<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 / / Confidential, for
Use of the Commission
Only (as permitted by
Rule 14a-6(e)(2))
/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)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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(i)(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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
________________________________________________________________________________
/ / Fee paid previously with preliminary materials.
/ / 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:
- --------------------------------------------------------------------------------
<PAGE>
POGO PRODUCING COMPANY
PAUL G. VAN WAGENEN
CHAIRMAN, PRESIDENT &
CHIEF EXECUTIVE OFFICER
March 25, 1996
Dear Shareholders of Pogo Producing Company:
You are cordially invited to attend the 1996 Annual Meeting of Shareholders
of Pogo Producing Company (the "Company"), which will be held in the Century II
Room, Renaissance Houston Hotel, Six Greenway Plaza, Houston, Texas 77046, on
Tuesday, April 23, 1996, 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) approval of the Company's
1995 Long-Term Incentive 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,
/s/ Paul G. Van Wagenen
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>
POGO PRODUCING COMPANY
P.O. BOX 2504
HOUSTON, TEXAS 77252-2504
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 23, 1996
------------------------
TO THE SHAREHOLDERS OF
POGO PRODUCING COMPANY:
Notice is hereby given that the Annual Meeting of Shareholders of Pogo
Producing Company (the "Company") will be held at the Century II Room,
Renaissance Houston Hotel, Six Greenway Plaza, Houston, Texas 77046,
on Tuesday, April
23, 1996, 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
1999 annual meeting;
2. To approve the Company's 1995 Long-Term Incentive Plan
as more fully described in the accompanying
proxy statement;
3. To approve the appointment of Arthur Andersen LLP, independent
public accountants, to audit the financial statements of the Company
for the year 1996; and
4. To transact such other business as may properly come before the
meeting.
Shareholders of record at the close of business on March 8, 1996 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,
/s/ Gerald A. Morton
GERALD A. MORTON
Corporate Secretary
<PAGE>
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 Shareholders 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
shareholders beginning on or about March 25, 1996. 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 8, 1996, the record date for
determining shareholders entitled to vote at the meeting, the Company had
outstanding and entitled to vote 33,073,045 shares of common stock,
par value
$1.00 per share ("Common Stock"). The Company has no other class of stock
outstanding which is entitled to vote at the meeting. 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
including approval of the proposed 1995 Long-Term Incentive Plan and the
appointment of Arthur Andersen LLP to audit the financial statements of the
Company for 1996.
Abstentions from proposals are treated as votes against that 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>
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 Company's
1995 Long-Term Incentive Plan (the "Incentive Plan") described below, (3)
FOR the appointment of Arthur Andersen LLP, independent public accountants, to
audit the financial statements of the Company for 1996 and (4) in the discretion
of such persons in connection with any other business that may properly come
before the meeting.
REVOCABILITY OF PROXIES
Shareholders 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 Shareholders, (ii) giving a duly
executed proxy bearing a later date, or (iii) attending the annual meeting and
voting in person. Attendance by shareholders 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. W. M. Brumley, Jr., John B.
Carter, Jr., Frederick A. Klingenstein and Paul G. Van Wagenen, 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 1999. 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 eight continuing
directors named below will not be required to stand for election at this
meeting, as their present terms expire in either 1997 or 1998. Should any of
Messrs. Brumley, Carter, Klingenstein or Van Wagenen 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 four nominees, including those listed below.
2
<PAGE>
NOMINEES
The following table sets forth information concerning the four nominees for
election as directors at the 1996 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,
1996.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(1)
------------------------
PERCENT
NUMBER OF OF
NAME AND BUSINESS EXPERIENCE SHARES CLASS(2)
---------------------------- ------------ --------
<S> <C> <C>
W.M. BRUMLEY, JR., has been engaged for more than 70,442(3) *
five years in managing his personal investments. Mr.
Brumley, 67, has served as a Director of the Company
since 1977 and currently serves as a member of its
Audit Committee.
JOHN B. CARTER, JR., has been Chairman of Houston Na- 91,177(4) *
tional Bank for more than five years. Mr. Carter,
71, was originally elected to the Company's Board of
Directors in 1977 and currently serves as Chairman
of the Compensation Committee and a member of its
Executive Committee.
FREDERICK A. KLINGENSTEIN has been Chairman of 2,479,723(5)(6) 7.5%
Klingenstein, Fields & Co., L.P., an investment ad-
visory firm, since 1989. Mr. Klingenstein, 64, has
served as a Director of the Company since 1987 and
currently serves as a member of its Executive and
Compensation Committees.
PAUL G. VAN WAGENEN became Chairman of the Board and 45,456(7) *
Chief Executive Officer of the Company in March
1991. He had previously been elected
President of the Company in 1990. Mr. Van Wagenen,
50, has served as a Director of the Company since
1988 and currently serves as the Chairman of its Ex-
ecutive Committee.
</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) The shares listed include 1,848 shares which could be acquired upon
conversion of the Company's 8% Convertible Subordinated Debentures, due
2005 (the "Convertible Debentures") and 45,250 shares subject to options
exercisable within 60 days.
(4) The shares listed include 4,177 shares which could be acquired upon
conversion of Convertible Debentures and 30,000 shares subject to options
exercisable within 60 days.
(5) See note (3) to table entitled "Principal Shareholders."
(6) Includes 15,000 shares subject to options exercisable within 60 days.
(7) The shares listed include 10,802 shares held for Mr. Van Wagenen's account
under the Company's Tax-Advantaged Savings Plan and 14,653 shares subject
to options exercisable within 60 days, but does not include shares granted
to Mr. Van Wagenen pursuant to the Company's Incentive Plan, none of which
have vested.
3
<PAGE>
DIRECTORS WITH TERMS EXPIRING IN 1997 AND 1998
The following table sets forth information concerning the eight directors of
the Company not required to stand for re-election at the 1996 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, 1996.
CONTINUING DIRECTORS
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
OWNED(1)
--------------------
NUMBER PERCENT OF
NAME AND BUSINESS EXPERIENCE OF SHARES CLASS(2)
---------------------------- --------- ----------
<S> <C> <C>
TOBIN ARMSTRONG has been engaged for more than five years 35,000(3) *
in the ranching business. Mr. Armstrong, 72, has served
as a Director of the Company since 1977 and currently
serves as a member of its Compensation Committee. His
present term expires in 1997.
JACK S. BLANTON has been President of Eddy Refining 37,000(4) *
Company since 1958 and Chairman of the Board of Houston
Endowment, Inc. since 1990. Mr. Blanton, 68, has served
as a Director of the Company since 1991 and currently
serves as a member of its Compensation Committee. His
present term expires in 1998. Mr. Blanton also serves as
a director of Ashland, Inc., SBC Communications Inc.,
Baker Hughes Incorporated and Burlington Northern Santa
Fe Corporation.
WILLIAM L. FISHER is and has been the Director of the Ge- 25,000(4) *
ology Foundation and occupant of the Barrow Chair of
Mineral Resources at the University of Texas at Austin
for more than five years. Dr. Fisher, 63, has served as
a Director of the Company since February 1992 and cur-
rently serves as a member of its Audit Commitee. His
present term expires in 1998. Dr. Fisher also serves as
a director of Diamond Shamrock, Inc.
WILLIAM E. GIPSON, has been an independent petroleum 63,118(5) *
geologist and rancher for more than five years. Mr.
Gipson, 71, has served as a Director of the Company
since 1970 and currently serves as a member of its Audit
Committee. His present term expires in 1998.
GERRIT W. GONG has been the Director of Asian Studies for 16,000(6) *
the Center for Strategic and International Studies, in
Washington, D.C. for more than five years. Dr. Gong, 42,
has served as a Director of the Company since 1993 and
currently serves as a member of its Audit Committee. His
present term expires in 1997.
</TABLE>
(Table continued on following page)
4
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
OWNED(1)
--------------------
NUMBER PERCENT OF
NAME AND BUSINESS EXPERIENCE OF SHARES CLASS(2)
---------------------------- --------- ----------
<S> <C> <C>
JOHN STUART HUNT has been engaged for more than five 100 *
years in managing his personal investments. Mr. Hunt,
74, has served as a Director of the Company since 1983
and currently serves as the Chairman of its Audit
Committee. His present term expires in 1997. Mr. Hunt is
also a director of CMS Nomeco Oil & Gas Co.
NICHOLAS R. PETRY is Chairman of the Board of Petry 81,000(3) *
Company and Managing Partner of N.G. Petry Construction
Company and Mill Iron Ranches. He has been engaged in
such businesses for more than five years. Mr. Petry, 77,
has served as a Director of the Company since 1981 and
currently serves as a member of its Executive and
Compensation Committees. His present term expires in
1998.
JACK A. VICKERS has been the owner of The Vickers 30,100(3) *
Companies for more than five years. Mr. Vickers, 70, has
served as a Director of the Company since 1985. His
present term expires in 1997.
</TABLE>
- --------
(1) See note 1 to table entitled "Nominees."
(2) An asterisk indicates less than 1%.
(3) Includes 30,000 shares subject to options exercisable within 60 days.
(4) Includes 25,000 shares subject to options exercisable within 60 days.
(5) Includes 26,000 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.
(6) Includes 15,000 shares subject to options exercisable within 60 days.
ORGANIZATION AND ACTIVITY OF THE BOARD OF DIRECTORS
In addition to the Executive Committee, comprised of Messrs. Van Wagenen
(Chairman), Carter, Klingenstein and Petry, 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
for the Company's employees; 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.
5
<PAGE>
The Board of Directors held four meetings during 1995. The Audit Committee
held two meetings during the year. The Compensation Committee held three
meetings during the year. No director attended fewer than 75% of the total
meetings held during 1995 by the Board of Directors or any committee 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, 1996.
<TABLE>
<CAPTION>
NUMBER
OF SHARES
BENEFICIALLY PERCENT
NAME OWNED(1) OF CLASS(2)
- ---- ------------ -----------
<S> <C> <C>
Stuart P. Burbach..................................... 26,686 *
Kenneth R. Good....................................... 58,828 *
Radford P. Laney...................................... 20,605 *
Sammie M. Shaw........................................ 40,876 *
Paul G. Van Wagenen................................... 45,456 *
All directors and executive officers as a group (24
persons)............................................. 3,229,385 9.7%
</TABLE>
- --------
(1) See note (1) to table entitled "Nominees." The shares listed include: (a)
shares subject to options exercisable within 60 days as follows: Mr.
Burbach, 20,889 shares; Mr. Good, 42,348 shares; Mr. Laney, 11,333 shares;
Mr. Shaw, 18,139 shares; Mr. Van Wagenen, 14,653 shares; all directors and
executive officers as a group, 429,977 shares; (b) shares held under the
Tax-Advantaged Savings Plan as follows: Mr. Burbach, 5,777; Mr. Good,
15,618; Mr. Laney 9,272; Mr. Shaw, 1,237; Mr. Van Wagenen, 10,802; all
directors and executive officers as a group, 77,853 shares; and (c) shares
that may be acquired upon conversion of Convertible Debentures as follows:
all officers and directors as a group, 7,291 shares. These share amounts do
not include shares granted pursuant to the Incentive Plan, none of which
have vested.
(2) An asterisk indicates less than 1%.
6
<PAGE>
PRINCIPAL SHAREHOLDERS
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, 1996, 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 or 5 1/2%
Convertible Subordinated Notes due 2004 (the "Subordinated Notes").
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
-----------------------
SHARES PERCENTAGE
------------ ----------
<S> <C> <C>
State Farm Mutual Automobile........................... 5,520,077(2) 16.7%
Insurance Company
and certain affiliates
One State Farm Plaza
Bloomington, Illinois 61701
Frederick A. Klingenstein,............................. 2,904,291(3) 8.8%
John Klingenstein and
Klingenstein, Fields & Co., L.P.
787 Seventh Avenue
New York, New York 10019
FMR Corp............................................... 2,048,463(4) 6.2%
and certain affiliates
82 Devonshire Street
Boston, Massachusetts 02109-3614
American Express Company............................... 1,923,795(5) 5.8%
and American Express Financial Corporation
American Express Tower
World Financial Center
New York, New York 10285
</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 5,520,077 shares, 3,180,145 shares are reported as beneficially
owned by State Farm Mutual Automobile Insurance Company, 957,766 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.
(Footnotes continued on following page)
7
<PAGE>
(3) Frederick A. Klingenstein and his brother John Klingenstein are affiliates
of Klingenstein, Fields & Co., L.P. Of such 2,904,291 shares, 2,904,291
shares are reported as beneficially owned by Klingenstein, Fields & Co.,
L.P., 2,464,723 shares by Frederick A. Klingenstein and 2,440,390 shares by
John Klingenstein. Frederick A. Klingenstein, John Klingenstein and
Klingenstein, Fields & Co., L.P. each reported shared dispositive power
with respect to 2,464,723 shares, 2,440,390 shares and 2,904,291 shares,
respectively, and shared voting power with respect to 1,727,431 shares,
1,878,736 shares and no shares, respectively. Frederick A. Klingenstein and
John Klingenstein each reported sole voting power with respect to 737,792
shares and 561,654 shares, respectively. The shares beneficially owned by
Klingenstein, Fields & Co., L.P. include 4,884 shares issuable upon
conversion of Convertible Debentures. In addition, Frederick A.
Klingenstein beneficially owns, and has sole voting and dispositive power
with respect to, 15,000 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 2,048,463 shares, 2,039,164 are reported as beneficially owned by
Fidelity Management & Research Company and 9,298 shares (including 1,899
shares issuable upon conversion of Subordinated Debentures) are reported as
beneficially owned by Fidelity Management Trust Company, each of which is a
wholly-owned subsidiary of FMR Corp. Edward C. Johnson 3d and FMR Corp.
each report sole dispositive power with respect to 2,048,463 shares, sole
voting power with respect to only 1,899 shares and no voting power, either
sole or shared, with respect to 2,046,564 shares. The Schedule 13G states
that Mr. Johnson, together with Abigail P. Johnson and various members of
Mr. Johnson's family and trusts for their benefit, through their ownership
of voting common stock and the execution of a shareholder's voting
agreement, may be deemed to form a controlling group with respect to FMR
Corp.
(5) All 1,923,795 shares are reported as beneficially owned by both American
Express Company and its subsidiary American Express Financial Corporation,
each of whom disclaim any sole voting or dispositive power with respect to
any of the shares. Each of American Express Company and American Express
Financial Corporation report shared voting power with respect to 1,200,050
shares and shared dispositive power with respect to 1,923,795 shares. In
its Schedule 13G filing, American Express Company expressly disclaims
beneficial ownership of the shares attributable to it in such filing.
8
<PAGE>
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
1993, 1994 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION AWARDS
------------------------------ ---------------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL BONUS COMPENSATION STOCK OPTIONS COMPENSATION
POSITION YEAR SALARY($) ($) ($)(1) AWARDS(2) (#) ($)(3)
------------------ ---- --------- ------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul G. Van Wagenen..... 1995 $528,117 $20,000 $ -- $20,000 50,000 $9,240
Director, Chairman of
the Board, 1994 443,742 -- -- -- 40,000 9,220
President and Chief
Executive 1993 372,492 -- -- -- 41,042 8,994
Officer
D. Stephen Slack(4)..... 1995 $293,858 $ -- $ -- $ -- 25,000 $9,240
Director, Senior Vice 1994 269,370 -- -- -- 20,000 9,220
President--Finance and 1993 241,247 -- -- -- 20,521 8,994
Chief Financial Officer
Kenneth R. Good......... 1995 $213,028 $12,500 $ -- $12,500 25,000 $9,240
Senior Vice President-- 1994 189,375 -- -- -- 20,000 9,220
Land and Budgets 1993 167,500 -- -- -- 20,521 8,994
Stuart P. Burbach....... 1995 $196,000 $20,000 $ -- $20,000 20,000 $9,240
Vice President and 1994 174,375 -- -- -- 8,000 9,220
Offshore Division
Manager 1993 155,625 -- -- -- 8,208 8,994
Sammie M. Shaw.......... 1995 $160,290 $20,000 $ -- $20,000 12,000 $9,240
Vice President--
Operations 1994 150,290 -- -- -- 8,000 8,985
1993 141,540 -- -- -- 8,208 8,994
Radford P. Laney........ 1995 $161,750 $12,500 $ -- $12,500 10,000 $9,240
Vice President and 1994 146,250 -- -- -- 7,000 9,220
International Division
Manager 1993 131,125 -- -- -- 6,000 8,994
</TABLE>
- --------
(1) No executive received perquisites or other personal benefits in any year
shown which exceeded 10% of his salary.
(2) This amount represents the fair market value at their grant date (August 1,
1995) of restricted stock awards made to the named individuals pursuant to
the Incentive Plan. Each such award shall vest on August 1, 1996,
contingent upon, among other things, shareholder approval of the 1995 Long-
Term Incentive Plan and such employee's continued employment with the
Company through August 1, 1996. As of December 31, 1995, the aggregate
restricted share holdings and their value (based upon a per share price of
$28.25, the closing price of the Common Stock as reported on The New York
Stock Exchange, Inc. Composite Transactions Reporting System for December
29, 1995) of each of the named individuals were: Messrs. Van Wagenen,
Burbach and Shaw, 907 shares worth $25,595; and Messrs. Good and Laney, 567
shares worth $15,990. Upon approval of the Incentive Plan by shareholders
and the vesting of the Common Stock referred to in this column, dividends
shall be payableunless and until such shares become fully vested as
described above.
(3) These amounts represent Company matching contributions to the Tax-
Advantaged Savings Plan (401(k) Plan).
(4) Mr. Slack resigned from the Company effective October 27, 1995. See
"Severance Arrangements."
9
<PAGE>
II. STOCK OPTION PLANS. Option Grants Table. The following table shows
further information on grants of stock options during 1995 to the named
executive officers which are reflected in the preceding Summary Compensation
Table. The Board of Directors granted no stock options with stock appreciation
rights in 1995.
OPTION GRANTS IN 1995
INDIVIDUAL GRANTS
<TABLE>
- -------------------------------------------------------------------------------------------------
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED EXERCISE OR BASE
OPTIONS TO EMPLOYEES PRICE EXPIRATION GRANT DATE
NAME GRANTED IN 1995 ($ PER SHARE)(1) DATE PRESENT VALUE(2)
---- ---------- ------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Paul G. Van Wagenen..... 50,000 15.0% $22.0625 July 31, 2005 $645,500
D. Stephen Slack........ 25,000 7.5% $22.0625 July 31, 2005 322,750
Kenneth R. Good......... 25,000 7.5% $22.0625 July 31, 2005 322,760
Stuart P. Burbach....... 20,000 6.0% $22.0625 July 31, 2005 258,200
Sammie M. Shaw.......... 12,000 3.6% $22.0625 July 31, 2005 154,920
Radford P. Laney........ 10,000 3.0% $22.0625 July 31, 2005 129,100
</TABLE>
- --------
(1) The option exercise price was 100% of the fair market value of the Common
Stock on August 1, 1995, the date of grant. Generally, options granted
under the Company's stock option plans to employees become exercisable in
three equal increments on each of the three anniversaries following the
grant date. In addition, if a change of control of the Company were to
occur, the unvested options would become immediately exercisable subject,
in certain instances, to the discretion of the Compensation Committee of
the Board of Directors.
(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 6.47% (the
rate of interest on 10-year U.S. Treasury Bonds on the grant date of the
options), a $0.12 annual dividend rate over the life of the options and
volatility during the life of the options equal to 39.09% (the average
monthly price volatility for the Common Stock for the four years preceding
the grant date).
1995 Option Exercises and December 31, 1995 Values Table. Shown below is
information with respect to unexercised options to purchase Common Stock
granted under the Company's stock option plans to the named executive officers
and held by them at December 31, 1995.
AGGREGATE OPTION EXERCISES IN 1995 AND 1995 OPTION VALUES AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
SHARES HELD AT OPTIONS AT
ACQUIRED DECEMBER 31, 1995 DECEMBER 31, 1995(1)
ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Paul G. Van Wagenen..... 51,042 $678,310 14,653/90,347 $ 101,490/$657,260
D. Stephen Slack........ 10,000 153,750 49,848/45,173 1,046,774/ 328,628
Kenneth R. Good......... 10,000 172,188 42,348/45,173 693,149/ 328,627
Stuart P. Burbach....... 4,000 77,250 20,889/28,069 366,226/ 193,325
Sammie M. Shaw.......... 10,000 190,000 18,139/20,069 291,780/ 143,825
Radford P. Laney........ -- -- 11,333/16,667 169,415/ 117,585
</TABLE>
- --------
(1) Based on the per share closing price of the Common Stock as reported on
The New York Stock Exchange, Inc.'s Composite Transactions Reporting
System for December 29, 1995 ($28.25).
10
<PAGE>
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>
$100,000........................ $ 28,552 $ 38,070 $ 47,587 $ 57,105 $ 66,622
200,000........................ 58,552 78,070 97,587 117,105 136,662
300,000........................ 88,552 118,070 147,587 177,105 206,622
400,000........................ 118,552 158,070 197,587 237,105 276,622
500,000........................ 148,552 198,070 247,587 297,105 346,622
600,000........................ 178,552 238,070 297,587 357,105 416,622
</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 sections 415 and 401(a)(17) of the Internal Revenue Code of 1986,
as amended (the "Code") for pensions payable under tax-qualified retirement
plans. For 1995, the Code provides that the annual compensation of each
employee which is to be taken into account under the Retirement Plan cannot
exceed $150,000, and the maximum allowable pension benefit payable under such
plan would be limited to $120,000. In order to maintain benefit levels under
the Retirement Plan to which they would otherwise be entitled but for
limitations prescribed by the Code, the Company has entered into agreements
with Messrs. Van Wagenen and Good to supplement their (and their spouses')
benefits under the Retirement Plan in the event and to the extent that these
Code limitations reduce the retirement benefits that would otherwise be payable
to such individuals under the Retirement Plan.
Messrs. Van Wagenen, Slack, Good, Burbach, Shaw and Laney each have
approximately sixteen, eight, eighteen, eight, fourteen and eighteen credited
years of service, respectively, under the Retirement Plan.
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 $9,500 for 1996), and the Company makes matching contributions of
100% of the amount contributed, up to 6% of such employee's 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
11
<PAGE>
bonds), a growth and income fund and a growth stock fund. The employee may
redirect the investment of these amounts quarterly. Matching funds contributed
to the Savings Plan by the Company 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, Good, Burbach
and Laney have each entered into two-year employment contracts, effective
February 1, 1996, with the Company. Such contracts provide for minimum annual
salaries for Messrs. Van Wagenen, Good, Burbach and Laney of $575,000,
$226,000, $206,000 and $170,000, respectively. The contracts also provide for
continuation of coverage in 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 (as defined in the employment agreements), or within six months after a
"change in control" (as defined below) 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 Code on payments made to
such employee in connection with a change in control of the Company. "Change of
control," as defined in the employment agreements, includes certain events
constituting a change in the control or management of the Company (whether by
merger, consolidation, acquisition of assets or stock or otherwise).
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, Good, Burbach, Shaw and Laney.
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 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 (the "Stock Option Plan") or, if and when approved by
shareholders, pursuant to the Incentive 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 of his service as a director thereafter.
See "Proposal to Approve the 1995 Long-Term Incentive Plan." 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:
12
<PAGE>
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 1995,
the Committee followed essentially the same policies and practices that it
had followed during the prior year. In July 1995, 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 Committee
ultimately approved salary levels and, where appropriate, bonuses and 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 and bonuses.
See Items I and II above, entitled "Summary Compensation Table" and "Stock
Option Plans," for further information on cash compensation, stock option
grants and bonuses.
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 nineteen companies having a statistically
meaningful range of market capitalization and gross revenues were chosen
and analyzed. The companies selected for review for determining competitive
compensation include those seven companies comprising the New Peer Index
for which cumulative total return information is provided at Item IX below,
entitled "Performance Graph," plus twelve other companies, which
cumulatively comprise the nineteen-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, in the
lower half of base salary and short-term bonus provided executive officers
of Peer Group comparators and, in the case of long-term compensation and
bonuses, including stock options, in the lower half 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 and bonuses alone, the Company having instituted in 1995 a cash
and/or stock bonus policy awarding a combination of cash and/or Company
stock to those key employees it thought appropriate in order to assist in
retention as well as to reward past performance and encourage Company stock
ownership. Pursuant to this policy, seven key employees of the Company (not
including the Chief Executive Officer) were awarded cash and stock bonuses
in August 1995. One-half of each bonus was paid immediately in cash and
one-half in Company stock. The stock portion vests, subject to certain
exceptions, only if the shareholders approve the new plan in April, 1996,
and if the recipient remains employed with the Company until August 1,
1996. Executives, like all employees, participate in a tax-qualified
retirement plan and a
13
<PAGE>
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.
As of the date of this report, the Company's only long-term compensation
plan is its Stock Option Plan. No options have been granted under that plan
at a discount to current market price; therefore, compensation to an
executive from the Stock 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 circumstances, the executive must
render substantial services after the grant of options before being able to
realize any value with respect to such grant.
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 in 1993 and established by
the Committee as criteria against which executive officer performance would
be measured during the period August 1994 through August 1995. These
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 activities into new and promising
geographic areas consistent with Company expertise. The Committee
determined in July 1995 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 and increase in reserve
base; (iv) the individual's prior compensation level, including the number
and terms of options already held by such individual, (v) with respect to
individuals that have entered into employment contracts with the Company,
the minimum salaries provided for therein; and (vi) 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 benefits, and stock option awards,
is based on all factors taken as a whole, but is ultimately subjective.
In August 1995, the chief executive officer's cash salary compensation
was increased by 15%, with participation in employee benefit plans and
fringe benefit programs remaining essentially constant. 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
14
<PAGE>
the Committee's judgment that the chief executive officer's compensation
package was in the lower half of similar compensation relative to the Peer
Group. For example, with reference to the four principal business
objectives enunciated by the Company and utilized as a measurement of
criteria by the Committee, (i) the Company enjoyed a 22% increase in
production levels for the 1993-1994 biennium over the preceding biennium,
which contributed to a 30% increase in cash flow and an 8% increase in
earnings for 1994 compared to 1993; (ii) the Company replaced 153% of its
proven hydrocarbon reserves produced during the year, bringing the year-end
1994 proven reserves base to 446.1 billion cubic feet equivalent (Bcfe);
(iii) the increases in production, cash flow, earnings and the replacement
of reserves discussed above were accomplished against the backdrop of an 8%
decrease in interest expense; and (iv) the Company increased its
exploration and production activities worldwide during 1994 as reflected in
a 62% increase in the Company's capital expenditures during 1994 compared
to 1993. 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 morale of the Company's employees.
In addition to its annual July meeting, the Committee also customarily
meets in January of each year. In January 1995, the Committee determined to
renew and to extend the Company's employment contracts. At the time such
contracts were renewed and extended, minimum salaries were established in
each contract which equaled the compensation currently being received by
such key employee, as established in the annual salary review during the
prior August. 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 a 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. 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 code 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>
VIII. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. The
Compensation Committee of the 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 1995 or
engaged in any transactions or business relationships during 1995 that would
require disclosure under Item 404 of Regulation S-K under the Securities Act of
1933, as amended, the Exchange Act or 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.
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, (iii) a Peer
Index (the "Old Peer Index") selected by the Company composed of Anadarko
Petroleum Corporation, Apache Corporation, The Louisiana Land & Exploration
Company and Noble Affiliates, Inc. and (iv) a new Peer Index (the "New Peer
Index") selected by the Company composed of Anadarko Petroleum Corporation,
Apache Corporation, The Louisiana Land & Exploration Company, Noble Affiliates,
Inc., Parker & Parsley Petroleum Company, Santa Fe Energy Resources, Inc. and
Seagull Energy Corporation, each for the period of five fiscal years commencing
December 31, 1990 and ended December 31, 1995. The performance graph presented
below differs from that presented in prior years in that the Company is
changing its Peer Index from the Old Peer Index to the New Peer Index. The
Company determined to change its Peer Index, in part, because Maxus Energy
Corporation, which was formerly included in the Old Peer Index, was acquired
during 1995 by YPF Sociedad Anonima, a corporation that the Company did not
deem appropriate, due its size and business activities, for inclusion in the
New Peer Index.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P DOMESTIC
(FISCAL YEAR COVERED) POGO S&P 500 OLD PEER INDEX NEW PEER INDEX OIL
<S> <C> <C> <C> <C> <C>
1990 100 100 100 100 100.00
1991 93.75 130.47 87.47 83.55 88.98
1992 170.83 140.4 106.04 98.92 98.84
1993 279.17 154.58 149.1 139.02 99.84
1994 296.73 156.62 139.21 125.37 105.52
1995 474.84 215.44 177.68 155.94 120.13
</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>
X. SEVERANCE ARRANGEMENTS. D. Stephen Slack, formerly a Director and Senior
Vice President--Finance and Chief Financial Officer of the Company, resigned
from the Company effective October 27, 1995. In connection with his separation
from the Company, Mr. Slack received, a lump sum cash payment in January 1996
of $625,000, subject to applicable FICA and withholding for federal income
taxes. He also received, among other things, a lump sum cash payment of $70,903
under the excess benefit arrangements described under Item III above, entitled
"Retirement Plan", which was also subject to applicable FICA and withholding
for federal income taxes.
PROPOSAL TO APPROVE THE 1995 LONG-TERM INCENTIVE PLAN
GENERAL
On July 25, 1995, the Board of Directors approved, subject to shareholder
approval, the 1995 Long-Term Incentive Plan of the Company (the "Incentive
Plan"). The Board of Directors believes that the Incentive Plan will serve 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 will be eligible for awards under
the Incentive Plan. During 1995, the Board of Directors contingently awarded
restricted stock under the Incentive Plan totaling $130,000 on the date of
grant, including the amounts awarded to the individuals as set forth on the
"Summary Compensation Table" in the preceding section. All awards made during
1995 under the Incentive Plan were made to Company employees and are contingent
upon, with certain exceptions, shareholder approval of the Incentive Plan and,
with respect to each recipient's respective award, such recipient's continued
employment with the Company until August 1, 1996.
DESCRIPTION OF THE INCENTIVE PLAN
The Incentive Plan provides for awards granted wholly or partly in Common
Stock (including rights or options which may be exercised for or settled in
Common Stock). An aggregate of 2,000,000 shares of Common Stock has been
reserved for use under the Incentive Plan. Approval of the Incentive Plan by
shareholders will constitute shareholder approval of the reservation of such
shares. Awards to employees of the Company may be made as grants of stock
options, stock appreciation rights, stock awards, cash awards, performance
awards, or any combination thereof (collectively, "Awards"). No more than
400,000 shares of Common Stock shall be available for issuance to non-employee
directors of the Company ("Director Options"), and no more than 250,000 shares
of Common Stock shall be available for Awards other than stock options and
stock appreciation rights. Common Stock related to Awards or Director Options
that (i) are forfeited or terminated, (ii) expire unexercised, (iii) are
settled in cash in lieu of Stock (or in a manner that all or some of the shares
covered by an Award or Director Options are not issued to a participant in the
Incentive Plan (a "Participant")), or (iv) are exchanged for Awards that do not
involve Common Stock, shall immediately become available for Awards or Director
Options.
The Incentive Plan, as it applies to Participants who are employees (but not
to Participants who are non-employee directors of the Company), will be
administered by a committee consisting of at least
17
<PAGE>
two members of the Board of Directors who meet the requirements of the
definition of a disinterested person in Rule 16b-3(d)(3) of the Exchange Act
(the "Committee"). The Board of Directors currently intends to delegate its
authority to administer the Incentive Plan to the Company's Compensation
Committee. See "Continuing Directors--Organization and Activity of the Board of
Directors." The Committee may delegate to the Chief Executive Officer and to
other senior officers of the Company its duties under the Incentive Plan,
pursuant to such conditions as the Committee may establish. However, the
Company may not delegate to any person the authority to grant Awards to, or
take other action with respect to, Participants who are subject to Section 16
of the Exchange Act.
Any decision of the Committee in the interpretation and administration of the
Incentive Plan shall lie within its sole and absolute discretion and shall be
final, conclusive and binding on all parties concerned. The Committee may
extend the exercisability of an Award, accelerate the vesting or exercisability
of an Award, eliminate or make less restrictive any restrictions contained in
an Award, waive any restriction or other provision of the Incentive Plan or an
Award or otherwise amend or modify an Award. The Committee may also correct any
defect or inconsistency in the Incentive Plan or an Award.
Employee Awards. The Committee shall determine the type(s) of Awards to be
made to each employee Participant under the Incentive Plan. Each Award shall be
embodied in an Award agreement between the Company and the Participant
containing terms determined by the Committee.
The Awards, listed below, may be granted singly, in combination, or in
tandem. Awards may be made in combination or in tandem with, in replacement of,
or as alternatives to, grants or rights under the Incentive Plan or any other
employee plan of the Company. An Award may provide for the granting of
additional, replacement or alternative Awards upon the occurrence of specified
events, including the exercise of the original Award granted to a Participant.
No Participant may be granted during any one year period (i) Awards consisting
of stock options or stock appreciation rights exercisable for more than 150,000
shares of Common Stock, or (ii) in addition to any stock options or stock
appreciation rights, cash or other awards under the Incentive Plan having a
value determined on the date of grant in excess of $1,000,000.
1. Stock Option. An Award may consist of a right to purchase a specified
number of shares of Common Stock at a specified price that is not less than
50% of the fair market value of the Common Stock on the date of grant. A
stock option may be in the form of an incentive stock option within the
meaning of Section 422 of the Code.
The price at which shares of Common Stock may be purchased under an
employee stock option (or Director Option, discussed below) shall be paid
in full at the time of exercise (i) in cash, (ii) by tendering Common Stock
(valued at fair market value on the date of exercise) or surrendering
another Award, including Common Stock that cannot be publicly traded
("Restricted Stock"), or (iii) any combination thereof. The Committee shall
determine acceptable methods for tendering Common Stock or other Awards by
an employee to exercise a stock option. The Committee may provide for (i)
loans from the Company to an employee to permit the exercise or purchase of
Awards and (ii) procedures to permit the exercise or purchase of Awards by
use of the proceeds to be received from the sale of Common Stock issuable
pursuant to an Award to an employee. In the event shares of Restricted
Stock are tendered as consideration for the exercise of a stock option, a
number of the shares issued upon the exercise of the stock option (equal to
the number of shares
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of Restricted Stock used as consideration), shall be subject to the same
restrictions as the Restricted Stock so submitted.
2. Stock Appreciation Right. An Award may consist of a right to receive a
payment, in cash or Common Stock, equal to the excess of the fair market
value (or other specified valuation) of a specified number of shares of
Common Stock on the date the stock appreciation right is exercised over a
specified strike price.
3. Stock Award. An Award may consist of Common Stock or may be
denominated in units of Common Stock. All or part of any stock award may be
subject to conditions established by the Committee, which may include
continuous service with the Company, achievement of specific business
objectives, increases in specified indices, and attaining specified growth
rates. Such Awards may be based on fair market value or other specified
valuations.
4. Cash Award. An Award may be denominated in cash with the amount of the
eventual payment subject to future service and such other restrictions and
conditions as may be established by the Committee, including continuous
service with the Company, achievement of specific business objectives,
increases in specified indices, and attaining specified growth rates.
5. Performance Award. A performance Award shall be paid, vested, or
otherwise deliverable solely on account of the attainment of pre-
established, objective performance goals established by the Committee prior
to the earlier to occur of (i) 90 days after the commencement of the period
of service to which the performance goal relates and (ii) the elapse of 25%
of the period of service and in any event while the outcome is
substantially uncertain. A performance goal is objective if a third party
with knowledge of relevant facts could determine whether the goal is met
and such goals can be based on business criteria that apply to the
individual, a business unit, or the Company as a whole. No employee
Participant shall receive performance Awards during any one year period
having a value determined at the date of grant in excess of $1,000,000.
Director Options. Commencing June 1, 1996, automatic annual awards of
Director Options shall be made to each non-employee Director 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 the Incentive Plan or any
predecessor plan of the Company providing for awards of stock options to non-
employee Directors. 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
Incentive Plan.
Each Director Option shall terminate with respect to any shares not
previously purchased by the Director upon the expiration of 10 years from the
date of granting of such Director Option, notwithstanding any earlier
termination of the Director's status as a member of the Board of Directors. The
purchase price of each share of Stock granted under a Director Option shall be
equal to the fair market value of such share on the date the Director Option is
granted. All Director Options shall be exercisable immediately upon the date of
grant; provided, however, that (i) the Board of Directors may amend, modify,
suspend or terminate the Incentive Plan to address any changes in legal
requirements; and (ii) no Common Stock shall be issued with respect to any
Director Option unless the Company is satisfied that such issuance complies
with federal and state securities laws.
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Effect of Termination of Employment. Upon termination of employment of an
employee Participant, any unexercised, deferred or unpaid Awards shall be
treated as provided in the specific Award agreement evidencing the Award. In
the event of termination, the Committee may provide for the extension of the
exercisability of an Award, accelerate the vesting or exercisability of an
Award, eliminate or make less restrictive any restrictions contained in an
Award, waive any restriction or other provision of the Incentive Plan or an
Award, or otherwise amend or modify the Award.
Payment of Awards. In general, payment of Awards to employees may be made by
cash, Common Stock or combinations thereof and may include restrictions
determined by the Committee. The Committee may approve deferral of payments.
Dividends (or dividend equivalent rights) may be extended to any Award
denominated in Common Stock or units of Common Stock, subject to conditions
established by the Committee. The Committee may establish rules to credit
interest on deferred cash payments and dividend equivalents for deferred
payments denominated in Common Stock or units of Common Stock. The Committee
may permit the offer to a Participant to substitute an Award for another Award.
Adjustments. Existence of outstanding Awards and/or Director Options shall
not affect the power of the Company or its shareholders to make or authorize
any adjustments, recapitalizations, reorganizations or other changes in the
capital stock of the Company or its business, any merger or consolidation of
the Company, any issue of bonds, debentures, preferred or prior preference
stock, the dissolution or liquidation of the Company, any sale or transfer of
Company assets, or any other corporate act.
In the event of any subdivision or consolidation of outstanding shares of
Common Stock, any declaration of a dividend payable in shares of Common Stock,
any capital reorganization or reclassification, or any other transaction
involving an increase or reduction in the number of outstanding shares of
Common Stock, then the Board shall adjust the following to reflect such
transaction: (i) the number and shares of Common Stock reserved under the
Incentive Plan and covered by outstanding Awards and/or Director Options
denominated in Common Stock or units of Common Stock; (ii) the exercise or
other price in respect of such Awards and/or Director Options; (iii) the
appropriate fair market value and other price determinations for such Awards
and/or Director Options; and (iv) the number of shares of Common Stock covered
by automatically granted Director Options.
Assignability. No Award, Director Option, or any other benefit under the Plan
constituting a derivative security within the meaning of Rule 16a-1(c) of the
Exchange Act shall be assignable or otherwise transferable except by will, by
the laws of descent and distribution, or pursuant to a qualified domestic
relations order. The Committee may prescribe other restrictions on transfer.
Any attempted assignment of an Award, Director Option, or other benefit under
the Plan is null and void.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following discussion of tax considerations relating to options issuable
under the Incentive Plan describes only certain U.S. federal income tax
matters. It is general in nature and is not intended to cover all tax
consequences that may apply to a particular Participant or to the Company. The
provisions of the Code and the regulations thereunder relating to these matters
are complicated and their impact in any one case may depend upon the particular
circumstances.
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The Company intends that certain stock options issued to employee
Participants under the Incentive Plan constitute "incentive stock options" or
"ISO's" within the meaning of Section 422 of the Code, while other options
granted under the Incentive Plan, both to employee and non-employee
Participants, will constitute "non-qualified options" (a "Nonqualified
Option").
Incentive Stock Options. In general, for federal income tax purposes, neither
the grant nor the exercise of an ISO will result in taxable income to the
Participant or a deduction for the Company. A Participant may be subject to the
alternative minimum tax in the year that an ISO is exercised. The excess of the
fair market value of the Common Stock (determined at the date of exercise)
acquired through the exercise of an ISO over the exercise price is an addition
to income in determining alternative minimum taxable income and such additional
amount may be sufficient in amount to subject the Participant to the
alternative minimum tax.
If the Participant holds the Common Stock acquired through the exercise of
ISO's for the full holding period (two years after the ISO is granted and one
year after it is exercised), the Participant will recognize a capital gain or
loss at the time of the sale of the stock based on the difference between the
ISO's exercise price and the sale price. If Common Stock acquired through the
exercise of an ISO is disposed of before the end of the holding period
described above, a "disqualifying disposition", the Participant will recognize
ordinary income equal to the difference between the fair market value of the
shares on the date the option was exercised (or, if less, the amount received
on the sale of the Common Stock) and the option exercise price. The Company
will be entitled to a deduction in a corresponding amount to the extent that
the amount is reasonable compensation and is an ordinary and necessary business
expense. If the amount received by the Participant on the disqualifying
disposition exceeds the fair market value of the shares on the date of exercise
of the ISO, such excess will ordinarily constitute capital gain.
Nonqualified Stock Options. In general, the grant of a Nonqualified Option
will not result in taxable income to the Participant or a deduction to the
Company for federal income tax purposes. Upon exercise of a Nonqualified
Option, the Company will be entitled, for federal income tax purposes, to a tax
deduction and the Participant will recognize ordinary income. The amount of
such deduction and income generally will equal the amount by which the fair
market value of the shares acquired on the date the Nonqualified Option is
exercised exceeds the option exercise price of the shares. However, if the sale
of the Common Stock acquired upon exercise of a Nonqualified Option would
subject the Participant to liability under Section 16(b) of the Exchange Act,
the Participant will recognize ordinary income and the Company will be entitled
to a corresponding tax deduction equal to the amount by which the fair market
value of the shares acquired exceeds the option exercise price for the shares
on the earlier of (i) the date that the Participant is no longer subject to
liability under Section 16(b) of the Exchange Act or (ii) six months after the
date the Nonqualified Option is exercised.
Limitation on Deductions. Section 162(m) of the Code restricts the deduction
of compensation by a publicly held corporation. Specifically, Section 162(m)
prohibits the deduction of compensation to "covered employees" to the extent
that "remuneration" to any such covered employee exceeds $1,000,000 in any
taxable year. Covered employees are defined as the chief executive officer and
the four most highly compensated officers (other than the chief executive
officer) in the year in question. The exceptions to remuneration include
payments to or from a tax-qualified pension plan and "performance based
compensation." "Performance based compensation" includes stock options having
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an exercise price on the date of grant equal to the fair market value of the
Common Stock on the date of grant, and other compensation payable solely on
account of performance goals established and administered by a compensation
committee which consists solely of two or more outside directors which, in the
Company's case, currently is the Compensation Committee.
REQUIRED VOTE AND RECOMMENDATION
The approval and adoption of this proposal requires the affirmative vote 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. Accordingly, under
Delaware law and the Company's Restated Certificate of Incorporation and By-
laws, abstentions would have the same legal effect as a vote against this
proposal, even though this may not be the intent of the person entitled to vote
or giving the proxy. 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. The persons named in the
proxy intend to vote for the approval of the Incentive Plan, unless otherwise
instructed.
The Board of Directors recommends voting "FOR" this proposal.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of the Audit Committee, has
approved and recommends voting "FOR" the appointment of Arthur Andersen LLP as
independent public accountants to audit the financial statements of the Company
for the year 1996. Such firm has examined the Company's accounts since its
organization.
A representative of Arthur Andersen LLP will attend the annual meeting and
will have the opportunity to make a statement and to respond to appropriate
questions.
ANNUAL REPORT
The annual report to shareholders, including financial statements for the
year ended December 31, 1995, has been mailed to shareholders. The annual
report is not a part of the proxy solicitation material.
PROPOSALS BY SECURITY HOLDERS
Proposals intended to be presented by shareholders at the Company's 1996
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 25, 1996, in order
to be included in the Company's proxy material and form of proxy relating to
such meeting. Shareholder proposals must also be otherwise eligible for
inclusion.
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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 shareholders 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, 1995, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with.
A petition for relief, 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. A plan of reorganization in this
case was approved by the bankruptcy court and consummated on March 23, 1995.
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
/s/ PAUL G. VAN WAGENEN
----------------------------------
Paul G. Van Wagenen
Chairman of the Board
March 25__, 1995
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APPENDIX A
1995 LONG-TERM INCENTIVE PLAN
of
POGO PRODUCING COMPANY
1. Objectives. The Pogo Producing Company 1995
Long-Term Incentive Plan (the "Plan") is designed to retain key
employees, 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 Pogo Producing Company, a
Delaware corporation (the "Company"), and its Subsidiaries (as hereinafter
defined). These objectives are to be accomplished by making awards under
the Plan and thereby providing Participants (as hereinafter defined) with a
proprietary interest in the growth and performance of the Company and its
Subsidiaries.
2. Definitions. As used herein, the terms set forth
below shall have the following respective meanings:
"Award" means the grant of any form of stock option, stock
appreciation right, stock award or cash award, whether granted singly, in
combination or in tandem, to a Participant who is an employee pursuant to
any applicable terms, conditions and limitations as the Committee may
establish in order to fulfill the objectives of the Plan.
"Award Agreement" means a written agreement between
the Company and a Participant who is an employee that sets forth the
terms, conditions and limitations applicable to an Award.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Committee" means the Compensation Committee of the
Board or such other committee of the Board as is designated by the Board
to administer the Plan. The Committee shall be constituted to permit the
Plan to comply with Rule 16b-3 of the Exchange Act.
"Common Stock" means the Common Stock, par value
$1.00 per share, of the Company.
"Director" means an individual serving as a member of the
Board.
"Director Options" means nonqualified stock options
granted to Directors.
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"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time.
"Fair Market Value" means, as of a particular date, (i) if
shares of Common Stock are listed on a national securities exchange, the
mean between the highest and lowest sales price per share of Common
Stock on the consolidated transaction reporting system for the principal
such national securities exchange on that date, or, if there shall have been
no such sale so reported on that date, on the last preceding date on which
such a sale was so reported, (ii) if shares of Common Stock are not so
listed but are quoted on the NASDAQ National Market System, the mean
between the highest and lowest sales price per share of Common Stock on
the NASDAQ National Market System on that date, or, if there shall have
been no such sale so reported on that date, on the last preceding date on
which such a sale was so reported or (iii) if the Common Stock is not so
listed or quoted, the mean between the closing bid and asked price on that
date, or, if there are no quotations available for such date, on the last
preceding date on which such quotations shall be available, as reported by
NASDAQ, or, if not reported by NASDAQ, by the National Quotation
Bureau, Inc.
"Participant" means an employee of the Company or any of
its Subsidiaries or a Director to whom an Award has been made under this
Plan.
"Performance Award" means an award under the Plan made
by the Committee to a Participant who is an employee subject to the
attainment of one or more Performance Goals.
"Performance Goal" means a standard established by the
Committee, to determine in whole or in part whether a Performance Share
Award shall be earned.
"Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act, or any successor rule.
"Stock Option/SAR Limitation" means the limitation set
forth in Paragraph 7(a) and defined therein.
"Subsidiary" means any corporation of which the Company
directly or indirectly owns shares representing more than 50% of the
voting power of all classes or series of capital stock of such corporation
which have the right to vote generally on matters submitted to a vote of the
shareholders of such corporation.
3. Eligibility.
(a) Employees. Key employees of the Company and its
Subsidiaries eligible for an Award under this Plan are those who
hold positions of responsibility and whose performance, in the
judgment of the Committee, can have a significant effect on the
success of the Company and its Subsidiaries.
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(b) Directors. Recipients of Director Options shall
include all persons who, as of the time the Director Options are
awarded, are serving as Directors of the Company and are not
employees of the Company or any Subsidiary.
4. Common Stock Available for Awards and Director
Options. There shall be available for Awards granted wholly or partly in
Common Stock (including rights or options which may be exercised for or
settled in Common Stock) during the term of this Plan an aggregate of
2,000,000 shares of Common Stock, of which there shall be available for
Director Options during the term of this Plan not more than an aggregate
of 400,000 shares of Common Stock. Notwithstanding the foregoing, not
more than an aggregate of 250,000 shares of Common Stock shall be
available for Awards other than stock options and stock appreciation
rights. The Board and the appropriate officers of the Company shall from
time to time take whatever actions are necessary to file required documents
with governmental authorities and stock exchanges and transaction
reporting systems to make shares of Common Stock available for issuance
pursuant to Awards or Director Options. Common Stock related to
Awards or Director Options that are forfeited or terminated, expire
unexercised, are settled in cash in lieu of Stock or in a manner such that all
or some of the shares covered by an Award or Director Options are not
issued to a Participant, or are exchanged for Awards that do not involve
Common Stock, shall immediately become available for Awards or
Director Options hereunder. The Committee may from time to time adopt
and observe such procedures concerning the counting of shares against the
Plan maximum as it may deem appropriate under Rule 16b-3. 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.
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5. Administration. This Plan, as it applies to
Participants who are employees but not with respect to Participants who
are Directors and not employees, shall be administered by the Committee,
which shall have full and exclusive power to interpret this Plan and to
adopt such rules, regulations and guidelines for carrying out this Plan as it
may deem necessary or proper, all of which powers shall be exercised in
the best interests of the Company and in keeping with the objectives of this
Plan. The Committee shall consist of at least two members of the Board
who meet the requirements of the definition of "disinterested person" in
Rule 16b-3(d)(3) promulgated under the Exchange Act, or any successor
rule. The Committee may, in its discretion, provide for the extension of
the exercisability of an Award, accelerate the vesting or exercisability of an
Award, eliminate or make less restrictive any restrictions contained in an
Award, waive any restriction or other provision of this Plan or an Award
or otherwise amend or modify an Award in any manner that is either (i) not
adverse to the Participant holding such Award or (ii) consented to by such
Participant. The Committee may correct any defect or supply any omission
or reconcile any inconsistency in this Plan or in any Award in the manner
and to the extent the Committee deems necessary or desirable to carry it
into effect. Any decision of the Committee in the interpretation and
administration of this Plan shall lie within its sole and absolute discretion
and shall be final, conclusive and binding on all parties concerned. No
member of the Committee or officer of the Company to whom it has
delegated authority in accordance with the provisions of Paragraph 6 of
this Plan shall be liable for anything done or omitted to be done by him or
her, by any member of the Committee or by any officer of the Company in
connection with the performance of any duties under this Plan.
6. Delegation of Authority. The Committee may
delegate to the Chief Executive Officer and to other senior officers of the
Company its duties under this Plan pursuant to such conditions or
limitations as the Committee may establish, except that the Committee may
not delegate to any person the authority to grant Awards to, or take other
action with respect to, Participants who are subject to Section 16 of the
Exchange Act.
7. Awards.
(a) Employee Awards. The Committee shall determine
the type or types of Awards to be made to each Participant who is
an employee under this Plan. Each Award made hereunder shall be
embodied in an Award Agreement, which shall contain such terms,
conditions and limitations as shall be determined by the Committee
in its sole discretion and shall be signed by the Participant and by
the Chief Executive Officer or the Chief Administrative Officer of
the Company for and on behalf of the Company. Awards may
consist of those listed in this Paragraph 7(a) and may be granted
singly, in combination or in tandem. Awards may also be made in
combination or in tandem with, in replacement of, or as alternatives
to, grants or rights under this Plan or any other employee plan of
the Company or any of its Subsidiaries, including the plan of any
acquired entity. An Award may provide for the granting or
issuance of additional, replacement or alternative Awards upon the
occurrence of specified events, including the exercise of the
original Award granted to a Participant. Notwithstanding anything
herein to the contrary, no Participant may be granted, during any
one year period, Awards consisting of stock options or stock
appreciation rights exercisable for more than 150,000 shares of
Common Stock (the "Stock Option/SAR Limitation"). No
Participant may be granted, in addition to any stock options or
stock appreciation rights, cash or other awards under this Plan in
respect of any one year period having a value determined on the
date of grant in excess of $1,000,000.
(I) Stock Option. An Award may consist of a
right to purchase a specified number of shares of Common
Stock at a specified price that is not less than the greater of
(i) 50% of the Fair Market Value of the Common Stock on
the date of grant and (ii) the par value of the Common
Stock on the date of grant. A stock option may be in the
form of an incentive stock option ("ISO") which, in
addition to being subject to applicable terms, conditions
and limitations established by the Committee, complies
with Section 422 of the Code.
(II) Stock Appreciation Right. An Award may
consist of a right to receive a payment, in cash or Common
Stock, equal to the excess of the Fair Market Value or
other specified valuation of a specified number of shares of
Common Stock on the date the stock appreciation right
("SAR") is exercised over a specified strike price, as set
forth in the applicable Award Agreement.
(III) Stock Award. An Award may consist of
Common Stock or may be denominated in units of
Common Stock. All or part of any stock award may be
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subject to conditions established by the Committee, and set
forth in the Award Agreement, which may include, but are
not limited to, continuous service with the Company and its
Subsidiaries, achievement of specific business objectives,
increases in specified indices, attaining specified growth
rates and other comparable measurements of performance.
Such Awards may be based on Fair Market Value or other
specified valuations. The certificates evidencing shares of
Common Stock issued in connection with a stock award
shall contain appropriate legends and restrictions describing
the terms and conditions of the restrictions applicable
thereto.
(IV) Cash Award. An Award may be
denominated in cash with the amount of the eventual
payment subject to future service and such other
restrictions and conditions as may be established by the
Committee, and set forth in the Award Agreement,
including, but not limited to, continuous service with the
Company and its Subsidiaries, achievement of specific busi-
ness objectives, increases in specified indices, attaining
specified growth rates and other comparable measurements
of performance.
(V) Performance Award. Without limiting the
type or number of Awards that may be made to a
Participant under the other provisions of this Plan, the
Committee may make a Performance Award to a
Participant who is an employee. Such a Performance
Award shall be paid, vested or otherwise deliverable solely
on account of the attainment of one or more pre-established,
objective Performance Goals established by the
Committee prior to the earlier to occur of (i) 90 days after
the commencement of the period of service to which the
performance goal relates and (ii) prior to the elapse of 25%
of the period of service (as scheduled in good faith at the
time the goal is established) and in any event while the
outcome is substantially uncertain. A Performance Goal is
objective if a third party having knowledge of the relevant
facts could determine whether the goal is met and such
goals can be based on one or more business criteria that
apply to the individual, a business unit, or the Company as
a whole, and includes an increase in any one or more of the
following: production levels of equivalent volumes of oil
and gas, equivalent proven reserves, reserves value,
increased revenue, net income, stock price, market share,
earnings per share, or return on equity; or a decrease in
costs. Unless otherwise stated, such a Performance Goal
need not be based upon an increase or positive result under
a particular business criterion and could include, for
example, maintaining the status quo or limiting economic
losses (measured, in each case, by reference to specific
business criterion). No Participant who is an employee
shall receive more than $1,000,000 in respect of
Performance Awards made in any calendar year. In
interpreting Plan provisions applicable to Performance
Goals and Performance Share Awards, it is the intent of the
Plan to conform with the standards of Treasury Regulation
1.162-27(e)(2)(i) and the Committee in establishing such
goals and interpreting the Plan shall be guided by such
provisions. Prior to the payment of any compensation
based on the achievement of Performance Goals, the
Committee must
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certify in writing that applicable
Performance Goals and any of the material terms thereof
were, in fact, satisfied.
(b) Director Options. Commencing June 1, 1996,
automatic annual awards of Director Options shall be made to each
eligible Director on the first business day of June of each year, each
such annual grant to provide for the purchase of 5,000 shares of
Stock by each eligible Director; 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 or any
predecessor plan of the Company providing for awards of stock
options to nonemployee directors. Each Director Option shall
terminate and be of no force or effect with respect to any shares
not previously purchased by the Director upon the expiration of 10
years from the date of granting of such Director Option,
notwithstanding any earlier termination of the Director's status as
a Director of the Company. The purchase price of each share of
Stock placed under a Director Option shall be equal to the greater
of (i) Fair Market Value of such share on the date the Director
Option is granted or (ii) the par value of the Common Stock on the
date of grant. All Director Options shall be exercisable
immediately upon the date of grant, except as hereinafter
described. Notwithstanding the foregoing sentence, however, all
Director Options granted under this Plan are subject to, and may
not be exercised before, shareholder approval of the Plan required
under paragraph 18 hereof.
8. Payment of Awards.
(a) General. Payment of Awards to employees may be
made in the form of cash or Common Stock or combinations
thereof and may include such restrictions as the Committee shall
determine, including, in the case of Common Stock, restrictions on
transfer and forfeiture provisions. As used herein, "Restricted
Stock" means Common Stock that is restricted or subject to forfei-
ture provisions.
(b) Deferral. With the approval of the Committee,
payments in respect of Awards may be deferred, either in the form
of installments or a future lump sum payment. The Committee may
permit selected Participants to elect to defer payments of some or
all types of Awards in accordance with procedures established by
the Committee. Any deferred payment, whether elected by the
Participant or specified by the Award Agreement or by the
Committee, may be forfeited if and to the extent that the Award
Agreement so provides.
(c) Dividends and Interest. Dividends or dividend
equivalent rights may be extended to and made part of any Award
denominated in Common Stock or units of Common Stock, subject
to such terms, conditions and restrictions as the Committee may
establish. The Committee may also establish rules and procedures
for the crediting of interest on deferred cash payments and dividend
equivalents for deferred payments denominated in Common Stock
or units of Common Stock.
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(d) Substitution of Awards. At the discretion of the
Committee, a Participant may be offered an election to substitute
an Award for another Award or Awards of the same or different
type.
9. Stock Option Exercise. The price at which shares
of Common Stock may be purchased under an employee stock option or
a Director Stock Option shall be paid in full at the time of exercise in cash
or, if elected by the optionee, the optionee may purchase such shares by
means of tendering Common Stock or surrendering another Award,
including Restricted Stock, valued at Fair Market Value on the date of
exercise, or any combination thereof. The Committee shall determine
acceptable methods for tendering Common Stock or other Awards by an
employee to exercise a stock option as it deems appropriate. If permitted
by the Committee, payment may be made by successive exercises by the
Participant who is an employee. The Committee may provide for loans
from the Company to an employee to permit the exercise or purchase of
Awards and may provide for procedures to permit the exercise or purchase
of Awards by use of the proceeds to be received from the sale of Common
Stock issuable pursuant to an Award to an employee. Unless otherwise
provided in the applicable Award Agreement, in the event shares of
Restricted Stock are tendered as consideration for the exercise of a stock
option, a number of the shares issued upon the exercise of the stock
option, equal to the number of shares of Restricted Stock used as
consideration therefor, shall be subject to the same restrictions as the
Restricted Stock so submitted as well as any additional restrictions that
may be imposed by the Committee.
10. Tax Withholding. The Company shall have the right
to deduct applicable taxes from any Award payment and withhold, at the
time of delivery or vesting of cash or shares of Common Stock under this
Plan, an appropriate amount of cash or number of shares of Common
Stock or a combination thereof for payment of taxes required by law or to
take such other action as may be necessary in the opinion of the Company
to satisfy all obligations for withholding of such taxes. The Committee
may also permit withholding to be satisfied by the transfer to the Company
of shares of Common Stock theretofore owned by the holder of the Award
with respect to which withholding is required. If shares of Common Stock
are used to satisfy tax withholding, such shares shall be valued based on
the Fair Market Value when the tax withholding is required to be made.
11. Amendment, Modification, Suspension or
Termination. The Board may amend, modify, suspend or terminate this
Plan for the purpose of meeting or addressing any changes in legal
requirements or for any other purpose permitted by law, except that (i) no
amendment or alteration that would impair the rights of any Participant
under any Award or Director Option previously granted to such Participant
shall be made without such Participant's consent and (ii) no amendment or
alteration shall be effective prior to approval by the Company's
shareholders to the extent such approval is then required pursuant to
Rule 16b-3 in order to preserve the applicability of any exemption provided
by such rule to any Award or Director Option then outstanding (unless the
holder of such Award or Director Option consents) or to the extent
shareholder approval is otherwise required by applicable legal
requirements.
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<PAGE>
12. Termination of Employment. Upon the termination
of employment by a Participant who is an employee, any unexercised,
deferred or unpaid Awards shall be treated as provided in the specific
Award Agreement evidencing the Award. In the event of such a
termination, the Committee may, in its discretion, provide for the extension
of the exercisability of an Award, accelerate the vesting or exercisability of
an Award, eliminate or make less restrictive any restrictions contained in
an Award, waive any restriction or other provision of this Plan or an
Award or otherwise amend or modify the Award in any manner that is
either (i) not adverse to such Participant or (ii) consented to by such
Participant.
13. Assignability. Unless otherwise determined by the
Committee and provided in the Award Agreement, no Award, no Director
Option, or any other benefit under this Plan constituting a derivative
security within the meaning of Rule 16a-1(c) under the Exchange Act shall
be assignable or otherwise transferable except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order
as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder. The Committee may prescribe and
include in applicable Award Agreements other restrictions on transfer.
Any attempted assignment of an Award, Director Option or any other
benefit under this Plan in violation of this Paragraph 13 shall be null and
void.
14. Adjustments.
(a) The existence of outstanding Awards and/or
Director Options shall not affect in any manner 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 capital stock of the Company or its business or any merger or
consolidation of the Company, or any issue of bonds, debentures,
preferred or prior preference stock (whether or not such issue is
prior to, on a parity with or junior to the Common Stock) or
Common Stock 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 of any kind, whether or not
of a character similar to that of the acts or proceedings enumerated
above.
(b) In the event of any subdivision or consolidation of
outstanding shares of Common Stock or declaration of a dividend
payable in shares of Common Stock or capital reorganization or
reclassification or other transaction involving an increase or
reduction in the number of outstanding shares of Common Stock,
then (i) the number of shares of Common Stock reserved under this
Plan and covered by outstanding Awards and/or Director Options
denominated in Common Stock or units of Common Stock, (ii) the
exercise or other price in respect of such Awards and/or Director
Options, (iii) the appropriate Fair Market Value and other price
determinations for such Awards and/or Director Options, (iv) the
number of shares of Common Stock covered by Director Options
automatically granted under Paragraph 7(b) hereof and (v) the
Stock Option/SAR Limitation in Paragraph 7(a) hereof shall each
be proportionately adjusted by the Board to reflect such
transaction. In the event of any consolidation or merger of the
Company with another corporation or entity, or the adoption
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<PAGE>
by the Company of a plan of exchange affecting the Common Stock
or any distribution to holders of Common Stock of securities or
property (other than normal cash dividends or dividends payable in
Common Stock), the Board shall make appropriate adjustments to
(i) the number of shares of Common Stock reserved under this Plan
and covered by outstanding Awards and/or Director Options
denominated in Common Stock or units of Common Stock, (ii) the
exercise or other price in respect of such Awards and/or Director
Options, (iii) the appropriate Fair Market Value and other price
determinations for such Awards and/or Director Options, (iv) the
number of shares of Common Stock covered by Director Options
automatically granted under Paragraph 7(b) hereof and (v) the
Stock Option Limitation in Paragraph 7(a) hereof to give effect to
such transaction; provided that such adjustments shall only be such
as necessary to maintain the proportionate interest of the holders
of the Awards and/or Director Options and preserve, without
exceeding, the value of such Awards and/or Director Options. In
the event of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation, the
Board shall be authorized to issue or assume Awards and/or
Director Options by means of substitution of new Awards or new
Director Options, as appropriate, for previously issued Awards
and/or Director Options or an assumption of previously issued
Awards and/or Director Options as part of such adjustment.
15. Restrictions. No Common Stock or other form of
payment shall be issued with respect to any Award or Director Option
unless the Company shall be satisfied based on the advice of its counsel
that such issuance will be in compliance with applicable federal and state
securities laws. It is the intent of the Company that this Plan comply with
Rule 16b-3 with respect to persons subject to Section 16 of the Exchange
Act unless otherwise provided herein or in an Award Agreement, that any
ambiguities or inconsistencies in the construction of this Plan be interpreted
to give effect to such intention, and that if any provision of this Plan is
found not to be in compliance with Rule 16b-3, such provision shall be null
and void to the extent required to permit this Plan to comply with
Rule 16b-3. Certificates evidencing shares of Common Stock delivered
under this Plan may be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules, regula-
tions and other requirements of the Securities and Exchange Commission,
any securities exchange or transaction reporting system upon which the
Common Stock is then listed and any applicable federal and state securities
laws. The Committee may cause a legend or legends to be placed upon
any such certificates to make appropriate reference to such restrictions.
16. Unfunded Plan. Insofar as it provides for Director
Options or Awards of cash, Common Stock or rights thereto, this Plan
shall be unfunded. Although bookkeeping accounts may be established
with respect to Participants who are entitled to cash, Common Stock or
rights thereto under this Plan, any such accounts shall be used merely as a
bookkeeping convenience. The Company shall not be required to seg-
regate any assets that may at any time be represented by cash, Common
Stock or rights thereto, nor shall this Plan be construed as providing for
such segregation, nor shall the Company nor the Board nor the Committee
be deemed to be a trustee of any cash, Common Stock or rights thereto to
be granted under this Plan. Any liability or obligation of the Company to
any Participant with respect to a grant of cash, Common Stock or rights
thereto under this Plan shall
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<PAGE>
be based solely upon any contractual
obligations that may be created by this Plan and any Award Agreement,
and no such liability or obligation of the Company shall be deemed to be
secured by any pledge or other encumbrance on any property of the
Company. Neither the Company nor the Board nor the Committee shall
be required to give any security or bond for the performance of any
obligation that may be created by this Plan.
17. Governing Law. This Plan and all determinations
made and actions taken pursuant hereto, to the extent not otherwise
governed by mandatory provisions of the Code or the securities laws of the
United States, shall be governed by and construed in accordance with the
laws of the State of Delaware.
18. Effective Date of Plan. This Plan shall be effective
as of the date (the "Effective Date") it is approved by the Board.
Notwithstanding the foregoing, this Plan is expressly conditioned upon the
approval by the holders of a majority of shares of Common Stock present,
or represented, and entitled to vote at a meeting of the Company's
shareholders held on or before July 1, 1996. If the shareholders of the
Company should fail so to approve this Plan prior to such date, this Plan
shall terminate and cease to be of any further force or effect and all grants
of Director Options and Awards hereunder shall be null and void.
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<PAGE>
POGO PRODUCING COMPANY
PROXY PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD TUESDAY, APRIL 23, 1996.
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 1996 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>
POGO PRODUCING COMPANY
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
1.ELECTION OF DIRECTORS For All
Nominees - W.M. Brumley, Jr., For Withheld Except
John B. Carter, Jr., / / / / / /
Frederick A. Klingenstein
and Paul G. Van Wagenen
2. APPROVAL OF THE 1995 LONG-TERM For Against Abstain
INCENTIVE PLAN as more fully / / / / / /
described in the accompanying
Proxy Statement.
3. APPROVAL OF THE APPOINTMENT OF For Against Abstain
- ----------------- ARTHUR ANDERSEN LLP as independent / / / / / /
Nominee Exception accountants, to audit the financial
statements of the Company for 1996.
ALL SHARES WILL BE VOTED AS DIRECTED HEREIN AND, UNLESS OTHERWISE DIRECTED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE PROPOSAL TO APPROVE THE
1995 LONG-TERM INCENTIVE PLAN AND FOR THE PROPOSAL TO APPROVE THE APPOINTMENT
OF ARTHUR ANDERSEN LLP TO AUDIT THE FINANCIAL STATEMENTS OF THE COMPANY FOR
1996.
The undersigned hereby acknowledges receipt of the
Notice of, and Proxy Statement for, the Annual
Meeting and the 1995 Annual Report to Stockholders of
Pogo Producing Company.
Dated: _______________________________________ , 1996
_____________________________________________________
Signature
_____________________________________________________
Signature
NOTE: Please sign exactly as your name appears on the
reverse side of this proxy. Joint owners should each
sign. Executors, Administrators, Trustees, etc.
should give their full title. Corporations should
sign with their full corporate name by an authorized
officer.
