherwise
than as expressly permitted by this Agreement; or


 


(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.


 


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6.                                       Obligations of the Company upon Termination.


 


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


 


(i)                                     the
Company shall pay to the Executive in a lump-sum in cash within 30 days after
the Date of Termination the aggregate of the following amounts:


 


(A)                              the
sum of (1) the Executive’s Annual Base Salary through the Date of
Termination to the extent not theretofore paid and (2) any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described in clauses (1) and (2) shall
be hereinafter referred to as the “Accrued Obligations”); and


 


(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


 


8





















 


Employment Period, assuming for this purpose that all accrued benefits
are fully vested and that benefit accrual formulas are no less advantageous to
the Executive than those in effect during the 90-day period immediately
preceding the Applicable Date, and (2) the actuarial equivalent (utilizing
for this purpose the actuarial assumptions utilized with respect to the
Retirement Plan during the 90-day period immediately preceding the Applicable
Date) of the Executive’s actual benefit (paid or payable), if any, under the
Retirement Plan (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


 


9





















 


to the Executive’s estate or beneficiary, as
applicable, in a lump-sum in cash within 30 days of the Date of Termination of
an amount equal to the sum of the Severance Amount and the Supplemental
Retirement Amount.


 


(c)                                  Disability.  If the Executive’s employment is terminated
by reason of the Executive’s Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for (i) payment of Accrued Obligations (which shall be paid to the
Executive in a lump-sum in cash within 30 days of the Date of Termination) and
the timely payment or provision of the Welfare Benefit Continuation and Other
Benefits (excluding, in each case, Disability Benefits (as defined below)), and
(ii) payment to the Executive in a lump-sum in cash within 30 days of the
Date of Termination of an amount equal to the greater of (A) the sum of
the Severance Amount and the Supplemental Retirement Amount and (B) the
present value (determined as provided in Section 280G(d)(4) of the Code)
of any cash amount to be received by the Executive as a disability benefit pursuant
to the terms of any long term disability plan, policy or arrangement of the
Company and its affiliated companies, but not including any proceeds of
disability insurance covering the Executive to the extent paid for on a
contributory basis by the Executive (which shall be paid in any event as an
Other Benefit) (the benefits included in this clause (B) shall be
hereinafter referred to as the “Disability Benefits”).


 


(d)                                 Cause;
By Executive Other than for Good Reason And Other Than During a Window Period.  If the Executive’s employment shall be
terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the
obligation to pay to the Executive Annual Base Salary through the Date of
Termination plus the amount of any compensation previously deferred by the
Executive, in each case to the extent theretofore unpaid.  If the Executive terminates employment during
the Employment Period, excluding a termination either for Good Reason or without
any reason during the Window Period, this Agreement shall terminate without
further obligations to the Executive, other than for Accrued Obligations, 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


 


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Section 6(a)(ii) of this Agreement, such amounts
shall not be reduced whether or not the Executive obtains other
employment.  If there is any contest by
the Company concerning the Payments or benefits to be provided to the Executive
hereunder whether through litigation, arbitration or mediation, or with respect
to the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof, and the Executive is the
prevailing party, the Company agrees to pay promptly upon conclusion of the
contest all legal fees and expenses which the Executive may reasonably have
incurred.


 


(b)                                 If
there shall be any dispute between the Company and the Executive (i) in
the event of any termination of the Executive’s employment by the Company,
whether such termination was for Cause, or (ii) in the event of any
termination of employment by the Executive, whether Good Reason existed, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that
Good Reason did not exist, the Company shall pay all amounts, and provide all
benefits, to the Executive and/or the Executive’s family or other
beneficiaries, as the case may be, that the Company would be required to pay or
provide pursuant to Section 6(a) hereof as though such termination were by
the Company without Cause or by the Executive with Good Reason; provided,
however, that the Company shall not be required to pay any disputed amounts
pursuant to this paragraph except upon receipt of an undertaking (which need
not be secured) by or on behalf of the Executive to repay all such amounts to which
the Executive is ultimately adjudged by such court not to be entitled.


 


9.                                       Certain Additional Payments by the Company.


 


(a)                                  Anything
in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by the Company to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section 9)
(a “Payment”) would be subject to the excise tax imposed by Section 4999
of the Code or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the “Excise Tax”),
then the Executive shall be entitled to receive an additional payment (a “Gross-Up
Payment”) in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed 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


 


11





















 


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 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


 


12





















 


to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine; provided, however, that
if the Company directs the Executive to pay such claim and sue for a refund,
the Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount.  Furthermore, the Company’s
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive shall be entitled
to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.


 


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


 


10.                                 Confidential Information.  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.


 


13





















 


(c)                                  The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.  As used in this Agreement, “Company” shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement
by operation of law, or otherwise.  If a
Business Combination is consummated that would have resulted in a Change of
Control but for the satisfaction of the conditions specified in clauses (i),
(ii) and (iii) of Section 2(c) and if the parent corporation resulting
from the Business Combination is other than the Company (hereinafter a “New
Parent”), then, as a condition to consummation of this Business Combination,
the New Parent shall be considered a successor for purposes of this Section 11.


 


12.                                 Miscellaneous.


 


(a)                                  This
Agreement shall be an unfunded obligation of the Company.


 


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


 


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


 


If to the Executive:


 


J. Don McGregor


P. O. Box 2504


Houston, TX 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.


 


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(f)                                    The
Executive’s or the Company’s failure to insist upon strict compliance with any
provision hereof or any other provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be
deemed to be a waiver of such provision or right or any other provision or
right of this Agreement.


 


(g)                                 This
Agreement supersedes the Employment Agreement between Company and the Executive
dated as of February 1, 2003 and extended and renewed most recently as of February 1,
2004, 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.


 


 


	
   

  	
   

  	
   

  
	
   

  	
  J. Don McGregor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  POGO PRODUCING COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
    John O. McCoy, Jr.

  	
   

  



 


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