<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
POGO PRODUCING COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
GERALD A. MORTON
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
- ---------------
(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE> 2
POGO PRODUCING COMPANY
PAUL G. VAN WAGENEN
CHAIRMAN, PRESIDENT &
CHIEF EXECUTIVE OFFICER
March 21, 1994
Dear Shareholders of Pogo Producing Company:
You are cordially invited to attend the 1994 Annual Meeting of Stockholders
of Pogo Producing Company (the "Company"), which will be held in the Century II
Room, Stouffer Presidente Hotel, Six Greenway Plaza, Houston, Texas 77046, on
Tuesday, April 26, 1994, at 10:00 a.m., CDT (Houston time).
At the meeting you will be asked to consider and vote upon: (1) election of
four directors, each for a term of three years; (2) an amendment to the
Company's 1989 Incentive and Nonqualified Stock Option Plan; (3) ratification of
the appointment of independent public accountants to audit the financial
statements of the Company and (4) such other business as may properly come
before the meeting or any adjournment thereof.
We hope that you will find it convenient to attend the meeting in person.
However, whether or not you expect to attend, in order to assure your
representation at the meeting and the presence of a quorum, please date, sign
and promptly mail the enclosed proxy. A return envelope is provided, and no
postage need be affixed if mailed in the United States.
Sincerely,
Paul G. Van Wagenen
Chairman of the Board
5 GREENWAY PLAZA, SUITE 2700 HOUSTON, TEXAS 77046-0504
P.O. BOX 2504 HOUSTON, TEXAS 77252-2504
713/297-5000 FAX 713/297-5100
<PAGE> 3
POGO PRODUCING COMPANY
P.O. BOX 2504
HOUSTON, TEXAS 77252-2504
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 26, 1994
------------------------
TO THE STOCKHOLDERS OF
POGO PRODUCING COMPANY:
Notice is hereby given that the Annual Meeting of Stockholders of Pogo
Producing Company (the "Company") will be held at the Century II Room, Stouffer
Presidente Hotel, Six Greenway Plaza, Houston, Texas 77046, on Tuesday, April
26, 1994, at 10:00 a.m., CDT (Houston time), for the following purposes:
1. To elect four members of the board of directors to serve until the
1997 annual meeting;
2. To approve an amendment to the Company's 1989 Incentive and
Nonqualified Stock Option Plan (the "Stock Option Plan") principally
to increase the number of shares of the Company's common stock, par
value $1.00 per share, that may be offered pursuant to the Stock
Option Plan from 1,500,000 to 2,500,000 shares and to limit the number
of shares upon which options may be granted in any one year to any one
key employee under the Stock Option Plan to no more than 150,000
shares;
3. To approve the appointment of Arthur Andersen & Co., independent
public accountants, to audit the financial statements of the Company
for the year 1994; and
4. To transact such other business as may properly come before the
meeting.
Stockholders of record at the close of business on March 10, 1994 are
entitled to notice of and to vote at the meeting or any adjournment thereof.
You are cordially invited to attend the meeting in person. Even if you plan
to attend the meeting, however, you are requested to sign, date and return the
accompanying proxy as soon as possible.
By Order of the Board of Directors,
RONALD B. MANNING
Corporate Secretary
<PAGE> 4
POGO PRODUCING COMPANY
5 GREENWAY PLAZA, SUITE 2700
HOUSTON, TEXAS 77046-0504
713/297-5000
------------------------
PROXY STATEMENT
------------------------
This proxy statement is furnished in connection with the solicitation of
proxies by the board of directors (the "Board of Directors") of Pogo Producing
Company (the "Company") to be voted at the Annual Meeting of Stockholders to be
held at the time and place and for the purposes set forth in the accompanying
notice.
This proxy statement and the accompanying proxy card are being mailed to
stockholders beginning on or about March 21, 1994. The Company will bear the
costs of soliciting proxies in the accompanying form. In addition to the
solicitation of proxies by mail, proxies may also be solicited by telephone,
telegram or personal interview by officers and regular employees of the Company.
The Company also expects to retain D.F. King & Co., Inc., a professional proxy
soliciting firm, to assist in the solicitation of proxies. The Company
anticipates that the fees and expenses it will incur for such service will be
less than $25,000. The Company will reimburse brokers or other persons holding
stock in their names or in the names of their nominees for their reasonable
expenses in forwarding proxy material to beneficial owners of stock.
VOTING OF SHARES
As of the close of business on March 10, 1994, the record date for
determining stockholders entitled to vote at the meeting, the Company had
outstanding and entitled to vote 32,542,952 shares of common stock, par value
$1.00 per share ("Common Stock"). The Company has no other class of stock
outstanding. Each share of Common Stock is entitled to one vote with respect to
the matters to be acted upon at the meeting. Shareholders are not allowed to
cumulate votes in the election of directors. The presence, in person or by
proxy, of the holders of a majority of the votes represented by outstanding
shares of Common Stock is necessary to constitute a quorum at the annual
meeting.
In accordance with Delaware law, a shareholder entitled to vote for the
election of directors can withhold authority to vote for all nominees for
director or can withhold authority to vote for certain nominees for director.
The affirmative vote of the holders of a majority of the shares of Common Stock
present, in person or by proxy, and entitled to vote at the annual meeting of
shareholders is required to (i) elect directors to the Company's board of
directors and (ii) decide any proposals that may be brought before the meeting.
Abstentions from proposals are treated as votes against the particular proposal.
Broker non-votes on proposals are treated as votes withheld by the beneficial
holders of the applicable shares and, therefore, such shares are treated as not
voting on the proposal as to which there is the broker non-vote.
All duly executed proxies received before the meeting will be voted in
accordance with the choices specified thereon. As to a matter for which no
choice has been specified in a proxy, the shares
<PAGE> 5
represented thereby will be voted by the persons named in the proxy (1) FOR the
election as directors of the four nominees listed herein, (2) FOR the amendment
to the 1989 Incentive and Nonqualified Stock Option Plan described below, (3)
FOR the appointment of Arthur Andersen & Co., independent public accountants, to
audit the financial statements of the Company for 1994 and (4) in the discretion
of such persons in connection with any other business that may properly come
before the meeting.
REVOCABILITY OF PROXIES
Stockholders have the unconditional right to revoke their proxies at any
time prior to the voting of their proxies at the annual meeting by (i) filing a
written revocation with the secretary of the Company at the address set forth on
the attached Notice of Annual Meeting of Stockholders, (ii) giving a duly
executed proxy bearing a later date, or (iii) attending the annual meeting and
voting in person. Attendance by stockholders at the annual meeting will not, of
itself, revoke their proxies.
ELECTION OF FOUR DIRECTORS
Unless contrary instructions are set forth on the proxies, it is intended
that the persons named in the proxy will vote all shares represented by proxies
FOR the election as directors of Messrs. Tobin Armstrong, Gerrit W. Gong, John
Stuart Hunt and Jack A. Vickers, each of whom is presently a director of the
Company.
If the four nominees are elected at this meeting, each will serve for a
term of three years ending in 1997. The Restated Certificate of Incorporation of
the Company provides for the classification of the Board of Directors into three
classes having staggered terms of three years each. The nine continuing
directors named below will not be required to stand for election at this
meeting, as their present terms expire in either 1995 or 1996. Should any of
Messrs. Armstrong, Gong, Hunt or Vickers become unable or unwilling to accept
nomination or election, the persons acting under the proxy will vote for the
election, in his stead, of such other person as the Board of Directors may
recommend. Management has no reason to believe that any of the nominees will be
unable or unwilling to serve if elected to office. Proxies cannot be voted for
more than the four nominees listed below.
NOMINEES
The following table sets forth information concerning the four nominees for
election as directors at the 1994 Annual Meeting, including the business
experience of each during the past five years and the number of shares of Common
Stock beneficially owned by each based on information as of March 1, 1994.
2
<PAGE> 6
NOMINEES
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
OWNED(1)
------------------
NUMBER PERCENT
OF OF
NAME AND BUSINESS EXPERIENCE SHARES CLASS(2)
- ------------------------------------------------------------------------ ------ -----
<S> <C> <C>
TOBIN ARMSTRONG has been engaged for more than five years in the 25,000(3) *
ranching business. He became a Director of the Company in 1977. Mr.
Armstrong is 70 years of age.
GERRIT W. GONG is the Director for Asian Studies for the Center for 11,000(4) *
Strategic and International Studies, in Washington, D.C., and has
served in that capacity for more than the last five years. From 1987
to 1989 he also served as special assistant to two U.S. ambassadors to
China. Dr. Gong, 40, has been a Director of the Company since May,
1993.
JOHN STUART HUNT has been engaged for more than five years in managing 12,450(5) *
his personal investments. He became a Director of the Company in 1983.
Mr. Hunt, 72, is also a director of Nomeco Oil & Gas Co. and Katy
Industries.
JACK A. VICKERS is owner of The Vickers Companies and has been engaged 20,100(3) *
for more than five years in managing his personal investments. Mr.
Vickers is 68 years of age and became a Director of the Company in
1985.
</TABLE>
- ---------------
(1) Under regulations of the Securities and Exchange Commission (the "SEC"),
shares are deemed to be "beneficially owned" by a person if he directly or
indirectly has or shares the power to vote or to dispose of such shares,
whether or not he has any economic interest in such shares. In addition, a
person is deemed to own beneficially any shares as to which he has the right
to acquire beneficial ownership within 60 days such as by exercise of an
option or by conversion of another security. Each person has sole power to
vote and dispose of the shares listed opposite his name except as indicated
in other footnotes. Percentages are rounded to the nearest one-tenth of one
percent.
(2) An asterisk indicates less than 1%.
(3) Includes 20,000 shares subject to options exercisable within 60 days.
(4) Includes 10,000 shares subject to options exercisable within 60 days.
(5) Includes 5,000 shares subject to options exercisable within 60 days. In
addition, Mr. Hunt disclaims any voting or dispositive power with respect to
7,350 shares owned by his wife.
DIRECTORS WITH TERMS EXPIRING IN 1995 AND 1996
The following table sets forth information concerning the nine directors of
the Company not required to stand for re-election at the 1994 Annual Meeting,
including the business experience of each during the past five years and the
shares of Common Stock of the Company beneficially owned by each based on
information as of March 1, 1994.
3
<PAGE> 7
CONTINUING DIRECTORS
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(1)
------------------------
NUMBER PERCENT
OF OF
NAME AND BUSINESS EXPERIENCE SHARES CLASS(2)
---------------------------------------------------------------- -------- -------
<S> <C> <C>
JACK S. BLANTON has been President of Eddy Refining Company 27,000(3) *
since 1958 and is Chairman of the Board of Houston Endowment,
Inc. Mr. Blanton, 66, was elected to the Board of Directors of
the Company in 1991 and his present term expires in 1995. He
also serves as a director of Ashland Oil, Inc., Texas Commerce
Bancshares, Inc., Southwestern Bell Corporation, Baker Hughes,
Incorporated and Burlington Northern, Inc.
W.M. BRUMLEY, JR., was Senior Vice President - Administration 70,467(4) *
and Accounting of the Company and a member of the Executive
Committee from 1977 to 1989. Since 1989, he has managed his
personal investments. Mr. Brumley has been a Director of the
Company since 1977 and his present term expires in 1996. He is
65 years of age.
JOHN B. CARTER, JR., was elected to his current term as a 79,253(5) *
Director of the Company in 1990 and his present term expires
in 1996. From 1987 to 1990, Mr. Carter was an Advisory
Director of the Company. Prior to 1987, Mr. Carter was Senior
Vice President - Finance of the Company, a Director and a
member of the Executive Committee. Mr. Carter, 69, is also
chairman of Houston National Bank.
WILLIAM L. FISHER has been the Director of the Bureau of 15,000(3) *
Economic Geology and the Director of the Geology Foundation at
the University of Texas at Austin for more than five years.
Dr. Fisher was formerly the Assistant Secretary - Energy and
Minerals of the U.S. Department of the Interior. Dr. Fisher,
61, became a Director of the Company in February 1992 and his
present term expires in 1995. He is also a director of Diamond
Shamrock, Inc.
WILLIAM E. GIPSON, was President and Chief Operating Officer of 109,212(6) *
the Company from 1977 until his retirement in 1989. Since
then, he has been an independent petroleum geologist and
rancher. He has been a Director of the Company since 1970 and
his present term expires in 1995. Mr. Gipson is 69 years of
age. He also serves as a director of St. George Metals, Inc.
</TABLE>
(Table Continued on following page)
4
<PAGE> 8
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(1)
------------------------
NUMBER PERCENT
OF OF
NAME AND BUSINESS EXPERIENCE SHARES CLASS(2)
---------------------------------------------------------------- -------- -------
<S> <C> <C>
FREDERICK A. KLINGENSTEIN has been chairman of Klingenstein, 2,602,127(7)(8) 8.0%
Fields & Co., L.P., an investment advisory firm, since January
1, 1989. He served as Chairman and Chief Executive Officer of
Wertheim Schroder & Co. Incorporated from 1972 until 1986 and
as Co-chairman and a director of such firm from 1986 until
1988. Mr. Klingenstein, 62, has been a Director of the Company
since 1987. His present term expires in 1996.
NICHOLAS R. PETRY is Chairman of the Board of Petry Company and 71,000(7) *
Managing Partner of N.G. Petry Construction Company and Mill
Iron Ranches. He has been engaged in such businesses for more
than five years. He has served as a Director of the Company
since 1981 and his present term expires in 1995. Mr. Petry,
75, is also a director of First Bank System, Inc.
D. STEPHEN SLACK has been Senior Vice President, Chief Financial 50,451(9) *
Officer and Treasurer of the Company since 1988 and a Director
of the Company since 1989. His present term expires in 1995.
Mr. Slack was, from 1982 until 1988, regional manager of the
Southwest Energy and Minerals Division of Chemical Bank of New
York. He is 44 years of age.
PAUL G. VAN WAGENEN became Chairman of the Board and Chief 99,335(10) *
Executive Officer of the Company in March 1991. He had
previously been elected President of the Company in 1990. From
1986 to 1990, he served as Senior Vice President and General
Counsel of the Company. Mr. Van Wagenen, 48, became a Director
of the Company in 1988. His present term expires in 1996.
</TABLE>
- ---------------
(1) See note 1 to table entitled "Nominees."
(2) An asterisk indicates less than 1%.
(3) Includes 15,000 shares subject to options exercisable within 60 days.
(4) The shares listed include 1,873 shares which could be acquired upon
conversion of 8% Convertible Subordinated Debentures Due December 31, 2005
of the Company (the "Convertible Debentures") and 51,250 shares subject to
options exercisable within 60 days.
(5) The shares listed include 4,253 shares which could be acquired upon
conversion of Convertible Debentures and 40,000 shares subject to options
exercisable within 60 days.
(6) Includes 42,000 shares of Common Stock subject to options exercisable
within 60 days, 5,800 shares of Common Stock held in trust by Mr. Gipson
for the benefit of his children and 1,266 shares which could be acquired
upon conversion of Convertible Debentures.
(7) Includes 20,000 shares subject to options exercisable within 60 days.
(8) See note (3) to table entitled "Principal Stockholders."
(9) Includes 7,027 shares of Common Stock held under the Company's
tax-advantaged savings plan, 100 shares held by him in trust for the
benefit of his children, 950 shares held by a trust for the benefit of his
children and 30,500 shares of Common Stock subject to options exercisable
within 60 days.
(10) The shares listed include 9,751 shares held for Mr. Van Wagenen's account
under the Company's tax-advantaged savings plan and 58,333 shares subject
to options exercisable within 60 days.
5
<PAGE> 9
ORGANIZATION AND ACTIVITY OF THE BOARD OF DIRECTORS
In addition to the Executive Committee, comprised of Messrs. Van Wagenen
(Chairman), Carter, Klingenstein, Petry and Slack, the Board of Directors has an
Audit Committee comprised of Messrs. Hunt (Chairman), Brumley, Fisher, Gipson
and Gong and a Compensation Committee comprised of Messrs. Carter (Chairman),
Armstrong, Blanton, Klingenstein and Petry. The functions of the Audit Committee
are to recommend to the Board of Directors the firm of independent public
accountants to be engaged to audit the financial statements of the Company, to
review the plan and scope of the audit, to review with the auditors and Company
officers the Company's significant accounting policies and its internal
controls, and to have general responsibility in connection with related matters.
The Compensation Committee approves any form of compensation of all employees of
the Company; administers the granting of employment contracts to certain
officers of the Company; and administers the granting of stock options to
certain key employees under the Company's Stock Option Plans. The Board of
Directors has no standing nominating committee.
The Board of Directors held four meetings during 1993. The Audit Committee
held two meetings during the year. The Compensation Committee held two meetings
during the year. No incumbent director attended fewer than 75% of the total
meetings held during 1993 by the Board of Directors and all committees thereof
on which he served.
COMMON STOCK OWNED BY DIRECTORS AND OFFICERS
The following table sets forth information regarding the Common Stock
beneficially owned by each of the Company's executive officers named in the
Summary Compensation Table that appears under "Executive Compensation" and all
of the directors and officers of the Company as a group based on information as
of March 1, 1994.
<TABLE>
<CAPTION>
NUMBER
OF SHARES PERCENT
BENEFICIALLY OF
NAME OWNED(1) CLASS(2)
---------------------------------------------------------------- --------- ----
<S> <C> <C>
Stuart P. Burbach............................................... 13,973 *
Kenneth R. Good................................................. 36,142 *
Sammie M. Shaw.................................................. 52,835 *
D. Stephen Slack................................................ 50,451 *
Paul G. Van Wagenen............................................. 99,335 *
All directors and executive officers as a group (23 persons).... 3,405,036 10.4%
</TABLE>
- ---------------
(1) See note (1) to table entitled "Nominees." The shares listed include: (a)
shares subject to options as follows: Mr. Burbach, 9,750 shares; Mr. Good,
20,666 shares; Mr. Shaw, 26,500 shares; Mr. Slack, 30,500 shares; Mr. Van
Wagenen, 58,333 shares; all directors and executive officers as a group,
475,532 shares; (b) shares held under the Tax-Advantaged Savings Plan as
follows: Mr. Burbach, 4,203; Mr. Good, 14,614; Mr. Shaw, 21,335; Mr. Slack,
7,027; Mr. Van Wagenen, 9,751; all directors and executive officers as a
group, 90,735 shares; and (c) shares that may be acquired upon conversion of
Convertible Debentures as follows: all officers and directors as a group,
7,392 shares.
(2) An asterisk indicates less than 1%.
6
<PAGE> 10
PRINCIPAL STOCKHOLDERS
The following table sets forth, with respect to each person (or "group"
within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) who is known by the Company to be the
beneficial owner of more than 5% of the Common Stock of the Company, the number
of shares beneficially owned and the percentage such number constitutes of the
entire class as of March 1, 1994, or as applicable, the date of filing of the
document indicated in footnote (1). To the Company's knowledge, no person or
group holds 5% or more of the Company's Convertible Debentures.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
-----------------------
SHARES PERCENTAGE
--------- -----
<S> <C> <C>
State Farm Mutual Automobile................................. 5,798,077(2) 17.8%
Insurance Company
and certain affiliates
One State Farm Plaza
Bloomington, Illinois 61701
Frederick A. Klingenstein,................................... 3,497,972(3) 10.7%
John Klingenstein and
Klingenstein, Fields & Co., L.P.
787 Seventh Avenue
New York, New York 10019
FMR Corp..................................................... 3,053,900(4) 9.4%
and certain affiliates
82 Devonshire Street
Boston, Massachusetts 02109-3614
Nicholas-Applegate Capital Management........................ 1,727,925(5) 5.3%
600 West Broadway
San Diego, CA 92101
</TABLE>
- ---------------
(1) See footnote (1) to table entitled "Nominees." Information in the table and
footnotes is based on the most recent respective Statement on Schedule 13G
or 13D or amendment thereto filed by such persons with the Securities and
Exchange Commission (the "SEC"), except as otherwise known to the Company.
(2) Of such 5,798,077 shares, 3,180,145 shares are reported as beneficially
owned by State Farm Mutual Automobile Insurance Company, 1,235,766 shares by
State Farm Life Insurance Company, 1,235,766 shares by State Farm Insurance
Companies Employee Retirement Trust and 146,400 shares by State Farm Fire &
Casualty Company. The Schedule 13G filed jointly by such entities indicates
that such entities may be deemed to constitute a group but states that each
such person disclaims beneficial ownership as to all shares not specifically
attributed to such entity in this footnote and disclaims that it is part of
a group.
(3) Frederick A. Klingenstein and his brother John Klingenstein are affiliates
of Klingenstein, Fields & Co., L.P. Of such 3,497,972 shares, 3,497,972
shares are reported as beneficially owned by Klingenstein, Fields & Co.,
L.P., 2,582,127 shares by Frederick A. Klingenstein and 2,558,544 shares by
John Klingenstein. Frederick A. Klingenstein, John Klingenstein and
Klingenstein, Fields & Co., L.P. each reported shared dispositive power with
respect to 2,582,127 shares, 2,558,544 shares and
(Footnotes continued on following page)
7
<PAGE> 11
3,497,972 shares, respectively, and shared voting power with respect to
1,844,835 shares, 1,996,890 shares and no shares, respectively. Frederick A.
Klingenstein and John Klingenstein each reported sole voting power with
respect to 737,292 shares and 561,654 shares, respectively. The shares
beneficially owned by Klingenstein, Fields & Co., L.P. include 5,012 shares
issuable upon conversion of Convertible Debentures. In addition, Frederick
A. Klingenstein beneficially owns, and has sole voting and dispositive power
with respect to, 20,000 shares subject to options exercisable within 60
days. Frederick Klingenstein disclaims beneficial ownership of a portion of
the shares attributed to him above. John Klingenstein disclaims beneficial
ownership of a portion of the shares attributed to him above. Shares
attributed to each individual include shares owned jointly with his wife, by
trusts of which he is the trustee and by others who have granted him a power
of attorney to vote and dispose of shares.
(4) Of such 3,053,900 shares, all are reported as beneficially owned by FMR
Corp., Edward C. Johnson 3d, Fidelity Management & Research Company and
3,033,900 shares are reported as beneficially owned by Fidelity Magellan
Fund. FMR Corp. and Mr. Johnson each report sole dispositive power and no
voting power, either sole or shared, with respect to the 3,053,900 shares.
The Schedule 13G states that Mr. Johnson, together with various trusts for
the benefit of Johnson family members, through their ownership of voting
common stock, form a controlling group with respect to FMR Corp.
(5) Of such 1,727,925 shares, all are reported as beneficially owned by
Nicholas-Applegate Capital Management ("NACM"). NACM reports sole
dispositive power with respect to all 1,727,925 shares and sole voting power
with respect to 409,200 shares and shared voting power with respect to no
shares.
8
<PAGE> 12
EXECUTIVE COMPENSATION
I. SUMMARY COMPENSATION TABLE. The following table (the "Summary
Compensation Table") sets forth certain information regarding annual and
long-term compensation of each of the named executive officers of the Company
during 1991, 1992 and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION --------------------
--------------------------------- AWARDS
OTHER -------------------- ALL
ANNUAL RESTRICTED SECURITIES OTHER
BONUS COMPENSATION STOCK UNDERLYING COMPENSA-
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($)(1) ($)(2) AWARDS OPTIONS(#) TION ($)(6)
- -------------------------------- ---- -------- -------- -------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul G. Van Wagenen............. 1993 $372,492 $ -- $ -- $ -- 41,042 $8,994
Director, Chairman of the Board, 1992 334,377 -- -- -- 20,000 8,728
President and Chief Executive 1991 278,133(3) -- -- -- 25,000 8,475
Officer
D. Stephen Slack................ 1993 $241,247 $ -- $ -- $ -- 20,521 $8,994
Director, Senior Vice 1992 223,750 -- -- -- 12,000 8,728
President -- Finance and 1991 202,292 -- -- -- 15,000 8,475
Chief Financial Officer
and Treasurer
Kenneth R. Good................. 1993 $167,500 $ -- $ -- $ -- 20,521 $8,994
Senior Vice President -- 1992 150,625 -- -- -- 12,000 8,728
Land and Budgets 1991 136,875 -- -- -- 10,000 8,475
Stuart P. Burbach............... 1993 $155,625 $ -- $ -- $ -- 8,208 $8,994
Vice President and 1992 140,108 -- -- -- 5,000 8,728
Offshore Division Manager 1991 84,472(4) -- -- -- 20,000 4,050
Sammie M. Shaw.................. 1993 $141,540 $ -- $ -- $ -- 8,208 $8,994
Vice President -- Operations 1992 133,540(5) -- -- -- 5,000 8,728
</TABLE>
- ---------------
(1) The Company presently has no bonus plan.
(2) No executive received perquisites or other personal benefits in any year
shown which exceeded 10% of his salary.
(3) Mr. Van Wagenen was elected Chairman and Chief Executive Officer of the
Company in March 1991. He was elected President in October 1990.
(4) Mr. Burbach joined the Company in June 1991.
(5) Mr. Shaw became an executive officer of the Company in April 1992.
(6) These amounts represent Company matching contributions to the Tax-Advantaged
Savings Plan (401(k) Plan).
9
<PAGE> 13
II. STOCK OPTION PLANS. Option Grants Table. Shown below is further
information on grants of stock options during 1993 to the named executive
officers which are reflected in the Summary Compensation Table above. The Board
of Directors granted no stock options with stock appreciation rights in 1993.
OPTION GRANTS IN 1993
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
OF
TOTAL
NUMBER OPTIONS EXERCISE
OF GRANTED OR
SECURITIES TO BASE
UNDERLYING EMPLOYEES PRICE GRANT DATE
OPTIONS IN ($ PER EXPIRATION PRESENT
NAME GRANTED 1993 SHARE)(1) DATE VALUE(2)
- --------------------------- ------ ----- ------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Paul G. Van Wagenen........ 41,042 14.1% $15.125 July 30, 2003 $ 400,980
D. Stephen Slack........... 20,521 7.0% $15.125 July 30, 2003 200,490
Kenneth R. Good............ 20,521 7.0% $15.125 July 30, 2003 200,490
Stuart P. Burbach.......... 8,208 2.8% $15.125 July 30, 2003 80,192
Sammie M. Shaw............. 8,208 2.8% $15.125 July 30, 2003 80,192
</TABLE>
- ---------------
(1) The option exercise price was 100% of the fair market value of the Common
Stock on July 31, 1993, the date of grant. Conditions under which the
options granted under the Stock Option Plan become exercisable are set
forth in "Approval of Amendment to the 1989 Incentive and Nonqualified
Stock Option Plan." Generally, options granted under the Stock Option Plan
to employees become exercisable in three equal increments on each of the
three anniversaries following the grant date.
(2) Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options and applying certain assumptions thereunder,
including an underlying security price on the date of grant equal to the
exercise price set forth above, the expiration set forth above, a risk free
rate of interest during the life of the options equal to 5.81% (the rate of
interest on 10 year U.S. Treasury Bonds on the grant date of the options),
that no dividends would be paid during the life of the options and
volatility during the life of the options equal to 43.58% (the average
monthly price volatility for the Common Stock for the four years preceding
the grant date).
1993 Option Exercises and December 31, 1993 Values Table. Shown below is
information with respect to unexercised options to purchase Common Stock granted
under the Company's stock option plans to the named executive officers and held
by them at December 31, 1993.
AGGREGATE OPTION EXERCISES IN 1993 AND 1993 OPTION VALUES AT DECEMBER 31, 1993
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS HELD IN-THE-MONEY
AT OPTIONS AT
SHARES DECEMBER 31, DECEMBER 31,
ACQUIRED 1993 1993(1)
ON VALUE ------------- -----------------
NAME EXERCISE REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------- ------ -------- ------------- -----------------
<S> <C> <C> <C> <C>
Paul G. Van Wagenen....... 37,750 $434,500 58,334/62,708 $628,131/$278,562
D. Stephen Slack.......... 33,500 399,750 30,500/33,521 307,124/ 160,472
Kenneth R. Good........... 17,467 208,424 20,667/31,854 205,232/ 141,927
Stuart P. Burbach......... -- -- 15,000/18,208 163,229/ 117,297
Sammie M. Shaw............ -- -- 26,500/13,208 268,728/ 61,672
</TABLE>
- ---------------
(1) Based on the closing price of the Common Stock on the New York Stock
Exchange on December 31, 1993 ($16.75).
10
<PAGE> 14
III. RETIREMENT PLAN. The Company maintains a noncontributory retirement
plan (the "Retirement Plan"), covering all salaried employees, under which the
Company annually makes such contributions as are actuarially necessary to
provide the retirement benefits established under such plan. The following table
shows estimated annual benefits payable under the Retirement Plan upon
retirement at age 65, based on average annual salary during the five highest
consecutive years of the ten years before retirement, to persons having the
average salary levels and years of service specified in the table.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE ANNUAL YEARS OF SERVICE AT RETIREMENT
SALARY BEFORE --------------------------------------------------------
RETIREMENT 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- -------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$100,000................................. $ 28,807 $ 38,410 $ 48,012 $ 57,615 $ 67,217
150,000................................. 43,807 58,410 73,012 87,615 102,217
200,000................................. 58,807 78,410 98,012 117,615 137,217
250,000................................. 73,807 98,410 123,012 147,615 172,217
300,000................................. 88,807 118,410 148,012 177,615 207,217
350,000................................. 103,807 138,410 173,012 207,615 242,217
400,000................................. 118,807 158,410 198,012 237,615 277,217
450,000................................. 133,807 178,410 223,012 267,615 312,217
</TABLE>
Benefits under the Retirement Plan are based on a percentage of employee
earnings, length of service and certain other factors and are payable upon
normal retirement at age 65, upon early retirement at age 55 or after
termination of employment under certain circumstances. The Retirement Plan
provides that annual benefits under such plan are limited to the maximum amount
prescribed by section 415 of the Internal Revenue Code and annual compensation
that may be taken into account beginning January 1, 1994 is limited to $150,000.
Effective January 25, 1994, the Compensation Committee has authorized the
Company to enter into agreements with Messrs. Van Wagenen, Slack, Good and
Burbach to supplement their (and their spouses') benefits under the Retirement
Plan in the event and to the extent that certain recently enacted Internal
Revenue Code limitations placed on pensions that may be paid under tax-qualified
retirement plans (such as the Retirement Plan) reduce the retirement benefits
that would otherwise be payable to such individuals under the Retirement Plan.
Messrs. Van Wagenen, Slack, Good, Burbach and Shaw each have approximately
fourteen, six, sixteen, six, and twelve credited years of service, respectively,
under the Retirement Plan. The benefits indicated in the table are not subject
to reduction for Social Security benefits.
IV. TAX-ADVANTAGED SAVINGS PLAN. The Company has a Tax-Advantaged Savings
Plan (the "Savings Plan") in which all salaried employees may participate. Under
the Savings Plan, a participating employee may allocate up to 10% of such
employee's salary as a tax-deferred contribution (subject to a maximum dollar
limitation of $8,994 for 1993), and the Company makes matching contributions of
100% of the amount contributed, up to 6% of salary.
Funds contributed to the Savings Plan by an employee and the earnings and
accretions thereon may, according to instructions from such employee, be used to
purchase shares of Common Stock or to invest in certain mutual funds managed by
The Vanguard Group of Investment Companies ("Vanguard"), including a
money-market fund, a long-term bond fund, a balanced fund (investing in both
stocks and bonds), a growth and income fund and a growth stock fund. The
employee may redirect the
11
<PAGE> 15
investment of these amounts quarterly. Matching funds contributed to the Savings
Plan by the Company, as well as the full account balance of each participant as
of January 1, 1985, are invested only in Common Stock. All contributions to the
Savings Plan are held by entities controlled by Vanguard. Participants in the
Savings Plan may exercise voting rights over shares of Common Stock held in
accounts established under the Savings Plan for their benefit.
V. SUPPLEMENTAL AND EMPLOYMENT AGREEMENTS. Messrs. Van Wagenen, Slack,
Good and Burbach have entered into two-year employment contracts with the
Company. Such contracts provide for minimum annual salaries of $410,000,
$260,000, $180,000 and $165,000 for Messrs. Van Wagenen, Slack, Good and
Burbach, respectively, and continuation of coverage or participation in, as the
case may be, the Company's employee benefit plans and programs during the
contract term. In addition, upon termination of employment by reason of death or
disability, by the Company without cause, by the employee for good reason, or
within six months after certain changes in control of the Company, the employee
is entitled to (i) compensation theretofore owed, (ii) three years' salary and
bonus, (iii) compensation for retirement benefits that would have been earned
had the employee completed the remaining term of the employment contract, (iv)
coverage under the Company's compensation plans and practices for the remaining
term of the employment contract and (v) payments to compensate the employee for
the imposition of certain excise taxes imposed under the Internal Revenue Code
on payments made to such employee in connection with a change in control of the
Company.
The Company also has a supplemental disability plan under which amounts may
be payable to officers of the Company from time to time in the future.
Supplemental disability amounts are in addition to existing programs and are
designed to bring total monthly disability benefits to a level equal to 60% of
monthly salary at the time of disability. The participants in such plan include
Messrs. Van Wagenen, Slack, Good, Burbach and Shaw.
VI. COMPENSATION OF DIRECTORS. Each director, other than those who are
regularly employed officers of the Company, receives an annual director's fee of
$18,000. In addition, effective January 1, 1994, each director, other than those
who are regularly employed officers of the Company, receives a fee of $1,000 for
each meeting of the Board of Directors actually attended and a fee of $250 for
each meeting of the Compensation Committee or Audit Committee actually attended.
Pursuant to the terms of the Company's Amended and Restated 1989 Incentive and
Nonqualified Stock Option Plan, each Non-Employee Director is granted options to
purchase 10,000 shares of Common Stock on the first business day of June
following such director's initial election and options to purchase 5,000 shares
of Common Stock each year thereafter. The Company also reimburses directors for
travel and related expenses incurred in attending meetings of the Board of
Directors or its committees.
VII. REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION. The
Compensation Committee of the Board of Directors has furnished the following
report on executive compensation:
The Compensation Committee (referred to hereafter as the "Committee")
periodically reviews the compensation of the Company's executive officers
and customarily meets in July of each year to consider executive officer
compensation generally, as well as specific compensation matters. In July
1993, the Committee reviewed (i) personnel evaluations of the Company's key
employees including executive officers, (ii) compensation guidelines
suggested to the Company together with comparables of industry peer group
companies ("Peer Group") prepared by an independent compensation
consultant, (iii) information regarding the Company's results in meeting
its principal business objectives, and (iv) the recommendations of
management. The
12
<PAGE> 16
Committee ultimately approved salary levels and, where appropriate, stock
option grants for Company employees including executive officers. In
connection with these determinations, the Committee reviewed the general
terms and conditions of employment of all employees of the Company,
including but not limited to each executive officer, and considered
compensation practices within the industry. In addition to compensation
studies submitted by the independent consultant, the Committee considered
advice of legal counsel and the individual views of Committee members on
the Company's goals and objectives in reaching its decisions concerning
executive officer compensation, including stock option grants. See Items I
and II above, entitled "Summary Compensation Table" and "Stock Option
Plans" for further information on cash compensation and stock option
grants.
The Peer Group was selected after an examination of all companies in
the Company's industry that had similar property holdings in similar
geographic areas, foreign as well as domestic. From that group, with the
help of outside independent consultants practicing in the field of public
company executive compensation, a list of 20 companies having a
statistically meaningful range of market capitalization and gross revenue
from approximately twice the size of the Company down to approximately half
the size of the Company were chosen and analyzed. The companies selected
for review for determining competitive compensation include those five
companies comprising the Peer Index for which cumulative total return
information is provided at Item IX below, entitled "Performance Graph,"
plus fifteen other companies; which, cumulatively comprise the twenty
company Peer Group described above. Based upon information provided by the
Company's independent consultants, generally the Company's officers are, in
the case of base salary, at the low end of base salary and short-term bonus
provided executive officers of Peer Group comparators and, in the case of
long-term compensation including stock options, at the low end of similar
compensation provided to executive officers of the Peer Group comparators.
The Committee believes, and the executive compensation arrangements so
reflect, that a blend of current cash compensation, fringe benefits, and
long-term incentive compensation is appropriate. Current cash is provided
by salary alone, the Company currently having no bonus plan, whether cash,
stock or otherwise. Executives, like all employees, participate in a
tax-qualified retirement plan and a tax-qualified savings plan maintained
by the Company, (including an excess benefit arrangement adopted in
December 1993, which is designed to provide to its executives, including
the chief executive officer and other management employees, benefit
opportunities otherwise curtailed by the application of certain limitations
of the tax code) as well as in certain welfare benefit programs elsewhere
described, which arrangements in the aggregate are substantially similar to
those provided by the Peer Group comparators. Long-term incentive to
executives is achieved through modest grants of stock options priced at
market on date of grant and with traditional terms and conditions.
The Company's only long-term compensation plan is its Stock Option
Plan. No options are granted under that plan at a discount to current
market price; therefore, compensation to an executive from the option plan
depends entirely on increases in the market value of the Company's common
stock, with the result that stock options benefit an executive if, and only
to the extent that, similar benefits are received by the Company's
stockholders. Moreover, the continued service requirements (delayed
vesting) applicable to the stock option grants insure that, in the usual
circumstance, the executive must render substantial services after the
grant of options before being able to realize any value with respect to
such grant.
13
<PAGE> 17
The Committee has adopted its executive compensation policies and
practices with a view to engendering in management the principle that
improving the Company's value is of paramount importance and that Company
value is measured, to a lesser extent, by reference to improvement in the
market value of the Company's common equity as reflected on the national
exchanges on which such equity is traded; and, to a greater extent, by the
most recent year's results relating to the principal corporate business
objectives publicly enunciated by the Company for the period 1990-1992: (i)
development of liquid hydrocarbon productivity; (ii) debt reduction and
interest cost saving; (iii) reduction of overhead and operating costs; and
(iv) hydrocarbon reserves preservation and enhancement. These objectives
were the same as those reviewed and established by the Committee in July of
1992 in setting compensation for the period August 1992 through July 1993.
The Committee determined in July 1993 that in every case the stated
objectives had been demonstrably met to a high degree of success during the
prior twelve-month period. In making its decisions, the Committee takes
into account (i) success in achieving the principal corporate business
objectives articulated above, (ii) evaluations by the Committee and others
of the individual performance and achievement of executives, (iii) the
increase in the Company's value as measured by its stock price, (iv) the
individual's prior compensation level, and (v) compensation paid to Peer
Group executives. The Committee does not assign weights to particular
factors, and determination by the Committee of the exact levels of
compensation, including salary, fringe benefit and stock option awards, is
based on all factors taken as a whole, but is ultimately subjective.
In August 1993, the chief executive officer's cash salary compensation
was increased by 17%, with participation in employee benefit plans and
fringe benefit programs remaining essentially constant except that the
chief executive officer's August 1993 stock option grant was somewhat
larger than in prior years. The Committee's determination of the chief
executive officer's salary and stock option grant was based principally on
the Company's achievement of its principal business objectives and the
Committee's judgment that the chief executive officer's compensation
package was at the low end relative to the Peer Group. For example, with
reference to the four principal business objectives enunciated publicly by
the Company in 1992 and earlier, (i) the Company enjoyed a 13% increase in
total revenue and a 57% increase in earnings. This was attributable to the
Company reaching a six-year high in production levels, due in large part to
a 27% increase in the production of liquids as compared to 1991; (ii) the
Company achieved a 13-year low in total debt level, and 24% savings in
interest costs compared to 1991; (iii) the Company achieved a 10% reduction
in general and administrative costs and an 8% reduction in operating costs
as compared to 1991; and (iv) the Company replaced 143% of its proven
hydrocarbon reserves produced during the year, bringing the year-end 1992
proven reserves base to a four-year high. In addition, the Committee noted
the substantial contribution the chief executive officer's management style
and work ethic made to the maintenance of the high positive morale of
Company employees.
Noting that the efforts of the Company's officers and employees in
meeting the aforementioned objectives had been successful over the past
several years, the Committee determined that revised corporate business
objectives established by the board should be used for measuring Company
officer and employee performance prospectively, which objectives include
(i) steadily increasing hydrocarbon production levels, leading to increased
revenues and earnings, (ii) growing the hydrocarbon reserves asset base,
(iii) maintaining appropriate levels of debt and interest for an entity the
size of the Company and controlling overhead and operating costs consistent
with the Company's activity levels, and (iv) expanding exploration and
production
14
<PAGE> 18
activities into new and promising geographic areas consistent with Company
expertise. The Committee advised the executive officers of these new
criteria for judging Company performance for the period August 1993 through
July 1994 and determined that achievement of these goals would be important
in evaluating executive officer performance for such period.
In addition to its annual July meeting, the Committee also customarily
meets in January of each year. In January 1993, the Committee determined to
renew and to extend the Company's employment contracts. Seven key employees
of the Company presently have such employment contracts. The Committee
believes that the employment contracts are necessary to secure for the
benefit of the Company the services of the individuals offered the
contracts on the terms and conditions therein stated and to provide
management stability in the event of significant corporate control events
such as a tender offer, significant change in stock ownership or proxy
contest. See Item V. above, entitled "Supplemental and Employment
Agreements" for further information on certain of the employment contracts.
Under Section 162(m) of the tax code, certain deductions otherwise
available to the Company by reason of its incurrence of executive
compensation expenses might not be deductible if (i) the aggregate of such
amounts otherwise deductible in a single year by the Company with respect
to one executive exceeds $1,000,000, (ii) the executive officer is the
Company's chief executive officer or one of the four other most highly
compensated officers (determined in each case as of the last day of the
year), and (iii) there is not available an exception or exemption which
would exclude the compensation from the limitation. Amounts payable or
accrued under (i) the Company's tax-qualified plans, (ii) certain fringe
benefit plans that do not result in income to the executive, and (iii) its
stock option grants will all be excluded in considering whether the
$1,000,000 level for a particular executive in a particular year has been
exceeded. Because regulations relating to the application of the deduction
limitation were not published until December 1993, the Committee did not in
1993 consider the application of these provisions to the Company's
executive officer compensation policies and practices. However, after
considering Company estimates of compensation payable to its executive
officers, the fact that stock option compensation will not be considered in
such determination, and the advice of counsel, the Committee believes that
this provision of the tax law is unlikely to have any impact upon the
Company in the near term.
Committee decisions are generally reviewed by the board as a whole
except with respect to those matters that must be peculiarly within the
province of the Compensation Committee in order that the establishment and
operation of the Stock Option Plan comply with SEC Rule 16b-3.
THE COMPENSATION COMMITTEE:
JOHN B. CARTER, JR., Chairman
TOBIN ARMSTRONG
JACK S. BLANTON
FREDERICK A. KLINGENSTEIN
NICHOLAS R. PETRY
15
<PAGE> 19
VIII. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. The
Company's Compensation Committee of its Board of Directors consists of Messrs.
John B. Carter, Jr. (Chairman), Tobin Armstrong, Jack S. Blanton, Frederick A.
Klingenstein and Nicholas R. Petry. No member of the Compensation Committee was
an officer or employee of the Company or any of its subsidiaries during 1993 or
engaged in any transactions or business relationships during 1993 that would
require disclosure under Item 404 of Regulation S-K Under the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended and the Energy
Policy and Conservation Act of 1975 as promulgated by the Securities and
Exchange Commission. Mr. Carter was an officer of the Company from 1977 to 1987
as more fully described under "Continuing Directors."
IX. PERFORMANCE GRAPH. Set forth below is a line graph comparing the yearly
percentage change in the cumulative total shareholder return on the Company's
Common Stock against the cumulative total return of (i) the Standard & Poor's
500 Stock Index, (ii) the Standard & Poor's Domestic Oil Index and (iii) a Peer
Index selected by the Company composed of Anadarko Petroleum Corporation, Apache
Corporation, The Louisiana Land & Exploration Company, Maxus Energy Corporation
and Noble Affiliates, Inc. for the period of five fiscal years commencing
December 31, 1988 and ended December 31, 1993.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P DOMESTIC
(FISCAL YEAR COVERED) POGO S&P 500 PEER INDEX OIL
<S> <C> <C> <C> <C>
1988 100 100 100 100
1989 248.49 131.69 152.29 144.01
1990 145.46 127.61 129.97 136.73
1991 136.36 166.49 111.15 127.82
1992 248.49 179.16 129.22 130.53
1993 406.06 197.25 172.21 137.52
</TABLE>
Note: The stock price performance for the Company's Common Stock is not
necessarily indicative of future performance. Total Shareholder Return
assumes reinvestment of all dividends.
16
<PAGE> 20
APPROVAL OF AMENDMENT TO THE
1989 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
The Board of Directors, upon recommendation of the Compensation Committee,
has approved and recommends a vote FOR an amendment (the "Amendment") to the
Company's 1989 Incentive and Nonqualified Stock Option Plan, as amended and
restated effective January 21, 1991 (the "Stock Option Plan") which would (i)
increase the number of shares of Common Stock upon which options may be granted
pursuant to the Stock Option Plan from 1,500,000 to 2,500,000 shares and (ii)
limit the number of shares upon which options may be granted in any one year to
any one key employee under the Stock Option Plan to no more than 150,000 shares.
In accordance with recent changes to applicable regulations, the required
minimum number of Compensation Committee members would be reduced from three
persons to two. The affirmative vote of a majority of the votes present and
entitled to vote at the 1994 annual meeting is required to approve the
Amendment.
The Stock Option Plan was originally approved by stockholders at the 1990
annual meeting held on April 24, 1990 and permitted the issuance of options on
up to 1,000,000 shares of Common Stock. The Stock Option Plan was amended and
restated effective January 21, 1991, at which time, among other things, the
number of shares upon which options could be granted was increased to 1,500,000.
The amended and restated Stock Option Plan was approved by the stockholders at
the 1991 annual meeting held on April 23, 1991. Stockholder approval of the
Amendment is necessary to allow the Committee continued flexibility to use stock
options as part of the Company's compensation program for its key employees. As
of March 1, 1994, options for only 236,056 shares remain available for grant
pursuant to the Stock Option Plan.
The Board of Directors believes that the Stock Option Plan serves as a
valuable employment incentive, permitting the Company to retain in its employ
persons of training, experience and ability, to attract new employees whose
services are considered unusually valuable, to attract and retain qualified
persons to serve as directors of the Company, to encourage the sense of
proprietorship of such persons, and to stimulate the active interests of such
persons in the development and financial success of the Company. Approximately
50 employees and 11 non-employee directors are eligible for awards under the
Stock Option Plan.
Recent changes to the federal tax code and proposed regulations thereunder
have required the Company, in order to preserve tax deductions otherwise
available to the Company with respect to options granted under the Stock Option
Plan in certain instances, to seek stockholder approval to amend the Stock
Option Plan to limit the number of shares of Common Stock upon which options may
be granted in any one year to any one employee. Consequently, the Amendment also
includes a limitation on the number of shares upon which options may be granted
in any one year to any one key employee under the Stock Option Plan to no more
than 150,000 shares.
The Amended Plan will be administered by the Committee which consists of at
least two members of the Board of Directors who have been appointed by the Board
of Directors and who meet the requirements of the definition of "disinterested
person" in Rule 16b-3(d)(3) under the Exchange Act.
Under the Amended Plan, options for shares of Common Stock may be granted
to key employees of the Company in any combination of incentive or nonqualified
stock options ("Employee Options"), as determined by the Committee in its
discretion. The Committee has the authority to determine the terms and
provisions of any option agreements relating to Employee Options.
17
<PAGE> 21
Pursuant to the Amended Plan, all persons who serve as directors of the
Company and who are not employees of the Company or any parent or subsidiary of
the Company ("Non-Employee Directors") are automatically eligible for grants of
nonqualified options covering a fixed number of shares of Common Stock
("Director Options"). Each Non-Employee Director is granted options to purchase
10,000 shares of Common Stock upon his initial election and options to purchase
5,000 shares of Common Stock are automatically granted on the first business day
of June in each succeeding year in which such Non-Employee Director serves. Each
Employee Option granted pursuant to the Amended Plan is exercisable in one or
more installments on such date or dates as the Committee shall determine,
although no portion of any Employee Option may become exercisable within the
first six months after it is granted. Employee Options that have not vested
expire upon such employee's termination of employment with the Company except
upon the death, disability or retirement of such employee, in which case all of
such employee's Employee Options become immediately exercisable. All Director
Options granted pursuant to the Amended Plan are immediately exercisable on the
date of the grant. Options are generally nontransferable and their exercise
price is payable in full at the time of exercise, either in cash or by delivery
of Common Stock with a fair market value equal to the exercise price that the
optionee has owned for at least six months prior to the exercise date.
Subject to adjustment as specified in the Amended Plan, a total of
2,500,000 shares of Common Stock shall be subject to the Amended Plan. The
purchase price of each share placed under an Employee Option pursuant to the
Amended Plan shall not be less than the fair market value of such share on the
date the Employee Option is granted. The purchase price of each share placed
under a Director Option shall be equal to the fair market value of such share on
the date the Director Option is granted. Subject to certain limitations, as
specified in the Amended Plan, options granted under the Amended Plan will
terminate ten years from the date of granting of each option.
The Amended Plan provides that in the event a "Change of Control" (as
hereinafter defined) occurs, any unmatured installments of outstanding Employee
Options would be accelerated and such options would become immediately
exercisable. The Amended Plan provides, however, for a limitation on the
acceleration of unmatured option installments in certain circumstances as set
forth in the Amended Plan. The Committee may determine, in its discretion, that
a "Change of Control" has occurred or will occur when a tender offer for
outstanding shares of Common Stock is made, an offer to the Company to acquire
all of the business and assets of the Company is made, which results in a change
of control of the Company, or upon the occurrence of any other actual change in
the control or management of the Company (whether by merger, consolidation,
acquisition of assets or stock or otherwise). In addition, a "Change of Control"
shall conclusively be deemed to have occurred if any "person," including a
"group" as determined in accordance with Section (13)(d)(3) of the Exchange Act,
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 80% or more of the combined voting power of the Company's
then outstanding securities. The change of control provisions may in certain
circumstances discourage a takeover of the Company or make it more difficult,
and may have a similar effect on removal of incumbent management. The change of
control provisions are not the result of management's knowledge of any specific
efforts to accumulate Common Stock or to obtain control of the Company by means
of a merger, tender offer, solicitation of proxies or consents or otherwise, nor
are they part of a plan to implement a series of anti-takeover measures.
The Board of Directors may amend, alter or discontinue the Amended Plan,
except that no amendment or alteration shall be made which would impair the
rights of a participant who has been granted options, without his consent, and
except that no amendment or alteration shall be made
18
<PAGE> 22
without approval of stockholders, which would: (i) increase the total number of
shares reserved for the purposes of such plan, except as specified therein with
regard to a capital change of the Company, or decrease the option exercise
price; (ii) extend the option period provided therein; (iii) materially increase
the benefits accruing to optionees under the Amended Plan; or (iv) materially
modify the requirements as to eligibility for participation in the Amended Plan.
The Company intends that certain Employee Options issued under the Amended
Plan will constitute incentive stock options within the meaning of Section 422
of the Internal Revenue Code. A $100,000 limit applies to the aggregate fair
market value (determined at grant) of stock with respect to which incentive
stock options are first exercisable by an optionee under all incentive stock
option plans of the Company during any calendar year. In most instances, the tax
treatment under the Internal Revenue Code of stock options qualifying as
"incentive stock options" is more favorable to employees than the tax treatment
accorded nonqualified options. Generally, upon the exercise of an incentive
stock option, the optionee recognizes no income for federal income tax purposes.
However, the exercise of the incentive stock option may require payment of an
alternative minimum tax. The exercise of an incentive stock option results in an
adjustment for calculating alternative minimum taxable income. The amount and
timing of the adjustment to alternative minimum taxable income is generally
governed by the income tax principles that apply to the taxation of nonqualified
stock options.
On the sale of the shares acquired due to exercise of an incentive stock
option (assuming that the sale does not occur within two years from the date of
grant of the option or within each year from the date of exercise), any gain is
taxed to the optionee as long-term capital gain. The Company would not be
entitled to a tax deduction upon the grant or exercise of an incentive stock
option. However, the Company would be entitled to an ordinary income tax
deduction in an amount equal to the amount of ordinary income recognized by such
optionees upon the exercise of nonqualified options. In the event of a sale or
other taxable disposition by the optionee of shares acquired due to the exercise
of an incentive stock option within two years from the date of grant of the
option or within one year from the date of exercise, the optionee generally will
recognize ordinary income to the extent the fair market value of the shares on
the date of exercise exceeds the exercise price, and any remaining gain or loss
will be a capital gain or loss. To the extent the optionee has ordinary income
upon a sale of shares acquired due to exercise of an incentive stock option, the
Company will be entitled to an ordinary income tax deduction.
The Company also intends that certain Employee Options and all Director
Options issued pursuant to the Amended Plan will constitute nonqualified
options. Generally, upon the exercise of a nonqualified option, the optionee
recognizes taxable income in an amount equal to the difference between the then
fair market value of the shares on the date of exercise price, unless the
optionee is an officer or director of the Company. Upon any sale of shares
acquired upon exercise of a nonqualified option, any difference between the
sales price and the fair market value of the shares recognized as taxable income
due to exercise of the nonqualified option will be treated generally as capital
gain or loss.
From the inception of the Stock Option Plan through March 1, 1994, options
with respect to 1,278,945 shares of the Company's Common Stock have been granted
to directors, officers and other key employees at exercise prices ranging from
$5.56 to $19.00 per share for terms of ten years. The number of shares subject
to options granted in 1993 to the named executive officers as a group, and all
current directors who are not executive officers as a group, and all employees,
including officers who
19
<PAGE> 23
are not executive officers, as a group, and the corresponding dollar value on
the date of grant are shown in the following table:
1989 INCENTIVE AND STOCK OPTION PLAN (1)
<TABLE>
<CAPTION>
NUMBER
DOLLAR OF UNITS
NAME AND POSITION VALUE($) (SHARES)(2)
- -------------------------------------------------------------------- ------ --------
<S> <C> <C>
Paul G. Van Wagenen................................................. (3) 41,042
Chairman of the Board, President and Chief Executive Officer
D. Stephen Slack.................................................... (3) 20,521
Director, Senior Vice President -- Finance and Chief Financial
Officer
Kenneth R. Good..................................................... (3) 20,521
Senior Vice President -- Land and Budgets
Stuart P. Burbach................................................... (3) 8,208
Vice President and Offshore Division Manager
Sammie M. Shaw...................................................... (3) 8,208
Vice President -- Operations
Executive Group (12 persons)........................................ (3) 135,000
Non-Executive Director Group (11 persons)........................... (3) 60,000
Non-Executive Officer Employee Group (39 persons)................... (3) 96,500
</TABLE>
- ---------
(1) Summary of benefits granted under the Stock Option Plan during the year
ended December 31, 1993.
(2) Conditions under which the options granted under the Stock Option Plan could
be adjusted are described in the accompanying discussion of the Stock Option
Plan.
(3) Exercise price equals the fair market price of the Company's Common Stock on
the date of grant.
The closing price per share of the Company's Common Stock as reported on
The New York Stock Exchange, Inc. Composite Transactions Reporting System for
March 1, 1994, was $18.25.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of the Audit Committee, has
approved and recommends a vote FOR the appointment of Arthur Andersen & Co. as
independent public accountants to audit the financial statements of the Company
for the year 1994. Such firm has examined the Company's accounts since its
organization.
A representative of Arthur Andersen & Co. will attend the annual meeting
and will have the opportunity to make a statement and to respond to appropriate
questions.
20
<PAGE> 24
ANNUAL REPORT
The annual report to stockholders, including financial statements, for the
year ended December 31, 1993 has been mailed to stockholders. The annual report
is not a part of the proxy solicitation material.
PROPOSALS BY SECURITY HOLDERS
Proposals intended to be presented by stockholders at the Company's 1995
Annual Meeting must be received by the Company, at the address set forth on the
first page of this Proxy Statement, no later than November 21, 1994, in order to
be included in the Company's proxy material and form of proxy relating to such
meeting. Stockholder proposals must also be otherwise eligible for inclusion.
COMPLIANCE WITH THE
EXCHANGE ACT AND OTHER MATTERS
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the SEC and the New York
Stock Exchange initial reports of ownership and reports of changes in ownership
of Common Stock and other equity securities of the Company. Officers, directors
and greater than ten-percent stockholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1993, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with, except that
Messrs. Brumley, Carter, Hunt and Gipson each inadvertently did not file one
report on Form 4 to report the acquisition or disposition of certain 8%
convertible subordinated debentures due 2005 (the "Debentures") held by them
including, in the cases of Messrs. Brumley, Hunt and Gipson, the involuntary
disposition upon mandatory redemption by the Company of certain of the
Debentures they each held. Each of these omissions was corrected on a timely
filed year-end report on Form 5.
A petition for relief, still pending, pursuant to Chapter 11 of the U.S.
Bankruptcy Code, was filed by Mr. Hunt on June 14, 1993, in the U.S. Bankruptcy
Court for the Northern District of Texas, Dallas Division, following an adverse
judgment which was rendered against him in Winkler County, Texas. The judgment
is under appeal.
21
<PAGE> 25
OTHER BUSINESS
Management does not intend to bring any business before the annual meeting
other than the matters referred to in the accompanying notice and at this date
has not been informed of any matters that may be presented to the meeting by
others. If, however, any other matters properly come before the meeting, it is
intended that the persons named in the accompanying proxy will vote on such
matters pursuant to the proxy in accordance with their best judgment.
By Order of the Board of Directors
Paul G. Van Wagenen
Chairman of the Board
March 21, 1994
22
<PAGE> 26
(Continued from other side)
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
<TABLE>
<S> <C> <C> <C> <C> <C>
WITHHOLD FOR ALL NOMINEES EXCEPT
FOR AUTHORITY NOMINEE(S) WRITTEN BELOW
1994 1. ELECTION OF DIRECTORS - / / / / / /
Nominees - Tobin Armstrong, Gerrit W. Gong, -----------------------------
John Stuart Hunt and Jack A. Vickers
P FOR AGAINST ABSTAIN The undersigned
R 2. APPROVAL OF AN AMENDMENT / / / / / / hereby acknowledges
O to the 1989 Incentive receipt of the
X and Non-Qualified Stock Notice of, and
Y Option Plan. Proxy Statement
FOR AGAINST ABSTAIN for, the Annual
3. APPROVAL OF THE APPOINTMENT OF / / / / / / Meeting and the
ARTHUR ANDERSEN & CO. as 1994 Annual Report
independent accountants, to to Stockholders of
audit the financial statements Pogo Proudcing Company.
of the Company for 1994.
Dated: , 1994
----------
-----------------------------
Signature
-----------------------------
Signature
ALL SHARES WILL BE VOTED AS DIRECTED HEREIN AND, UNLESS OTHERWISE NOTE: Please sign
DIRECTED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE exactly as your name
APPROVAL OF THE AMENDMENT TO THE 1989 INCENTIVE AND NON-QUALIFIED appears on the
STOCK OPTION PLAN AND FOR THE PROPOSAL TO APPROVE THE APPOINTMENT reverse side of
OF ARTHUR ANDERSEN & CO. TO AUDIT THE FINANCIAL STATEMENTS OF THE this proxy. Joint
COMPANY FOR 1994. owners should each
sign. Executors,
Administrators,
Trustees, etc.
should give their
full title.
Corporations should
sign full corporate
name by authorized
officer.
</TABLE>
<PAGE> 27
POGO PRODUCING COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD TUESDAY, APRIL 26, 1994.
The undersigned hereby appoints Paul G. Van Wagenen and John O. McCoy,
Jr. jointly and severally, proxies, with full power of substitution and with
discretionary authority, to vote all shares of Common Stock of Pogo Producing
Company that the undersigned would be entitled to vote at the 1994 Annual
Meeting of Stockholders, or at any adjournments thereof, on all matters
which may come before such meeting, all as set forth in the accompanying
Proxy Statement, including the proposals set forth on the reverse side of this
proxy.
IMPORTANT - This Proxy must be signed and dated on the reverse side.
<PAGE> 1
1989 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
OF
POGO PRODUCING COMPANY
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 25, 1994)
1. PURPOSE OF THE PLAN.
This 1989 Incentive and Nonqualified Stock Option Plan (the "Plan")
originally adopted effective July 25, 1989, and as amended and restated herein
effective January 25, 1994, is intended as an incentive, to retain in the employ
of Pogo Producing Company (the "Company") and any Parent or Subsidiary of the
Company (within the meaning of Section 425(e) or (f) of the Internal Revenue
Code of 1986 ("Code")), persons of training, experience and ability, to attract
new employees whose services are considered unusually valuable, to attract and
retain qualified Directors of the Company ("Directors"), to encourage the sense
of proprietorship of such employees and Directors, and to stimulate the active
interest of such persons in the development and financial success of the
Company. It is further intended that certain options issued pursuant to this
Plan shall constitute incentive stock options within the meaning of Section 422A
of the Code ("Incentive Options") while certain other options granted under the
Plan will be nonqualified stock options ("Nonqualified Options"). The Incentive
and Nonqualified Options granted to employees of the Company will be hereinafter
referred to as "Employee Options," and the Nonqualified Options granted under
the Plan to Directors will hereinafter be referred to as "Director Options."
Incentive Options and Nonqualified Options for both employees and Directors will
hereinafter be collectively referred to as the "Options."
2. ADMINISTRATION OF THE PLAN.
The Board of Directors shall appoint and maintain as administrator of the
Plan the Compensation Committee (the "Committee") which shall consist of at
least two members of the Board of Directors who meet the requirements of the
definition of "disinterested person" in Rule 16b-3(d)(3) promulgated under the
Securities Exchange Act of 1934 (the "Act"). The members of the Committee shall
serve at the pleasure of the Board. The Committee shall have full power and
authority to designate recipients of Employee Options, to determine the terms
and provisions of respective Employee Option agreements (which need not be
identical) and to interpret the provisions and supervise the administration of
the Plan. All decisions and selections made by the Committee pursuant to the
provisions of the Plan shall be made by a majority of its members. Any decision
reduced to writing and signed by all of the members shall be fully effective as
if it had been made by a majority at a meeting duly held. The Committee shall
have the authority to grant in its discretion to the holder of an outstanding
Employee Option (whether granted under this Plan or any other option plan of the
Company) in exchange for the surrender and cancellation of such Employee Option
a new Employee Option having a purchase price lower than provided in the
Employee Option so surrendered and cancelled and containing such other terms and
conditions as the Committee may prescribe in accordance with the provisions of
the Plan. The Committee shall have the authority to designate which Options
granted under the Plan shall be Incentive Options and which shall be
Nonqualified Options; the Committee, in its sole discretion, may determine that
all the Employee Options granted under the Plan may be Incentive or Nonqualified
Options. All Director Options granted under this Plan are subject to, and may
not be exercised before, shareholder approval of the Plan at the 1991 annual
meeting of the shareholders, and if such approval is not forthcoming all
Director Options previously granted shall be void.
1
<PAGE> 2
3. DESIGNATION OF OPTIONEES.
(a) Employee Options.
The persons eligible for participation in the Plan as recipients of
Employee Options ("Employee Optionees") shall include only key employees
(including employees who also serve as Directors) of the Company or of any
Parent or Subsidiary of the Company. An employee who has been granted an
Employee Option hereunder may be granted an additional Employee Option or
Employee Options, if the Committee shall so determine. No person may receive in
any calendar year options, whether Employee Options or Director Options, on more
than 150,000 shares of Stock. The aggregate fair market value (determined in
accordance with Paragraph 5 of the Plan as of the date the Option is granted) of
the stock (within the meaning of Section 422A(d) of the Code) with respect to
which Incentive Options are exercisable for the first time by any Employee
Optionee during any calendar year (under all stock option plans of the Company
and any Parent and Subsidiary of the Company) shall not exceed $100,000.
(b) Director Options.
Recipients of Director Options ("Director Optionees") shall include all
persons who, as of the time Director Options are awarded, are serving as
Directors of the Company and are not employees of the Company or of any Parent
or Subsidiary of the Company. Director Options shall be granted to each eligible
Director Optionee on January 22, 1991, providing for the purchase of 10,000
shares of Stock. Commencing in June 1992, automatic annual awards of Director
Options shall be made to each eligible Director Optionee on the first business
day of June, providing for the purchase of 5,000 shares of Stock; provided that
such Director Options shall provide for the purchase of 10,000 shares of Stock
if the recipient of such Director Option had not previously received a grant of
a Director Option pursuant to this Plan. (Employee Optionees and Director
Optionees will hereinafter be collectively referred to as "Optionees".)
4. STOCK RESERVED FOR THE PLAN.
Subject to adjustment as provided in Paragraph 9 hereof, a total of
2,500,000 shares of Common Stock, $1.00 par value ("Stock"), of the Company
shall be subject to the Plan. The shares of Stock subject to the Plan shall
consist of unissued shares or previously issued shares reacquired and held by
the Company, or any Parent or Subsidiary of the Company, and such amount of
shares shall be and is hereby reserved for sale for such purpose. Any of such
shares which may remain unsold and which are not subject to outstanding Options
at the termination of the Plan shall cease to be reserved for the purpose of the
Plan, but until termination of the Plan the Company shall at all times reserve a
sufficient number of shares to meet the requirements of the Plan. Should any
Option expire or be cancelled prior to its exercise in full, the shares
theretofore subject to such Option may again be subjected to an Option under the
Plan. Director Options shall not be awarded in any year in which a sufficient
number of shares of Stock are not available for grant under the Plan.
5. OPTION PRICE.
(a) The purchase price of each share of Stock placed under an Employee
Option shall not be less than 100% of the fair market value of such share on the
date the Employee Option is granted. The purchase price of each share of Stock
placed under a Director Option shall be equal to the fair market value of such
share on the date the Director Option is granted.
2
<PAGE> 3
(b) The fair market value of a share on a particular date shall be deemed
to be the mean between the highest and lowest sales price per share of the Stock
on the New York Stock Exchange on that date, or, if there shall have been no
sale on that date, on the last preceding date on which such a sale or sales were
effected on the New York Stock Exchange.
6. OPTION PERIOD.
(a) Employee Options.
(i) Employee Options granted under this Plan shall terminate and be of
no force or effect upon termination of employment with the Company for any
reason other than death or disability prior to the expiration of six months
from the date of grant.
(ii) If an Employee Optionee's employment with the Company continues
for six months or longer subsequent to the date an Employee Option is
granted, or is earlier terminated due to death or disability, then, subject
to the installment exercise provisions of Paragraph 7, said Employee Option
shall terminate and be of no force or effect with respect to any shares not
previously purchased by the Employee Optionee upon the first to occur of
(i) the expiration of ten years from the date of granting of each Employee
Option, or (ii) the expiration of 90 days after the Employee Optionee's
termination of employment with the Company for reasons other than death,
disability, retirement, or other reasons approved in writing by the
Committee.
(iii) "Employment with the Company" as used in this Plan shall include
employment with any Parent or Subsidiary of the Company and Employee
Options granted under this Plan shall not be affected by an employee's
transfer of employment from the Company to a Parent or Subsidiary of the
Company, from a Parent or Subsidiary of the Company to the Company, or
between a Parent or Subsidiary of the Company.
(b) Director Options.
Director Options shall terminate and be of no force or effect with respect
to any shares not previously purchased by the Director Optionee upon the
expiration of ten years from the date of granting of each Director Option,
notwithstanding any earlier termination of the Director Optionee's status as a
Director of the Company.
7. EXERCISE OF OPTIONS.
(a) Employee Options.
(i) Each Employee Option granted hereunder shall be exercisable in one
or more installments (annual or other) on such date or dates as the
Committee may in its sole discretion determine, and the terms of such
exercise shall be set forth in the Stock Option Agreement covering the
grant of the Employee Option. However, notwithstanding the provisions of
this Paragraph 7 or Paragraph 8, no portion of any Employee Option shall
become exercisable prior to the expiration of six months following the date
upon which the Employee Option is granted. The right to purchase shares of
Stock shall be cumulative so that when the right to purchase any shares has
accrued such shares or any part thereof may be purchased at any time
thereafter until the expiration or termination of the Employee Option.
3
<PAGE> 4
(ii) In the event of termination of employment with the Company for
any reason other than death, disability or retirement, Employee Options may
be exercised only with respect to the number of shares purchasable at the
time of such termination.
(iii) In the event an Employee Optionee terminates employment with the
Company due to death, disability or retirement following the date of grant
and while Employee Options granted hereunder are still in force and
unexpired under the terms of Paragraph 6(a) hereof, any unmatured
installments of the Employee Options shall be accelerated. Such
acceleration shall be effective as of the date of death, retirement or
disability, whichever is appropriate. The Employee Options outstanding in
the name of a deceased, retired or a disabled Employee Optionee, whichever
is appropriate, shall thereupon be exercisable in full without regard to
the installment exercise provisions of the Stock Option Agreement.
(iv) For purposes of this Plan, (A) the term "disability" shall mean a
disability that qualifies the Optionee for disability benefits under the
Company's Long-Term Disability Plan or under the Social Security Act, as
amended, and (B) the term "retirement" shall mean retirement on or after
attainment of early retirement age with entitlement to a benefit under any
retirement plan of the Company or any Parent or Subsidiary of the Company
qualified under Section 401(a) of the Code.
(v) The Stock Option Agreement evidencing any Incentive Options
granted under this Plan shall provide that if the Employee Optionee makes a
disposition, within the meaning of Section 425(c) of the Code and
regulations promulgated thereunder, of any share or shares of Stock issued
to him pursuant to his exercise of an Incentive Option granted under the
Plan within the two-year period commencing on the day after the date of the
grant of such Incentive Option or within a one-year period commencing on
the day after the date of transfer of the share or shares to him pursuant
to the exercise of such Incentive Option, he shall, within ten days of such
disposition, notify the Company thereof and immediately deliver to the
Company any amount of federal income tax withholding required by law.
(b) Director Options.
All Director Options shall be exercisable immediately on the date of grant;
provided, however, that Director Options awarded on January 22, 1991, are
subject to, and may not be exercisable before, shareholder approval of this
amended and restated Plan at the 1991 annual meeting of the shareholders.
(c) General.
(i) Options may be exercised solely by the Optionee during his
lifetime or after his death by the person or persons entitled thereto under
his will or the laws of descent and distribution.
(ii) The purchase price of the shares as to which an Option is
exercised shall be paid in full at the time of the exercise. Such purchase
price shall be payable in cash, or at the election of the Optionee, in
Stock theretofore owned for at least six months by such Optionee having a
fair market value determined in accordance with Paragraph 5(b) hereof equal
to the purchase price (or any combination of cash and such Stock). Any
previously owned Stock delivered in satisfaction of all or a portion of the
purchase price shall be appropriately endorsed for transfer and assignment
to the Company. No Optionee shall be, or have any of the rights or
privileges of, a shareholder of the Company in respect of any shares
purchasable upon the exercise of any part of
4
<PAGE> 5
an Option unless and until certificates representing such shares shall have
been issued by the Company to such Optionee.
8. CHANGE OF CONTROL.
(a) Acceleration of Unmatured Employee Option Installments.
Subject to the limitations of Paragraph 7(a), in the event a "Change of
Control" occurs on or after July 25, 1989, any unmatured installments of
outstanding Employee Options held by the Employee Optionee shall be accelerated
and such Employee Options shall become immediately exercisable without regard to
any installment exercise provisions of the Stock Option Agreement. The
Compensation Committee may determine, in its discretion, that a "Change of
Control" has occurred or will occur when a tender offer for outstanding shares
of Stock is made, or offer to the Company to acquire all of the business and
assets of the Company is made, which results in a change of control of the
Company, or upon the occurrence of any other actual change in the control or
management of the Company (whether by merger, consolidation, acquisition of
assets or stock or otherwise). In addition, a "Change of Control" shall
conclusively be deemed to have occurred if any "person," including a "group" as
determined in accordance with Section 13(d)(3) of the Act, becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 80 percent or more of the combined voting power of the Company's
then outstanding securities.
(b) Parachute Payment Limitation.
Notwithstanding the provisions of Paragraph 8(a) or Paragraph 9 of this
Plan, the aggregate present value of all parachute payments payable to or for
the benefit of an Employee Optionee in the Plan, whether payable pursuant to
this Plan or otherwise, shall be limited to three times the Employee Optionee's
base amount less one dollar and, to the extent necessary, the acceleration of
unmatured Employee Option installments shall be reduced by the Company in order
that this limitation not be exceeded. For purposes of this Paragraph 8(b), the
terms parachute payment, base amount and present value shall have the meanings
assigned thereto under Section 280G of the Code. It is the intention of this
Paragraph 8(b) to avoid excise taxes on the Employee Optionee under Section 4999
of the Code or the disallowance of a deduction to the Company pursuant to
Section 280G of the Code.
9. CAPITAL CHANGE OF THE COMPANY.
(a) The existence of this Plan and Options granted hereunder shall not
affect in any way the right or power of the Company or its shareholders to make
or authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stocks ahead of or affecting the Company's Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
(b) The shares with respect to which Options may be granted hereunder are
shares of the Stock of the Company as presently constituted. If, and whenever,
prior to the delivery by the Company of all of the shares of the Stock which are
subject to Options granted hereunder, the Company shall effect a subdivision or
consolidation of shares or other capital readjustment, the payment of a stock
dividend, a stock split, combination of shares or recapitalization or other
increase or reduction of the number of shares of the Stock outstanding without
receiving compensation therefor in money, services or
5
<PAGE> 6
property, the number of shares of Stock available under the Plan and the number
of shares of Stock with respect to which Options granted hereunder may
thereafter be exercised shall (i) in the event of an increase in the number of
outstanding shares, be proportionately increased, and the cash consideration
payable per share shall be proportionately reduced; and (ii) in the event of a
reduction in the number of outstanding shares, be proportionately reduced, and
the cash consideration payable per share shall be proportionately increased.
(c) If the Company is reorganized, or merged or consolidated or party to a
plan of exchange with another corporation pursuant to which reorganization,
merger, consolidation or plan of exchange stockholders of the Company receive
any shares of Stock or other securities or if the Company shall distribute
("Spin Off") securities of another corporation to its shareholders, there shall
be substituted for the shares subject to the unexercised portions of outstanding
Options an appropriate number of shares of (i) each class of stock or other
securities which were distributed to the shareholders of the Company in respect
of such shares in the case of a reorganization, merger, consolidation or plan of
exchange, or (ii) in the case of a Spin Off, the securities distributed to
shareholders of the Company together with shares of Stock, such number of shares
or securities to be determined in accordance with the provisions of Section 425
of the Code (or other applicable provisions of the Code or regulations issued
thereunder which may from time to time govern the treatment of incentive stock
options in such a transaction); provided, however, that all such Options may be
cancelled by the Company as of the effective date of (x) a reorganization,
merger, consolidation, plan of exchange or Spin Off or (y) any dissolution or
liquidation of the Company, by giving notice to each holder thereof or his
personal representative of its intention to do so and by permitting the purchase
for a period of approximately thirty days during the sixty days next preceding
such effective date of all of the shares subject to such outstanding Options,
without regard to the installment provisions set forth in the Stock Option
Agreement.
(d) Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number of shares of Stock subject to Options
granted hereunder.
10. PURCHASE FOR INVESTMENT.
Unless the Options and shares covered by the Plan have been registered
under the Securities Act of 1933, as amended, or the Company has determined that
such registration is unnecessary, each person exercising an Option under the
Plan may be required by the Company to give a representation in writing that he
is acquiring such shares for his own account for investment and not with a view
to, or for sale in connection with, the distribution of any part thereof.
11. TAXES.
The Company may make such provisions as it may deem appropriate for the
withholding of any taxes which it determines is required in connection with any
Options granted under the Plan.
6
<PAGE> 7
12. EFFECTIVE DATE OF PLAN.
The Plan was adopted effective July 25, 1989 and was approved by
shareholders at the 1990 annual meeting of the shareholders. The Plan was
amended and restated effective January 22, 1991 and was approved by shareholders
at the 1991 annual meeting of the shareholders. The Plan, as amended and
restated effective January 25, 1994, shall be effective upon shareholder
approval of the amended Plan of the 1994 annual meeting of the shareholders. If
the amended and restated Plan is not approved at the 1994 annual meeting of the
shareholders, then the amendments made effective as of January 25, 1994 shall be
null and void, and any option grants in excess of the limits under Paragraph 4
of the Plan, as in effect prior to the amendment and restatement effective
January 25, 1994, shall also be null and void.
13. AMENDMENTS OR TERMINATION.
The Board of Directors may amend, alter or discontinue the Plan, except
that no amendment or alteration shall be made which would impair the rights of
any Optionee under any Option theretofore granted, without his consent, and
except that no amendment or alteration shall be made which, without the approval
of the shareholders, would:
(a) Increase the total number of shares reserved for the purposes of
the Plan, except as is provided in Paragraph 9, or decrease the Option
exercise price provided for in Paragraph 5; or
(b) Extend the Option period provided for in Paragraph 6; or
(c) Materially increase the benefits accruing to Optionees under the
Plan; or
(d) Materially modify the requirements as to eligibility for
participation in the Plan.
14. GOVERNMENT REGULATIONS.
The Plan, and the granting and exercise of Options thereunder, and the
obligation of the Company to sell and deliver shares under such Options, shall
be subject to all applicable laws, rules and regulations, and to such approvals
by any governmental agencies or national securities exchanges as may be
required.
POGO PRODUCING COMPANY
Attested to by the
Corporate Secretary
as adopted by the
Board of Directors of
Pogo Producing Company
on January 25, 1994.
/s/ Ronald B. Manning
Secretary
7
