def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o |
|
Preliminary Proxy Statement |
o |
|
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
þ |
|
Definitive Proxy Statement |
o |
|
Definitive Additional Materials |
o |
|
Soliciting Material Pursuant to §240.14a-12 |
El Paso Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ |
|
No fee required. |
o |
|
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
|
(1) |
|
Title of each class of securities to which transaction applies: |
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
Aggregate number of securities to which transaction 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: |
|
|
|
|
|
|
|
|
|
o |
|
Fee paid previously with preliminary materials. |
|
o |
|
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: |
|
|
|
|
|
|
|
|
|
Dear El Paso Stockholder:
We cordially invite you to attend our 2009 Annual Meeting of
Stockholders. The Annual Meeting will be held on Wednesday,
May 6, 2009, beginning at 9:00 a.m. (local/Central
time) at the Doubletree Hotel Houston Downtown, 400 Dallas
Street, Houston, Texas 77002.
At this years Annual Meeting, you will be asked to vote on
the election of 11 directors, an amendment and restatement
of our 2005 Omnibus Incentive Compensation Plan, an amendment
and restatement of our Employee Stock Purchase Plan, and the
ratification of Ernst & Young LLPs appointment
as our independent registered public accounting firm for 2009.
Our Chairman Ronald L. Kuehn, Jr., and board members
William H. Joyce and Joe B. Wyatt will be retiring from our
Board of Directors at this Annual Meeting pursuant to our
mandatory retirement age policy. We thank them for their
dedicated service to El Paso and wish them well.
We remain committed to providing transparent and fulsome
compensation disclosures in our proxy statement. To that end, in
addition to required disclosures, we have included in the
accompanying proxy statement individual executive profiles that
summarize the compensation earned or paid during 2008 to our
CEO, our CFO and our three other most highly compensated
executive officers. We believe these individual executive
profiles, which begin on page 25 of the proxy statement,
provide a clear and concise summary that is easy to understand.
In addition, we are pleased this year to take advantage of SEC
rules that allow companies to furnish their proxy materials over
the Internet. As a result, we are mailing to most of our
stockholders an Important Notice Regarding the Availability of
Proxy Materials (Notice) instead of a paper copy of
this proxy statement and our 2008 Annual Report on
Form 10-K.
The Notice contains instructions on how to access those
documents over the Internet. The Notice also contains
instructions on how to request a paper copy of our proxy
materials, including this proxy statement, our 2008 Annual
Report on
Form 10-K
and a form of proxy card. All stockholders who do not receive a
Notice will receive a paper copy of the proxy materials by mail.
We believe that this new process will allow us to provide our
stockholders with the information they need in an efficient,
cost-effective manner, while reducing the environmental impact
of printing and distributing proxy materials.
I urge you to vote for your Boards nominees, the two plan
restatements and the ratification of Ernst & Young
LLP. Your vote is important. I hope you will be able to attend
the annual meeting, but if you cannot, please vote your proxy as
soon as you can.
Sincerely,
Douglas L. Foshee
President and Chief Executive Officer
Houston, Texas
March 26, 2009
EL PASO
CORPORATION
1001 Louisiana Street
Houston, Texas 77002
NOTICE OF 2009 ANNUAL MEETING
OF STOCKHOLDERS
May 6, 2009
On May 6, 2009, El Paso Corporation will hold its 2009
Annual Meeting of Stockholders at the Doubletree Hotel Houston
Downtown, 400 Dallas Street, Houston, Texas 77002. The Annual
Meeting will begin at 9:00 a.m. (local/Central time).
Only El Paso stockholders who owned shares of our common
stock at the close of business on March 11, 2009, are
entitled to notice of, and can vote at, this Annual Meeting or
any adjournments or postponements that may take place. At the
Annual Meeting, you will be asked to take action and consider
proposals to:
|
|
|
|
1.
|
Elect 11 directors, each to hold office for a term of one
year;
|
|
|
2.
|
Approve the El Paso Corporation 2005 Omnibus Incentive
Compensation Plan, as amended and restated, to increase the
number of shares available for issuance by 12.5 million;
|
|
|
3.
|
Approve the El Paso Corporation Employee Stock Purchase
Plan, as amended and restated, to extend the term of the plan
until such time as no additional shares remain available for
purchase; and
|
|
|
4.
|
Ratify the appointment of Ernst & Young LLP as our
independent registered public accounting firm for the fiscal
year ending December 31, 2009.
|
These proposals are described in the attached proxy statement.
We will also attend to any other business properly presented at
the Annual Meeting. The Board of Directors is not aware of any
other matters to be presented at the Annual Meeting.
By Order of the Board of Directors
Marguerite N. Woung-Chapman
Corporate Secretary
Houston, Texas
March 26, 2009
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
2009 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 6,
2009
Our proxy statement for the 2009 Annual Meeting and our Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2008 are available
at www.proxyvote.com.
ATTENDING
THE MEETING
If you plan to attend the Annual Meeting in person and are a
stockholder of record, bring with you a form of
government-issued personal identification to the Annual Meeting.
If you own stock through a bank, broker or other nominee, you
will need proof of ownership as of the record date to attend the
Annual Meeting. If you are an authorized proxy holder, you must
present the proper documentation. Please see page 4 for
more information on what documents you will need for admission
to the Annual Meeting. Registration will begin at 8:00 a.m.
(local/Central time), and seating will be on a first come
first served basis. No cameras, recording equipment or
other electronic devices will be allowed in the meeting room. If
you do not provide photo identification or comply with the other
procedures outlined above upon request, you may not be admitted
to the Annual Meeting. In addition, please note parking is
not provided for the Annual Meeting. There is parking
generally available at the Doubletree Hotel Houston Downtown and
at other public parking garages around the Doubletree Hotel
Houston Downtown.
EL PASO
CORPORATION
PROXY STATEMENT
TABLE
OF CONTENTS
|
|
|
|
|
|
|
Page
|
|
|
Number
|
|
|
|
|
1
|
|
|
|
|
6
|
|
|
|
|
12
|
|
|
|
|
17
|
|
|
|
|
19
|
|
|
|
|
23
|
|
|
|
|
25
|
|
|
|
|
31
|
|
|
|
|
31
|
|
|
|
|
47
|
|
|
|
|
48
|
|
|
|
|
51
|
|
|
|
|
53
|
|
|
|
|
55
|
|
|
|
|
56
|
|
|
|
|
58
|
|
|
|
|
59
|
|
|
|
|
64
|
|
|
|
|
67
|
|
|
|
|
68
|
|
|
|
|
77
|
|
|
|
|
80
|
|
|
|
|
81
|
|
|
|
|
|
|
|
|
|
A-1
|
|
|
|
|
B-1
|
|
EL PASO
CORPORATION
1001 Louisiana Street
Houston, Texas 77002
PROXY
STATEMENT
2009
ANNUAL MEETING OF STOCKHOLDERS May 6,
2009
Our Board of Directors is furnishing you with this proxy
statement to solicit proxies on its behalf to be voted at the
2009 Annual Meeting of Stockholders of El Paso Corporation.
The Annual Meeting will be held at the Doubletree Hotel Houston
Downtown, 400 Dallas Street, Houston, Texas 77002, on Wednesday,
May 6, 2009, at 9:00 a.m. (local/Central time). The
proxies also may be voted at any adjournments or postponements
of the Annual Meeting.
In accordance with the Notice and Access rules
adopted by the U.S. Securities and Exchange Commission
(SEC), we have elected to provide access to our
proxy materials to our stockholders by providing access to such
documents on the Internet. Accordingly, on or about
March 26, 2009, an Important Notice Regarding the
Availability of Proxy Materials (Notice) will be
mailed to our stockholders of record. Stockholders will have the
ability to access the proxy materials on a website referred to
in the Notice or request a printed set of the proxy materials be
sent to them, by following the instructions on the Notice.
Unless stated otherwise or the context otherwise requires,
all references in this proxy statement to us,
we, our, company or
El Paso are to El Paso Corporation.
GENERAL
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Stockholders holding shares of El Pasos common stock,
par value $3.00 per share, as of the close of business on the
record date, March 11, 2009, and present in person or
represented by a properly executed proxy are entitled to vote at
the Annual Meeting, or any adjournments or postponements of the
Annual Meeting. You have one vote for each share of common stock
held as of the record date, which may be voted on each proposal
presented at the Annual Meeting.
|
|
2.
|
What is
the record date and what does it mean?
|
The record date for the Annual Meeting is March 11, 2009.
The record date was established by the Board of Directors as
required by our By-laws and Delaware law. Owners of record of
El Pasos common stock at the close of business on the
record date are entitled to:
|
|
|
|
|
Receive notice of the Annual Meeting; and
|
|
|
|
Vote at the Annual Meeting, and any adjournments or
postponements of the Annual Meeting.
|
|
|
3.
|
How many
shares of El Paso common stock were outstanding on the
record date?
|
There were 698,634,520 shares of common stock outstanding
and entitled to vote at the Annual Meeting at the close of
business on the record date. Common stock is the only class of
stock entitled to vote.
|
|
4.
|
Why did I
receive a Notice in the mail regarding the Internet availability
of proxy materials this year instead of a full set of proxy
materials?
|
This year, in connection with SEC rules that allow companies to
furnish their proxy materials over the Internet, we have sent to
most of our stockholders an Important Notice Regarding the
Availability of Proxy Materials instead of a paper copy of the
proxy materials. Instructions on how to access the proxy
materials over the Internet or to request a paper copy may be
found in the Notice. In addition, stockholders may request to
receive proxy materials in
1
printed form by mail or electronically by
e-mail on an
ongoing basis. A stockholders election to receive proxy
materials by mail or
e-mail will
remain in effect until the stockholder terminates the election.
|
|
5.
|
Why
didnt I receive a Notice in the mail regarding the
Internet availability of proxy materials?
|
We are providing stockholders who have previously requested to
receive paper copies of the proxy materials with paper copies of
the proxy materials instead of a Notice. If you would like to
reduce the costs incurred by us in mailing proxy materials, you
can consent to receiving all future proxy statements, proxy
cards and annual reports electronically via
e-mail or
the Internet. To sign up for electronic delivery, please follow
the instructions provided in your Notice, or if you received a
printed version of the proxy materials by mail, by following the
instructions provided with your proxy materials and on your
proxy card or voting instruction card to vote using the
Internet. When prompted, indicate that you agree to receive or
access stockholder communications electronically in the future.
|
|
6.
|
Can I
vote my shares by filling out and returning the
Notice?
|
No. The Notice will, however, provide instructions on how to
vote by Internet, by requesting and returning a paper proxy
card, or by submitting a ballot in person at the Annual Meeting.
|
|
7.
|
How can I
access the proxy materials over the Internet?
|
You can view the proxy materials for the Annual Meeting on the
Internet at www.proxyvote.com. Please have your 12 digit
control number available. Your 12 digit control number can be
found on your Notice. If you received a paper copy of your proxy
materials, your 12 digit control number can be found on your
proxy card or voting instruction form.
Our proxy materials are also available on our website at
www.elpaso.com.
You are voting on the following:
|
|
|
|
|
the election of 11 directors;
|
|
|
|
the approval of the El Paso Corporation 2005 Omnibus
Incentive Compensation Plan, as amended and restated;
|
|
|
|
the approval of the El Paso Corporation Employee Stock
Purchase Plan, as amended and restated; and
|
|
|
|
the ratification of the appointment of Ernst & Young
LLP as our independent registered public accounting firm for the
fiscal year ending December 31, 2009.
|
|
|
9.
|
How does
the Board recommend that I vote?
|
The Board recommends that you vote:
|
|
|
|
|
FOR each of the nominees for director;
|
|
|
|
FOR the approval of the El Paso Corporation 2005
Omnibus Incentive Compensation Plan, as amended and restated;
|
|
|
|
FOR the approval of the El Paso Corporation Employee
Stock Purchase Plan, as amended and restated; and
|
|
|
|
FOR the approval of the ratification of the appointment
of Ernst & Young LLP as our independent registered
public accounting firm for the fiscal year ending
December 31, 2009.
|
Your vote is very important regardless of the number of shares
you hold. The Board strongly encourages you to exercise your
right to vote as a stockholder of the company.
2
You may vote by any of the following methods:
|
|
|
|
|
By Telephone or Internet If you have
telephone or Internet access, you may submit your proxy vote by
following the instructions provided in the Notice, or if you
received a printed version of the proxy materials by mail, by
following the instructions provided with your proxy materials
and on your proxy card or voting instruction form.
|
|
|
|
By Mail You may submit your proxy vote by
mail by signing a proxy card if your shares are registered or,
for shares held beneficially in street name, by following the
voting instructions included by your broker, trustee or nominee,
and mailing it in the enclosed envelope. If you provide specific
voting instructions, your shares will be voted as you have
instructed.
|
|
|
|
In Person at the Annual Meeting If your
shares are registered directly in your name with our transfer
agent, Computershare Trust Company, N.A., you are considered,
with respect to those shares, the stockholder of record. As the
stockholder of record, you have the right to vote in person at
the Annual Meeting. If your shares are held in a brokerage
account or by another nominee or trustee, you are considered the
beneficial owner of shares held in street name. As the
beneficial owner, you are also invited to attend the Annual
Meeting. Since a beneficial owner is not the stockholder of
record, you may not vote these shares in person at the meeting
unless you obtain a legal proxy from your broker,
trustee or nominee that holds your shares, giving you the right
to vote the shares at the meeting. See question 18,
Who can attend the Annual Meeting? below for
additional information.
|
|
|
12.
|
If I vote
by telephone or Internet and received a proxy card in the mail,
do I need to return my proxy card?
|
No.
|
|
13.
|
Can I
change my vote?
|
If you are a stockholder of record, you may revoke your proxy at
any time before the voting polls are closed at the Annual
Meeting, by the following methods:
|
|
|
|
|
voting at a later time by telephone or Internet;
|
|
|
|
writing our Corporate Secretary, Marguerite N. Woung-Chapman,
El Paso Corporation, P.O. Box 2511, Houston,
Texas
77252-2511; or
|
|
|
|
giving notice of revocation to the Inspector of Election at the
Annual Meeting.
|
If you are a street name stockholder and you vote by proxy, you
may later revoke your proxy by informing the holder of record in
accordance with that entitys procedures.
|
|
14.
|
What
happens if I do not specify a choice for a proposal when
returning a proxy?
|
You should specify your choice for each proposal on your proxy
card or voting instruction form. Shares represented by proxies
will be voted in accordance with the instructions given by the
stockholders. If you are a registered stockholder and your proxy
card is signed and returned without voting instructions, it will
be voted according to the recommendation of the Board of
Directors. If you are a beneficial stockholder and fail to
provide voting instructions, your broker, bank or other holder
of record is permitted to vote your shares on the election of
directors and the ratification of Ernst & Young LLP as
our independent registered public accounting firm. However, the
record holder may not vote on the approval of our amended and
restated 2005 Omnibus Incentive Compensation Plan or amended and
restated Employee Stock Purchase Plan absent instructions from
you. Without your voting instructions on these proposals, a
broker non-vote will occur.
3
|
|
15.
|
What
happens if other matters come up at the Annual
Meeting?
|
The matters described in the notice of Annual Meeting are the
only matters we know of which will be voted on at the Annual
Meeting. If other matters are properly presented at the Annual
Meeting, the persons named in the enclosed proxy card or voting
instruction form will vote your shares according to their best
judgment.
|
|
16.
|
Who will
count the votes?
|
A representative of Broadridge, an independent tabulator
appointed by the Board of Directors, will count the votes and
act as the Inspector of Election. The Inspector of Election
shall have the authority to receive, inspect, electronically
tally and determine the validity of the proxies received.
A quorum is a majority of the aggregate voting power
of the outstanding shares of common stock and is required to
hold the Annual Meeting. A quorum is determined by counting
shares of common stock present in person at the Annual Meeting
or represented by proxy. If you submit a properly executed
proxy, you will be considered part of the quorum even if you
abstain from voting. Broker non-votes are treated as present for
the purpose of determining a quorum.
|
|
18.
|
Who can
attend the Annual Meeting?
|
Admission to the Annual Meeting is limited to stockholders of
El Paso, persons holding validly executed proxies from
stockholders who held El Paso common stock on
March 11, 2009, and invited guests of El Paso.
If you are a stockholder of El Paso, you must bring certain
documents with you in order to be admitted to the Annual
Meeting. The purpose of this requirement is to help us verify
that you are actually a stockholder of El Paso. Please read
the following rules carefully because they specify the documents
that you must bring with you to the Annual Meeting in order to
be admitted. The items that you must bring with you differ
depending upon whether you are a record holder or hold your
stock in street name.
Proof of ownership of El Paso stock must be shown at the
door. Failure to provide adequate proof that you were a
stockholder on the record date may prevent you from being
admitted to the Annual Meeting.
If you were a record holder of El Paso common stock on
March 11, 2009, then you must bring a valid
government-issued personal identification (such as a
drivers license or passport).
If a broker, bank, trustee or other nominee was the record
holder of your shares of El Paso common stock on
March 11, 2009, then you must bring:
|
|
|
|
|
Valid government-issued personal identification (such as a
drivers license or passport), and
|
|
|
|
Proof that you owned shares of El Paso common stock on
March 11, 2009.
|
Examples of proof of ownership include the following: (1) a
letter from your bank or broker stating that you owned
El Paso common stock on March 11, 2009; (2) a
brokerage account statement indicating that you owned
El Paso common stock on March 11, 2009; or
(3) the voting instruction form provided by your broker
indicating that you owned El Paso common stock on
March 11, 2009.
If you are a proxy holder for a stockholder of El Paso,
then you must bring:
|
|
|
|
|
The validly executed proxy naming you as the proxy holder,
signed by a stockholder of El Paso who owned shares of
El Paso common stock on March 11, 2009, and
|
|
|
|
Valid government-issued personal identification (such as a
drivers license or passport), and
|
|
|
|
If the stockholder whose proxy you hold was not a record holder
of El Paso common stock on March 11, 2009, proof
of the stockholders ownership of shares of El Paso
common stock on March 11, 2009, in the form of a
letter or statement from a bank, broker or other nominee
indicating that the stockholder owned El Paso common stock
on March 11, 2009.
|
You may not use cameras, recording equipment or other electronic
devices during the Annual Meeting.
4
|
|
19.
|
How many
votes must each proposal receive to be adopted?
|
|
|
|
|
|
With respect to the election of directors, our By-laws provide
for the election of directors by the majority vote of
stockholders in uncontested elections. This means the number of
votes cast for a nominees election must exceed the number
of votes cast against such nominees election in order for
him or her to be elected to the Board of Directors.
|
|
|
|
With respect to the approval of the amendment and restatement of
our 2005 Omnibus Incentive Compensation Plan, in order to
satisfy the listing standards of the New York Stock Exchange, or
NYSE, the total vote cast with respect to the proposal
concerning the omnibus plan must represent more than 50% of the
total number of shares entitled to vote on the proposal, and the
proposal must receive the affirmative vote of a majority of the
shares present in person or represented by proxy at the Annual
Meeting.
|
|
|
|
With respect to the approval of the amendment and restatement of
our Employee Stock Purchase Plan, in order to satisfy the
requirements of Section 423 of the Internal Revenue Code
and our By-laws, the proposal must receive the affirmative vote
of a majority of the shares present in person or represented by
proxy at the Annual Meeting.
|
|
|
|
With respect to the ratification of Ernst & Young LLP
as our independent registered public accounting firm for the
fiscal year ending December 31, 2009, the proposal must
receive the affirmative vote of a majority of the shares present
in person or represented by proxy at the Annual Meeting.
|
|
|
20.
|
How are
votes counted?
|
Votes are counted in accordance with our By-laws and Delaware
law. A broker non-vote or abstention will not be counted in
determining the election of directors. A broker non-vote or
abstention will be counted towards a quorum and as represented
at the meeting. Accordingly, a broker non-vote or abstention
will have the same effect as a vote against each of the
proposals other than the election of directors. Shares will not
be voted at the Annual Meeting if a properly executed proxy card
covering those shares has not been returned and the holder does
not cast votes in respect of those shares in person at the
Annual Meeting.
|
|
21.
|
How can I
view the stockholder list?
|
A complete list of the registered stockholders entitled to vote
at the Annual Meeting will be available to view during the
Annual Meeting. You may access this list at El Pasos
offices at 1001 Louisiana Street, Houston, Texas 77002
during ordinary business hours for a period of ten days before
the Annual Meeting.
|
|
22.
|
Who pays
for the proxy solicitation related to the Annual
Meeting?
|
We do. In addition to sending you or making available to you
these materials, some of our directors and officers as well as
management and non-management employees may contact you by
telephone, mail,
e-mail or in
person. You may also be solicited by means of press releases
issued by El Paso, postings on our website,
www.elpaso.com, and advertisements in periodicals. None
of our officers or employees will receive any extra compensation
for soliciting you. We have retained Georgeson Inc. to assist us
in soliciting your proxy for an estimated fee of $17,500, plus
reasonable out-of-pocket expenses. Georgeson will ask brokers
and other custodians and nominees whether other persons are
beneficial owners of El Paso common stock. If so, we will
supply them with the Notice or proxy materials for distribution
to the beneficial owners. We will also reimburse banks,
nominees, fiduciaries, brokers and other custodians for their
costs of sending the Notice or proxy materials to the beneficial
owners of El Paso common stock.
|
|
23.
|
If I want
to submit a stockholder proposal for the 2010 Annual Meeting,
when is it due?
|
If you want to submit a proposal for possible inclusion in next
years proxy statement, you must submit it in writing
to the Corporate Secretary, El Paso Corporation,
P.O. Box 2511, Houston, Texas
77252-2511,
telephone (713) 420-4018
and facsimile
(713) 420-4099.
El Paso must receive your proposal on or before
November 26, 2009. El Paso will consider only
proposals meeting the requirements of the applicable rules of
the SEC.
5
Additionally, under our By-laws, for a stockholder to bring any
matter before the 2010 Annual Meeting that is not included in
the 2010 Proxy Statement, the stockholders written notice
must be received not less than 90 days nor more than
120 days prior to the first anniversary of the 2009 Annual
Meeting. Under this criterion, stockholders must provide us with
a notice of a matter to be brought before the 2010 Annual
Meeting during the period from January 6, 2010 to
February 5, 2010.
If the 2010 Annual Meeting is held more than 30 days before
or 60 days after May 6, 2010, for a stockholder
seeking to bring any matter before the 2010 Annual Meeting, the
stockholders written notice must be received not less than
90 days nor more than 120 days before the date of the
2010 Annual Meeting or by the tenth day after we publicly
announce the date of the 2010 Annual Meeting, if that would
result in a later deadline.
|
|
24.
|
How can I
obtain a copy of the Annual Report on
Form 10-K?
|
As set forth on the Notice, you may receive a hardcopy of proxy
materials, including the Annual Report on
Form 10-K,
by following the directions set forth on the Notice. The Annual
Report on
Form 10-K
is also available at on our website at www.elpaso.com.
CORPORATE
GOVERNANCE
We are committed to maintaining the highest standards of
corporate governance. We believe that strong corporate
governance is critical to achieving our performance goals, and
to maintaining the trust and confidence of investors, employees,
suppliers, business partners, customers, regulatory agencies and
other stakeholders.
Corporate Governance Guidelines. Our Corporate
Governance Guidelines, together with the Board committee
charters, provide the framework for the effective governance of
El Paso. The Board of Directors has adopted our Corporate
Governance Guidelines to address matters including
qualifications for directors, standards for independence of
directors, election of directors, responsibilities of directors,
mandatory retirement for directors, limitation on serving on
other boards/committees, the composition and responsibility of
committees, conduct and minimum frequency of Board and committee
meetings, management succession, director access to management
and outside advisors, director compensation, stock ownership
requirements, prohibition on hedging company stock, director
orientation and continuing education, annual self-evaluation of
the Board, its committees and directors and our policy on poison
pills. The Board of Directors recognizes that effective
corporate governance is an on-going process, and the Board,
either directly or through the Governance & Nominating
Committee, will review and revise as necessary our Corporate
Governance Guidelines annually, or more frequently if deemed
necessary. Our Corporate Governance Guidelines may be found on
our website at www.elpaso.com.
Independence of Board Members. Our Corporate
Governance Guidelines require that a majority of our Board of
Directors meet the independence requirements of the
NYSE listing requirements and at least 75 percent of our
Board of Directors must not be from current management. The
Board of Directors observes and complies with all criteria for
independence established by the NYSE listing requirements and
other governing laws and regulations. The Board of Directors
makes its determination of the independence of its members based
on categorical standards it has adopted to assist in its
assessment of the independence of each director. The categorical
standards adopted by the Board of Directors are consistent with
the NYSE listing requirements and provide that a director, in
order to be considered independent, must not have a direct or
indirect material relationship with us or our management other
than as a director. The standards of independence adopted by the
Board are contained in our Corporate Governance Guidelines,
which may be found on our website at www.elpaso.com.
The Board has affirmatively determined that each of our
directors, with the exception of our President and Chief
Executive Officer (CEO) Douglas L. Foshee, meet the
standards of independence adopted by the Board and are
independent. Among other things, the Board has
reviewed all of the payments received by Mr. Kuehn during
2008 (as reflected in the Director Compensation table on
page 66 of this proxy statement) and has determined that
none of these payments affects his independence on the Board
because the payments received by him related to either his
service on the Board, or other benefits Mr. Kuehn is
entitled to pursuant to his termination and consulting agreement
that was entered into as part of the merger with Sonat Inc. in
1999 and which are not dependent upon his
6
continued service on the Board. The Board also reviewed each
directors commercial and charitable relationships and
determined that, with the exception of Mr. Foshees
service as our President and CEO, none of these relationships
affect the independence of the individual directors. Thus, 13 of
our 14 current directors, and 10 of our 11 director
nominees, are independent. Further, our Audit, Compensation,
Governance & Nominating, Finance and Health,
Safety & Environmental Committees are composed
entirely of independent directors.
Audit Committee Financial Expert. The Audit
Committee plays an important role in promoting effective
accounting, financial reporting, risk management and compliance
procedures and controls. All members of our Audit Committee meet
the financial literacy standard required by the NYSE rules and
at least one member qualifies as having accounting or related
financial management expertise under the NYSE rules. In
addition, the Board of Directors has affirmatively determined
that Messrs. Hix (chairman of our Audit Committee), Goldman
and Shapiro are audit committee financial experts.
Chairman/Lead Director. Mr. Kuehn
currently serves as the Chairman of our Board of Directors in a
non-executive capacity. As the Chairman of the Board of
Directors, Mr. Kuehn has a number of responsibilities,
which include setting board meeting agendas in collaboration
with the CEO, presiding at Board meetings, executive sessions
and the annual stockholders meeting, assigning tasks to
the appropriate committees, and ensuring that information flows
openly between management and the Board. However, on May 6,
2009, Mr. Kuehn will be retiring from our Board of
Directors.
Mr. Kuehn served as the Lead Director of the Board from
September 2002 to March 2003. In March 2003, Mr. Kuehn
assumed the role of Chairman and interim CEO until Douglas L.
Foshee joined El Paso as President, CEO and a director in
September 2003. Mr. Foshee arrived at a seminal time in
El Pasos history. An acrimonious proxy battle had
only recently ended and Mr. Foshee was charged with leading
an aggressive turnaround plan to reorganize the company around
its two key businesses pipelines and exploration and
production and return the company to growth and
profitability. During that period of time to the present,
Mr. Kuehn continued to serve as Chairman and
Mr. Foshee was able to devote 100 percent of his time
to achieving the turnaround.
Following our Annual Meeting on May 6, 2009, the Board
intends to elect Mr. Foshee to succeed Mr. Kuehn as
Chairman. Mr. Foshee will also continue to serve as our
President and CEO. In determining that Mr. Foshee was the
appropriate person to serve in the combined role of Chairman and
CEO, the Board relied on several important measures. First,
Mr. Foshees leadership, integrity and vision have
been instrumental in the successful execution of
El Pasos turnaround and its continued strong
performance, despite challenging economic conditions. Second,
Mr. Foshee has the confidence of the Board, the company and
its stockholders. Third, the Boards performance and
El Pasos corporate governance have flourished since
Mr. Foshees arrival. Fourth and most importantly, the
Board believes that Mr. Foshee has the ability to execute
on both the companys short-term and long-term strategies
necessary for the challenging marketplace in which the company
competes.
While these measures were important, the Board would not have
considered combining the roles of Chairman and CEO if it did not
firmly believe that El Paso has in place sound
counter-balancing mechanisms to ensure that the company
maintains the highest standards of corporate governance and
continued accountability of the CEO to the Board. These
counter-balancing mechanisms include:
|
|
|
|
|
A super-majority of independent directors on the Board, which
super-majority will be maintained.
|
|
|
|
The Board will designate an independent Lead Director, effective
upon Mr. Foshees election as Chairman, who will be
directly available to address any stockholder inquiries. It is
the Boards intent to designate J. Michael Talbert as
Lead Director. Mr. Talbert has been a member of our Board
since 2003 and until 2007, served as non-executive Chairman of
the Board of Transocean Inc. Mr. Talbert has been a strong
and influential addition to the Board and played an integral
role in promoting robustness and confidence in the Boards
execution of its responsibilities. As detailed below in how the
roles will interact, Mr. Talberts responsibilities as
Lead Director and advisory role to Mr. Foshee will
complement Mr. Foshees role as Chairman and CEO while
providing the necessary checks and balances to hold both the
Board and the Chairman/CEO accountable in their respective roles.
|
|
|
|
Each of the Boards standing committees, including the
Audit, Compensation, Governance & Nominating, Finance
and Health, Safety & Environmental Committees, are
comprised of and chaired solely by
|
7
|
|
|
|
|
non-employee
directors who meet the independence requirements under the NYSE
listing standards and other governing laws and regulations.
|
|
|
|
|
|
Review and determination of Mr. Foshees compensation
and performance will remain within the purview of the
Compensation Committee.
|
|
|
|
The independent directors will continue to meet in regular
executive sessions without management present to discuss the
effectiveness of the companys management, the quality of
the Board meetings and any other issues and concerns.
|
|
|
|
The Board will provide continued oversight of succession
planning.
|
As stated in our Corporate Governance Guidelines, the Board does
not have a policy as to whether the role of the CEO and the
Chairman should be separate, or whether the Chairman should be a
management or non-management director. Thus, while the Board has
determined that Mr. Foshee will serve in the combined role
of Chairman and CEO, the Board has the right to separate those
roles if in the future it determines that such a separation
would be in the best interest of the company and its
stockholders.
Below is a summary of the respective responsibilities of the
Chairman/CEO and the Lead Director.
|
|
|
|
|
|
|
|
Chairman/CEO
|
|
|
Lead Director
|
|
|
|
|
|
|
|
|
Calls meetings of the Board and the
stockholders
|
|
|
Calls meetings of the Board or executive
sessions with the independent directors
|
|
|
|
|
Chairs meetings of the Board and the
annual meeting of stockholders
|
|
|
Chairs meetings of the Board and the
annual meeting of stockholders when the Chairman is unavailable
|
|
|
|
Chairs meetings of the Board when there
is a potential conflict of interest with the Chairman on issues
to be considered
|
|
|
|
Chairs executive sessions of the
independent directors
|
|
|
|
|
Establishes Board meeting schedules and
agendas
|
|
|
Coordinates with the Chairman to ensure
that meeting schedules allow sufficient time for discussion of
all agenda items and agendas cover all items necessary for the
Board to discharge its responsibilities
|
|
|
|
Establishes agendas for executive
sessions
|
|
|
|
|
Ensures that information provided to the
Board is sufficient for the Board to fulfill its primary
responsibilities
|
|
|
Provides input to the Chairman on the
scope, quality, quantity and timeliness of the information
provided to the Board
|
|
|
|
|
Communicates with all directors on key
issues and concerns outside of Board meetings
|
|
|
Serves as a non-exclusive conduit to the
Chairman of views and concerns of the independent directors
|
|
|
|
|
With Lead Director, jointly recommends
Committee Chair positions to full Board and the Governance
Committee
|
|
|
With Chairman, jointly recommends
Committee Chair positions to full Board and the Governance
Committee
|
|
|
|
|
8
|
|
|
|
|
|
|
|
Chairman/CEO
|
|
|
Lead Director
|
|
|
|
|
|
|
|
|
In conjunction with the
Governance & Nominating Committee, ensures that the
Board is balanced in composition and structure and leads Board
recruitment efforts
|
|
|
Collaborates with the Chairman and the
Governance Committee in monitoring the composition and structure
of the Board and assists in Board recruitment efforts
|
|
|
|
|
Oversees compliance with the
Companys governance principles
|
|
|
Collaborates with the Governance &
Nominating Committee on questions of possible conflicts of
interest or breaches of the Companys governance principles
by other directors, including the Chairman
|
|
|
|
|
Represents the Company to and interacts
with external stakeholders and employees
|
|
|
Is available for consultation and direct
communication with stockholders and interested parties
|
|
|
|
|
Leads the Board review of management
succession and development plans
|
|
|
Leads the executive sessions of the
independent directors on management succession and development
plans and provides feedback to the Chairman/CEO
|
|
|
|
Oversees the process of hiring or firing
a CEO including any compensation arrangements
|
|
|
|
Recommends to the Board the retention of
outside advisors who report directly to the Board
|
|
|
|
Participates with the Compensation
Committee Chair in communicating performance feedback and
compensation decisions to the CEO
|
|
|
|
|
Communications with Chairman/Lead
Director. Interested parties may communicate
directly with Mr. Kuehn, or following his retirement, with
Mr. Talbert, by writing to Chairman/Lead Director of the
Board,
c/o Corporate
Secretary, El Paso Corporation, P.O. Box 2511,
Houston, Texas
77252-2511,
facsimile
(713) 420-4099.
Executive Sessions of the Board of
Directors. The Board of Directors holds regular
executive sessions in which non-management Board members meet
without any members of management present. Currently,
Mr. Kuehn presides over the executive sessions of the
Board. Upon Mr. Kuehns retirement in May 2009, the
Lead Director will preside over the executive sessions. During
2008, non-management members of the Board met in executive
session five times and several Committees of the Board met in
executive session without members of management present. The
purpose of these executive sessions is to promote open and
candid discussion among the non-management directors.
Committees of the Board of Directors. The
Board of Directors has adopted charters for the Audit Committee,
the Compensation Committee and the Governance &
Nominating Committee that comply with the corporate governance
rules adopted by the SEC pursuant to the Sarbanes-Oxley Act of
2002 and the NYSE listing standards. The Audit Committee, the
Compensation Committee, the Governance & Nominating
Committee, the Finance Committee and the Health,
Safety & Environmental Committee charters may be found
on our website at www.elpaso.com.
Board/Committee/Director Evaluations. Each
year the Board of Directors and each Board committee
participates in a self-assessment or evaluation of the
effectiveness of the Board and its committees. At least once
every three years, the Board conducts an evaluation of each
individual director. During 2008, each director participated in
a self-assessment of the Board and its committees. The results
of these assessments were compiled and presented to the Board
and the respective committees for discussion and, if necessary,
action.
9
Management Succession. The Board periodically
reviews with the CEO the management succession and development
plan which includes the succession of the CEO in the event of an
emergency or retirement, as well as the succession of other
employees critical to our companys continued operations
and success.
Director Education. We encourage and
facilitate director participation in seminars and conferences
and other opportunities for continuing director education. All
of our directors are required to attend, at least once every two
years, a continuing educational program, seminar or conference
designed for board members. In addition, each of our directors
is a member of the National Association of Corporate Directors.
Each of our directors has met the continuing director education
requirements specified above.
Stock Ownership Requirements. Our Board of
Directors is committed to director and senior management stock
ownership. Directors are required to own shares of our common
stock with a value of five times the annual cash retainer paid
to non-employee directors within a five-year time period
following initial election to the Board. The Board also requires
that our CEO own shares of our common stock with a value of at
least five times his or her annual base salary, and that other
executive officers own shares of our common stock with a value
of at least two times their base salary within a five-year time
period following initial election to that position. Each share
of common stock owned by a director or executive officer is
deemed to have a value equal to the greater of (i) the
trading price of our common stock as of the date the applicable
share was acquired by the director or executive officer or
(ii) the trading price of the share of common stock as of
the measurement date. Shares of restricted stock, deferred
shares and shares in our retirement savings plan or other
similar plans are counted towards meeting these requirements.
Additionally, a director or executive officer is deemed to own
shares of common stock with a value equal to the in-the-money
value, if any, of any vested or unvested stock option, stock
appreciation right, or similar equity-linked grant that is held
by the director or executive officer on any given measurement
date. Each of our executive officers and non-employee directors
met the stock ownership requirements as of December 31,
2008.
Voting Standard to Elect Directors. Our
By-laws provide for the election of directors by the majority
vote of stockholders in uncontested elections. This means the
number of votes cast for a nominees election must exceed
the number of votes cast against such nominees election in
order for him or her to be elected to the Board of Directors.
Our By-laws provide for the election of directors by the
plurality of votes cast in contested elections. This means that
in elections where the number of nominees exceeds the number of
directors to be elected, the nominees who receive the highest
number of votes will be elected to the Board of Directors. In
addition, our Corporate Governance Guidelines provide that the
Board will nominate for election or appoint to Board vacancies
only candidates who irrevocably agree to resign if they fail to
receive the required majority vote in uncontested elections. In
the event a director fails to receive a majority of votes cast
and the Board accepts the resignation tendered, then that
director would cease to be a director of El Paso. In
accordance with our Corporate Governance Guidelines, our By-laws
require as a part of a stockholders written notice in
connection with the nomination of a director, a statement
whether the nominated individual intends to tender an
irrevocable resignation effective upon such persons
failure to receive the required vote for re-election at the next
meeting at which such person would face re-election. Each of our
directors has submitted an irrevocable letter of resignation
that becomes effective in the event he or she does not receive a
majority of votes cast for his or her election.
Policy on Poison Pill Plans. Our Corporate
Governance Guidelines include a policy on poison pills, or
stockholder rights plans. We do not currently have in place a
stockholders rights plan, and the Board currently has no plans
to adopt such a plan. However, if the Board is presented with a
set of facts and circumstances which leads it to conclude that
adopting a stockholder rights plan would be in the best
interests of stockholders, the Board will seek prior stockholder
approval unless the Board, in exercising its fiduciary
responsibilities under the circumstances, determines by vote of
a majority of the independent directors that such submission
would not be in the best interests of our stockholders in the
circumstances. If the Board were ever to adopt a stockholder
rights plan without prior stockholder approval, the Board would
present such plan to the stockholders for ratification within
one year or cause it to expire within one year, without being
renewed or replaced. Further, if the Board adopts a stockholder
rights plan and our stockholders do not approve such plan, it
will terminate.
Code of Ethics. We have adopted a code of
ethics, referred to as our Code of Business Conduct,
that applies to all of our directors and employees, including
our CEO, Chief Financial Officer (CFO) and senior
financial and accounting officers. Our Code of Business Conduct
is a value-based code that is built on our five core values:
10
stewardship, integrity, safety, accountability and excellence.
In addition to other matters, our Code of Business Conduct
establishes policies to deter wrongdoing and to promote honest
and ethical conduct, including ethical handling of actual or
apparent conflicts of interest, compliance with applicable laws,
rules and regulations, full, fair, accurate, timely and
understandable disclosure in public communications and prompt
internal reporting of violations of our Code of Business
Conduct. We also have an Ethics & Compliance Office
and Ethics & Compliance Committee, which is composed
of members of senior management, that administers our ethics and
compliance program and reports to the Audit Committee of our
Board of Directors. A copy of our Code of Business Conduct is
available on our website at www.elpaso.com. We will post
on our internet website all waivers to or amendments of our Code
of Business Conduct, which are required to be disclosed by
applicable law and the NYSE listing standards. Currently, we do
not have nor do we anticipate any waivers of or amendments to
our Code of Business Conduct. We believe our Code of Business
Conduct exceeds the requirements set forth in the applicable SEC
regulations and the corporate governance rules of the NYSE.
Transactions with Related Persons. Our Board
has adopted a written related person transactions policy. The
policy defines a related person transaction as one in which
El Paso is a participant, the amount involved equals or
exceeds $120,000, and a related person has a direct or indirect
material interest. The policy defines a related person as any
executive officer, director or director nominee, person known to
be the beneficial owner of 5 percent or more of
El Pasos voting securities, immediate family member
of any of the foregoing persons, or firm or corporation in which
any of the foregoing persons is employed as an officer, a
partner or greater than 10 percent owner.
The policy includes procedures to review and approve, as
necessary, any related person transactions prior to the
transaction being entered into, or ratify any related person
transactions that have not been previously approved. Other than
certain pre-approved transactions specifically set forth in the
policy, any related person transaction involving executive
officers or their immediate family members other than the CEO or
the general counsel are referred to the CEO and general counsel
for approval. If the CEO and the general counsel cannot agree on
the approval or non-approval of the related person transaction,
the transaction will be referred to the Governance &
Nominating Committee for approval. Any related person
transaction involving the general counsel and his or her
immediate family members will be referred to the CEO for
approval. Any related person transaction involving
5 percent stockholders, directors, director nominees or the
CEO and their immediate family members will be referred to the
Governance & Nominating Committee for approval. All
determinations made by the CEO and the general counsel are
reported to the Governance & Nominating Committee at
its next regularly scheduled meeting.
In determining whether to approve a related person transaction,
the CEO, general counsel or Governance & Nominating
Committee will consider whether:
|
|
|
|
|
the terms of the transaction are fair to El Paso and would
be on the same basis if the transaction did not involve a
related person,
|
|
|
|
there are business reasons to enter into the transaction,
|
|
|
|
the transaction would impair the independence of an outside
director,
|
|
|
|
the transaction would present an improper conflict of interest
for any director or executive officer, and
|
|
|
|
the transaction is material.
|
The policy for approval of related person transactions can be
found on our website at www.elpaso.com.
During 2008, we did not enter into, and we do not currently
propose entering into, any transactions with related persons
required to be disclosed under SEC regulations.
Special Stockholder Meetings. Our By-laws
permit stockholders who own at least 25 percent of our
outstanding shares to call a special meeting of stockholders.
Web Access. We provide access through our
website to current information relating to corporate governance,
including a copy of each of the Boards standing committee
charters, our Corporate Governance Guidelines, our Code of
Business Conduct, our Restated Certificate of Incorporation and
By-laws, our policy for approval of related person transactions,
biographical information concerning each director, and other
matters regarding our corporate governance principles. We also
provide access through our website to all filings submitted by
El Paso to the SEC.
11
Our website is www.elpaso.com, and access to this
information is free of any charge to the user (except for any
internet provider or telephone charges). Copies will also be
provided to any person upon request. Such requests should be in
writing, addressed to El Paso Corporation,
c/o Ms. Marguerite
Woung-Chapman, Corporate Secretary, P.O. Box 2511,
Houston, TX 77252. Information contained on our website is not
part of this proxy statement.
Process for Communication with the Board. Our
Board has established a process for interested parties to
communicate with the Board. Such communications should be in
writing, addressed to the Board or an individual director,
c/o Ms. Marguerite
N. Woung-Chapman, Corporate Secretary, El Paso Corporation,
P.O. Box 2511, Houston, Texas
77252-2511.
The Corporate Secretary will forward all communications to the
addressee.
Director Attendance at Annual Meeting. The
Board encourages all director nominees standing for election to
attend the Annual Meeting in accordance with our Corporate
Governance Guidelines. All incumbent directors who were elected
at our 2008 Annual Meeting attended our 2008 Annual Meeting of
Stockholders.
INFORMATION
ABOUT THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held nine meetings during 2008. Each
director, with the exception of Mr. Vagt, attended at least
75 percent of his or her board and committee meetings.
Mr. Vagt was unable to attend certain board and committee
meetings due to scheduling conflicts associated with his
appointment as President of The Heinz Endowments in January
2008, which appointment occurred after our 2008 board meeting
dates had been selected. Prior to 2008, Mr. Vagt attended
52 of 54 of his board and committee meetings since his
appointment to our Board in 2005. Scheduling conflicts with
respect to his responsibilities as President of The Heinz
Endowments are not expected to occur in 2009.
The Board of Directors has established five standing committees
to assist the Board in carrying out its duties: the Audit
Committee, the Compensation Committee, the
Governance & Nominating Committee, the Finance
Committee and the Health, Safety & Environmental
Committee. We describe the committees, their membership during
2008 and their principal responsibilities below.
|
|
|
|
|
|
|
|
|
|
|
|
|
Governance &
|
|
|
|
Health, Safety &
|
Audit
|
|
Compensation
|
|
Nominating
|
|
Finance
|
|
Environmental
|
|
Thomas R. Hix
|
|
Steven J. Shapiro
|
|
Anthony W. Hall, Jr.
|
|
Robert W. Goldman
|
|
John Whitmire
|
(Chairman)
|
|
(Chairman)
|
|
(Chairman)
|
|
(Chairman)
|
|
(Chairman)
|
Juan Carlos Braniff
|
|
James L. Dunlap
|
|
James L. Dunlap
|
|
Juan Carlos Braniff
|
|
Anthony W. Hall, Jr.
|
Robert W. Goldman
|
|
William H. Joyce
|
|
Robert F. Vagt
|
|
Thomas R. Hix
|
|
William H. Joyce
|
Steven J. Shapiro
|
|
Ferrell P. McClean
|
|
Joe B. Wyatt
|
|
Ferrell P. McClean
|
|
J. Michael Talbert
|
John Whitmire
|
|
J. Michael Talbert
|
|
|
|
Robert F. Vagt
|
|
|
|
|
Joe B. Wyatt
|
|
|
|
|
|
|
Audit
Committee
The Audit Committee held nine meetings during 2008. The Audit
Committee currently consists of five
non-employee
directors, each of whom the Board has determined is
independent as such term is defined in
Section 10A of the Exchange Act, the SEC rules thereunder,
the NYSE listing standards and our Corporate Governance
Guidelines. The Board of Directors has determined that each
member of the Audit Committee possesses the necessary level of
financial literacy required to enable him or her to serve
effectively as an Audit Committee member. No Audit Committee
member serves on more than three audit committees of public
companies, including our Audit Committee. We maintain an
Internal Audit Department to provide management and the Audit
Committee with ongoing assessments of our risk management
processes and system of internal controls. In addition, we
maintain a Financial Controls Group to manage our internal
control over financial reporting compliance activities. The
Audit Committees duties, which are discussed in detail in
its charter, include, among other duties:
|
|
|
|
|
Assisting the Board of Directors in fulfilling its
responsibilities with respect to the oversight of:
|
|
|
|
|
-
|
the integrity of our financial statements;
|
12
|
|
|
|
-
|
our disclosure controls and procedures and internal control over
financial reporting;
|
|
|
-
|
the evaluation and retention, including a review of the
qualifications, independence and performance, of independent
auditors and any independent petroleum reserves engineer;
|
|
|
-
|
the performance of our internal audit and ethics and compliance
functions;
|
|
|
-
|
our compliance with legal and regulatory requirements and our
Code of Business Conduct; and
|
|
|
-
|
our risk management policies and procedures.
|
|
|
|
|
|
The appointment, compensation, retention, oversight and
dismissal of our independent auditor or any other accounting
firm engaged for the purpose of preparing or issuing an audit
report or related work, or performing other audit, review or
attestation services.
|
|
|
|
The pre-approval of all auditing services and fees and, for our
principal auditor, allowable non-audit (including tax) services
and fees provided to us.
|
|
|
|
The resolution of any disagreement between management and our
independent auditor regarding financial reporting or audit
matters.
|
|
|
|
The appointment, compensation, retention, oversight and
dismissal of any independent petroleum reserves engineer engaged
for the purpose of reviewing, preparing or auditing an estimate
of our natural gas and oil reserves.
|
|
|
|
The review of procedures for the receipt, retention and
treatment of complaints received by us regarding any accounting,
internal accounting controls or auditing matters.
|
Our principal independent auditor, Ernst & Young LLP,
reports directly to the Audit Committee. In addition, the Audit
Committee provides an open avenue of communication between the
internal auditors, the independent auditor and the Board.
Interested parties may contact the Audit Committee members by
following the process outlined in the Corporate Governance
section of this proxy statement.
The Audit Committee Charter can be found on our website at
www.elpaso.com.
Policy
for Approval of Audit and Non-Audit Fees
During 2008, the Audit Committee approved all the types of audit
and permitted non-audit services which our independent auditors
were to perform during the year, as required under applicable
law, and the cap on fees for each of these categories. The Audit
Committees current practice is to consider for
pre-approval annually all categories of audit and permitted
non-audit services proposed to be provided by our independent
auditors for a fiscal year.
Pre-approval
of tax services requires that the principal independent auditor
provide the Audit Committee with written documentation of the
scope and fee structure of the proposed tax services and discuss
with the Audit Committee the potential effects, if any, of
providing such services on the independent auditors
independence. The Audit Committee will also consider for
pre-approval annually the maximum amount of fees and the manner
in which the fees are determined for each type of pre-approved
audit and non-audit services proposed to be provided by our
independent auditors for the fiscal year. The Audit Committee
must separately pre-approve any service that is not included in
the approved list of services or any proposed services exceeding
pre-approved cost levels. The Audit Committee has delegated
pre-approval authority to the Chairman of the Audit Committee
for services that need to be addressed between Audit Committee
meetings. The Audit Committee is then informed of these
pre-approval decisions, if any, at the next meeting of the Audit
Committee. See Principal Accountant Fees and
Services on page 80 of this proxy statement for the
aggregate fees paid to Ernst & Young LLP for the years
ended December 31, 2008 and 2007.
Compensation
Committee
The Compensation Committee held four meetings during 2008. The
Compensation Committee currently consists of six non-employee
directors, each of whom the Board has determined is
independent under (a) the NYSE listing
standards, (b) the non-employee director standards of
Rule 16b-3
of the Exchange Act, (c) the outside
13
director requirements of Section 162(m) of the Internal
Revenue Code (the Code) and (d) our Corporate
Governance Guidelines.
The Compensation Committees functions, which are discussed
in detail in its charter, include, among other functions,
responsibility to:
|
|
|
|
|
Review and approve annually the individual elements of total
compensation for the CEO, review and approve the corporate goals
and objectives relevant to CEO compensation, evaluate the
CEOs performance in light of those goals and objectives,
and determine and approve the CEOs compensation level
based on this evaluation.
|
|
|
|
Review and approve annually the individual elements of total
compensation for all executive officers, which includes all
officers who are subject to Section 16(a) of the Exchange
Act.
|
|
|
|
Review appropriate criteria for establishing performance targets
and determining annual corporate and executive performance
ratings.
|
|
|
|
Ensure that our executive long-term and short-term incentive
compensation programs are administered in accordance with our
stated compensation objectives and make recommendations with
respect to such programs, where appropriate, for full Board
approval.
|
|
|
|
Review our employee benefit and compensation programs (including
all new equity-based compensation programs) and consider
management recommendations subject, where appropriate, to
stockholder or full Board approval.
|
|
|
|
Review and approve goals and objectives relevant to director
compensation, including annual retainer and meeting fees, and
terms and awards of equity compensation, and recommend changes,
where appropriate, for full Board approval.
|
|
|
|
Select, retain, evaluate, and, where appropriate, replace the
independent executive compensation consulting firm, and review
all related fees.
|
The Compensation Committee Charter can be found on our website
at www.elpaso.com.
At the beginning of each calendar year, the Compensation
Committee approves our corporate and business unit financial and
non-financial performance goals. The Compensation Committee also
establishes the annual base salaries and minimum, target, and
maximum annual cash incentive bonus levels for each of the
executive officers. After the financial and non-financial
results are available for the year, the Compensation Committee
determines the appropriate achievement level of the performance
goals for purposes of determining annual cash incentive bonuses
and long-term incentive award grants. The Compensation Committee
also takes into account the executives individual
performances to determine the amount of each executives
annual cash incentive bonus and the value of his or her
long-term incentive awards. The Compensation Committee also
considers recommendations from our CEO regarding the
compensation levels for those executives reporting directly to
him. During the year, the Compensation Committee generally meets
at least four times and reviews, among other things, our
compensation programs and recommended changes, our peer group,
proxy and survey benchmarking data, internal pay disparity
trends, wealth accumulation, total compensation profiles for our
CEO and other executive officers, CEO accountabilities and the
general compensation landscape.
See the Compensation Discussion and Analysis beginning on
page 31 of this proxy statement for a further discussion of
our procedures for determining and establishing executive
compensation, including the Compensation Committees
engagement of an independent executive compensation consultant,
and the role of management in determining executive compensation.
Compensation
Committee Interlocks and Insider Participation
During 2008, the following independent directors served on our
Compensation Committee: Messrs. Dunlap, Joyce, Shapiro,
Talbert and Wyatt and Ms. McClean. The Compensation
Committee has neither interlocks nor insider participation.
14
Governance &
Nominating Committee
The Governance & Nominating Committee met five times
during 2008. The Governance & Nominating Committee
currently consists of four non-employee directors, each of whom
the Board has determined is independent as such term
is defined in the NYSE listing standards and our Corporate
Governance Guidelines. The Board has delegated to the
Governance & Nominating Committee its oversight
responsibilities relating to corporate governance and the
establishment of criteria for Board selection (including an
initial determination regarding director independence).
The Governance & Nominating Committees
functions, which are discussed in detail in its charter,
include, among other functions, responsibility to:
|
|
|
|
|
Develop and recommend to the Board corporate governance
principles and review and make recommendations regarding the
Corporate Governance Guidelines.
|
|
|
|
Identify and review the qualifications of candidates for Board
membership, screen possible candidates for Board membership and
communicate with members of the Board regarding Board meeting
format and procedures.
|
|
|
|
Determine desired qualifications, expertise and characteristics
and, to the extent the Governance & Nominating
Committee deems necessary, conduct searches for potential
candidates for Board membership with such attributes.
|
|
|
|
Ensure that we have an appropriate policy on potential conflicts
of interest, including, but not limited to, the policies on
(1) related person transactions (including any dealings
with directors, officers or employees), and (2) such other
transactions that could have the appearance of a potential
conflict of interest.
|
|
|
|
Monitor and report to the Board whether there is any current
relationship between any director and El Paso that may
adversely affect the independent judgment of the director.
|
|
|
|
Oversee the process of annual performance evaluations for the
Board, each committee and directors.
|
|
|
|
Act as a nominating committee and consider any nominations
properly submitted by the stockholders to the Corporate
Secretary in accordance with our Corporate Governance
Guidelines, our By-laws and the process set forth in this proxy
statement.
|
|
|
|
Review and make recommendations to the Board of Directors as to
the chairpersons and members of each committee of the Board
(other than the Governance & Nominating Committee).
|
The Governance & Nominating Committee Charter can be
found on our website at www.elpaso.com.
Director
Nomination Process
The Governance & Nominating Committee will review any
nominations from stockholders, other Board members, third party
search firms, executives and other such persons. At a minimum,
we believe our directors, whether nominated by stockholders or
by the Board, should possess the education, experience and
skills necessary to assist and provide oversight to our
management in the operation of our businesses, as set forth in
our Corporate Governance Guidelines. Among other matters, the
Board considers education; business, governmental and civic
experience; leadership; diversity; communication, interpersonal
and other required skills; independence; and other matters
relevant to the Boards objectives. We have a comprehensive
process in place to identify and evaluate candidates to be
nominated for director. The Governance & Nominating
Committee identifies the needs of the Board by asking each
director to identify particular skills that will strengthen the
Board, and that are in conformity with the goals identified in
our Corporate Governance Guidelines. A third party search firm
is then retained to help identify, assess qualifications and
screen specific candidates. The Governance &
Nominating Committee reviews the qualifications of the
candidates presented and interviews the most qualified. The
Governance & Nominating Committee recommends potential
nominees to the full Board, which interviews the candidates and
then makes nominations for election at the Annual Meeting. Each
director nominee who appears on the ballot has been recommended
by the Governance & Nominating Committee to the full
Board.
15
Stockholders seeking to nominate persons for election as
directors at the 2010 Annual Meeting must submit,
in writing, a timely notice complying with our
By-laws to Ms. Marguerite N. Woung-Chapman, Corporate
Secretary, El Paso Corporation, P.O. Box 2511,
Houston, Texas
77252-2511,
telephone
(713) 420-4018
and facsimile
(713) 420-4099.
To be timely for a stockholder seeking to bring any matter
before the 2010 Annual Meeting, the stockholders written
notice must be received not less than 90 days nor more than
120 days prior to the first anniversary of the 2009 Annual
Meeting. Under these criteria, stockholders must provide us with
notice of nominations sought to be made at the 2010 Annual
Meeting during the period from January 6, 2010 to
February 5, 2010.
If the 2010 Annual Meeting is held more than 30 days before
or 60 days after May 6, 2010, for a stockholder
seeking to bring any matter before the 2010 Annual Meeting, the
stockholders written notice must be received not less than
90 days nor more than 120 days before the date of the
2010 Annual Meeting or by the tenth day after we publicly
announce the date of the 2010 Annual Meeting, if that would
result in a later deadline.
Finance
Committee
The Finance Committee met five times during 2008. The Finance
Committee currently consists of five non-employee directors,
each of whom the Board has determined is independent
under the NYSE listing standards and in accordance with our
Corporate Governance Guidelines. The Finance Committee assists
the Board in fulfilling its oversight responsibilities by
reviewing and recommending appropriate action with respect to
our capital structure, source of funds, payment of dividends,
liquidity and financial position.
The Finance Committees functions, which are discussed in
detail in its charter, include, among other functions,
responsibility to:
|
|
|
|
|
Review and recommend to the Board our long-range financial plan,
including the amount and allocation of capital spending and
financing thereof.
|
|
|
|
Review and approve capital projects in excess of
$25 million and up to $75 million.
|
|
|
|
Recommend to the Board financial policies that maintain or
improve our financial strength.
|
|
|
|
Develop and recommend dividend policies and recommend to the
Board specific dividend payments.
|
|
|
|
Review terms and conditions of financing plans, including the
issuance of securities, corporate borrowings, off-balance sheet
structures and investments, and make recommendations to the
Board regarding such financings.
|
|
|
|
Review and make recommendations regarding our interest rate,
foreign currency, commodity and other financial liquidity risk
management policies, strategies and positions.
|
The Finance Committee Charter can be found on our website at
www.elpaso.com.
Health,
Safety & Environmental Committee
The Health, Safety & Environmental Committee met four
times during 2008. The Health, Safety & Environmental
Committee currently consists of four non-employee directors,
each of whom the Board has determined is independent
under the NYSE listing standards and our Corporate Governance
Guidelines. The Health, Safety & Environmental
Committee assists the Board in fulfilling its oversight
responsibilities with respect to the Boards and our
continuing commitment to improving the environment, ensuring the
safety of our employees and ensuring that our businesses and
facilities are operated and maintained in a safe and
environmentally sound manner.
The Health, Safety & Environmental Committees
functions, which are discussed in detail in its charter,
include, among other functions, responsibility to:
|
|
|
|
|
Review and provide oversight with regard to our policies,
standards, accountabilities and programs relative to health,
safety and environmental-related matters, including our pipeline
integrity program and our greenhouse gas emissions inventory and
reduction program.
|
16
|
|
|
|
|
Advise the Board and make recommendations for the Boards
consideration regarding health, safety and environmental-related
issues.
|
|
|
|
Review and provide oversight with respect to our safety and
readiness to respond to crisis situations.
|
The Health, Safety & Environmental Committee Charter
can be found on our website at www.elpaso.com.
AUDIT
COMMITTEE REPORT
Each member of the Audit Committee is independent,
as that term is defined under Section 10A of the Exchange
Act, the SEC rules, the NYSE listing standards and our Corporate
Governance Guidelines. Each member of the Audit Committee is
also financially literate, as that qualification is interpreted
by our Board of Directors in its business judgment. Further,
each of Messrs. Goldman, Hix and Shapiro qualifies and is
designated as an audit committee financial expert,
serving on the Audit Committee as such term is defined in rules
adopted by the SEC and interpreted by our Board. The Audit
Committee currently consists of five members:
Messrs. Braniff, Goldman, Hix, Shapiro and Whitmire. During
2008, the Audit Committee met nine times and discussed, among
other things, the financial information contained in each
quarterly earnings announcement and the
Form 10-K
and
Forms 10-Q
with management, our internal auditors and our independent
auditor prior to release.
Policies
and Mission
As a Committee, our primary purpose is to assist the Board of
Directors in fulfilling its oversight responsibilities with
respect to:
|
|
|
|
|
the integrity of El Pasos financial statements;
|
|
|
|
El Pasos disclosure controls and procedures and
internal control over financial reporting;
|
|
|
|
the evaluation and retention of El Pasos independent
auditors and any third party petroleum reserves engineer
(including a review of their qualifications, independence,
performance and procedures utilized in their reserve estimation
process);
|
|
|
|
the performance of El Pasos internal audit and ethics
and compliance functions;
|
|
|
|
El Pasos compliance with legal and regulatory
requirements and its Code of Business Conduct; and
|
|
|
|
El Pasos risk management policies and procedures.
|
We have prepared this audit committee report as required by the
SEC. As part of completing this report, we conduct a number of
activities. We engage in an annual self evaluation to determine
our effectiveness as a Committee. We review annually with the
head of El Pasos internal audit function the scope of
internal audit activities, the results of audits that have been
performed, the adequacy of internal audit staffing, its annual
budget and the internal audit department charter. We are
directly responsible for the appointment, compensation,
retention, oversight and dismissal of independent auditors
engaged by El Paso for the purpose of preparing or issuing
an audit report or related work, and the independent auditors
report directly to us. We obtain and review annually a report by
our principal independent auditor describing, among other
matters, the independent auditors internal quality control
procedures and all relationships between the independent auditor
and El Paso. We review with El Pasos Controller
and the independent auditor all critical accounting policies and
practices, significant changes in El Pasos selection
and application of accounting principles, judgments made in
connection with the preparation of the financial statements and
other significant financial reporting issues. We meet at least
on a quarterly basis with the head of El Pasos
internal audit function, the independent auditor and management
to discuss the effectiveness of disclosure controls and
procedures, and any changes in El Pasos internal
control over financial reporting that occurred during its most
recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, internal control over
financial reporting. We also discuss the effectiveness of
internal control over financial reporting and managements
assessment of its effectiveness. We review the procedures for
the receipt, retention and treatment of complaints received by
El Paso regarding any accounting, internal controls or
auditing matters. We review El Pasos risk assessment
and risk management guidelines and policies, including
El Pasos significant risk exposures and steps taken
by management to monitor and control these exposures. All audit
services and permitted
17
non-audit services provided to El Paso by its independent
auditors are pre-approved by us in accordance with our
pre-approval policy and applicable law. These responsibilities
do not preclude us from obtaining the input of management, but
these responsibilities may not be delegated to management.
Consistent with our policies and mission stated above, we have
adopted a charter which may be found on El Pasos
website at www.elpaso.com.
Audit
Committee Statement
We have reviewed and discussed the audited financial statements
with El Paso management; discussed the effectiveness of
disclosure controls and procedures and internal control over
financial reporting with El Paso management; discussed with
our independent registered public accounting firm the matters
required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees), as modified
or supplemented; received written disclosures and the letter
from El Pasos independent registered public
accounting firm as required by applicable requirements of the
Public Company Accounting Oversight Board regarding the
independent registered public accounting firms
communications with us concerning independence, and have
discussed with our independent registered public accounting firm
their independence, as well as their internal quality control
procedures; and based on the review and discussions described in
this paragraph, recommended to the Board of Directors that the
audited financial statements be included in El Pasos
Annual Report on
Form 10-K
for the 2008 fiscal year for filing with the SEC.
El Pasos management is responsible for
El Pasos financial reporting process, internal audit
process, the effectiveness of disclosure controls and procedures
and internal control over financial reporting, and the
preparation of El Pasos financial statements.
El Pasos independent registered public accounting
firm is responsible for auditing those financial statements and
the effectiveness of internal control over financial reporting.
We monitor and review these processes but do not conduct
auditing or accounting reviews or procedures. We meet with
management and the independent registered public accounting firm
to discuss the financial statements, and rely on
El Pasos managements representation that the
financial statements have been prepared in conformity with
U.S. generally accepted accounting principles, and on the
representations of El Pasos independent registered
public accounting firm included in their report on
El Pasos financial statements.
Current
Members of the Audit Committee of the Board of
Directors
|
|
|
|
|
|
|
|
|
Thomas R. Hix
|
|
Juan Carlos Braniff
|
|
Robert W. Goldman
|
|
Steven J. Shapiro
|
|
John Whitmire
|
(Chairman)
|
|
(Member)
|
|
(Member)
|
|
(Member)
|
|
(Member)
|
18
PROPOSAL NO. 1
Election of Directors
The Board. You will have the opportunity to
elect our entire Board of Directors, consisting of 11 members,
at the Annual Meeting. Messrs. Joyce, Kuehn and Wyatt are
not standing for re-election and will be retiring from the Board
as of the close of the Annual Meeting. All of our other
incumbent directors are standing for re-election. All directors
are elected annually and serve a one-year term or until his or
her successor has been duly elected and shall qualify.
Nominations. At the Annual Meeting, we will
nominate the 11 persons named in this proxy statement as
directors.
OUR BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINEES NAMED BELOW.
General Information about the Nominees for Election, as of
March 11, 2009. Each of the following
nominees has agreed to be named in this proxy statement and to
serve as a director if elected.
|
|
|
|
|
|
|
Juan
Carlos Braniff
Age 51
Member Audit Committee
Member Finance Committee
|
|
Director
since 1997
|
Mr. Braniff has served as a director since 1997.
Mr. Braniff has been Chairman of Capital I Ltd. Partners
and a partner in Alpha Patrimonial S.A. de C.V. in Mexico City
since August 2005. Mr. Braniff was a business consultant
from January 2004 to August 2005. Mr. Braniff served Grupo
Financíero BBVA Bancomer as Vice Chairman from October 1999
to January 2004, as Deputy Chief Executive Officer of Retail
Banking from September 1994 to October 1999 and as Executive
Vice President of Capital Investments, Mortgage Banking and
Tourism from December 1991 to September 1994. Mr. Braniff
is currently a member of the board of directors of Ixe Grupo
Financiero S.A. de C.V.
|
|
|
|
|
|
|
James
L. Dunlap
Age 71
Member Compensation Committee
Member Governance & Nominating Committee
|
|
Director
since 2003
|
Mr. Dunlap has served as a director since 2003.
Mr. Dunlap has primarily been engaged in business
consulting since 1999. Mr. Dunlap previously served as Vice
Chairman, President and Chief Operating Officer of Ocean
Energy/United Meridian Corporation from 1996 to 1999. For
33 years prior to that date, Mr. Dunlap served Texaco,
Inc. in various positions, including Senior Vice President,
President of Texaco USA, President and Chief Executive Officer
of Texaco Canada Inc. and Vice Chairman of Texaco Ltd., London.
Mr. Dunlap is currently a member of the Advisory Council of
the Nantucket Conservation Foundation, a trustee of the Culver
Educational Foundation and a trustee of the Woods Hole
Oceanographic Institution.
19
|
|
|
|
|
|
|
Douglas
L. Foshee
Age 49
President and Chief Executive Officer,
El Paso Corporation
|
|
Director
since 2003
|
Mr. Foshee has been President, Chief Executive Officer and
a director of El Paso since September 2003. Prior to
joining El Paso, Mr. Foshee served as Executive Vice
President and Chief Operating Officer of Halliburton Company
having joined that company in 2001 as Executive Vice President
and Chief Financial Officer. Prior to assuming his position at
Halliburton, Mr. Foshee served as President, Chief
Executive Officer and Chairman of the Board of Nuevo Energy
Company and Chief Executive Officer and Chief Operating Officer
of Torch Energy Advisors, Inc. Mr. Foshee presently serves
as a director of Cameron International Corporation and is a
trustee of AIG Credit Facility Trust. Mr. Foshee serves as
Chairman of the Federal Reserve Bank of Dallas, Houston Branch.
Mr. Foshee also serves on the Board of Trustees of Rice
University and serves as a member of the Council of Overseers
for the Jesse H. Jones Graduate School of Management. He is a
member of the Greater Houston Partnership Board and Executive
Committee and other civic and community organizations.
Mr. Foshee also serves on the board of directors of
El Paso Pipeline GP Company, L.L.C.
|
|
|
|
|
|
|
Robert
W. Goldman
Age 66
Chairman Finance Committee
Member Audit Committee
|
|
Director
since 2003
|
Mr. Goldman has served as a director since 2003.
Mr. Goldmans primary occupation has been as a
financial consultant since October 2002. Prior to that,
Mr. Goldman served as Senior Vice President, Finance and
Chief Financial Officer of Conoco, Inc. from 1998 to 2002 and
Vice President, Finance from 1991 to 1998. For more than five
years prior to that date, Mr. Goldman held various
executive positions with Conoco, Inc. and E.I. Du Pont de
Nemours & Co., Inc. From 2002 until July, 2008,
Mr. Goldman served as the elected Vice President, Finance
of the World Petroleum Council. He is a member of the Financial
Executives Institute and the Outside Advisory Council of Global
Infrastructure Partners. Mr. Goldman serves on the board of
directors of McDermott International, Inc., Parker Drilling
Company and Tesoro Corporation. Mr. Goldman also serves on
the board of trustees of Kenyon College, Gambier, Ohio.
|
|
|
|
|
|
|
Anthony
W. Hall, Jr.
Age 64
Chairman Governance & Nominating
Committee
Member Health, Safety & Environmental
Committee
|
|
Director
since 2001
|
Mr. Hall has served as a director since 2001. Mr. Hall
has been Chief Administrative Officer of the City of Houston
since January 2004. Mr. Hall served as the City Attorney
for the City of Houston from March 1998 to January 2004.
Mr. Hall served as a director of The Coastal Corporation
from August 1999 to January 2001. Prior to March 1998,
Mr. Hall was a partner in the Houston law firm of Jackson
Walker, LLP. Mr. Hall is a director of Houston Endowment
Inc. and Chairman of the Boulé Foundation.
20
|
|
|
|
|
|
|
Thomas
R. Hix
Age 61
Chairman Audit Committee
Member Finance Committee
|
|
Director
since 2004
|
Mr. Hix has served as a director since 2004. Mr. Hix
has been a business consultant since January 2003. He served as
Senior Vice President of Finance and Chief Financial Officer of
Cooper Cameron Corporation from January 1995 to January 2003.
From September 1993 to April 1995, Mr. Hix served as Senior
Vice President of Finance, Treasurer and Chief Financial Officer
of The Western Company of North America. Mr. Hix is a
member of the board of directors of Health Care Service
Corporation.
|
|
|
|
|
|
|
Ferrell
P. McClean
Age 62
Member Compensation Committee
Member Finance Committee
|
|
Director
since 2006
|
Ms. McClean has served as a director since 2006.
Ms. McClean has been a business consultant since 2002.
Ms. McClean served as Managing Director and Senior Advisor
of J.P. Morgan Chase & Co.s energy/power
investment banking group from 2000 to 2002. From 1991 until
2000, Ms. McClean served as Managing Director and headed
the investment banking and global energy group at
J.P.Morgan & Co. Prior to 1991, Ms. McClean held
various positions with J.P. Morgan & Co.
Ms. McClean served as a member of the board of directors of
Unocal Corporation and is currently on the board of directors of
GrafTech International Ltd. (formerly UCAR International, Inc.).
|
|
|
|
|
|
|
Steven
J. Shapiro
Age 57
Chairman Compensation Committee
Member Audit Committee
|
|
Director
since 2006
|
Mr. Shapiro has served as a director since 2006. From
October 2000 to April 2006, Mr. Shapiro served as Executive
Vice President and Chief Financial Officer of Burlington
Resources Inc. During his five-year tenure at Burlington
Resources, Mr. Shapiro served as a member of the board of
directors and the office of the chairman. Before that, he served
as Senior Vice President, Chief Financial Officer and Director
at Vastar Resources, Inc. and spent 16 years in various
roles of increasing responsibility with Atlantic Richfield
Company (ARCO). Mr. Shapiro recently served as Chairman of
the Executive Committee of the American Petroleum
Institutes General Committee on Finance and is a trustee
of the Houston Museum of Natural Science. Mr. Shapiro is a
member of the board of directors of Barrick Gold Corporation.
21
|
|
|
|
|
|
|
J.
Michael Talbert
Age 62
Member Compensation Committee
Member Health, Safety & Environmental
Committee
|
|
Director
since 2003
|
Mr. Talbert has served as a director since 2003.
Mr. Talbert served as Executive Chairman of the Board of
Transocean Inc. from October 2002 to October 2004 and as
non-executive Chairman from October 2004 to November 2007.
Previously, Mr. Talbert served as Chief Executive Officer
of Transocean, Inc. and its predecessor companies from August
1994 until October 2002, Chairman of the Board from August 1994
until September 1999, and as President from December 1999 until
December 2001. Mr. Talbert served as Chairman of the Board
of The Offshore Drilling Company (TODCO) from February 2004 to
October 2005. He served as President and Chief Executive Officer
of Lone Star Gas Company from 1990 to 1994. Mr. Talbert
served as President of Texas Oil & Gas Company from
1987 to 1990, and served in various positions at Shell Oil
Company from 1970 to 1982. Mr. Talbert is a past Chairman
of the National Ocean Industries Association and a member of the
University of Akrons College of Engineering Advancement
Council. Mr. Talbert is a member of the board of directors
of Transocean Inc.
|
|
|
|
|
|
|
Robert
F. Vagt
Age 62
Member Finance Committee
Member Governance & Nominating Committee
|
|
Director
since 2005
|
Mr. Vagt has served as a director since 2005. Mr. Vagt
has served as President of The Heinz Endowments since January
2008. Prior to that time, he served as President of Davidson
College from July 1997 to August 2007. Mr. Vagt served as
President and Chief Operating Officer of Seagull Energy
Corporation from 1996 to 1997. From 1992 to 1996, he served as
President, Chairman and Chief Executive Officer of Global
Natural Resources. Mr. Vagt served as President and Chief
Operating Officer of Adobe Resources Corporation from 1989 to
1992. Prior to 1989, he served in various positions with Adobe
Resources Corporation and its predecessor entities.
|
|
|
|
|
|
|
John
L. Whitmire
Age 68
Chairman Health, Safety & Environmental
Committee
Member Audit Committee
|
|
Director
since 2003
|
Mr. Whitmire has served as a director since 2003.
Mr. Whitmire has been Chairman of CONSOL Energy, Inc. since
1999. He served as Chairman and Chief Executive Officer of Union
Texas Petroleum Holdings, Inc. from 1996 to 1998, and spent over
30 years serving Phillips Petroleum Company in various
positions including Executive Vice President of Worldwide
Exploration and Production from 1992 to 1996 and Vice President
of North American Exploration and Production from 1988 to 1992.
Mr. Whitmire also served as a member of the Phillips
Petroleum Company Board of Directors from 1994 to 1996.
Mr. Whitmire is a member of the board of directors of
Transocean Inc.
22
SECURITY
OWNERSHIP OF A CERTAIN BENEFICIAL OWNER AND MANAGEMENT
The following table sets forth information as of
February 27, 2009 regarding beneficial ownership of our
common stock by each director, our CEO, our CFO and the other
three most highly compensated executive officers in the last
fiscal year, our directors and executive officers as a group and
each person or entity known by us to own beneficially more than
5 percent of our outstanding shares of common stock. No
family relationship exists between any of our directors or
executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial Ownership
|
|
|
Stock
|
|
|
|
|
|
Percent
|
Title of Class
|
|
|
Name of Beneficial Owner
|
|
(Excluding Options) (1)
|
|
|
Options (2)
|
|
|
Total
|
|
|
of Class (3)
|
|
|
Common Stock
|
|
|
FMR LLC(4)
|
|
|
64,396,102
|
|
|
|
0
|
|
|
|
64,396,102
|
|
|
9.2%
|
|
|
|
|
82 Devonshire Street
Boston, MA 02109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Franklin Resources, Inc.(5)
|
|
|
51,707,341
|
|
|
|
0
|
|
|
|
51,707,341
|
|
|
7.4%
|
|
|
|
|
One Franklin Parkway
San Mateo, CA 94403-1906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
J. C. Braniff
|
|
|
107,583
|
(6)
|
|
|
13,000
|
|
|
|
120,583
|
|
|
*
|
|
Common Stock
|
|
|
J. L. Dunlap
|
|
|
74,950
|
|
|
|
8,000
|
|
|
|
82,950
|
|
|
*
|
|
Common Stock
|
|
|
R. W. Goldman
|
|
|
86,879
|
|
|
|
8,000
|
|
|
|
94,879
|
|
|
*
|
|
Common Stock
|
|
|
A. W. Hall, Jr.
|
|
|
81,777
|
|
|
|
12,000
|
|
|
|
93,777
|
|
|
*
|
|
Common Stock
|
|
|
T. R. Hix
|
|
|
73,081
|
|
|
|
0
|
|
|
|
73,081
|
|
|
*
|
|
Common Stock
|
|
|
W. H. Joyce
|
|
|
69,233
|
|
|
|
0
|
|
|
|
69,233
|
|
|
*
|
|
Common Stock
|
|
|
R. L. Kuehn, Jr.
|
|
|
295,336
|
(7)
|
|
|
11,000
|
|
|
|
306,336
|
|
|
*
|
|
Common Stock
|
|
|
F. P. McClean
|
|
|
47,997
|
(8)
|
|
|
0
|
|
|
|
47,997
|
|
|
*
|
|
Common Stock
|
|
|
J. M. Talbert
|
|
|
59,487
|
|
|
|
8,000
|
|
|
|
67,487
|
|
|
*
|
|
Common Stock
|
|
|
S. J. Shapiro
|
|
|
40,753
|
|
|
|
0
|
|
|
|
40,753
|
|
|
*
|
|
Common Stock
|
|
|
R. F. Vagt
|
|
|
33,342
|
|
|
|
0
|
|
|
|
33,342
|
|
|
*
|
|
Common Stock
|
|
|
J. L. Whitmire
|
|
|
106,030
|
|
|
|
8,000
|
|
|
|
114,030
|
|
|
*
|
|
Common Stock
|
|
|
J. B. Wyatt
|
|
|
107,489
|
|
|
|
14,000
|
|
|
|
121,489
|
|
|
*
|
|
Common Stock
|
|
|
D. L. Foshee
|
|
|
896,195
|
|
|
|
2,403,502
|
|
|
|
3,299,697
|
|
|
*
|
|
Common Stock
|
|
|
D. M. Leland
|
|
|
248,732
|
|
|
|
460,791
|
|
|
|
709,523
|
|
|
*
|
|
Common Stock
|
|
|
B. J. Smolik
|
|
|
185,467
|
|
|
|
106,848
|
|
|
|
292,315
|
|
|
*
|
|
Common Stock
|
|
|
R. W. Baker
|
|
|
278,950
|
|
|
|
580,632
|
|
|
|
859,582
|
|
|
*
|
|
Common Stock
|
|
|
J. C. Yardley
|
|
|
205,674
|
|
|
|
404,245
|
|
|
|
609,919
|
|
|
*
|
|
Common Stock
|
|
|
Directors and executive officers as a group (20 persons
total), including those individuals listed above
|
|
|
3,196,837
|
|
|
|
4,574,738
|
|
|
|
7,771,575
|
|
|
1.1%
|
|
|
|
* |
|
Less than one percent |
|
(1) |
|
The directors and executive officers named in the table have
sole voting and investment power with respect to shares of our
common stock beneficially owned, except that Mr. Talbert
shares with his spouse voting and investment power with respect
to 5,000 shares of common stock held in a joint brokerage
account. This column also includes shares of common stock held
in the El Paso Corporation Benefits Protection Trust (as of
February 27, 2009) as a result of deferral elections
made in accordance with our benefit plans. These individuals
share voting power with the trustee under that plan and receive
dividend equivalents on such shares, but do not have the power
to dispose of, or direct the disposition of, such shares until
such shares are distributed. In addition, some shares of common
stock reflected in this column for certain individuals are
subject to restrictions. None of the shares of common stock
reflected in this column have been pledged as security. |
|
(2) |
|
The directors and executive officers have the right to acquire
the shares of common stock reflected in this column within
60 days of February 27, 2009, through the exercise of
stock options. As of February 27, 2009, certain individuals
listed in the table have vested stock options that have an
exercise price of $40 or higher, which options are included in
the table above. It is not likely that our stock price will
reach $40 during the |
23
|
|
|
|
|
remaining terms of these stock options, thus it is not likely
the stock options will be
in-the-money
before they expire by their own terms. The number of stock
options at or above a $40 exercise price for
Messrs. Braniff, Hall, Kuehn, Wyatt, Leland, Baker and
Yardley is 5,000, 6,000, 8,000, 8,000, 144,375, 156,709 and
164,375 stock options, respectively. Stock options granted under
our plans are not subject to execution, attachment or similar
process and cannot be transferred, assigned, pledged or
hypothecated in any manner other than by will or by the
applicable laws of descent and distribution. |
|
(3) |
|
Based on 698,637,338 shares outstanding as of
February 27, 2009. |
|
(4) |
|
According to a Schedule 13G/A filed on February 17,
2009, as of December 31, 2008, FMR LLC was deemed to
beneficially own 64,396,102 shares of common stock. |
|
(5) |
|
According to a Schedule 13G/A filed on February 6,
2009, as of December 31, 2008, Franklin Resources, Inc. was
deemed to beneficially own 51,707,341 shares of common
stock. |
|
(6) |
|
Mr. Braniffs beneficial ownership excludes
3,500 shares owned by his wife. Mr. Braniff disclaims
any beneficial ownership in those shares. |
|
(7) |
|
Mr. Kuehns beneficial ownership excludes
28,720 shares owned by his wife or children. Mr. Kuehn
disclaims any beneficial ownership in those shares. |
|
(8) |
|
Ms. McCleans beneficial ownership includes
1,500 shares held by her husbands IRA and
7,475 shares held in a revocable trust. |
The following table sets forth, as of February 27, 2009,
the number of common units of our master limited partnership,
El Paso Pipeline Partners, L.P., owned by each of our
executive officers and directors and all of our executive
officers and directors as a group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
|
Common Units
|
|
Common Units
|
Title of Class
|
|
Name of Beneficial Owner
|
|
Beneficially Owned
|
|
Beneficially Owned (1)
|
|
Common Units
|
|
J. C. Braniff
|
|
|
0
|
|
|
|
*
|
|
Common Units
|
|
J. L. Dunlap
|
|
|
7,500
|
|
|
|
*
|
|
Common Units
|
|
R. W. Goldman
|
|
|
5,000
|
|
|
|
*
|
|
Common Units
|
|
A. W. Hall, Jr.
|
|
|
0
|
|
|
|
*
|
|
Common Units
|
|
T. R. Hix
|
|
|
10,000
|
|
|
|
*
|
|
Common Units
|
|
W. H. Joyce
|
|
|
0
|
|
|
|
*
|
|
Common Units
|
|
R. L. Kuehn, Jr.
|
|
|
65,239
|
|
|
|
*
|
|
Common Units
|
|
F. P. McClean
|
|
|
8,000
|
|
|
|
*
|
|
Common Units
|
|
J. M. Talbert
|
|
|
0
|
|
|
|
*
|
|
Common Units
|
|
S. J. Shapiro
|
|
|
6,000
|
|
|
|
*
|
|
Common Units
|
|
R. F. Vagt
|
|
|
0
|
|
|
|
*
|
|
Common Units
|
|
J. L. Whitmire
|
|
|
25,000
|
|
|
|
*
|
|
Common Units
|
|
J. B. Wyatt
|
|
|
15,000
|
|
|
|
*
|
|
Common Units
|
|
D. L. Foshee
|
|
|
25,000
|
|
|
|
*
|
|
Common Units
|
|
D. M. Leland
|
|
|
13,200
|
|
|
|
*
|
|
Common Units
|
|
B. J. Smolik
|
|
|
12,500
|
|
|
|
*
|
|
Common Units
|
|
R. W. Baker
|
|
|
5,000
|
|
|
|
*
|
|
Common Units
|
|
J. C. Yardley
|
|
|
10,000
|
|
|
|
*
|
|
|
|
Directors and executive officers as a group (20 persons
total), including those individuals listed above
|
|
|
209,439
|
|
|
|
*
|
|
|
|
|
* |
|
Less than one percent |
|
(1) |
|
Based on 84,965,923 common units outstanding as of
February 27, 2009. |
24
INDIVIDUAL
EXECUTIVE PROFILES
The following are individual executive profiles that summarize
the compensation earned or paid in 2008 to our CEO, our CFO and
our three other most highly compensated executive officers, whom
we refer to as our named executive officers. The
individual executive profiles provide biographical information
and summarize the compensation disclosures that are provided in
the Compensation Discussion and Analysis and executive
compensation tables in this proxy statement. These profiles are
supplemental and are being provided in addition to the detailed
compensation tables required by the SEC that follow the
Compensation Discussion and Analysis. We believe these profiles
provide stockholders with a concise and easy to understand
summary of 2008 compensation. The compensation information
presented in the following executive profiles is calculated in
accordance with the SEC regulations and is derived from the more
detailed compensation tables that begin on page 48 of this
proxy statement. Please consult those tables and the
accompanying footnotes for an explanation of how the
compensation information is calculated.
25
Douglas
L.
Foshee:
Individual Executive Profile
President, Chief Executive
Officer,
and Director of El Paso Corporation
Age: 49
Tenure with El Paso:
6 years
Tenure in Industry: 27 years
MBA, Jesse H. Jones Graduate School of Management, Rice
University
Graduate of Southwestern Graduate School of Banking, Southern
Methodist University
BBA, Southwest Texas State University
Mr. Foshee has been President, Chief Executive Officer and
a director of El Paso since September 2003. Prior to
joining El Paso, Mr. Foshee served as Executive Vice
President and Chief Operating Officer of Halliburton Company
having joined that company in 2001 as Executive Vice President
and Chief Financial Officer. Prior to assuming his position at
Halliburton, Mr. Foshee served as President, Chief
Executive Officer and Chairman of the Board of Nuevo Energy
Company and Chief Executive Officer and Chief Operating Officer
of Torch Energy Advisors, Inc. Mr. Foshee presently serves
as a director of Cameron International Corporation and is a
trustee of AIG Credit Facility Trust. Mr. Foshee serves as
Chairman of the Federal Reserve Bank of Dallas, Houston Branch.
Mr. Foshee also serves on the Board of Trustees of Rice
University and serves as a member of the Council of Overseers
for the Jesse H. Jones Graduate School of Management. He is a
member of the Greater Houston Partnership Board and Executive
Committee and other civic and community organizations.
Mr. Foshee also serves on the board of directors of
EI Paso Pipeline GP Company, L.L.C.
2008
Compensation1
|
|
|
|
|
Salary
|
|
|
|
|
Base Salary
|
|
$
|
1,037,502
|
|
Performance-Based Cash Bonus
|
|
$
|
593,220
|
|
Perquisites and Personal Benefits
|
|
$
|
3,214
|
|
|
|
|
|
|
Annual Long-Term
Incentive Award
|
|
|
|
|
|
|
|
|
|
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock
|
|
$
|
2,323,916
|
|
Stock Options
|
|
$
|
2,164,560
|
|
Restricted Stock Dividends
|
|
$
|
59,659
|
|
|
|
|
|
|
Retirement
Benefits
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual increase in accumulated pension benefit
|
|
$
|
133,632
|
|
|
|
|
|
|
Retirement Savings Plan (RSP)
|
|
|
|
|
Company matching contribution to RSP
|
|
$
|
10,350
|
|
Supplemental RSP benefit
|
|
$
|
104,648
|
|
Annual earnings on supplemental RSP benefit
|
|
$
|
29,646
|
|
2008
Total Compensation
Stock
Ownership Requirements
Mr. Foshees ownership in our common stock exceeds the
required ownership thresholds of five times base salary, as
discussed elsewhere in this proxy statement.
Payment
Upon Termination
(As of December 31,
2008)
|
|
|
|
|
Voluntary Termination
|
|
$
|
2,021,102
|
|
Involuntary Termination without Cause
|
|
$
|
1,963,344
|
2
|
Retirement
|
|
$
|
0
|
2
|
Death
|
|
$
|
5,089,727
|
2
|
Disability
|
|
$
|
1,210,410
|
2
|
Termination with Cause
|
|
$
|
0
|
2
|
Change in Control of El Paso
|
|
$
|
10,690,196
|
2
|
|
|
1
|
Please note total 2008 Compensation does not tie directly
to the Summary Compensation Table.
|
|
2
|
Reflects incremental value of enhanced benefits above amounts
Mr. Foshee is entitled to as a result of voluntary
termination. Value of equity reflects $7.83, the closing price
of our common stock on December 31, 2008.
|
26
D. Mark
Leland:
Individual Executive Profile
Executive Vice President and
Chief Financial Officer
Age: 47
Tenure with El Paso:
23 years
Tenure in Industry: 23 years
BBA, University of Puget Sound
Certified Management Accountant
Certified Internal Auditor
Mr. Leland has been Executive Vice President and Chief Financial
Officer of El Paso since August 2005. Mr. Leland served as
Executive Vice President of El Paso Exploration &
Production Company (formerly known as EI Paso Production Holding
Company) from January 2004 to August 2005, and as Chief
Financial Officer and a director from April 2004 to August 2005.
He served in various capacities for GulfTerra Energy Partners,
L.P. and its general partner, including as Senior Vice President
and Chief Operating Officer from January 2003 to December 2003,
as Senior Vice President and Controller from July 2000 to
January 2003, and as Vice President from August 1998 to July
2000. Mr. Leland has also worked in various capacities for El
Paso Field Services and El Paso Natural Gas Company beginning in
1986. Mr. Leland also serves on the board of directors of
El Paso Pipeline GP Company, L.L.C.
2008
Compensation1
|
|
|
|
|
Salary
|
|
|
|
|
Base Salary
|
|
$
|
519,756
|
|
Performance-Based Cash Bonus
|
|
$
|
162,000
|
|
Perquisites and Personal Benefits
|
|
$
|
1,150
|
|
|
|
|
|
|
Annual Long-Term
Incentive Award
|
|
|
|
|
|
|
|
|
|
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock
|
|
$
|
728,505
|
|
Stock Options
|
|
$
|
622,000
|
|
Restricted Stock Dividends
|
|
$
|
19,510
|
|
|
|
|
|
|
Retirement
Benefits
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual increase in accumulated pension benefit
|
|
$
|
11,269
|
|
|
|
|
|
|
Retirement Savings Plan (RSP)
|
|
|
|
|
Company matching contribution to RSP
|
|
$
|
10,350
|
|
Supplemental RSP benefit
|
|
$
|
32,405
|
|
Annual earnings on supplemental RSP benefit
|
|
$
|
8,753
|
|
2008
Total Compensation
Stock
Ownership Requirements
Mr. Lelands ownership in our common stock exceeds the
required ownership thresholds of two times base salary, as
discussed elsewhere in this proxy statement.
Payment
Upon Termination
(As of December 31,
2008)
|
|
|
|
|
Voluntary Termination
|
|
$
|
950,368
|
|
Involuntary Termination without Cause
|
|
$
|
830,597
|
2
|
Retirement
|
|
$
|
0
|
2
|
Death
|
|
$
|
2,143,996
|
2
|
Disability
|
|
$
|
567,785
|
2
|
Termination with Cause
|
|
$
|
0
|
2
|
Change in Control of El Paso
|
|
$
|
2,843,325
|
2
|
|
|
1
|
Please note total 2008 Compensation does not tie directly
to the Summary Compensation Table.
|
|
2
|
Reflects incremental value of enhanced benefits above amounts
Mr. Leland is entitled to as a result of voluntary termination.
Value of equity reflects $7.83, the closing price of our common
stock on December 31, 2008.
|
27
Brent J.
Smolik:
Individual
Executive Profile
Executive Vice President and
President of El Paso Exploration
& Production Company
Age: 47
Tenure with El Paso: 3 years
Tenure in Industry: 25 years
BS, Petroleum Engineering, Texas A&M University
Mr. Smolik has been Executive Vice President of
El Paso and President of El Paso Exploration & Production
Company since November 2006. Prior to joining El Paso, Mr.
Smolik was President of ConocoPhillips Canada from April 2006 to
October 2006. Prior to the Burlington Resources merger with
ConocoPhillips, he was President of Burlington Resources Canada
from September 2004 to March 2006. From 1990 to 2004,
Mr. Smolik worked in various engineering and asset
management capacities for Burlington Resources Inc., including
the Chief Engineering role from 2000 to 2004. He was a member of
the Burlington Executive Committee from 2001 to 2006.
Mr. Smolik also serves on the boards of the American
Exploration and Production Council and the Independent Petroleum
Association of America.
2008
Compensation1
|
|
|
|
|
Salary
|
|
|
|
|
Base Salary
|
|
$
|
562,392
|
|
Performance-Based Cash Bonus
|
|
$
|
172,500
|
|
Perquisites and Personal Benefits
|
|
$
|
1,642
|
|
|
|
|
|
|
Annual Long-Term
Incentive Award
|
|
|
|
|
|
|
|
|
|
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock
|
|
$
|
667,799
|
|
Stock Options
|
|
$
|
622,000
|
|
Restricted Stock Dividends
|
|
$
|
23,399
|
|
|
|
|
|
|
Retirement
Benefits
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual increase in accumulated pension benefit
|
|
$
|
45,747
|
|
|
|
|
|
|
Retirement Savings Plan (RSP)
|
|
|
|
|
|
|
|
|
|
Company matching contribution to RSP
|
|
$
|
10,350
|
|
Supplemental RSP benefit
|
|
$
|
14,958
|
|
Annual earnings on supplemental RSP benefit
|
|
$
|
1,179
|
|
2008
Total Compensation
Stock
Ownership Requirements
Mr. Smoliks ownership in our common stock exceeds the
required ownership thresholds of two times base salary, as
discussed elsewhere in this proxy statement.
Payment
Upon Termination
(As of December 31,
2008)
|
|
|
|
|
Voluntary Termination
|
|
$
|
91,720
|
|
Involuntary Termination without Cause
|
|
$
|
750,835
|
2
|
Retirement
|
|
$
|
0
|
2
|
Death
|
|
$
|
2,108,907
|
2
|
Disability
|
|
$
|
481,672
|
2
|
Termination with Cause
|
|
$
|
0
|
2
|
Change in Control of El Paso
|
|
$
|
3,349,944
|
2
|
|
|
1
|
Please note total 2008 Compensation does not tie directly
to the Summary Compensation Table.
|
|
2
|
Reflects incremental value of enhanced benefits above amounts
Mr. Smolik is entitled to as a result of voluntary termination.
Value of equity reflects $7.83, the closing price of our common
stock on December 31, 2008.
|
28
James C.
Yardley:
Individual
Executive Profile
Executive Vice President,
Pipeline Group
Age: 57
Tenure with El Paso: 31 years
Tenure in Industry: 31 years
MBA, Harvard Business School
BA, Economics, Duke University
Mr. Yardley has been Executive Vice President of El Paso
with responsibility for the regulated pipeline business unit
since August 2006. He has served as President of Tennessee Gas
Pipeline since February 2007 and Chairman of the Board
since August 2006. Mr. Yardley has been Chairman of
EI Paso Natural Gas Company since August 2006 and has
served as President of Southern Natural Gas Company since May
1998. Mr. Yardley has been a member of the Management Committees
of both Colorado Interstate Gas Company and Southern Natural Gas
Company since their conversion to general partnerships in
November 2007. Mr. Yardley served as Vice President,
Marketing and Business Development for Southern Natural Gas
Company from April 1994 to April 1998. Prior to that time, Mr.
Yardley worked in various capacities with Southern Natural Gas
Company and Sonat Inc. beginning in 1978. Mr. Yardley is
presently a member of the board of directors of Scorpion
Offshore Ltd. and Chairman of the Board of Interstate Natural
Gas Association of America. Mr. Yardley also serves as Director,
President and Chief Executive Officer of EI Paso Pipeline
GP Company, L.L.C.
2008
Compensation1
|
|
|
|
|
Salary
|
|
|
|
|
Base Salary
|
|
$
|
511,263
|
|
Performance-Based Cash Bonus
|
|
$
|
195,000
|
|
Perquisites and Personal Benefits
|
|
$
|
5,939
|
|
|
|
|
|
|
Annual Long-Term
Incentive Award
|
|
|
|
|
|
|
|
|
|
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock
|
|
$
|
607,076
|
|
Stock Options
|
|
$
|
622,000
|
|
Restricted Stock Dividends
|
|
$
|
15,833
|
|
|
|
|
|
|
Retirement
Benefits
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual increase in accumulated pension benefit
|
|
$
|
56,258
|
|
|
|
|
|
|
Retirement Savings Plan (RSP)
|
|
|
|
|
Company matching contribution to RSP
|
|
$
|
10,350
|
|
Supplemental RSP benefit
|
|
$
|
32,106
|
|
Annual earnings on supplemental RSP benefit
|
|
$
|
7,605
|
|
2008
Total Compensation
Stock
Ownership Requirements
Mr. Yardleys ownership in our common stock exceeds the
required ownership thresholds of two times base salary, as
discussed elsewhere in this proxy statement.
Payment
Upon Termination
(As of December 31,
2008)
|
|
|
|
|
Voluntary Termination
|
|
$
|
3,709,409
|
|
Involuntary Termination without Cause
|
|
$
|
515,016
|
2
|
Retirement
|
|
$
|
0
|
2,3
|
Death
|
|
$
|
1,757,504
|
2
|
Disability
|
|
$
|
257,508
|
2
|
Termination with Cause
|
|
$
|
0
|
2
|
Change in Control of El Paso
|
|
$
|
2,672,864
|
2
|
|
|
1
|
Please note total 2008 Compensation does not tie directly
to the Summary Compensation Table.
|
|
2
|
Reflects incremental value of enhanced benefits above amounts
Mr. Yardley is entitled to as a result of voluntary termination.
Value of equity reflects $7.83, the closing price of our common
stock on December 31, 2008.
|
|
3
|
Mr. Yardley is eligible for early retirement. The value of his
retirement benefits are reflected under Voluntary Termination.
|
29
Robert W.
Baker:
Individual
Executive Profile
Executive Vice President and
General Counsel
Age: 52
Tenure with El Paso: 26 years
Tenure in Industry: 28 years
JD, The University of Texas Law School
BA and BS, Business, Economics and Accounting,
University of Delaware
Licensed to practice law in Texas and Louisiana
Mr. Baker has been Executive Vice President and General Counsel
of El Paso since January 2004. From February 2003 to
December 2003, he served as Executive Vice President of El Paso
and President of El Paso Merchant Energy. He was Senior Vice
President and Deputy General Counsel of El Paso from January
2002 to February 2003. Prior to that time, he worked in various
capacities in the legal department of Tenneco Energy and
El Paso beginning in 1983. Mr. Baker also serves as
Executive Vice President and General Counsel of El Paso
Pipeline GP Company, L.L.C.
2008
Compensation1
|
|
|
|
|
Salary
|
|
|
|
|
Base Salary
|
|
$
|
456,696
|
|
Performance-Based Cash Bonus
|
|
$
|
120,000
|
|
Perquisites and Personal Benefits
|
|
$
|
1,150
|
|
|
|
|
|
|
Annual Long-Term
Incentive Award
|
|
|
|
|
|
|
|
|
|
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock
|
|
$
|
607,076
|
|
Stock Options
|
|
$
|
622,000
|
|
Restricted Stock Dividends
|
|
$
|
17,466
|
|
|
|
|
|
|
Retirement
Benefits
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual increase in accumulated pension benefit
|
|
$
|
64,354
|
|
|
|
|
|
|
Retirement Savings Plan (RSP)
|
|
|
|
|
Company matching contribution to RSP
|
|
$
|
10,350
|
|
Supplemental RSP benefit
|
|
$
|
24,382
|
|
Annual earnings on supplemental RSP benefit
|
|
$
|
8,605
|
|
2008
Total Compensation
Stock
Ownership Requirements
Mr. Bakers ownership in our common stock exceeds the
required ownership thresholds of two times base salary, as
discussed elsewhere in this proxy statement.
Payment
Upon Termination
(As of December 31,
2008)
|
|
|
|
|
Voluntary Termination
|
|
$
|
1,278,475
|
|
Involuntary Termination without Cause
|
|
$
|
729,439
|
2
|
Retirement
|
|
$
|
0
|
2
|
Death
|
|
$
|
1,883,867
|
2
|
Disability
|
|
$
|
498,193
|
2
|
Termination with Cause
|
|
$
|
0
|
2
|
Change in Control of El Paso
|
|
$
|
2,500,930
|
2
|
|
|
1
|
Please note total 2008 Compensation does not tie directly
to the Summary Compensation Table.
|
|
2
|
Reflects incremental value of enhanced benefits above amounts
Mr. Baker is entitled to as a result of voluntary termination.
Value of equity reflects $7.83, the closing price of our common
stock on December 31, 2008.
|
30
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
The compensation discussion and analysis set forth below
provides an explanation of our compensation programs, including
the objectives of such programs and the rationale for each
element of compensation, for our named executive officers. They
include our Chief Executive Officer, Mr. Douglas L. Foshee,
our Executive Vice President and Chief Financial Officer,
Mr. D. Mark Leland, and our other three most highly
compensated executive officers, Mr. Brent J. Smolik,
Mr. James C. Yardley, and Mr. Robert W. Baker. This
section also describes the actions and decisions of the
Compensation Committee of our Board of Directors during 2008
through February 2009, which is the committee that oversees our
compensation programs and sets executive officer compensation.
The discussion is divided into the following six parts:
I. Compensation
Objectives
II. Role of
Compensation Committee, Independent Consultant and Management
III. Elements of Total
Compensation
IV. Factors Considered When
Determining Total Compensation
V. 2008 Compensation
Decisions
VI. Other Compensation
Policies
|
|
I.
|
Compensation
Objectives
|
At El Paso, stewardship and accountability are two of our
core values. As active stewards, we strive to serve our
stockholders by consistently building long-term value. In
addition, accountability measures are a key part of the metrics
we use to judge the performance of our company and the
performance of our executive officers. These principles of
stewardship and accountability play an integral role in our
compensation programs, which are designed to reward performance
and the creation of stockholder value.
Our compensation programs, which reflect our core values of
stewardship and accountability, have two primary and
straight-forward objectives:
|
|
|
|
|
attract, retain and motivate high-performing executive
talent, and
|
|
|
|
align the interests of our executive officers with both the
short-term and long-term interests of our stockholders.
|
We believe these designs are accomplished by providing our
executives with a competitive mix of short-term and long-term
compensation, by rewarding superior performance, and by linking
a significant portion of each officers pay to specific,
measurable performance goals.
|
|
II.
|
Role of
Compensation Committee, Independent Consultant and
Management
|
Compensation
Committee
The Compensation Committee of the Board of Directors has primary
responsibility for determining and approving, on an annual
basis, the total compensation level of our CEO and other senior
officers who are subject to Section 16(a) of the Exchange
Act, who we refer to as our executive officers. The
Compensation Committee receives information and advice from its
compensation consultant as well as from our human resources
department and management to assist in compensation
determinations.
Compensation
Consultant
The Compensation Committee has retained Deloitte Consulting LLP
(Deloitte) as its independent compensation
consultant. Deloitte advises the Compensation Committee on an
ongoing basis with regard to the general competitive landscape
and trends in compensation and executive and director
compensation matters, including (i) competitive
benchmarking, (ii) incentive plan design,
(iii) performance metrics testing, (iv) peer group
31
selection, (v) updates on trends in executive and director
compensation, (vi) review of the compensation discussion
and analysis and related tables included in our proxy statement,
and (vii) handling other matters requested by the
Compensation Committee. The compensation consultant attends
meetings of the Compensation Committee and participates in the
committees executive sessions, as well. The compensation
consultant is directly accountable to the Compensation Committee
and the committee reviews all fees paid to the consultant for
such compensation advice. In addition, the Compensation
Committee reviews, on an annual basis, the performance of the
compensation consultant and provides the consultant with direct
feedback.
Certain Deloitte affiliates are also engaged by El Paso to
provide the following services: tax and tax-related services,
financial advisory services and system integration and process
optimization consulting. The Compensation Committee reviewed the
payments made to the Deloitte affiliates during 2008, as well as
the services the Deloitte affiliates performed for El Paso.
In addition, the Compensation Committee discussed the payments
and services with its independent compensation consultant and
confirmed that the consultants compensation is not tied to
the level of other services provided by Deloitte to
El Paso. Based on its review, the Compensation Committee
believes that each of these relationships is separate and
independent and does not impair Deloittes ability to
provide independent compensation advice to the committee.
Role of
Management and CEO in Determining Executive
Compensation
While the Compensation Committee has the responsibility to
approve and monitor all compensation for our named executive
officers, we, as management, play an important role in
determining executive compensation. At the Compensation
Committees request, we recommend appropriate company-wide
and business unit financial and non-financial performance goals.
We work with the compensation consultant to analyze competitive
market data and to recommend base salary levels, annual
incentive awards and long-term incentive awards for our
executive officers. We also work with the Compensation Committee
to establish the agenda and prepare meeting information for each
Compensation Committee meeting. Our CEO likewise assists the
Compensation Committee by providing his evaluation of the
performance of the executive officers who report directly to
him, and recommends compensation levels for such officers. The
Compensation Committee also has a process for soliciting from
the CEO a candid and critical self-assessment of his own
performance, which is used to assist the Compensation Committee
and the Board of Directors in their evaluation of the CEOs
performance.
III.
Elements of Total Compensation
Total
Compensation
Our named executive officers total annual compensation
includes three principal elements:
|
|
|
|
|
base salary,
|
|
|
|
performance-based annual cash incentive, and
|
|
|
|
long-term equity-based incentive awards.
|
We also provide our executives with retirement, severance, and
health and welfare benefits.
We seek to provide each executive officer with a level of cash
compensation commensurate with the executives professional
status in the form of base salary. We also focus on at-risk,
performance-based pay. Such performance-based pay is designed to
reward stewardship and accountability, to align our executive
officers interests with those of our stockholders and to
promote the creation of stockholder value.
32
The table below summarizes the elements of our total
compensation program.
|
|
|
|
|
|
|
Compensation Element
|
|
|
Objective
|
|
|
Key Features
|
Base Salary
|
|
|
To provide a level of assured cash compensation sufficient,
together with performance-based incentives, to motivate
executives to perform at a consistently high level
|
|
|
Reviewed annually with adjustments made based on individual
performance, pay relative to market, and internal equity
considerations
|
|
Performance-Based Annual Cash Bonuses
|
|
|
To motivate and reward executive officers contributions to
achievement of pre-established financial and operational
performance goals, as well as individual performance
|
|
|
Broad-based incentive bonus program covering all employees
Compensation Committee establishes annual cash incentive bonus opportunity for each named executive officer at beginning of year
Paid after year end once the Compensation Committee has determined companys performance and each named executive officers performance relative to pre-established performance goals
|
|
|
|
|
|
|
|
Long-Term Equity Awards (stock options and restricted
stock)
|
|
|
To reward stock price appreciation and encourage retention
To motivate and reward achievement of pre-established corporate financial goals and relative total shareholder return (TSR), as well as individual performance
|
|
|
Broad-based long-term equity program covering all manager level
employees and above
Target value is allocated approximately 50% in restricted stock
and 50% in stock options
Awards vest in three equal annual installments; awards are
forfeited if executive voluntarily terminates employment prior
to vesting (except for retirement, in which restricted stock
awards vest pro-rata) or is terminated for cause
Stock options:
granted at target levels (not adjusted
for corporate or individual performance)
value of stock options is recognized
only if stock price increases, thereby creating value for all
stockholders
Restricted stock:
performance-based with target levels
adjusted for corporate, TSR and individual performance
amount granted is based on the
achievement of pre-established performance goals: 50% on
achievement of annual overall corporate financial goals and 50%
on our relative TSR compared to our peer group of companies, and
is adjusted for individual performance
designed to reward executives for
achievement of performance goals, as well as to provide an
incentive to create additional stockholder value
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
Compensation Element
|
|
|
Objective
|
|
|
Key Features
|
Retirement Plans
|
|
|
To provide retirement savings in a tax-efficient manner
To provide a fixed level of retirement income and encourage retention
|
|
|
Retirement benefits are provided under the following plans:
Retirement Savings Plan
broad-based 401(k) plan covering all
employees, which provides for immediate vesting of benefits for
both participant contributions and company matching
contributions
company contributes an amount equal to
75% of each participants voluntary contributions under the
plan, up to a maximum of 6% of eligible compensation
Pension Plan
broad-based defined benefit plan
covering all employees, which provides pension benefits under a
cash balance formula
participants fully vest in pension
benefits upon the earlier of completion of three years of
service or attainment of age 65
Supplemental Benefits Plan
plan covering key management
employees, including named executive officers
non-contributory plan which provides
benefits in excess of amounts payable under the Retirement
Savings Plan and Pension Plan due to tax code limitations
|
|
|
|
|
|
|
|
Health & Welfare Benefits
|
|
|
To provide reasonable health and welfare benefits to executives
and their dependents and promote healthy living
|
|
|
Broad-based health and welfare benefits available to all employees, including medical, dental, vision, disability and life insurance coverage as well as dependent day-care and healthcare flexible spending accounts
Named executive officers also participate in our Senior Executive Survivor Benefits Plan
Senior Executive Survivor Benefits Plan:
provides senior officers, including named executive officers, with survivor benefit coverage in lieu of the coverage provided generally to employees under our group life insurance plan in the event of a named executive officers death
amount of survivor benefit is 21/2X the executive officers annual salary
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
Compensation Element
|
|
|
Objective
|
|
|
Key Features
|
Severance
|
|
|
To provide a measure of financial security in the event an executives employment is terminated without cause
To encourage retention and ensure continued dedication by named executive officers in the event of a change in control
|
|
|
Severance benefits are provided under the following plans:
Severance Pay Plan:
broad-based severance plan available to
all employees which provides benefits following an involuntary
termination without cause
maximum payout is 1X annual salary
Key Executive Severance Protection Plan:
plan covering key executive personnel,
including named executive officers, which provides for payment
of severance benefits in the event of a participants
involuntary termination of employment or termination for good
reason within two years following a change in control
provides benefits only upon a
double triggering event, meaning both a change in
control and an involuntary/good reason termination of employment
must occur
maximum payout is 3X annual salary +
target bonus for CEO; 2X annual salary + target bonus for other
named executive officers
|
|
|
|
|
|
|
|
Employee Stock Purchase Plan
|
|
|
To encourage stock ownership and align interests of executives
with stockholders
|
|
|
Broad-based plan under which employees, including executive
officers, can contribute up to $23,750 each year through payroll
deduction to purchase El Paso stock at a 5% discount
|
|
|
|
|
|
|
|
Perquisites
|
|
|
Limited perquisites provided to assist executives in carrying
out duties and increase productivity
|
|
|
Include limited personal use of leased aircraft, limited
accompaniment of family members with executives traveling for
business purposes, and subsidized annual physical examinations
|
|
|
|
|
|
|
|
Employment
Agreements
We do not have employment agreements with our named executive
officers.
|
|
IV.
|
Factors
Considered When Determining Total Compensation
|
Competitive Benchmark Data the Starting
Point. When making compensation decisions, we
review the compensation paid to our CEO and other named
executive officers relative to the compensation paid to
similarly-situated executives at our peer companies. This
practice is often referred to as benchmarking. We
also utilize survey data representing the market of companies in
which we compete for executive talent as an additional means of
benchmarking. While we believe benchmarks are helpful and
provide a point of reference, they are not determinative.
Rather, competitive benchmarking is a starting point in our
evaluation of total executive compensation.
The Compensation Committee is provided benchmarking market data
compiled by its independent compensation consultant and our
human resources department. This comparative information
provides a basis for the evaluation of the compensation paid to
our named executive officers. The Compensation Committee then
35
reviews the benchmarking data together with each officers
job responsibilities and individual performance, internal pay
equity, and performance against pre-established targets, each as
described below, in making compensation decisions. The
Compensation Committee also reviews an analysis of wealth
accumulation and potential payments upon various termination
scenarios as part of its competitive compensation decisions,
also as described below.
The Compensation Committee generally sets total compensation
targets for our executives, including base salary,
performance-based annual incentives, and long-term equity
awards, near the market median of our peer comparables. However,
because comparative data is just one of several analytic tools
that are used in determining executive officer compensation, pay
may exceed or be less than the median range of comparative
compensation based on:
|
|
|
|
|
the level of achievement of our pre-established performance
goals,
|
|
|
|
our performance against our peer group,
|
|
|
|
individual performance,
|
|
|
|
scope of job responsibilities,
|
|
|
|
internal equity considerations, and
|
|
|
|
the executives industry experience and tenure.
|
For example, the 2007 total annual compensation (base salary,
annual cash incentive, and long-term incentive opportunity) for
our named executive officers fell at the 51st percentile
when compared to peer group proxy data. Our peer group is
described below. In addition, the 2008 total annual compensation
targets for our named executive officers fell at the
49th percentile when compared to peer group proxy data
(based on the most recently available information disclosed in
the peer companies 2008 proxy statements).
El Pasos Peer Group. The
Compensation Committee selects an appropriate peer group of
companies to review executive officer compensation and to
compare TSR relative to our performance. TSR is utilized as a
metric in funding a portion of the long-term equity pool,
described later in this compensation discussion and analysis.
The Compensation Committee established our peer group for 2008
in October 2007. The Compensation Committee reviewed the peer
group once again in October 2008, and after such review and
discussions with its independent compensation consultant,
determined that no changes were warranted. The peer group
consists of 22 companies, and is made up of a proportional
mix of pipeline/utility companies, exploration and production
companies, and diversified energy companies. Our peer group for
2008 consisted of the following companies:
|
|
|
|
|
Anadarko Petroleum Corp.
|
|
Equitable Resources, Inc.
|
|
Sempra Energy
|
Apache Corporation
|
|
National Fuel Gas Co.
|
|
Southern Union Co.
|
CenterPoint Energy, Inc.
|
|
Newfield Exploration Co.
|
|
Spectra Energy Corp.
|
Chesapeake Energy Corp.
|
|
NiSource, Inc.
|
|
TransCanada Corp.
|
Devon Energy Corp.
|
|
Noble Energy, Inc.
|
|
Williams Companies
|
Dominion Resources, Inc.
|
|
ONEOK, Inc.
|
|
XTO Energy Inc.
|
Enbridge Inc.
|
|
Pioneer Natural Resources
|
|
|
EOG Resources, Inc.
|
|
Questar Corporation
|
|
|
External Market Conditions and Individual
Factors. As discussed above, while benchmarking
data is helpful in assessing the overall competitiveness of our
compensation program, we believe our executive compensation
program must take into account external market conditions and
individual factors. Some of these factors include the
executives level of experience, the executives
tenure and responsibilities within our company, the
executives position and the appropriate competitive
pressures for that position within the industry, and of course,
performance. In addition, the Compensation Committee asks its
compensation consultant to provide it with an objective opinion
regarding total executive compensation levels relative to each
individual executives responsibilities.
Internal Pay Equity. We also believe that our
executive compensation program must be internally consistent and
equitable in order to motivate our employees to create
stockholder value. We are committed to internal pay equity and
our Compensation Committee closely monitors, on an annual basis,
the relationship between the compensation of our named executive
officers and the compensation of our non-managerial employees.
In 2008, the Compensation Committee reviewed a comparison of CEO
and other named executive officer pay (base salary,
36
target and actual bonus, and target and actual total
compensation) to non-management employee pay for the period 2004
to 2007. The Compensation Committee also reviewed trends in pay
equity from 2006 to 2007. The results showed a flat trend in
base salary, a slightly decreasing trend in target bonus and
actual bonus, a slightly decreasing trend in target total
compensation and a slightly increasing trend in actual total
compensation in comparison to
non-management
employees. Overall, it was noted that the reason actual total
compensation between all of our named executive officers and
non-management employees increased from 2006 to 2007 related to
the difference in equity grants made from 2006 to 2007, with
2007 grants made at a higher level reflecting our higher TSR
performance relative to our peer group in 2007. The Compensation
Committee will continue to periodically conduct these analyses
to monitor and avoid any unjustified widening of compensation
differentials.
Tally Sheets and Payments upon Termination
Events. When making compensation decisions, the
Compensation Committee reviews tally sheets prepared for each of
our named executive officers. These tally sheets are prepared by
the compensation group of our human resources department and are
reviewed by the compensation consultant. The tally sheets
quantify the elements of each named executives total
compensation, including base salary, annual incentive bonus, and
long-term equity grants. The Compensation Committee does not
assign a weighting to tally sheets in the overall decision
making process, but rather uses the tally sheets as a tool to
view the overall impact of each element of compensation.
The Compensation Committee also reviews tally sheets reflecting
the potential payments upon various termination scenarios. These
termination scenarios include voluntary termination, involuntary
termination without cause, termination with cause, retirement,
death, disability and termination within two years following a
change in control. Based upon certain assumptions related to the
timing of these events, the tally sheets provide the total
remuneration that would be payable to the named executive
officers, including all aspects of each named executive
officers compensation and benefits under our plans, and
are used to ensure that there are no surprises or questions
about compensation items in the event of the various termination
events.
In its most recent review of tally sheets, which included
year-end 2008 compensation information, the Compensation
Committee discovered no unintended consequences of the
compensation program design, and consequently no material
changes were made or deemed necessary to the executive
compensation program or the individual elements of our executive
officers compensation as a result of this review.
See the section entitled Potential Payments upon Termination or
Change in Control beginning on page 59 of this proxy
statement for the total amount of compensation and benefits each
named executive officer could receive as a result of the various
termination events.
Wealth Accumulation. The Compensation
Committee also reviews annually all of the elements of total
compensation paid to each named executive officer during the
prior 5-year
period, including base salaries, annual cash incentive bonuses,
the value of long-term incentive awards and any special payments
made to an individual executive. The Compensation Committee also
reviews the projected value of each named executive
officers accumulated equity grants over the subsequent
five-year period based upon various stock appreciation
scenarios. This is done to more effectively analyze not only the
amount of compensation each named executive officer has
accumulated to date, but also to better understand how current
equity grants may affect the amount of wealth the named
executive officers accumulate in the future. In addition, due to
the volatility in the stock market during 2008, the Compensation
Committee reviewed an analysis of the change in total equity
values for outstanding equity awards held by our named executive
officers from
12/31/07 to
12/31/08.
The analysis reflected a cumulative loss of between 54% to 79%
of the equity value of the awards, which is indicative of the
linkage that exists between the interests of our named executive
officers and our stockholders. While the Compensation Committee
reviews a wealth accumulation analysis each year, to date, the
amount of the named executive officers past compensation
has generally not been a significant factor in the Compensation
Committees determinations.
|
|
V.
|
2008
Compensation Decisions
|
2008
Annual Base Salary Adjustments and 2008 Target Bonus
Opportunities
At the beginning of 2008, the Compensation Committee considered
whether adjustments would be made to the annual base salaries
and target bonus opportunities for our named executive officers.
On February 6, 2008, the
37
Compensation Committee made modest adjustments to
Messrs. Foshees, Smoliks and Yardleys
base salaries based on 2008 market conditions and comparative
benchmarking data. The Compensation Committee decided not to
adjust the base salaries of Messrs. Leland and Baker
because the committee felt their existing salaries were
reasonably positioned relative to peer group and survey
benchmarking data. No adjustments were made to the named
executive officers 2008 target bonus opportunities, which
the Compensation Committee believes continue to be appropriate
and commensurate with the responsibilities of the respective
executives. These target bonus opportunities were derived in
part from peer group and competitive survey benchmarking data
and in part by the Compensation Committees judgment on the
internal equity of the positions, scope of job responsibilities
and the executives industry experience and tenure. The
following tables set forth the base salaries and annual target
bonus opportunities for the named executive officers. The base
salary adjustments for 2008 were effective April 1, 2008.
Annual
Base Salaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 Base Salary
|
|
2008 Base Salary
|
|
2007-2008
|
|
|
effective 4/1/07
|
|
effective 4/1/08
|
|
Percentage
|
Name
|
|
($)
|
|
($)
|
|
Increase
|
|
Douglas L. Foshee
|
|
$
|
1,000,008
|
|
|
$
|
1,050,000
|
|
|
|
5
|
%
|
D. Mark Leland
|
|
$
|
519,756
|
|
|
$
|
519,756
|
|
|
|
0
|
%
|
Brent J. Smolik
|
|
$
|
550,008
|
|
|
$
|
566,520
|
|
|
|
3
|
%
|
James C. Yardley
|
|
$
|
500,004
|
|
|
$
|
515,016
|
|
|
|
3
|
%
|
Robert W. Baker
|
|
$
|
456,696
|
|
|
$
|
456,696
|
|
|
|
0
|
%
|
Target
Bonus Opportunities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 Target
|
|
2008 Target
|
|
|
|
|
Bonus
|
|
Bonus
|
|
2007-2008
|
|
|
Opportunity
|
|
Opportunity
|
|
Percentage
|
Name
|
|
(% of salary)
|
|
(% of salary)
|
|
Increase
|
|
Douglas L. Foshee
|
|
|
120
|
%
|
|
|
120
|
%
|
|
|
0
|
%
|
D. Mark Leland
|
|
|
60
|
%
|
|
|
60
|
%
|
|
|
0
|
%
|
Brent J. Smolik
|
|
|
90
|
%
|
|
|
90
|
%
|
|
|
0
|
%
|
James C. Yardley
|
|
|
75
|
%
|
|
|
75
|
%
|
|
|
0
|
%
|
Robert W. Baker
|
|
|
60
|
%
|
|
|
60
|
%
|
|
|
0
|
%
|
Annual
Cash Incentive Awards for 2008 Performance
In February 2009, the Compensation Committee approved the amount
of the named executive officers annual cash incentive
awards for 2008 performance. The following discussion sets forth
the process the Compensation Committee followed in determining
the amount of each named executive officers annual cash
incentive award for 2008 performance. The annual cash incentive
bonuses for 2008 performance are scheduled to be paid in March,
2009.
Performance Goals. At the beginning of 2008,
the Compensation Committee established a threshold, target and
maximum annual cash incentive bonus level for each of the named
executive officers (see the ranges of cash incentive bonuses as
a percentage of base salary on page 41). The Compensation
Committee also approved corporate and business unit financial
and non-financial performance goals.
38
Our 2008 corporate financial goals, which are the primary goals
used in determining the annual incentive bonuses for our named
executive officers, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Goals
|
Corporate Financial
Goals
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Weighting
|
|
Earnings Per Share
|
|
$
|
1.00
|
|
|
$
|
1.03
|
|
|
$
|
1.10
|
|
|
|
35
|
%
|
EBITDA
|
|
$
|
3,330 MM
|
|
|
$
|
3,400 MM
|
|
|
$
|
3,550 MM
|
|
|
|
35
|
%
|
Cash Flow from Operations
|
|
$
|
2,065 MM
|
|
|
$
|
2,120 MM
|
|
|
$
|
2,280 MM
|
|
|
|
15
|
%
|
Debt (net of cash)
|
|
$
|
13,355 MM
|
|
|
$
|
13,200 MM
|
|
|
$
|
12,940 MM
|
|
|
|
15
|
%
|
In addition, the Compensation Committee approved additional
performance goals for our corporate shared services group and
our pipeline and exploration and production business units. For
our corporate shared services group, the 2008 financial goals
included the corporate goals listed above, plus additional goals
relating to corporate and legacy costs. For our pipeline
business unit, the 2008 financial goals were based on value
creation, which is a measure of the cash value created in excess
of the cost of invested capital. For our exploration and
production (E&P) business unit, the 2008
financial goals included EBITDA, cash costs, average daily
production rates measured in million cubic feet of natural gas
equivalent per day (MMcfe/d), present value ratio, and reserve
replacement cost.
Our corporate financial goals were set in alignment with our
strategic plan and objectives for the year and in each case were
more aggressive than the goals established for 2007. For
example, the threshold 2008 EPS goal is $.23 higher than in
2007, and the threshold 2008 EBITDA goal is $404 million
higher than in 2007. In making the determination of the
threshold, target and maximum levels, the Compensation Committee
considered the specific circumstances expected to be faced by
our company and its business units in 2008. The threshold levels
represent reasonably achievable goals and acceptable growth from
2007 targets, whereas the maximum levels would require
exceptional performance and would result in top or near top
quartile performance versus our peer group.
The Compensation Committee also approved certain non-financial
goals for our corporate shared services group and business
units, including certification of compliance with our Code of
Business Conduct by 100 percent of our employees, no
material weakness in our internal controls over financial
reporting, and safety goals relating to (i) recordable
injuries, (ii) preventable vehicle incident rates, and
(iii) the number of spills outside of secondary
containment. The 2008 non-financial goals also included a goal
relating to the successful in-line inspection of our pipelines
as part of our pipeline integrity program. While the
Compensation Committee reviews these non-financial goals, they
do not materially impact the incentive awards payable to our
named executive officers, which awards are primarily weighted
towards the achievement of our corporate financial goals, as
described below.
Weighting of Corporate and Business Unit Goals. The
annual cash incentive awards for our named executive officers,
including our business unit heads Messrs. Smolik and
Yardley, are primarily weighted towards the achievement of our
corporate financial goals. With respect to our business unit
heads, the Compensation Committee determined it would be
appropriate to weight their annual bonuses primarily on
corporate performance to ensure the business unit heads are
aligning the performance of their business units with corporate
performance. Below is a chart summarizing the weighting of the
corporate and
business-unit
goals for purposes of determining each officers annual
incentive award.
39
Performance
Weights for Named Executive Officers
Annual Incentive Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
Shared Services
|
|
Exploration &
|
|
|
Named Executive
Officer
|
|
Corporate Goals
|
|
Goals
|
|
Production Goals
|
|
Pipeline Goals
|
|
Douglas L. Foshee
|
|
|
75
|
%
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
D. Mark Leland
|
|
|
75
|
%
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
Brent J. Smolik
|
|
|
75
|
%
|
|
|
|
|
|
|
25
|
%
|
|
|
|
|
James C. Yardley
|
|
|
75
|
%
|
|
|
|
|
|
|
|
|
|
|
25
|
%
|
Robert W. Baker
|
|
|
75
|
%
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
Annual Incentive Awards Negative
Discretion. The Compensation Committee uses
negative discretion in setting payouts under our
annual incentive award program. For purpose of
Section 162(m) of the Code, the annual incentives are
payable at maximum to the extent any of the corporate or
business unit financial or non-financial goals are achieved at
threshold performance. The Compensation Committee then exercises
its negative discretion to reduce the payout of incentive awards
to reflect actual corporate, business unit and individual
performance. By setting a high amount which can then be reduced,
we believe our annual incentive payments qualify for full
deductibility under Section 162(m) of the Code. This
reduction is not a negative reflection on the performance of our
company or our named executive officers, but rather is done to
ensure maximum flexibility with respect to the payment of
performance-based bonuses. If the Compensation Committee were to
have instead funded incentive awards at a minimum threshold and
used discretion to increase the amounts to reflect company and
individual performance, actual payouts would not qualify for the
Section 162(m) tax deduction. The Compensation Committee
uses a similar negative discretion approach in
determining the number of shares of restricted stock to be
granted to our Section 162(m) covered executives, which
grants are described later in this discussion. For further
information on Section 162(m), see the description of
Regulatory Considerations beginning on page 45 of this
proxy statement.
After the 2008 financial results became available, the
Compensation Committee determined the appropriate funding of the
2008 annual incentive bonus pool based on the achievement of the
pre-established financial and non-financial performance goals
for the year. The following table sets forth the percentage that
the annual incentive bonus pool is funded based on the level of
performance relative to the performance goals that were
established for the year.
Funding
of the
Annual Incentive Bonus Pool
|
|
|
|
|
Performance
|
|
Pool Funding
|
|
Maximum Goals Met
|
|
|
150
|
%(1)
|
Target Goals Met
|
|
|
100
|
%(2)
|
Threshold Goals Met
|
|
|
50
|
%(3)
|
Threshold Not Met
|
|
|
0
|
%
|
|
|
|
(1) |
|
The maximum funding of the annual incentive bonus pool is 150%
for performance at or above the maximum performance level. |
|
(2) |
|
For performance above target but below maximum, actual funding
is between 100%-150%, as determined by the Compensation
Committee. |
|
(3) |
|
For performance above threshold but below target, actual funding
is between 50%-100%, as determined by the Compensation Committee. |
Individual Performance Adjustment. As
mentioned above, accountability plays an important role in our
compensation programs, and individual performance is an
important factor in determining annual incentives. In addition,
individual performance goals support our vision of being the
place to work, the neighbor to have, and the company to own.
Each year, our named executive officers receive an individual
performance rating based on an
40
evaluation of the executive officers individual
contribution and performance against his or her individual
performance goals for the year and determined through our
performance management program. Individual performance goals for
2008 included leadership training and development initiatives,
recruiting top talent for key management positions, controlling
costs and supporting volunteer efforts in the communities in
which we work. Based on such individual performance rating, an
individual performance factor ranging between 0% and 150%, as
approved by the Compensation Committee, is assigned to each
executive. The Compensation Committee then uses the individual
performance factor (ranging from 0%-150%) to apply discretion
and adjust the executives actual annual cash incentive
award.
Under this formula, the maximum bonus opportunity is 225% of the
target bonus, which is calculated by taking 150% of the maximum
annual incentive bonus pool times 150% of the maximum individual
performance adjustment factor. The range of annual cash
incentive bonuses, based on the level of company performance
(and, where appropriate, the performance of our business units)
and the individual executive, is illustrated as a percentage of
base salary for each named executive officer in the following
table. The actual percentage of cash incentive bonuses could be
at any level between the minimum and maximum percentages
(0%-225%) based on company and individual performance.
Range of
Cash Incentive Bonuses as a Percentage of Base Salary for
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
|
|
|
|
|
|
Threshold
|
|
|
|
|
|
|
|
|
Not Met
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Douglas L. Foshee
|
|
|
0
|
%
|
|
|
60
|
%
|
|
|
120
|
%
|
|
|
270
|
%
|
D. Mark Leland
|
|
|
0
|
%
|
|
|
30
|
%
|
|
|
60
|
%
|
|
|
135
|
%
|
Brent J. Smolik
|
|
|
0
|
%
|
|
|
45
|
%
|
|
|
90
|
%
|
|
|
202.50
|
%
|
James C. Yardley
|
|
|
0
|
%
|
|
|
37.50
|
%
|
|
|
75
|
%
|
|
|
168.75
|
%
|
Robert W. Baker
|
|
|
0
|
%
|
|
|
30
|
%
|
|
|
60
|
%
|
|
|
135
|
%
|
The potential range of values of the annual cash incentive
awards for 2008 performance for each of the named executive
officers is reflected in the Grants of Plan-Based Awards table
in the Estimated Possible Payouts under Non-Equity
Incentive Plan Awards column on page 51 of this proxy
statement.
El Paso Performance. In February 2009,
the Compensation Committee reviewed the actual performance of
our company and its business units relative to the corporate and
business unit performance goals that were established for the
year. In reviewing our actual performance relative to the
corporate financial goals, the Compensation Committee excluded
the impacts of certain items under pre-approved adjustment
categories, including: items attributable to hurricanes Ike and
Gustav and tropical storm Dolly such as repair costs and lower
production, volatile commodity prices in the oil and gas
industry, including a ceiling test impairment to our domestic
and Brazilian full cost pools, unbudgeted delays or gains and
losses on asset sales activity in Brazil, actions taken to
resolve legacy issues, and certain unbudgeted or strategic
items, including early spending on the Ruby Pipeline project
approved by the Board of Directors in 2008. The Compensation
Committee determined that these items were not related to the
ongoing operation of El Paso in a manner consistent with
the way the performance goals and ranges were set. Based on
these adjustments, the Compensation Committee determined that
El Paso achieved the following adjusted results:
|
|
|
|
|
earnings per share of $1.17, which is above the maximum goal of
$1.10,
|
|
|
|
EBITDA of $3,389 million, which is above the threshold goal
of $3,330 million, but below the target of
$3,400 million,
|
|
|
|
cash flow from operations of $2,192 million, which is above
the target goal of $2,120 million, and
|
|
|
|
outstanding debt (net of cash) of $12,973 million, which
resulted in above target achievement,
|
which collectively resulted in a determination of a corporate
achievement level of 100%. In addition, the Compensation
Committee determined that our corporate shared services group
and our pipeline business unit
41
achieved their respective financial goals and substantially all
of the non-financial performance goals (with achievement levels
of 105% and 115%, respectively), and our E&P business unit
achieved many of its financial and non-financial performance
goals (with an achievement level of 67%).
Reduction and Modification of Bonus
Amounts. Although the company achieved its
corporate financial performance goals, the Compensation
Committee decided it would be appropriate to reduce and modify
the cash incentive awards payable to our named executive
officers for 2008 performance. Upon the recommendation of our
CEO, the Compensation Committee elected to use its negative
discretion to reduce the cash bonuses otherwise earned by our
named executive officers, including our CEO, primarily due to
the market downturn and weakening global economy. On average,
the reduction resulted in approval of cash incentive awards at
approximately 90% of target, despite higher weighted corporate
and business unit achievement levels. Furthermore, the
Compensation Committee determined that one-half of each named
executive officers approved bonus should be paid in the
form of restricted stock, rather than being paid entirely in
cash. This is a change from prior years and was done for two
reasons: (i) to continue to motivate the named executive
officers to focus on building long-term shareholder value over
short-term results, and (ii) to put a significant portion
of the bonus at risk and encourage retention and focus. The
restricted stock payable as part of the approved bonuses will be
granted on April 1, 2009 at the same time as our annual
equity grants are made, as described in the Long Term
Incentive Awards section below, and the shares will cliff
vest three years from the date of grant.
2008 Annual Incentives. Based on the policies
described earlier in this compensation discussion and analysis,
the Compensation Committee reviewed all elements of the named
executive officers total compensation for 2008, as well as
company and individual performance. Based on the Compensation
Committees review of these and external factors, the
committee approved annual incentive bonuses for our named
executive officers, as set forth in the chart below. The amount
was calculated by starting with the maximum bonus amount payable
for Code Section 162(m) purposes, which was then reduced to
reflect the following formula:
target bonus X
corporate/business unit achievement percentage X individual
performance factor = annual incentive award
The amount was then further adjusted by the Compensation
Committee per the CEOs recommendation, as described above.
The following table compares each named executives target
annual cash incentive for 2008 performance versus the actual
incentive earned, as well as the portion of the incentive
payable in cash and the portion payable in the form of
restricted stock, as determined by the Compensation Committee.
Target
vs. Actual
Annual Incentive Bonuses
Paid for 2008 Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target Cash
|
|
Percentage of
|
|
Actual Incentive Bonus (1)
|
|
|
|
|
Incentive
|
|
Target Bonus
|
|
Cash
|
|
Restricted Stock
|
|
|
|
|
|
|
Bonus
|
|
Approved
|
|
Portion
|
|
Portion
|
|
Total
|
|
|
|
Douglas L. Foshee
|
|
$
|
1,260,000
|
|
|
|
94
|
%
|
|
$
|
593,220
|
|
|
$
|
593,220
|
|
|
$
|
1,186,440
|
|
D. Mark Leland
|
|
$
|
311,854
|
|
|
|
104
|
%
|
|
$
|
162,000
|
|
|
$
|
162,000
|
|
|
$
|
324,000
|
|
Brent J. Smolik
|
|
$
|
509,868
|
|
|
|
68
|
%
|
|
$
|
172,500
|
|
|
$
|
172,500
|
|
|
$
|
345,000
|
|
James C. Yardley
|
|
$
|
386,262
|
|
|
|
101
|
%
|
|
$
|
195,000
|
|
|
$
|
195,000
|
|
|
$
|
390,000
|
|
Robert W. Baker
|
|
$
|
274,018
|
|
|
|
88
|
%
|
|
$
|
120,000
|
|
|
$
|
120,000
|
|
|
$
|
240,000
|
|
|
|
|
(1) |
|
The cash portion of the annual bonus will be paid in March,
2009. The portion of the annual bonus payable in the form of
restricted stock will be granted on April 1, 2009 at the
time of our annual equity grants and will cliff vest three years
from the date of grant. |
The cash portion of the amount awarded to our named executive
officers for their annual incentive bonuses for 2008 performance
is included in the Summary Compensation Table under the column
Non-Equity Incentive Plan Compensation on
page 48 of this proxy statement. The portion of the
incentive bonuses payable in the form of restricted stock will
be reflected in next years Summary Compensation Table and
Grants of Plan-Based Awards Table in accordance with SEC
requirements regarding equity grant reporting.
42
Long-Term
Incentive Awards
We use our stockholder approved 2005 Omnibus Incentive
Compensation Plan, or omnibus plan, for long-term
incentive awards. Under the omnibus plan, the Compensation
Committee is the plan administrator with respect to employees
subject to Section 162(m) and Section 16 of the
Exchange Act, which includes our named executive officers. The
Compensation Committee determines the timing of when the annual
grants of restricted stock and stock options to such executives
will occur as well as the terms and restrictions applicable to
such grants.
The Compensation Committee approves the annual grant to our
executive officers after the financial results are available for
the prior fiscal year and selects a future grant date (usually
several weeks subsequent to the Compensation Committees
action) when the awards will be granted. The Compensation
Committees standard practice is to select the first
trading day of the quarter following the filing of the Annual
Report on
Form 10-K
as the grant date for long-term incentive awards, which
historically has been the first trading day of April. Stock
options are granted with an exercise price based upon the
average between the high and low selling prices at which our
common stock traded on the grant date.
As described earlier, annual long-term incentives are comprised
of an approximate 50/50 combination of stock options and
restricted stock. Options are granted at target levels and are
not adjusted for company or individual performance. This
practice is in place to mitigate the effect of short term
performance on a long-term incentive. Restricted stock awards
are performance-based and are adjusted for both company and
individual performance, as described below. The target equity
opportunities for the 2007 performance year and for the 2008
performance year, including both the option and restricted stock
components are included below. These target long-term equity
opportunities were derived from peer group and competitive
survey benchmarking data and from the Compensation
Committees judgment on the internal equity of the
positions and scope of job responsibilities.
Target
Long-Term Equity Opportunities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 Performance
|
|
2008 Performance
|
|
2007-2008
|
|
|
Year Target Equity
|
|
Year Target Equity
|
|
Percentage
|
Name
|
|
Opportunity (1)
|
|
Opportunity (1)
|
|
Increase
|
|
Douglas L. Foshee
|
|
$
|
4,350,000
|
|
|
$
|
4,350,000
|
|
|
|
0
|
%
|
D. Mark Leland
|
|
$
|
1,250,000
|
|
|
$
|
1,250,000
|
|
|
|
0
|
%
|
Brent J. Smolik
|
|
$
|
1,250,000
|
|
|
$
|
1,250,000
|
|
|
|
0
|
%
|
James C. Yardley
|
|
$
|
1,250,000
|
|
|
$
|
1,250,000
|
|
|
|
0
|
%
|
Robert W. Baker
|
|
$
|
1,250,000
|
|
|
$
|
1,250,000
|
|
|
|
0
|
%
|
The amount of equity available to fund the equity pool for
annual restricted stock grants is based 50% on achievement of
the annual overall corporate financial goals and 50% on
El Pasos one-year relative TSR compared to our peer
group of companies.
The portion of the equity pool used for restricted stock grants
that is funded based on El Pasos TSR compared to its
peer group of companies is determined as follows:
Funding
of Portion of Equity Pool
Based on Total Shareholder Return
for Restricted Stock Grants
|
|
|
Total Shareholder
Return
|
|
Equity Pool Funding
|
|
1st
Quartile
(75th to
100th percentile)
|
|
Funded at 150%
|
2nd Quartile
(50th to
74th percentile)
|
|
Funded from 100% to 150% based on actual TSR results
|
3rd &
4th Quartile
(0 to
49th percentile)
|
|
Funded from 0% to 100% (1)
|
|
|
|
(1) |
|
If our TSR is below the
50th
percentile (i.e., third or fourth quartile), at least one of the
pre-established corporate or business unit financial or
non-financial performance goals must be achieved before any
restricted stock grants will be awarded. |
43
The portion of the equity pool used for restricted stock grants
that is funded based on achievement of the annual overall
corporate financial goals is determined using the same
percentage rating approved by the Compensation Committee for
purposes of funding the corporate annual incentive pool.
Following the determination of the funding percentage for the
equity pool, the Compensation Committee applies the individual
performance factors described on pages 40 and 41 as an
adjustment performance factor to determine the executive
officers actual restricted stock award.
Annual
Grant based on 2007 Performance
On February 6, 2008, the Compensation Committee approved
the 2008 annual grant of long-term incentive awards in the form
of restricted stock and stock options based on 2007 performance.
These long-term awards were granted to the named executive
officers on April 1, 2008. During 2007, we achieved above
target performance of our overall corporate financial
performance goals, resulting in the funding of one-half of the
restricted stock portion of the equity pool at 115%. In
addition, during 2007, El Pasos TSR relative to its
peer group was in the third quartile (41st percentile),
resulting in the funding of one-half of the restricted stock
portion of the equity pool at 82%. Accordingly, the restricted
stock grants that were granted to the named executive officers
on April 1, 2008 were funded at 98.5% of overall target
(50% × (115% based on corporate financial performance + 82%
based on TSR performance) = 98.5%) and were adjusted for
individual performance. Stock options were granted at target and
were not adjusted for corporate or individual performance. The
restricted stock and stock options vest in three equal annual
installments beginning one year from the date of grant. The
number of shares and grant date fair market value of the
restricted stock and stock options awarded in April 2008 to each
named executive officer is reflected in the Grants of Plan-Based
Awards table on page 51 of this proxy statement.
Annual
Grant based on 2008 Performance
In February 2009, the Compensation Committee approved the 2009
annual grant of long-term incentive awards in the form of
restricted stock and stock options based on 2008 performance.
These long-term incentive awards are expected to be granted to
the named executive officers on April 1, 2009. During 2008,
we achieved target performance of our overall corporate
financial performance goals, resulting in the funding of
one-half of the restricted stock portion of the equity pool at
100%. However, during 2008, El Pasos TSR relative to
our peer group of companies was in the fourth quartile
(18th percentile), and due to this lower quartile
performance, the Compensation Committee determined that the
funding of one-half of the restricted stock pool based on TSR
results should be at 0%. Accordingly, restricted stock grants
that will occur in April 2009 based upon 2008 performance will
be funded at 50% of overall target (50% × (100% based on
corporate financial performance + 0% based on TSR performance) =
50%) and the value of each named executive officers
individual grant will be adjusted for individual performance, as
described above. Stock options will be granted at target and
will not be adjusted for corporate or individual performance.
The restricted stock and stock options will vest in three equal
annual installments beginning one year from the date of grant.
The following table compares each named executive officers
target equity opportunity for 2008 performance versus the actual
equity amount earned as described above.
44
Target
vs. Actual
Long-Term Incentive Awards
Based on 2008 Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
|
2008 Performance
|
|
Target Equity
|
|
2008 Performance
|
|
|
Year Target Equity
|
|
Opportunity
|
|
Year Actual Equity
|
Name
|
|
Opportunity
|
|
Approved
|
|
Payout (1)
|
|
Douglas L. Foshee
|
|
$
|
4,350,000
|
|
|
|
78
|
%
|
|
$
|
3,398,220
|
|
D. Mark Leland
|
|
$
|
1,250,000
|
|
|
|
78
|
%
|
|
$
|
974,265
|
|
Brent J. Smolik
|
|
$
|
1,250,000
|
|
|
|
75
|
%
|
|
$
|
937,500
|
|
James C. Yardley
|
|
$
|
1,250,000
|
|
|
|
84
|
%
|
|
$
|
1,047,794
|
|
Robert W. Baker
|
|
$
|
1,250,000
|
|
|
|
72
|
%
|
|
$
|
900,735
|
|
|
|
|
(1) |
|
We use a Black-Scholes valuation to convert the dollar value of
the grant into options, and we use a 10 day average of the
closing sales price of our stock in advance of the Compensation
Committee meeting in which the awards are approved, which
meeting is set pursuant to a pre-established corporate calendar,
to convert the dollar value of the grant into restricted stock. |
The number of shares and grant date fair market value of the
restricted stock and stock options awarded in April 2009 to each
named executive officer will be reflected in next years
Grants of Plan-Based Awards table in accordance with SEC
reporting requirements.
2009 Base
Salary Freeze
At its February 2009 meeting, the Compensation Committee
determined it would be appropriate to freeze base salaries at
2008 levels for all employees, including our named executive
officers. The Compensation Committee felt this action would be
appropriate to reflect the companys ongoing efforts to
reduce costs due to the ongoing financial crisis and the
weakening economy and to better position the company for
long-term success. As such, our named executive officers will
not receive base salary increases in 2009. However, for the
general employee population we will continue to assess the
feasibility of providing base salary adjustments at some point
during the year.
2009
Annual Cash Incentive Plan Changes
Also at its February 2009 meeting, the Compensation Committee
determined that the corporate financial measures that will be
used for our 2009 annual cash incentive program will include
earnings per share, EBITDA, debt net of cash, and return on
total capital (ROTC), and will not include cash flow
from operations. Cash flow from operations was eliminated since
it is primarily driven by EBITDA, which is already a performance
measure, and ROTC was added in its place. ROTC is a measure of
the companys ability to earn a satisfactory return on its
investments, and the Compensation Committee and management
believe this is an important metric given the capital intensive
nature of our company.
|
|
VI.
|
Other
Compensation Policies
|
Regulatory
Considerations
Section 162(m) imposes a limit of $1,000,000 on the amount
that we may deduct for federal income tax purposes in any one
year for compensation paid to our CEO and any of the our other
named executive officers, other than our CFO, who are employed
as of the end of the year. However, to the extent compensation
is
performance-based
within the meaning of Section 162(m), the Sections
limitations will not apply. Our executive compensation plans,
including our omnibus plan, are structured so that awards such
as cash incentive awards, stock options and restricted stock
qualify as deductible performance-based compensation. While the
Compensation Committee strives to make awards under our plans
that are intended to qualify as performance-based compensation
under Section 162(m), it is possible under certain
circumstances that some portion of the compensation paid to our
executive officers will not meet the standards of deductibility
under
45
Section 162(m). The Compensation Committee reserves the
right to award compensation which does not qualify as
performance-based under Section 162(m) if it determines
that such awards are necessary to provide a competitive
compensation package to attract and retain qualified executive
talent. The annual cash incentive awards, stock options and
performance-based restricted stock that were granted to the
named executive officers during 2008 were intended to be
performance-based within the meaning of Section 162(m).
Stock
Ownership
Our Corporate Governance Guidelines impose stock ownership
requirements on our executive officers. These stock ownership
requirements are designed to emphasize stock ownership by our
executive officers and to further align their interests with our
stockholders through good times and bad. These
requirements are as follows:
|
|
|
|
|
Position
|
|
Minimum Aggregate Value
|
|
Chief Executive Officer
|
|
|
5 X base salary
|
|
Other Executive Officers
|
|
|
2 X base salary
|
|
Each executive officer is required to meet the ownership
threshold within five years of election as an executive officer.
As of December 31, 2008, each of our named executive
officers ownership in our common stock exceeded the
required ownership thresholds and did so in the requisite time
frames. See page 10 of this proxy statement for further
information regarding the stock ownership requirements for our
executive officers.
Margin
Trading Prohibition
In 2008, we adopted a policy prohibiting executives from hedging
their ownership of company stock. Under the policy, executive
officers are prohibited from holding El Paso securities in
a margin account or otherwise entering into any pledge
arrangement that would permit a third party to sell the
El Paso securities without the executives consent or
knowledge. This prohibition also applies to our non-employee
directors.
Compensation
Recovery
Under our omnibus plan, which provides for grants of annual cash
incentive awards and long-term incentive awards, if it is
determined that an executive officer in the plan knowingly
engaged in, or was grossly negligent with respect to, misconduct
that causes us to prepare an accounting restatement due to
material noncompliance with any financial reporting requirement
under the securities laws, the executive is required to
reimburse us the amount of any payment in settlement of an award
earned or accrued during the
12-month
period following the first public issuance or filing, whichever
first occurred, of the financial document that is required to be
restated.
46
COMPENSATION
COMMITTEE REPORT
Each member of the Compensation Committee is
independent, as that term is defined under
(a) the NYSE listing standards, (b) the non-employee
director standards of
Rule 16b-3
of the Exchange Act, as amended, (c) the outside director
requirements of Section 162(m) of the Code and
(d) El Pasos Corporate Governance Guidelines.
The Compensation Committee currently consists of
Messrs. Dunlap, Joyce, Shapiro, Talbert and Wyatt and
Ms. McClean.
As a Committee, our primary function is to ensure
El Pasos executive compensation program is
competitive so that El Paso can attract and retain
executive personnel and performance-based so that the interests
of El Pasos management are aligned with both the
short-term and long-term interests of El Pasos
stockholders. We engage an independent executive compensation
consulting firm to assist us in our review of
El Pasos executive and director compensation programs
to ensure these programs are competitive and consistent with our
stated objectives. The compensation consultant is retained by
and is directly accountable to us and we review all related fees
paid to the compensation consultant. We have no interlocks or
insider participation and we engage in annual self evaluations
to determine our effectiveness as a Committee. We have adopted a
charter which may be found on El Pasos website at
www.elpaso.com.
Compensation
Committee Statement
We have prepared this Compensation Committee Report as required
by the Securities and Exchange Commission. We have reviewed and
discussed with El Pasos management the Compensation
Discussion and Analysis included in this proxy statement, and
based on that review and discussion, we recommended to the Board
of Directors that the Compensation Discussion and Analysis be
included in this proxy statement.
Current
Members of the Compensation Committee of the Board of
Directors
|
|
|
|
|
|
|
|
|
|
|
Steven J. Shapiro
|
|
James L. Dunlap
|
|
William H. Joyce
|
|
Ferrell P. McClean
|
|
J. Michael Talbert
|
|
Joe B. Wyatt
|
(Chairman)
|
|
(Member)
|
|
(Member)
|
|
(Member)
|
|
(Member)
|
|
(Member)
|
47
Summary
Compensation Table
The following table and the narrative text that follows it
provide a summary of the compensation earned or paid in 2008,
2007 and 2006 to our CEO, our CFO and our three other most
highly compensated executive officers according to applicable
SEC regulations. The compensation reflected for each individual
was for their services provided in all capacities to us and our
subsidiaries. This table also identifies the principal capacity
in which each of the named executive officers served us at the
end of 2008.
Summary
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($) (1)
|
|
($) (2)
|
|
($) (3)
|
|
($) (4) (5)
|
|
($) (6)
|
|
($)
|
|
Douglas L. Foshee
|
|
|
2008
|
|
|
$
|
1,037,502
|
|
|
$
|
0
|
|
|
$
|
2,421,765
|
|
|
$
|
2,145,868
|
|
|
$
|
593,220
|
|
|
$
|
139,878
|
|
|
$
|
118,212
|
|
|
$
|
6,456,445
|
|
President & Chief
|
|
|
2007
|
|
|
$
|
987,507
|
|
|
$
|
0
|
|
|
$
|
2,241,918
|
|
|
$
|
1,957,958
|
|
|
$
|
1,518,000
|
|
|
$
|
109,884
|
|
|
$
|
166,399
|
|
|
$
|
6,981,666
|
|
Executive Officer
|
|
|
2006
|
|
|
$
|
950,004
|
|
|
$
|
0
|
|
|
$
|
1,643,310
|
|
|
$
|
1,684,220
|
|
|
$
|
1,400,000
|
|
|
$
|
106,714
|
|
|
$
|
109,408
|
|
|
$
|
5,893,656
|
|
D. Mark Leland
|
|
|
2008
|
|
|
$
|
519,756
|
|
|
$
|
0
|
|
|
$
|
844,768
|
|
|
$
|
589,900
|
|
|
$
|
162,000
|
|
|
$
|
13,116
|
|
|
$
|
43,905
|
|
|
$
|
2,173,445
|
|
Executive Vice President &
|
|
|
2007
|
|
|
$
|
513,567
|
|
|
$
|
0
|
|
|
$
|
786,232
|
|
|
$
|
479,222
|
|
|
$
|
430,358
|
|
|
$
|
223
|
|
|
$
|
45,163
|
|
|
$
|
2,254,765
|
|
Chief Financial Officer
|
|
|
2006
|
|
|
$
|
483,750
|
|
|
$
|
0
|
|
|
$
|
457,363
|
|
|
$
|
331,515
|
|
|
$
|
490,050
|
|
|
$
|
2,974
|
|
|
$
|
40,146
|
|
|
$
|
1,805,798
|
|
Brent J. Smolik
|
|
|
2008
|
|
|
$
|
562,392
|
|
|
$
|
0
|
|
|
$
|
1,003,516
|
|
|
$
|
495,830
|
|
|
$
|
172,500
|
|
|
$
|
46,011
|
|
|
$
|
26,950
|
|
|
$
|
2,307,199
|
|
Executive Vice President &
|
|
|
2007
|
|
|
$
|
550,008
|
|
|
$
|
0
|
|
|
$
|
1,683,289
|
|
|
$
|
264,828
|
|
|
$
|
622,100
|
|
|
$
|
27,924
|
|
|
$
|
360,113
|
|
|
$
|
3,508,262
|
|
President of Exploration &
|
|
|
2006
|
|
|
$
|
91,668
|
|
|
$
|
500,000
|
|
|
$
|
250,007
|
|
|
$
|
0
|
|
|
$
|
177,000
|
|
|
$
|
0
|
|
|
$
|
48,134
|
|
|
$
|
1,066,809
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James C. Yardley
|
|
|
2008
|
|
|
$
|
511,263
|
|
|
$
|
0
|
|
|
$
|
715,866
|
|
|
$
|
555,143
|
|
|
$
|
195,000
|
|
|
$
|
57,869
|
|
|
$
|
48,395
|
|
|
$
|
2,083,536
|
|
Executive Vice President,
|
|
|
2007
|
|
|
$
|
500,004
|
|
|
$
|
0
|
|
|
$
|
639,066
|
|
|
$
|
404,451
|
|
|
$
|
432,191
|
|
|
$
|
189
|
|
|
$
|
86,947
|
|
|
$
|
2,062,848
|
|
Pipeline Group
|
|
|
2006
|
|
|
$
|
385,680
|
|
|
$
|
0
|
|
|
$
|
215,278
|
|
|
$
|
162,816
|
|
|
$
|
569,536
|
|
|
$
|
56,065
|
|
|
$
|
119,338
|
|
|
$
|
1,508,713
|
|
Robert W. Baker
|
|
|
2008
|
|
|
$
|
456,696
|
|
|
$
|
0
|
|
|
$
|
738,217
|
|
|
$
|
582,433
|
|
|
$
|
120,000
|
|
|
$
|
66,168
|
|
|
$
|
35,882
|
|
|
$
|
1,999,396
|
|
Executive Vice President &
|
|
|
2007
|
|
|
$
|
451,257
|
|
|
$
|
0
|
|
|
$
|
722,122
|
|
|
$
|
476,535
|
|
|
$
|
315,120
|
|
|
$
|
43,010
|
|
|
$
|
39,143
|
|
|
$
|
2,047,187
|
|
General Counsel
|
|
|
2006
|
|
|
$
|
432,807
|
|
|
$
|
0
|
|
|
$
|
456,677
|
|
|
$
|
345,269
|
|
|
$
|
401,885
|
|
|
$
|
47,722
|
|
|
$
|
33,628
|
|
|
$
|
1,717,988
|
|
|
|
|
(1) |
|
The amount reflected in this column for 2008 is the amount of
compensation cost recognized in 2008 for restricted stock
granted in 2008 and prior years for each named executive
officer. The calculation of these amounts disregards the
estimate of forfeitures related to time-based vesting
conditions. The grant date fair market value of the restricted
stock computed in accordance with Statement of Financial
Accounting Standards No. 123 (revised 2004), Share-
Based Payment (SFAS No. 123(R)) used to
calculate these amounts is the same as that used for our
stock-based compensation disclosure in Note 16 to our
financial statements included in our 2008 Annual Report on
Form 10-K
filed with the SEC on March 2, 2009, and our Annual Reports
on
Form 10-K
for prior years. |
|
(2) |
|
The amount reflected in this column for 2008 is the amount of
compensation cost recognized in 2008 for stock options granted
in 2008 and prior years for each named executive officer. The
calculation of these amounts disregards the estimate of
forfeitures related to time-based vesting conditions. The grant
date fair market value of the stock options computed in
accordance with SFAS No. 123(R) used to calculate
these amounts is the same as that used for our stock-based
compensation disclosure in Note 16 to our financial
statements included in our 2008 Annual Report on
Form 10-K
filed with the SEC on March 2, 2009, and our Annual Reports
on
Form 10-K
for prior years. |
|
(3) |
|
The amount in this column for 2008 reflects each named executive
officers annual cash incentive bonus earned for 2008
performance. Annual cash incentive bonuses are performance-based
and driven by company and individual performance. Amounts for
2008 will be paid to the named executive officers in March,
2009. See the discussion under Annual Cash Incentive
Awards for 2008 Performance in the Compensation Discussion
and Analysis for additional information. |
|
(4) |
|
The amount in this column for 2008 reflects the annual change in
the actuarial present value of each named executive
officers accumulated pension and supplemental pension
benefits. The change in pension value is generally equal to the
difference between the actuarial present value at the end of the
year and the beginning of the year. Effective January 1,
2008, we adopted the measurement date provisions of Statement of
Financial |
48
|
|
|
|
|
Accounting Standards No. 158, Employers Accounting
for Defined Benefit Pension and Other Postretirement Plans
(SFAS No. 158) and changed the
measurement date of our pension and supplemental pension plans
from September 30 to December 31. The reported values above
have been annualized by multiplying the
15-month
change in pension value from September 30, 2007 to
December 31, 2008 by 12/15. The annual change in the
actuarial present value of Messrs. Foshees,
Lelands, Smoliks, Yardleys and Bakers
accumulated pension and supplemental pension benefits for 2008
is $133,632, $11,269, $45,747, $56,258, and $64,354,
respectively. In addition, effective January 1, 2008, the
Pension Plan was amended to permit participants to elect to
receive their pension benefits in the form of an unlimited lump
sum (the supplemental pension plan already permitted unlimited
lump sum payouts). Due to this amendment, our calculations as of
December 31, 2008 assume participants elect their pension
benefits as a lump sum. Our 2007 and 2006 disclosures using a
September 30 measurement date reflected a single life annuity
form of pension payment for all participants since their
projected pension benefits exceeded the previous lump sum limit
of $100,000. The impact for this change in methodology for
Messrs. Foshee, Leland, Smolik, Yardley and Baker is
$1,224, $15,694, $268, $70,674 and $4,069, respectively. |
|
(5) |
|
The amount in this column for 2008 also reflects above-market
interest credited to the named executive officers
supplemental Retirement Savings Plan account balances. During
2008, interest was credited to the balance of each executive
officers supplemental Retirement Savings Plan account
balance on a monthly basis at a rate equal to the average of
Moodys Seasoned Aaa Corporate Bond Rate and Moodys
Seasoned Baa Corporate Bond Rate, as published by Moodys
Investors Services, Inc. It was determined that the rate of
interest exceeded 120 percent of the applicable federal
long-term rate for each month during 2008. The total amount of
the above-market interest credited to
Messrs. Foshees, Lelands, Smoliks,
Yardleys and Bakers supplemental Retirement Savings
Plan account balance during 2008 was $6,246, $1,847, $264,
$1,611 and $1,814, respectively. See the Nonqualified Deferred
Compensation table and narrative description on pages 58
and 59 of this proxy statement for a description of the named
executive officers supplemental Retirement Savings Plan
benefits. |
|
(6) |
|
The compensation reflected in the All Other
Compensation column for 2008 for each of the named
executive officers includes company matching contributions to
our Retirement Savings Plan, supplemental company matching
contributions for the Retirement Savings Plan accrued under our
2005 Supplemental Benefits Plan, the incremental cost to
El Paso of personal use of aircraft, annual executive
physicals and tax reimbursements, which are listed in the table
immediately below. |
All Other
Compensation included in the Summary Compensation Table for
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
Supplemental
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matching
|
|
Company Matching
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
Contributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to the
|
|
Accrued under the
|
|
Personal
|
|
Annual
|
|
|
|
|
|
|
|
|
|
|
Retirement
|
|
2005 Supplemental
|
|
Use of
|
|
Executive
|
|
Tax
|
|
|
|
|
|
|
|
|
Savings Plan
|
|
Benefits Plan
|
|
Aircraft
|
|
Physicals
|
|
Reimbursements
|
|
Total
|
|
|
|
|
Name
|
|
($)
|
|
($) (A)
|
|
($) (B)
|
|
($) (C)
|
|
($) (D)
|
|
($)
|
|
|
|
|
Douglas L. Foshee
|
|
$
|
10,350
|
|
|
$
|
104,648
|
|
|
$
|
46
|
|
|
$
|
2,243
|
|
|
$
|
925
|
|
|
$
|
118,212
|
|
D. Mark Leland
|
|
$
|
10,350
|
|
|
$
|
32,405
|
|
|
$
|
0
|
|
|
$
|
1,150
|
|
|
$
|
0
|
|
|
$
|
43,905
|
|
Brent J. Smolik
|
|
$
|
10,350
|
|
|
$
|
14,958
|
|
|
$
|
362
|
|
|
$
|
1,150
|
|
|
$
|
130
|
|
|
$
|
26,950
|
|
James C. Yardley
|
|
$
|
10,350
|
|
|
$
|
32,106
|
|
|
$
|
1,116
|
|
|
$
|
2,850
|
|
|
$
|
1,973
|
|
|
$
|
48,395
|
|
Robert W. Baker
|
|
$
|
10,350
|
|
|
$
|
24,382
|
|
|
$
|
0
|
|
|
$
|
1,150
|
|
|
$
|
0
|
|
|
$
|
35,882
|
|
|
|
|
(A) |
|
The compensation reflected in this column for each of the named
executive officers for 2008 includes supplemental company
matching contributions for the Retirement Savings Plan which
were accrued under the 2005 Supplemental Benefits Plan.
Supplemental company matching contributions accrued under the
2005 Supplemental Benefits Plan are also disclosed as registrant
contributions in the Nonqualified Deferred Compensation table on
page 58 of this proxy statement. |
|
(B) |
|
El Paso makes available for business use to its executive
officers private aircraft leased by El Paso. The amount
shown in this column for Mr. Foshee for 2008 reflects the
incremental cost to El Paso for occasions when family
members accompanied him on business-related flights on private
aircraft leased by El Paso. The amount shown for
Mr. Yardley likewise reflects the incremental cost to
El Paso for an occasion when his spouse |
49
|
|
|
|
|
accompanied him on a business-related flight on private aircraft
leased by El Paso, as well as occasions when his spouse
accompanied him on business-related flights using a commercial
carrier. The amount shown for Mr. Smolik reflects an
occasion when his spouse accompanied him on a business-related
flight using a commercial carrier. Incremental cost is
calculated based on the variable operating costs to
El Paso, which include hourly rate fees, fuel charges,
segment fees, federal excise taxes and, if applicable,
international fees and does not include the fixed costs
associated with the lease agreements since private aircraft are
used primarily for business purposes. When the executive
officers use of leased aircraft or a guests travel
does not meet the IRSs standard for business use, but
nevertheless is determined by us to be business-related, the
cost of that travel is imputed as income to the executive
officer and a
gross-up
payment for taxes is provided. Any tax reimbursements with
respect to the imputed income for the travel are reflected in
the Tax Reimbursements column of this table. |
|
(C) |
|
The amounts in this column for 2008 reflect the cost to
El Paso for the executive officer annual physicals. |
|
(D) |
|
The amounts in this column for 2008 for Messrs. Foshee,
Smolik and Yardley reflect tax reimbursements associated with
imputed income for personal air travel that does not meet the
IRSs standard for business use. |
In addition to the items included in the above table that could
be characterized as having a personal benefit, El Paso
provided a separate parking space for Mr. Foshee during a
portion of 2008. Mr. Foshees use of the parking space
is not included in the table above because there is no
incremental cost to El Paso for Mr. Foshees use
of this parking space. The named executive officers may also use
season tickets purchased by El Paso to attend sporting
events when the tickets are not otherwise being used for
business purposes. The named executive officers use of
these tickets for personal reasons is not included in the table
above because there is no incremental cost to El Paso.
50
Grants of
Plan-Based Awards Table
The following table sets forth the range of potential annual
cash incentive bonuses for 2008 performance as a dollar amount
for each of the named executive officers. The table also sets
forth the number of shares of restricted stock and the number of
securities underlying stock options awarded during 2008 to the
named executive officers. In satisfaction of applicable SEC
regulations, the table further sets forth the date of grant for
each restricted stock and stock option award and the date on
which the Compensation Committee took action to approve the
grant of such award. The table also sets forth the per-share
exercise price of the stock options granted during 2008, the
closing market price of our common stock on the date of grant of
stock options, and the grant date fair market value of the
restricted stock and stock options awarded during 2008. The
restricted stock and stock options in this table were granted
under our 2005 Omnibus Incentive Compensation Plan, which
provides that the average between the high and low selling
prices at which our common stock traded on the date of grant is
used as the exercise price (or strike price) for stock options.
Grants of
Plan-Based Awards
During the Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
All Other
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
|
|
|
|
Fair
|
|
|
|
|
|
|
Estimated Possible Payouts
|
|
Awards:
|
|
Awards:
|
|
Exercise
|
|
Closing
|
|
Value
|
|
|
|
|
|
|
Under Non-Equity Incentive
|
|
Number of
|
|
Number of
|
|
or Base
|
|
Market Price
|
|
of Stock
|
|
|
|
|
Date of
|
|
Plan Awards (1)
|
|
Shares of
|
|
Securities
|
|
Price
|
|
of Underlying
|
|
and
|
|
|
|
|
Compensation
|
|
Threshold
|
|
|
|
|
|
|
|
Stock or
|
|
Underlying
|
|
of Option
|
|
Securities on
|
|
Option
|
|
|
Grant
|
|
Committee
|
|
Not Met
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units
|
|
Options
|
|
Awards
|
|
Grant Date
|
|
Awards
|
Name
|
|
Date
|
|
Action
|
|
($)
|
|
($)
|
|
($)
|
|
($) (2)
|
|
(#) (3)
|
|
(#) (4)
|
|
($/Sh) (5)
|
|
($/Sh) (6)
|
|
($) (7)
|
|
Douglas L. Foshee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Incentive
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
0
|
|
|
$
|
630,000
|
|
|
$
|
1,260,000
|
|
|
$
|
2,835,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
4/1/2008
|
|
|
|
2/6/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,323,916
|
|
Stock Options
|
|
|
4/1/2008
|
|
|
|
2/6/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
376,950
|
|
|
$
|
16.71
|
|
|
$
|
16.81
|
|
|
$
|
2,164,560
|
|
D. Mark Leland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Incentive
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
0
|
|
|
$
|
155,927
|
|
|
$
|
311,854
|
|
|
$
|
701,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
4/1/2008
|
|
|
|
2/6/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
728,505
|
|
Stock Options
|
|
|
4/1/2008
|
|
|
|
2/6/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,319
|
|
|
$
|
16.71
|
|
|
$
|
16.81
|
|
|
$
|
622,000
|
|
Brent J. Smolik
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Incentive
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
0
|
|
|
$
|
254,934
|
|
|
$
|
509,868
|
|
|
$
|
1,147,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
4/1/2008
|
|
|
|
2/6/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
667,799
|
|
Stock Options
|
|
|
4/1/2008
|
|
|
|
2/6/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,319
|
|
|
$
|
16.71
|
|
|
$
|
16.81
|
|
|
$
|
622,000
|
|
James C. Yardley
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Incentive
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
0
|
|
|
$
|
193,131
|
|
|
$
|
386,262
|
|
|
$
|
869,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
4/1/2008
|
|
|
|
2/6/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
607,076
|
|
Stock Options
|
|
|
4/1/2008
|
|
|
|
2/6/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,319
|
|
|
$
|
16.71
|
|
|
$
|
16.81
|
|
|
$
|
622,000
|
|
Robert W. Baker
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Incentive
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
0
|
|
|
$
|
137,009
|
|
|
$
|
274,018
|
|
|
$
|
616,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
4/1/2008
|
|
|
|
2/6/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
607,076
|
|
Stock Options
|
|
|
4/1/2008
|
|
|
|
2/6/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,319
|
|
|
$
|
16.71
|
|
|
$
|
16.81
|
|
|
$
|
622,000
|
|
|
|
|
(1) |
|
These columns show the potential value of the payout of the
annual cash incentive bonuses for 2008 performance for each
named executive officer if the threshold, target and maximum
performance levels are achieved. The potential payout is
performance-based and driven by company and individual
performance. The actual amount of the annual cash incentive
bonuses paid for 2008 performance is shown in the Summary
Compensation Table under the Non-Equity Incentive Plan
Compensation column. |
|
(2) |
|
The values in this column reflect that the maximum amount of
annual cash incentive bonuses for Messrs. Foshee, Leland,
Smolik, Yardley and Baker for 2008 performance was capped at
2.25 times the executive officers target bonus opportunity
for the year. |
|
(3) |
|
This column shows the number of shares of restricted stock
granted in 2008 to the named executive officers. The shares of
restricted stock time vest in three equal annual installments
beginning one year from the date of grant. |
|
(4) |
|
This column shows the number of stock options granted in 2008 to
the named executive officers. The stock options time vest in
three equal annual installments beginning one year from the date
of grant. |
51
|
|
|
(5) |
|
This column shows the exercise price for the stock options
granted during 2008, which was the average between the high and
low selling prices at which our common stock traded on the date
of grant. |
|
(6) |
|
This column shows the closing market price of a share of our
common stock on the date of grant of the stock options. |
|
(7) |
|
This column shows the grant date fair value of restricted stock
computed in accordance with SFAS No. 123(R) and the
grant date fair value of stock options computed in accordance
with SFAS No. 123(R) granted to the named executive
officers during 2008. Generally, the grant date fair value is
the amount expensed in our financial statements over the vesting
schedule of the restricted stock and stock options. |
The following is a description of material factors necessary to
understand the information regarding the stock awards and option
awards reflected in the Grants of Plan-Based Awards table. The
awards reflected in the Grants of Plan-Based Awards table are
shares of restricted stock and non-qualified stock options to
purchase shares of our common stock which were approved by the
Compensation Committee on February 6, 2008, and granted to
the named executive officers on April 1, 2008, as part of
our 2008 annual grant of long-term incentive awards. The equity
awards were granted under our 2005 Omnibus Incentive
Compensation Plan. In 2008, the value of restricted stock awards
granted as part of our annual grant of long-term incentive
awards was based on both company and individual performance. The
grant date fair value per share for the restricted stock granted
on April 1, 2008 was $16.705, computed in accordance with
SFAS No. 123(R). The grant date fair value per option
for the stock options granted on April 1, 2008 was $5.7423,
computed using a Black-Scholes option-pricing model based on
several assumptions and in accordance with
SFAS No. 123(R). These assumptions are based on
managements best estimate at the time of grant and are
listed below, as follows:
|
|
|
|
|
|
|
Grant Date
|
|
|
04/01/2008
|
|
Expected Term in Years
|
|
|
6.0
|
|
Expected Volatility
|
|
|
35
|
%
|
Expected Dividends
|
|
|
1
|
%
|
Risk-Free Interest Rate
|
|
|
2.8
|
%
|
Restricted stock carries voting and dividend
rights. Dividends are paid on restricted stock
directly to the holder of the restricted stock and at the same
rate as other holders of our common stock. Dividends are not
paid on unexercised stock options. The amount of dividends
received during 2008 on shares of unvested restricted stock
granted to the named executives is factored into the grant date
fair value per share in accordance with
SFAS No. 123(R) and is not required to be included in
the Grants of Plan-Based Awards table but is reflected in the
table below.
|
|
|
|
|
|
|
Dividends Received
|
|
|
during 2008 on
|
|
|
Restricted Stock
|
Name
|
|
($)
|
|
Douglas L. Foshee
|
|
$
|
59,659
|
|
D. Mark Leland
|
|
$
|
19,510
|
|
Brent J. Smolik
|
|
$
|
23,399
|
|
James C. Yardley
|
|
$
|
15,833
|
|
Robert W. Baker
|
|
$
|
17,466
|
|
The restrictions will lapse on any unvested shares of restricted
stock and any unvested stock options become fully exercisable in
the event of an executives termination of employment
without cause or by the executive for good reason,
if applicable, within two years following a change in
control of El Paso. See pages 69-75 of this
proxy statement for a summary of our 2005 Omnibus Incentive
Compensation Plan and page 74 for the definitions of
good reason and change in control. The
total value of restricted stock can be realized only if the
executives remain employees of El Paso for the required
vesting period. Stock options generally expire ten years from
the date of grant. However, stock options are subject to
forfeiture
and/or time
limitations on exercise in the event of a termination of
employment.
Employment
Agreements
As indicated in the Compensation Discussion and Analysis, we do
not enter into employment agreements with our named executive
officers.
52
Outstanding
Equity Awards Table
The following table sets forth, on an
award-by-award
basis, the number of securities underlying unexercised stock
options and the total number and aggregate market value of
shares of unvested restricted stock held by the named executive
officers as of December 31, 2008. The table also provides
the exercise price and date of expiration of each unexercised
stock option.
Outstanding
Equity Awards
at December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Market Value
|
|
|
Option Awards
|
|
|
|
Shares or
|
|
of Shares or
|
|
|
Number of Securities
|
|
|
|
|
|
Units of
|
|
Units of
|
|
|
Underlying Unexercised
|
|
Option
|
|
|
|
Stock That
|
|
Stock That
|
|
|
Options at Fiscal Year-End
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
Have Not
|
|
|
(#)
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
($) (7)
|
|
Date
|
|
(#)
|
|
($) (11)
|
|
Douglas L. Foshee
|
|
|
1,000,000
|
|
|
|
0
|
|
|
$
|
7.345
|
|
|
|
9/02/2013
|
|
|
|
41,667
|
(8)
|
|
$
|
326,253
|
|
|
|
|
375,000
|
|
|
|
0
|
|
|
$
|
7.090
|
|
|
|
4/01/2014
|
|
|
|
133,998
|
(9)
|
|
$
|
1,049,204
|
|
|
|
|
302,962
|
|
|
|
100,988
|
(1)
|
|
$
|
10.685
|
|
|
|
4/01/2015
|
|
|
|
139,115
|
(10)
|
|
$
|
1,089,270
|
|
|
|
|
168,481
|
|
|
|
84,241
|
(2)
|
|
$
|
12.155
|
|
|
|
4/03/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
123,090
|
|
|
|
246,180
|
(3)
|
|
$
|
14.580
|
|
|
|
4/02/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
376,950
|
(4)
|
|
$
|
16.705
|
|
|
|
4/01/2018
|
|
|
|
|
|
|
|
|
|
D. Mark Leland
|
|
|
63,000
|
|
|
|
0
|
|
|
$
|
42.125
|
|
|
|
10/25/2009
|
|
|
|
11,518
|
(8)
|
|
$
|
90,186
|
|
|
|
|
55,000
|
|
|
|
0
|
|
|
$
|
62.975
|
|
|
|
1/29/2011
|
|
|
|
52,740
|
(9)
|
|
$
|
412,954
|
|
|
|
|
6,375
|
|
|
|
0
|
|
|
$
|
62.975
|
|
|
|
1/29/2011
|
|
|
|
43,610
|
(10)
|
|
$
|
341,466
|
|
|
|
|
20,000
|
|
|
|
0
|
|
|
$
|
46.275
|
|
|
|
8/13/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
53,125
|
|
|
|
0
|
|
|
$
|
7.090
|
|
|
|
4/01/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
36,810
|
|
|
|
12,270
|
(1)
|
|
$
|
10.685
|
|
|
|
4/01/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
37,500
|
|
|
|
12,500
|
(5)
|
|
$
|
11.990
|
|
|
|
8/10/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
46,575
|
|
|
|
23,288
|
(2)
|
|
$
|
12.155
|
|
|
|
4/03/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
35,371
|
|
|
|
70,741
|
(3)
|
|
$
|
14.580
|
|
|
|
4/02/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
108,319
|
(4)
|
|
$
|
16.705
|
|
|
|
4/01/2018
|
|
|
|
|
|
|
|
|
|
Brent J. Smolik
|
|
|
35,371
|
|
|
|
70,741
|
(3)
|
|
$
|
14.580
|
|
|
|
4/02/2017
|
|
|
|
35,160
|
(9)
|
|
$
|
275,303
|
|
|
|
|
0
|
|
|
|
108,319
|
(4)
|
|
$
|
16.705
|
|
|
|
4/01/2018
|
|
|
|
39,976
|
(10)
|
|
$
|
313,012
|
|
James C. Yardley
|
|
|
63,000
|
|
|
|
0
|
|
|
$
|
42.125
|
|
|
|
10/25/2009
|
|
|
|
4,180
|
(8)
|
|
$
|
32,729
|
|
|
|
|
55,000
|
|
|
|
0
|
|
|
$
|
62.975
|
|
|
|
1/29/2011
|
|
|
|
3,333
|
(6)
|
|
$
|
26,097
|
|
|
|
|
6,375
|
|
|
|
0
|
|
|
$
|
62.975
|
|
|
|
1/29/2011
|
|
|
|
47,466
|
(9)
|
|
$
|
371,659
|
|
|
|
|
40,000
|
|
|
|
0
|
|
|
$
|
46.275
|
|
|
|
8/13/2011
|
|
|
|
36,341
|
(10)
|
|
$
|
284,550
|
|
|
|
|
48,875
|
|
|
|
0
|
|
|
$
|
7.090
|
|
|
|
4/01/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
34,096
|
|
|
|
11,366
|
(1)
|
|
$
|
10.685
|
|
|
|
4/01/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
16,901
|
|
|
|
8,451
|
(2)
|
|
$
|
12.155
|
|
|
|
4/03/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
13,333
|
|
|
|
6,667
|
(6)
|
|
$
|
14.275
|
|
|
|
8/16/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
35,371
|
|
|
|
70,741
|
(3)
|
|
$
|
14.580
|
|
|
|
4/02/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
108,319
|
(4)
|
|
$
|
16.705
|
|
|
|
4/01/2018
|
|
|
|
|
|
|
|
|
|
Robert W. Baker
|
|
|
40,000
|
|
|
|
0
|
|
|
$
|
42.125
|
|
|
|
10/25/2009
|
|
|
|
9,215
|
(8)
|
|
$
|
72,153
|
|
|
|
|
15,334
|
|
|
|
0
|
|
|
$
|
49.468
|
|
|
|
8/01/2010
|
|
|
|
49,224
|
(9)
|
|
$
|
385,424
|
|
|
|
|
55,000
|
|
|
|
0
|
|
|
$
|
62.975
|
|
|
|
1/29/2011
|
|
|
|
36,341
|
(10)
|
|
$
|
284,550
|
|
|
|
|
6,375
|
|
|
|
0
|
|
|
$
|
62.975
|
|
|
|
1/29/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
0
|
|
|
$
|
46.275
|
|
|
|
8/13/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
140,000
|
|
|
|
0
|
|
|
$
|
7.090
|
|
|
|
4/01/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
90,888
|
|
|
|
30,297
|
(1)
|
|
$
|
10.685
|
|
|
|
4/01/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
37,260
|
|
|
|
18,630
|
(2)
|
|
$
|
12.155
|
|
|
|
4/03/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
35,371
|
|
|
|
70,741
|
(3)
|
|
$
|
14.580
|
|
|
|
4/02/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
108,319
|
(4)
|
|
$
|
16.705
|
|
|
|
4/01/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These are stock options that were granted as part of the 2005
annual grant of long-term incentive awards and time vest in four
equal annual installments beginning one year from the date of
grant, with the remaining vesting date on April 1, 2009. |
|
(2) |
|
These are stock options that were granted as part of the 2006
annual grant of long-term incentive awards and time vest in
three equal annual installments beginning one year from the date
of grant, with the remaining vesting date on April 3, 2009. |
53
|
|
|
(3) |
|
These are stock options that were granted as part of the 2007
annual grant of long-term incentive awards and time vest in
three equal annual installments beginning one year from the date
of grant, with the remaining vesting dates on April 2, 2009
and April 2, 2010. |
|
(4) |
|
These are stock options that were granted as part of the 2008
annual grant of long-term incentive awards and time vest in
three equal annual installments beginning one year from the date
of grant, with vesting dates on April 1, 2009,
April 1, 2010 and April 1, 2011. |
|
(5) |
|
On August 10, 2005, Mr. Leland received an additional
grant of 50,000 stock options in connection with his appointment
as Executive Vice President and Chief Financial Officer. The
stock options time vest in four equal annual installments
beginning one year from the date of grant, with the remaining
vesting date on August 10, 2009. |
|
(6) |
|
On August 16, 2006, Mr. Yardley received an additional
grant of long-term incentive awards in the form of 20,000 stock
options and 10,000 shares of restricted stock in connection
with his appointment as Executive Vice President of El Paso
and Chairman of our Pipeline Group. The stock options and
restricted stock time vest in three equal annual installments
beginning one year from the date of grant, with the remaining
vesting date on August 16, 2009. |
|
(7) |
|
The average between the high and low selling prices at which our
common stock traded on the grant date is used as the exercise
price (or strike price) for stock options. No cash is realized
until the shares received upon exercise of an option are sold. |
|
(8) |
|
These are shares of restricted stock that were granted as part
of the 2006 annual grant of long-term incentive awards and time
vest in three equal annual installments beginning one year from
the date of grant, with the remaining vesting date on
April 3, 2009. |
|
(9) |
|
These are shares of restricted stock that were granted as part
of the 2007 annual grant of long-term incentive awards and time
vest in three equal annual installments beginning one year from
the date of grant, with the remaining vesting dates on
April 2, 2009 and April 2, 2010. |
|
(10) |
|
These are shares of restricted stock that were granted as part
of the 2008 annual grant of long-term incentive awards and time
vest in three equal annual installments beginning one year from
the date of grant, with vesting dates on April 1, 2009,
April 1, 2010 and April 1, 2011. |
|
(11) |
|
The values represented in this column have been calculated by
multiplying $7.83, the closing price of our common stock on
December 31, 2008 by the number of shares of stock. |
54
Option
Exercises and Stock Vested Table
The following table sets forth information concerning stock
option exercises and vesting of restricted stock during 2008 for
each of the named executive officers. In satisfaction of
applicable SEC regulations, the number of securities for which
stock options were exercised (if any) and the aggregate dollar
value realized upon the exercise of such stock options is
reflected in this table. The number of shares of restricted
stock that have vested and the aggregate dollar value realized
upon the vesting of such restricted stock is also reflected.
None of the named executive officers exercised stock options
during 2008.
Option
Exercises and Stock Vested
During Fiscal Year 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of Shares
|
|
Value Realized
|
|
Number of Shares
|
|
Value Realized
|
|
|
Acquired on Exercise
|
|
on Exercise
|
|
Acquired on Vesting
|
|
on Vesting
|
Name
|
|
(#)
|
|
($)
|
|
(#)
|
|
($) (1)
|
|
Douglas L. Foshee
|
|
|
0
|
|
|
$
|
0
|
|
|
|
193,445
|
|
|
$
|
3,131,001
|
|
D. Mark Leland
|
|
|
0
|
|
|
$
|
0
|
|
|
|
54,093
|
|
|
$
|
895,920
|
|
Brent J. Smolik
|
|
|
0
|
|
|
$
|
0
|
|
|
|
90,627
|
|
|
$
|
977,328
|
|
James C. Yardley
|
|
|
0
|
|
|
$
|
0
|
|
|
|
38,537
|
|
|
$
|
637,112
|
|
Robert W. Baker
|
|
|
0
|
|
|
$
|
0
|
|
|
|
53,261
|
|
|
$
|
884,491
|
|
|
|
|
(1) |
|
The values represented in this column for restricted stock have
been calculated by multiplying the per share fair market value
of the underlying shares on the vesting date by the number of
shares of restricted stock that vested. |
55
Pension
Benefits Table
The following table sets forth information with respect to the
pension benefits of each of the named executive officers.
El Paso sponsors a qualified Pension Plan and supplemental
benefits plans in which the named executive officers
participate. In satisfaction of applicable SEC regulations, this
table provides the number of years of service credited to the
named executive officers, the actuarial present value of the
named executive officers accumulated benefits at the
earliest unreduced retirement age and the dollar amount of
benefits paid, if any, to a named executive officer under each
of the plans during 2008. No pension benefits were paid to the
named executive officers during the year.
Pension
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years
|
|
Present Value of
|
|
Payments During
|
|
|
|
|
Credited Service
|
|
Accumulated Benefit
|
|
Last Fiscal Year
|
Name
|
|
Plan Name
|
|
(#) (1)
|
|
($) (2)
|
|
($)
|
|
Douglas L. Foshee
|
|
Pension Plan
|
|
|
5
|
|
|
$
|
59,311
|
|
|
$
|
0
|
|
|
|
Supplemental Benefits Plan
|
|
|
1
|
|
|
$
|
61,976
|
|
|
$
|
0
|
|
|
|
2005 Supplemental Benefits Plan
|
|
|
4
|
|
|
$
|
428,469
|
|
|
$
|
0
|
|
D. Mark Leland
|
|
Pension Plan
|
|
|
23
|
|
|
$
|
190,232
|
|
|
$
|
0
|
|
|
|
Supplemental Benefits Plan
|
|
|
19
|
|
|
$
|
207,156
|
|
|
$
|
0
|
|
|
|
2005 Supplemental Benefits Plan
|
|
|
4
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Brent J. Smolik
|
|
Pension Plan
|
|
|
2
|
|
|
$
|
21,724
|
|
|
$
|
0
|
|
|
|
Supplemental Benefits Plan
|
|
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
2005 Supplemental Benefits Plan
|
|
|
2
|
|
|
$
|
63,373
|
|
|
$
|
0
|
|
James C. Yardley
|
|
Pension Plan
|
|
|
31
|
|
|
$
|
891,038
|
|
|
$
|
0
|
|
|
|
Supplemental Benefits Plan
|
|
|
27
|
|
|
$
|
1,185,244
|
|
|
$
|
0
|
|
|
|
2005 Supplemental Benefits Plan
|
|
|
4
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Robert W. Baker
|
|
Pension Plan
|
|
|
12
|
|
|
$
|
166,774
|
|
|
$
|
0
|
|
|
|
Supplemental Benefits Plan
|
|
|
8
|
|
|
$
|
117,872
|
|
|
$
|
0
|
|
|
|
2005 Supplemental Benefits Plan
|
|
|
4
|
|
|
$
|
144,627
|
|
|
$
|
0
|
|
|
|
|
(1) |
|
Credited service shown for Mr. Leland was 16 years as
of December 31, 2001 for his Minimum Benefit (as described
below), and for Mr. Yardley was 27 years as of
December 31, 2004 for his Sonat Transition Benefit (as
described below). Credited service shown for Mr. Baker
reflects years of participation since January 1, 1997, when
he became eligible to participate in these plans. |
|
(2) |
|
The present value of the named executive officers
accumulated pension benefits in this column reflects a
6.33 percent discount rate and December 31, 2008
measurement date. The calculations reflect an age 65
commencement date except for Messrs. Leland and Yardley
whose calculations reflect their earliest unreduced retirement
age. Mr. Leland has a Minimum Benefit (as described below)
and will have 30 years of credited service prior to
age 60, and therefore would be eligible for an unreduced
early retirement benefit at age 60. Mr. Yardley has a
Sonat Transition Benefit (as described below) and would be
eligible for an unreduced early retirement benefit at
age 62. |
The following is a description of material factors necessary to
understand the information disclosed above in the Pension
Benefits table for each of the named executive officers.
Effective January 1, 1997, we amended our qualified Pension
Plan to provide pension benefits under a cash balance plan
formula that defines participants accrued benefits in
terms of a notional cash account balance. Eligible employees
become participants in the Pension Plan immediately upon
employment and are fully vested in their benefits upon the
earliest of the completion of three years of service or
attainment of age 65. At the end of each calendar quarter,
participant cash account balances are increased by an interest
credit based on
5-Year
Treasury bond yields, subject to a minimum interest credit of
56
4 percent per year, plus a pay credit equal to a percentage
of salary and bonus. The pay credit percentage is based on the
sum of age plus service at the end of the prior calendar year
according to the following schedule:
|
|
|
|
|
Age Plus Service
|
|
Pay Credit Percentage
|
|
Less than 35
|
|
|
4
|
%
|
35 to 49
|
|
|
5
|
%
|
50 to 64
|
|
|
6
|
%
|
65 and over
|
|
|
7
|
%
|
Prior to adopting a cash balance plan on January 1, 1997,
we provided pension benefits under a plan that defined monthly
benefits based on final average earnings and years of service
(the Prior Plan). The Pension Plan provides for a
special transition benefit for employees who were participants
in the Prior Plan on December 31, 1996. These employees
continued to accrue benefits under the old plan formula (the
Minimum Benefit) through December 31, 2001, or
termination, if earlier. The Minimum Benefit is based on years
of credited service and the average of the highest five
consecutive years of compensation out of the last ten years,
subject to maximum limitations as defined under the Pension
Plan. The initial cash account balance was equal to the present
value of the Prior Plan benefit as of December 31, 1996.
Upon separation of employment, these participants (including
Mr. Leland) will receive the greater of the Minimum Benefit
or a benefit based on their cash account balance.
The Pension Plan also provides for a special transition benefit
for former Sonat Inc. employees who were participants in the
Sonat Retirement Plan on December 31, 1999, and who became
active participants in the Pension Plan on January 1, 2000.
These participants continued to accrue benefits under the Sonat
retirement plan formula (the Sonat Transition
Benefit) through December 31, 2004, or termination,
if earlier. The Sonat Transition Benefit is based on years of
credited service and the average of the highest five consecutive
years of compensation out of the last ten years, subject to
maximum limitations as defined under the Pension Plan. The
initial cash account balance was equal to the present value of
the Sonat Retirement Plan benefit as of December 31, 1999.
Upon separation of employment, these participants (including
Mr. Yardley) will receive the greater of the Sonat
Transition Benefit or a benefit based on their cash account
balance. Additionally, active participants in the Pension Plan
on January 1, 2000, who had a Sonat cash account benefit on
December 31, 1999, will receive this cash balance benefit
upon their termination of employment.
Amounts in the Pension Benefits table reported as the actuarial
present value of each named executive officers accumulated
benefits are calculated as of December 31, 2008 using
SFAS No. 158 assumptions. These are the same
assumptions that are used for our pension liability disclosure
in Note 14 to our financial statements included in our 2008
Annual Report on
Form 10-K
filed with the SEC on March 2, 2009. However, the amounts
in the Pension Benefits table assume no pre-retirement
decrements (i.e., that the named executive officers work and
survive to retirement age) and reflect an age 65
commencement date for Messrs. Foshee, Smolik and Baker, an
age 60 commencement date for Mr. Leland, and an
age 62 commencement date for Mr. Yardley.
Under our qualified Pension Plan and applicable Code provisions,
compensation in excess of $230,000 cannot be taken into account
and the maximum payable benefit in 2008 was $185,000. For 2008,
any excess benefits otherwise accruing under our Pension Plan
were payable under the 2005 Supplemental Benefits Plan which was
adopted effective January 1, 2005 in connection with the
implementation of Section 409A of the Code. The 2005
Supplemental Benefits Plan replaced our prior Supplemental
Benefits Plan for benefits accruing after 2004. The benefits
that accrue under the 2005 Supplemental Benefits Plan are
supplemental benefits for officers and key management employees
(including all of the named executive officers) who could not be
paid under our Pension Plan
and/or
Retirement Savings Plan due to certain Code limitations. The
supplemental pension benefits under the 2005 Supplemental
Benefits Plan, when combined with the supplemental pension
benefits the executive is entitled to receive under our prior
Supplemental Benefits Plan and the amounts a participant is
entitled to receive under the qualified Pension Plan, will be
the actuarial equivalent of the Pension Plans benefit
formula had the limitations of the Code not been applied. The
named executive officers will receive their supplemental pension
benefits upon termination of employment in the form of a lump
sum payment, except that supplemental pension benefit payments
under the 2005 Supplemental Benefits Plan to certain
specified employees (including all of the named
executive officers), as determined pursuant to Section 409A
of the Code, will be delayed until six months after their
termination of employment. The supplemental Retirement Savings
Plan benefits under the plan include a credit
57
equal to the amount of the matching contribution to the
Retirement Savings Plan that cannot be made due to Code
limitations. See the Nonqualified Deferred Compensation table
below for additional information regarding the named executive
officers supplemental Retirement Savings Plan benefits.
The 2005 Supplemental Benefits Plan and prior Supplemental
Benefits Plan may not be terminated so long as the Pension Plan
and/or
Retirement Savings Plan remain in effect. The management
committee of the plans designates who may participate and also
administers the plan. In the event of a change in control of
El Paso or in the event of a participants death,
supplemental pension benefits become fully vested and
nonforfeitable. A change in control under the plans has the same
meaning as under the 2005 Omnibus Incentive Compensation Plan.
See the summary of the 2005 Omnibus Incentive Compensation Plan
beginning on page 69 of this proxy statement.
Named Executive Officers Eligible for Early
Retirement. Since Mr. Yardley is
age 57, he is eligible for early retirement benefits
payable from the Pension Plan and the Supplemental Benefits
Plan. If Mr. Yardley had terminated employment on
December 31, 2008 and commenced his benefits as of
January 1, 2009, his present value of accumulated benefits
would have been $1,320,000 for the Pension Plan and $1,760,000
for the Supplemental Benefits Plan (based on the same
assumptions used above). Note that these amounts exceed those
shown in the Pension Benefits table for Mr. Yardley because
the value of the early retirement benefits is greater at his
current age.
Nonqualified
Defined Contribution and
Other Nonqualified Deferred Compensation Plans
The following table sets forth information with respect to
nonqualified defined contribution plans for each of the named
executive officers as of December 31, 2008. We sponsor a
supplemental benefits plan that provides for the crediting of
matching contributions that could not be paid under the
Retirement Savings Plan due to Code limitations. We do not
sponsor a traditional nonqualified deferred compensation plan
that provides for deferrals of base salary and bonuses for
executive officers. None of the named executive officers had
withdrawals or distributions of supplemental Retirement Savings
Plan benefits during 2008.
Nonqualified
Deferred Compensation
as of December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registrant
|
|
Aggregate
|
|
Aggregate
|
|
|
Contributions in
|
|
Earnings in
|
|
Balance at Last
|
|
|
Last Fiscal Year
|
|
Last Fiscal Year
|
|
Fiscal Year End
|
Name
|
|
($) (1)
|
|
($)
|
|
($) (2)
|
|
Douglas L. Foshee
|
|
$
|
104,648
|
|
|
$
|
29,646
|
|
|
$
|
491,952
|
|
D. Mark Leland
|
|
$
|
32,405
|
|
|
$
|
8,753
|
|
|
$
|
145,784
|
|
Brent J. Smolik
|
|
$
|
14,958
|
|
|
$
|
1,179
|
|
|
$
|
28,928
|
|
James C. Yardley
|
|
$
|
32,106
|
|
|
$
|
7,605
|
|
|
$
|
132,639
|
|
Robert W. Baker
|
|
$
|
24,382
|
|
|
$
|
8,605
|
|
|
$
|
142,226
|
|
|
|
|
(1) |
|
The amounts in this column are reported as compensation to the
named executive officers in the Summary Compensation Table in
the All Other Compensation column as supplemental
company matching contributions for the Retirement Savings Plan
which were accrued under the 2005 Supplemental Benefits Plan.
See footnote 6 to the Summary Compensation Table on page 49
of this proxy statement. |
|
(2) |
|
Of the totals in this column, $435,312 for Mr. Foshee,
$114,820 for Mr. Leland, $27,521 for Mr. Smolik,
$89,173 for Mr. Yardley and $123,660 for Mr. Baker was
reported as compensation in the Summary Compensation Table
included in our proxy statement for this year and prior years. |
The following is a description of material factors necessary to
understand the information disclosed above in the Nonqualified
Deferred Compensation table for each of the named executive
officers. The registrants contributions reflected in this
table include supplemental company matching contributions for
the Retirement Savings Plan which are accrued under our
supplemental benefits plans. The supplemental Retirement Savings
Plan benefits are excess benefits in the form of company
matching contributions that cannot be made under the Retirement
Savings Plan due to Code limitations. During 2008, these excess
benefits were credited to each
58
executives supplemental Retirement Savings Plan account
balance under the 2005 Supplemental Benefits Plan. The plan
administrator determines the rate of interest, if any,
periodically attributable to the balance of each supplemental
Retirement Savings Plan account. For 2008, interest was credited
to the balance of each executives supplemental Retirement
Savings Plan account balance on a monthly basis at a rate equal
to the average of Moodys Seasoned Aaa Corporate Bond Rate
and Moodys Seasoned Baa Corporate Bond Rate, as published
by Moodys Investors Services, Inc. The balance of each
executives supplemental Retirement Savings Plan account
will be paid upon termination of employment in a lump sum
payment except that benefit payments under the 2005 Supplemental
Benefits Plan to certain specified employees
(including all of the named executive officers), as determined
pursuant to Section 409A of the Code, will be delayed until
six months after termination. See the description of our
supplemental benefits plans beginning on page 57 of this
proxy statement for further information.
Potential
Payments upon Termination or Change in Control
The following tables reflect the incremental value of
compensation and benefits each named executive officer would
receive in the event of an involuntary termination without
cause, retirement, death, disability, termination with cause and
a change in control of El Paso relative to a voluntary
termination of employment by the executive. All amounts are
based upon amounts payable in the event the termination event
occurs as of December 31, 2008, and thus include amounts
earned through such time. All amounts are estimates of the
amounts which would be paid to the executive officers upon their
termination. The actual amounts to be paid can only be
determined at the time of such executive officers
termination. The Compensation Committee reviews this information
each year as part of its overall analysis and review of
executive compensation.
Potential
Payments upon Termination or Change in Control
Assuming Termination Event Occurs
on December 31, 2008
Payments
made upon Voluntary Termination
The following table reflects the total value of payments the
named executive officers would receive in the event of a
voluntary termination. In the event a named executive officer
voluntarily terminates his or her employment, the executive
officer is entitled to his or her vested benefits under our
Pension Plan and Retirement Savings Plan (including supplemental
benefits). The named executive officer will make an election to
commence the qualified component of his or her pension benefit.
Supplemental pension and supplemental Retirement Savings Plan
benefits are paid in lump sum. Under our equity compensation
plans, unvested restricted stock and stock options are forfeited
in the event of a voluntary termination. Unless stock options
expire by their own terms, vested stock options may be exercised
for a period of three months.
Payments
made upon Voluntary Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement
|
|
Supplemental
|
|
|
|
|
|
|
|
|
|
|
Supplemental
|
|
Savings
|
|
Retirement
|
|
Continued
|
|
|
|
|
|
|
Pension
|
|
Pension
|
|
Plan
|
|
Savings Plan
|
|
Medical
|
|
Equity
|
|
|
|
|
Benefits
|
|
Benefits
|
|
Benefits
|
|
Benefits
|
|
Benefits
|
|
Awards
|
|
Total
|
Name
|
|
($) (1) (2)
|
|
($) (2)
|
|
($)
|
|
($)
|
|
($) (3)
|
|
($) (4)
|
|
($)
|
|
Douglas L. Foshee
|
|
$
|
71,268
|
|
|
$
|
589,317
|
|
|
$
|
106,065
|
|
|
$
|
491,952
|
|
|
$
|
0
|
|
|
$
|
762,500
|
|
|
$
|
2,021,102
|
|
D. Mark Leland
|
|
$
|
209,825
|
|
|
$
|
279,213
|
|
|
$
|
276,233
|
|
|
$
|
145,784
|
|
|
$
|
0
|
|
|
$
|
39,313
|
|
|
$
|
950,368
|
|
Brent J. Smolik(5)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
62,792
|
|
|
$
|
28,928
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
91,720
|
|
James C. Yardley
|
|
$
|
1,154,996
|
|
|
$
|
1,540,473
|
|
|
$
|
597,194
|
|
|
$
|
132,639
|
|
|
$
|
2,868
|
|
|
$
|
281,239
|
|
|
$
|
3,709,409
|
|
Robert W. Baker
|
|
$
|
192,803
|
|
|
$
|
303,469
|
|
|
$
|
536,377
|
|
|
$
|
142,226
|
|
|
$
|
0
|
|
|
$
|
103,600
|
|
|
$
|
1,278,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,051,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amounts in this column reflect a lump sum payment. |
59
|
|
|
(2) |
|
The amounts in these columns may differ from the amounts in the
Pension Benefits table due to several factors, including the use
of different assumptions and the timing of commencement of
payment. |
|
(3) |
|
For Mr. Yardley, a voluntary termination would be treated
as a qualified retirement. Therefore, for Mr. Yardley, this
column shows the value of continued medical, dental and vision
benefits for a period of three months at no cost. |
|
(4) |
|
Unvested restricted stock and stock options are forfeited in the
event of a voluntary termination. This column shows the value of
vested stock options held by the named executive officer
calculated using the difference between $7.83, the closing price
of our common stock on December 31, 2008 and the applicable
exercise price for each stock option. Mr. Yardley is
age 57 and eligible for early retirement. Therefore, for
Mr. Yardley, this column also shows the value of shares of
restricted stock that vest on a pro-rata basis in the event of
retirement calculated using $7.83, the closing price of our
common stock on December 31, 2008. |
|
(5) |
|
As of December 31, 2008, Mr. Smolik was not vested in
his pension benefits. |
Incremental
Payments made upon Involuntary Termination without
Cause
The following table reflects the incremental value of enhanced
benefits the named executive officers would receive in the event
of an involuntary termination without cause above the
compensation and benefits the executive officer is entitled to
as a result of a voluntary termination, which include a
severance payment, continued medical benefits and the value of
restricted stock that vests on a pro-rata basis. El Paso
sponsors a Severance Pay Plan that provides benefits to the
named executive officers following an involuntary termination
without cause. The Severance Pay Plan is a broad-based employee
plan providing severance benefits following a qualifying
termination for all of our salaried employees and
employees of certain of our subsidiaries, including the named
executive officers. A qualifying termination is
(1) a termination upon the elimination of the
participants position, or (2) a termination as a
result of a reduction in force. The amount of severance pay is
based on the individuals years of service and his or her
compensation level. The maximum amount of severance pay is 1X
the participants annual base salary. Severance pay is paid
in lump sum as soon as administratively practicable following
termination. Participants are also entitled to receive continued
medical and dental coverage for a period of three months
following termination. Under our equity compensation plans,
restricted stock vests on a pro-rata basis and unvested stock
options are forfeited in the event of an involuntary termination
without cause. Unless stock options expire by their own terms,
vested stock options may be exercised for a period of one year.
Incremental
Payments made upon Involuntary Termination without
Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
El Paso Corporation
|
|
|
|
|
|
|
Severance Pay Plan
|
|
|
|
|
|
|
Severance
|
|
Continued
|
|
Equity
|
|
|
|
|
Payment
|
|
Medical Benefits
|
|
Awards
|
|
Total
|
Name
|
|
($)
|
|
($)
|
|
($) (1)
|
|
($)
|
|
Douglas L. Foshee
|
|
$
|
1,050,000
|
|
|
$
|
2,934
|
|
|
$
|
910,410
|
|
|
$
|
1,963,344
|
|
D. Mark Leland
|
|
$
|
519,756
|
|
|
$
|
2,934
|
|
|
$
|
307,907
|
|
|
$
|
830,597
|
|
Brent J. Smolik
|
|
$
|
566,520
|
|
|
$
|
2,643
|
|
|
$
|
181,672
|
|
|
$
|
750,835
|
|
James C. Yardley
|
|
$
|
515,016
|
|
|
$
|
0
|
(2)
|
|
$
|
0
|
|
|
$
|
515,016
|
|
Robert W. Baker
|
|
$
|
456,696
|
|
|
$
|
2,898
|
|
|
$
|
269,845
|
|
|
$
|
729,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,789,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
For Messrs. Foshee, Leland, Baker and Smolik, this column
shows the value of shares of restricted stock that vest on a
pro-rata basis in the event of an involuntary termination
without cause calculated using $7.83, the closing price of our
common stock on December 31, 2008. The value of
Mr. Yardleys shares of restricted stock that vest on
a pro-rata basis are included in the voluntary termination
table. Unvested stock options are forfeited in the event of an
involuntary termination without cause. |
60
|
|
|
(2) |
|
The value of Mr. Yardleys continued medical benefits
is included in the voluntary termination table. |
Incremental
Payments made upon Retirement
None of the named executive officers is eligible for retirement
except for Mr. Yardley. Participants in our Pension Plan
are eligible for early retirement if they are at least
age 55 and have ten years of service. Mr. Yardley is
age 57 and eligible for early retirement under our Pension
Plan. For Mr. Yardley, the value of the early retirement
pension benefits he would have received in the event he retired
as of December 31, 2008 is reflected in the voluntary
termination table above. The commencement of pension benefits
before age 65 may result in a participants monthly
qualified pension benefits being reduced to cover the cost of
paying the benefits over a longer period of time. Retirement
eligible employees are also entitled to receive continued
medical and dental coverage for a period of three months
following termination at no cost. In addition, under our equity
compensation plans, restricted stock is vested on a pro-rata
basis and unvested stock options are forfeited in the event of
retirement. Unless stock options expire by their own terms,
vested stock options may be exercised for a period of three
years following retirement. See pages 56 and 57 of this
proxy statement for a description of our Pension Plan.
Incremental
Payments made upon Death
The following table reflects the incremental value of enhanced
benefits the named executive officers would receive in the event
of death above the compensation and benefits the executive
officers are entitled to as a result of a voluntary termination,
which include survivor benefit coverage and the value of
unvested stock options and restricted stock that become fully
vested. For Mr. Smolik, this also includes the value of his
qualified pension benefits and supplemental pension benefits
which become fully vested in the event of the named executive
officers death. In the event of a named executive
officers death, our Senior Executive Survivor Benefits
Plan provides our named executive officers with survivor benefit
coverage in lieu of the coverage provided generally under our
group life insurance plan. The amount of benefits provided is
2.5 times the executive officers annual salary. Benefits
are payable over 30 months beginning within 31 days
after the executives death, except that the plan
administrator may, in its discretion, accelerate payments. Under
our equity compensation plans, outstanding stock options become
fully vested and exercisable and the restriction periods
applicable to shares of restricted stock immediately lapse in
the event of death. Unless stock options expire by their own
terms, the executive officers beneficiary would have one
year to exercise all vested stock options.
Incremental
Payments made upon Death
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
|
|
Survivor
|
|
Equity Awards
|
|
|
|
|
Pension
|
|
Pension
|
|
Benefit
|
|
Stock
|
|
Restricted
|
|
|
|
|
Benefits
|
|
Benefits
|
|
Coverage
|
|
Options
|
|
Stock
|
|
Total
|
Name
|
|
($) (1)
|
|
($) (1)
|
|
($)
|
|
($) (2)
|
|
($) (3)
|
|
($)
|
|
Douglas L. Foshee
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,625,000
|
|
|
$
|
0
|
|
|
$
|
2,464,727
|
|
|
$
|
5,089,727
|
|
D. Mark Leland
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,299,390
|
|
|
$
|
0
|
|
|
$
|
844,606
|
|
|
$
|
2,143,996
|
|
Brent J. Smolik
|
|
$
|
26,625
|
|
|
$
|
77,667
|
|
|
$
|
1,416,300
|
|
|
$
|
0
|
|
|
$
|
588,315
|
|
|
$
|
2,108,907
|
|
James C. Yardley
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,287,540
|
|
|
$
|
0
|
|
|
$
|
469,964
|
|
|
$
|
1,757,504
|
|
Robert W. Baker
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,141,740
|
|
|
$
|
0
|
|
|
$
|
742,127
|
|
|
$
|
1,883,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,984,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amount in these columns for Mr. Smolik includes
qualified pension benefits and supplemental pension benefits
which become fully vested in the event of the named executive
officers death. |
|
(2) |
|
This column shows the value of stock options that become fully
vested and exercisable in the event of the death of a named
executive officer calculated using $7.83, the closing price of
our common stock on December 31, 2008. As the stock options
in question have exercise prices greater than $7.83, the value
of these options as of December 31, 2008 is reported as $0. |
61
|
|
|
(3) |
|
This column shows the value of shares of restricted stock that
become fully vested in the event of the death of a named
executive officer calculated using $7.83, the closing price of
our common stock on December 31, 2008. |
Incremental
Payments made upon Disability
The following table reflects the incremental value of enhanced
benefits the named executive officers would receive in the event
of permanent disability above the compensation and benefits the
executive officers are entitled to as a result of a voluntary
termination, which include disability benefits, the value of
unvested stock options that become fully vested and the value of
restricted stock that vests on a pro-rata basis. The named
executive officers may elect to receive the disability benefits
that are generally available to all eligible employees under our
subsidized health and welfare benefits plan. In the event of a
named executive officers permanent disability, disability
income would be payable on a monthly basis as long as the
executive officer qualifies as permanently disabled. For
purposes of this table, we have assumed the executive officer is
disabled for a period of one year. The restrictions on
outstanding shares of restricted stock lapse on a prorated basis
and all stock options become fully vested and exercisable in the
event an executive officer becomes permanently disabled. Unless
stock options expire by their own terms, vested stock options
may be exercised for a period of three years following permanent
disability.
Incremental
Payments made upon Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Awards
|
|
|
|
|
|
|
Disability
|
|
|
Stock
|
|
|
Restricted
|
|
|
|
|
|
|
Income
|
|
|
Options
|
|
|
Stock
|
|
|
Total
|
|
Name
|
|
($) (1)
|
|
|
($) (2)
|
|
|
($) (3)
|
|
|
($)
|
|
|
Douglas L. Foshee
|
|
$
|
300,000
|
|
|
$
|
0
|
|
|
$
|
910,410
|
|
|
$
|
1,210,410
|
|
D. Mark Leland
|
|
$
|
259,878
|
|
|
$
|
0
|
|
|
$
|
307,907
|
|
|
$
|
567,785
|
|
Brent J. Smolik
|
|
$
|
300,000
|
|
|
$
|
0
|
|
|
$
|
181,672
|
|
|
$
|
481,672
|
|
James C. Yardley
|
|
$
|
257,508
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
257,508
|
|
Robert W. Baker
|
|
$
|
228,348
|
|
|
$
|
0
|
|
|
$
|
269,845
|
|
|
$
|
498,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,015,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In the event of a named executive officers permanent
disability, disability income would be payable on a monthly
basis as long as the executive officer qualifies as permanently
disabled. The amounts in this column assume disability income is
paid to the executive officer for a period of one year. |
|
(2) |
|
This column shows the value of stock options that become fully
vested and exercisable in the event of the disability of a named
executive officer calculated using $7.83, the closing price of
our common stock on December 31, 2008. As the stock options
in question have exercise prices greater than $7.83, the value
of these options as of December 31, 2008 is reported as $0. |
|
(3) |
|
For Messrs. Foshee, Leland, Smolik and Baker, this column
shows the value of shares of restricted stock that vest on a
pro-rata basis in the event of disability calculated using
$7.83, the closing price of our common stock on
December 31, 2008. The value of Mr. Yardleys
shares of restricted stock that vest on a pro-rata basis are
included in the voluntary termination table. |
Incremental
Payments made upon Termination with Cause
In the event a named executive officer is terminated with cause,
the named executive officer would not receive any benefits above
the compensation and benefits he or she is entitled to as a
result of a voluntary termination. In the event a named
executive officer is terminated with cause, the executive
officer is entitled to his or her vested benefits under our
Pension Plan and Retirement Savings Plan (including supplemental
benefits). The value of these benefits is shown in the voluntary
termination table above. Supplemental pension and supplemental
Retirement Savings Plan benefits are paid in lump sum. Under our
equity compensation plans, unvested restricted stock and vested
but unexercised stock options are forfeited in the event of a
termination with cause.
62
Incremental
Payments made upon a Change in Control of El Paso
The following table reflects the incremental value of enhanced
benefits the named executive officers would receive in the event
of termination of employment following a change in control of
El Paso above the compensation and benefits the executive
officers are entitled to as a result of a voluntary termination,
which include benefits under our 2004 Key Executive Severance
Protection Plan and the value of stock options and restricted
stock that become fully vested. In March 2004, El Paso
adopted the 2004 Key Executive Severance Protection Plan to more
closely align our executive severance protection plan with
current market arrangements. This plan provides severance
benefits following a termination of employment within two years
of a change in control of El Paso for our executives and
certain executives of our subsidiaries designated by our Board
or the Compensation Committee, including all of the named
executive officers, and supersedes benefits payable under our
Severance Pay Plan (see Incremental Payments made upon
Involuntary Termination without Cause above). The benefits
of the plan include: (1) a cash severance payment in an
amount equal to 3 times the annual base salary and target bonus
for Mr. Foshee, and 2 times the annual base salary and
target bonus for executive vice presidents and senior vice
presidents, including Messrs. Leland, Smolik, Yardley and
Baker; (2) a pro-rated portion of the executives
target bonus for the year in which the termination of employment
occurs; (3) continuation of life and health insurance
following termination for a period of 36 months for
Mr. Foshee and 24 months for executive vice presidents
and senior vice presidents, including Messrs. Leland,
Smolik, Yardley and Baker; (4) a
gross-up
payment for any federal excise tax imposed on an executive in
connection with any payment or distribution made by us or any of
our affiliates under the plan or otherwise; provided that in the
event a reduction in payments in respect of the executive of 10%
or less would cause no excise tax to be payable in respect of
that executive, then the executive will not be entitled to a
gross-up
payment and payments to the executive shall be reduced to the
extent necessary so that the payments shall not be subject to
the excise tax; and (5) payment of legal fees and expenses
incurred by the executive to enforce any rights or benefits
under the plan. Supplemental pension benefits also become fully
vested and payable to the executive in the event of a
termination of employment following a change in control of
El Paso. Under our equity compensation plans, the
restriction periods applicable to shares of restricted stock
immediately lapse and all outstanding stock options become fully
vested and exercisable.
Incremental
Payments made upon a Change in Control of El Paso
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 Key Executive
|
|
|
|
|
|
|
|
|
|
|
Severance Protection Plan
|
|
|
|
|
|
|
|
|
Supplemental
|
|
|
|
|
|
Continued
|
|
Equity Awards
|
|
|
|
|
Pension
|
|
Severance
|
|
Bonus
|
|
Medical
|
|
Stock
|
|
Restricted
|
|
|
|
|
Benefits
|
|
Payment
|
|
Payment
|
|
Benefits
|
|
Options
|
|
Stock
|
|
Total
|
Name
|
|
($) (1)
|
|
($)
|
|
($)
|
|
($)
|
|
($) (2)
|
|
($) (3)
|
|
($) (4)
|
|
Douglas L. Foshee
|
|
$
|
0
|
|
|
$
|
6,930,000
|
|
|
$
|
1,260,000
|
|
|
$
|
35,469
|
|
|
$
|
0
|
|
|
$
|
2,464,727
|
|
|
$
|
10,690,196
|
|
D. Mark Leland
|
|
$
|
0
|
|
|
$
|
1,663,219
|
|
|
$
|
311,854
|
|
|
$
|
23,646
|
|
|
$
|
0
|
|
|
$
|
844,606
|
|
|
$
|
2,843,325
|
|
Brent J. Smolik
|
|
$
|
77,667
|
|
|
$
|
2,152,776
|
|
|
$
|
509,868
|
|
|
$
|
21,318
|
|
|
$
|
0
|
|
|
$
|
588,315
|
|
|
$
|
3,349,944
|
|
James C. Yardley
|
|
$
|
0
|
|
|
$
|
1,802,556
|
|
|
$
|
386,262
|
|
|
$
|
14,082
|
|
|
$
|
0
|
|
|
$
|
469,964
|
|
|
$
|
2,672,864
|
|
Robert W. Baker
|
|
$
|
0
|
|
|
$
|
1,461,427
|
|
|
$
|
274,018
|
|
|
$
|
23,358
|
|
|
$
|
0
|
|
|
$
|
742,127
|
|
|
$
|
2,500,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22,057,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amount in this column for Mr. Smolik includes
supplemental pension benefits which become fully vested in the
event of a change in control of El Paso. |
|
(2) |
|
This column shows the value of stock options that become fully
vested and exercisable in the event of a change in control of
El Paso calculated using $7.83, the closing price of our
common stock on December 31, 2008. As the stock options in
question have exercise prices greater than $7.83, the value of
these options as of December 31, 2008 is reported as $0. |
|
(3) |
|
This column shows the value of shares of restricted stock that
become fully vested in the event of a change in control of
El Paso calculated using $7.83, the closing price of our
common stock on December 31, 2008. |
|
(4) |
|
The named executive officers did not exceed their respective
Code Section 280G safe harbor amounts and therefore no
gross-up payment for federal excise taxes would have been owed
in the event their employment was terminated on
December 31, 2008 following a change in control of
El Paso. |
63
Benefits are payable for any termination of employment of an
executive in the 2004 Key Executive Severance Protection Plan
within two years following the date of a change in control,
except where termination is by reason of death, disability, for
cause or instituted by the executive other than for good
reason. Good reason means, as to any executive, the
occurrence of any of the following events or conditions
following a change in control: (a) a reduction in the
executives status, title, position or responsibilities,
(b) a reduction in the executives annual base salary,
(c) the requirement that the executives principal
place of employment be outside a fifty mile radius of his or her
principal place of employment immediately prior to the change in
control; (d) the termination of any material compensation
and benefits provided to the executive immediately prior to the
change in control, (e) any material breaches of any
provision of the plan and (f) any termination of the
executives employment for cause which does not comply with
the plan. Benefits are not payable for any termination of
employment following a change in control if (i) the
termination occurs in connection with the sale, divestiture or
other disposition of our designated subsidiaries, (ii) the
purchaser or entity subject to the transaction agrees to provide
severance benefits at least equal to the benefits available
under the plan, and (iii) the executive is offered, or
accepts, employment with the purchaser or entity subject to the
transaction. A change in control generally occurs
if: (i) any person or entity becomes the beneficial owner
of more than 20% of our common stock; (ii) a majority of
the current members of our Board of Directors or their approved
successors cease to be our directors (or, in the event of a
merger, the ultimate parent following the merger); or
(iii) a merger, consolidation, or reorganization, our
complete liquidation or dissolution, or the sale or disposition
of all or substantially all of our and our subsidiaries
assets (other than a transaction in which the same stockholders
before the transaction own 50% of the outstanding common stock
after the transaction is complete). The 2004 Key Executive
Severance Protection Plan generally may be amended or terminated
at any time prior to a change in control, provided that any
amendment or termination that would adversely affect the
benefits or protections of any executive under the plan shall be
null and void as it relates to that executive if a change in
control occurs within one year of the amendment or termination.
In addition, any amendment or termination of the plan in
connection with, or in anticipation of, a change in control
which actually occurs shall be null and void. From and
after a change in control, the plan may not be amended in any
manner that would adversely affect the benefits or protections
provided to any executive under the plan.
DIRECTOR
COMPENSATION
Our non-employee directors are compensated for their services on
the Board under the 2005 Compensation Plan for Non-Employee
Directors, which is designed to attract and retain highly
qualified individuals to serve as members of our Board. All
members of the Board are reimbursed for their reasonable
expenses for attending Board functions. As an employee director,
Mr. Foshee does not receive any additional compensation for
serving on the Board of Directors.
Pursuant to our 2005 Compensation Plan for Non-Employee
Directors, non-employee directors receive an annual retainer of
$80,000, $20,000 of which is required to be paid in deferred
shares of our common stock and the remaining $60,000 of which is
paid at the election of the director in any combination of cash,
deferred cash or deferred shares of common stock. For any
compensation received in deferred shares rather than cash, he or
she is credited with deferred shares with a value representing a
25 percent premium to the cash retainer he or she would
otherwise have received. For example, an individual director
could receive $60,000 in cash and $25,000 ($20,000, plus a
$5,000 premium) in mandatory deferred common stock assuming he
or she elects not to take additional deferred common stock or
could receive $100,000 in deferred common stock assuming he or
she elects to take the entire retainer in deferred common stock.
Each non-employee director who chairs a Committee of the Board
of Directors receives an additional retainer of $15,000 per
year, except for the Chairman of the Audit Committee who
receives an additional retainer of $20,000 per year, which may
be paid in the same manner as the annual retainer (with a total
up to $18,750, or $25,000 in the case of the Audit Committee
Chairman, if he or she elects to take the entire retainer in
deferred common stock). Each member of the Audit Committee,
other than the Audit Committee Chairman, receives an additional
amount of $5,000 per year to compensate him or her for the
additional meetings required by the Audit Committee, which
amount may be paid in the same manner as the annual retainer
(with a total of up to $6,250 if he or she elects to take the
entire amount in deferred common stock).
64
Each non-employee director also receives an annual long-term
equity credit in the form of deferred shares of our common stock
(without any premium) equal to the amount of the annual retainer
(currently $80,000). Directors are not entitled to receive their
deferred amounts until they cease to be a director of
El Paso.
The Compensation Committee, in consultation with its independent
compensation consultant, periodically reviews non-employee
director compensation and recommends changes (if appropriate) to
the full Board of Directors based upon competitive market
practices. In July 2008, the Compensation Committee asked
Deloitte to prepare an analysis of our current non-employee
director compensation program. El Pasos peer group of
companies were examined, as well as a group of 24 comparably
sized general industry companies (general industry
group), to determine the competitive market for
non-employee director compensation. The analysis showed that our
non-employee
director compensation is slightly below the median of both our
peer group and the general industry group, assuming a minimum
deferral of the cash retainer into deferred shares. If directors
elect to defer all of the cash retainer into deferred shares,
then our non-employee director compensation is slightly above
the median of both our peer group and the general industry
group. The Compensation Committee also reviewed the compensation
of our Chairman against a group of 29 comparatively-sized
companies across all industries. The Compensation Committee
determined that when comparing our Chairmans compensation
to this group, our Chairmans compensation is positioned
below the median. The Compensation Committee did not recommend
any increases to our non-employee director compensation program
during 2008.
Chairman
of the Board
Mr. Kuehn receives the same compensation as the other
non-employee directors for his service on the Board, plus a cash
payment of $33,750 per quarter to compensate him for the
additional time spent on Board matters as Chairman of the Board.
As part of the merger with Sonat Inc., we entered into a
termination and consulting agreement with Mr. Kuehn, dated
October 25, 1999. Under this agreement, we agreed to pay
Mr. Kuehns club dues until he retires from the Board.
For the remainder of his life, Mr. Kuehn will also receive
certain ancillary benefits made available to him prior to the
merger with Sonat Inc., including the provision of office space
and related services, and payment of life insurance premiums
sufficient to provide a death benefit equal to one-half his base
pay as in effect immediately prior to October 25, 1999.
Mr. Kuehn, his wife and his eligible dependents will
receive retiree medical coverage.
Director
Charitable Award Plan Terminated
The Director Charitable Award Plan was adopted in January 1992
to provide for each eligible director to designate up to four
charitable organizations to receive a maximum of $1,000,000 in
the aggregate upon the death of each director participant. A
director was eligible to participate after two consecutive years
of service on the Board of Directors. The Director Charitable
Award Plan was terminated on December 4, 2003, with respect
to any new participants, including current directors that had
not served on the Board for at least two years as of the date
the plan was terminated. Messrs. Braniff, Hall, Kuehn and
Wyatt (and eleven former directors) participate in this plan.
The reserve for the Director Charitable Award Plan is combined
with the total reserves maintained by our insurance captive and
has historically been funded with a combination of investment
income and annual premium payments. Directors derive no
financial benefit from this program since all charitable
deductions accrue solely to El Paso. No premium payments
were made to the plan in 2008, and we do not expect that any
premium payments will need to be made in future years.
Educational
Matching Gift Program
Non-employee directors may participate in our Educational
Matching Gift Program, which is a broad-based charitable program
available to all full-time employees, as well as Board members.
Under the program, we match contributions to eligible colleges,
universities and primary and secondary schools up to an annual
maximum of $5,000 per employee or director.
65
Director
Compensation Table
The following table sets forth (1) the aggregate dollar
amount of all fees, including each non-employee directors
annual retainer and any additional retainer for directors who
chair a Committee of the Board, paid in cash or deferred cash to
each of our non-employee directors during 2008 for their
services on the Board, (2) the aggregate dollar amount of
deferred shares of common stock received by each non-employee
director as part of his or her annual retainer
and/or
long-term equity credit, and (3) the value of total
compensation that each of our
non-employee
directors earned during 2008. Our non-employee directors do not
receive stock options or pension benefits.
Director
Compensation
for the Year Ended December 31, 2008 (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid in Cash
|
|
Stock Awards
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
($) (2)
|
|
($) (3)
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
Annual
|
|
Deferred
|
|
Deferred
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
Board/
|
|
Shares of
|
|
Shares of
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
Committee
|
|
Common Stock
|
|
Common Stock
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
Chair
|
|
for Retainer/
|
|
for Long-
|
|
Option
|
|
Compensation
|
|
All Other
|
|
|
|
|
|
|
Cash
|
|
Committee
|
|
Term Equity
|
|
Awards
|
|
Earnings
|
|
Compensation
|
|
Total
|
|
|
Name
|
|
Retainer
|
|
Chair Fees
|
|
Credit
|
|
($) (4)
|
|
($) (5)
|
|
($) (6)
|
|
($)
|
|
|
|
Juan Carlos Braniff
|
|
$
|
65,000
|
|
|
$
|
25,000
|
|
|
$
|
80,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,841
|
|
|
$
|
171,841
|
|
James L. Dunlap
|
|
$
|
60,000
|
|
|
$
|
38,125
|
|
|
$
|
80,000
|
|
|
$
|
0
|
|
|
$
|
930
|
|
|
$
|
0
|
|
|
$
|
179,055
|
|
Robert W. Goldman
|
|
$
|
80,000
|
|
|
$
|
35,500
|
|
|
$
|
80,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
5,000
|
|
|
$
|
200,500
|
|
Anthony W. Hall, Jr.
|
|
$
|
75,000
|
|
|
$
|
25,000
|
|
|
$
|
80,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
180,000
|
|
Thomas R. Hix
|
|
$
|
80,000
|
|
|
$
|
45,000
|
|
|
$
|
80,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
205,000
|
|
William H. Joyce
|
|
$
|
60,000
|
|
|
$
|
40,000
|
|
|
$
|
80,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
180,000
|
|
Ronald L. Kuehn, Jr.(7)
|
|
$
|
195,000
|
|
|
$
|
40,000
|
|
|
$
|
80,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
32,143
|
|
|
$
|
347,143
|
|
Ferrell P. McClean
|
|
$
|
60,000
|
|
|
$
|
40,000
|
|
|
$
|
80,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
180,000
|
|
Steven J. Shapiro
|
|
$
|
76,250
|
|
|
$
|
44,063
|
|
|
$
|
80,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
200,313
|
|
J. Michael Talbert
|
|
$
|
60,000
|
|
|
$
|
25,000
|
|
|
$
|
80,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
165,000
|
|
Robert F. Vagt
|
|
$
|
60,000
|
|
|
$
|
25,000
|
|
|
$
|
80,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
165,000
|
|
John L. Whitmire
|
|
$
|
80,000
|
|
|
$
|
45,000
|
|
|
$
|
80,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
205,000
|
|
Joe B. Wyatt
|
|
$
|
63,750
|
|
|
$
|
32,969
|
|
|
$
|
80,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
176,719
|
|
|
|
|
(1) |
|
Employee directors do not receive any additional compensation
for serving on the Board of Directors; therefore,
Mr. Foshees compensation is reflected in the Summary
Compensation Table on page 48 of this proxy statement.
Amounts paid as reimbursable business expenses to each director
for attending Board functions are not reflected in this table.
We do not consider the directors reimbursable business
expenses for attending board functions and other business
expenses required to perform board duties to have a personal
benefit and thus be considered a perquisite. |
|
(2) |
|
This column includes the value of a directors annual
retainer or additional retainer for directors who chair a
Committee of the Board of Directors that the director has
elected to receive in cash, deferred cash or deferred shares of
common stock. The amount reflected in this column for
Messrs. Dunlap, Goldman, Hix, Joyce, Kuehn,
Ms. McClean and Messrs. Shapiro, Whitmire and Wyatt
for 2008 includes $52,500, $42,000, $80,000, $60,000, $60,000,
$60,000, $76,250, $80,000, and $31,875, respectively, that the
director elected to receive in deferred stock. |
|
(3) |
|
Directors are not entitled to receive their deferred amounts
until they cease to be a director of El Paso. The aggregate
number of stock awards outstanding as of December 31, 2008
is 106,942 deferred shares for Mr. Braniff; 70,252 deferred
shares for Mr. Dunlap; 86,376 deferred shares for
Mr. Goldman; 71,273 deferred shares for Mr. Hall;
72,673 deferred shares for Mr. Hix; 67,850 deferred shares
for Mr. Joyce; 105,876 deferred shares for Mr. Kuehn;
38,818 deferred shares for Ms. McClean; 30,605 deferred
shares for Mr. Shapiro; 54,173 |
66
|
|
|
|
|
deferred shares for Mr. Talbert; 30,177 deferred shares for
Mr. Vagt; 105,419 deferred shares for Mr. Whitmire;
and 101,689 deferred shares for Mr. Wyatt. Directors
receive dividends on the deferred shares at the same rate as all
stockholders. Any such dividends are reinvested in deferred
shares of common stock. |
|
(4) |
|
We terminated our 2001 Stock Option Plan for Non-Employee
Directors in December 2003 and no longer award stock options to
our non-employee directors. Certain of the directors in the
table have vested stock options that were granted under the 2001
Stock Option Plan for Non-Employee Directors or prior plans. The
aggregate number of vested stock options outstanding under all
plans as of December 31, 2008 is 13,000 stock options for
Mr. Braniff, 8,000 stock options for Mr. Dunlap, 8,000
stock options for Mr. Goldman, 12,000 stock options for
Mr. Hall, 11,000 stock options for Mr. Kuehn, 8,000
stock options for Mr. Talbert, 8,000 stock options for
Mr. Whitmire and 14,000 stock options Mr. Wyatt. The
following directors have vested stock options that have an
exercise price of $40 or higher: Messrs. Braniff, Hall,
Kuehn and Wyatt have 5,000, 6,000, 8,000 and 8,000 stock
options, respectively, at or above a $40 exercise price. It is
not likely that our stock price will reach $40 during the
remaining term of these stock options, thus it is not likely the
stock options will be
in-the-money
before they expire by their own terms. |
|
(5) |
|
The amount in this column is above-market interest credited
during 2008 to Mr. Dunlaps deferred cash account
balance under the 2005 Compensation Plan for Non-Employee
Directors. |
|
(6) |
|
The amount reflected in this column for Mr. Braniff
reflects the cost of an airline ticket for an occasion when the
directors spouse accompanied him on a business-related
flight using a commercial carrier. The amount reflected in this
column for Mr. Goldman represents the amount of charitable
matching contributions made pursuant to our Educational Matching
Gift Program. The amount reflected in this column for
Mr. Kuehn includes $15,920 to reimburse Mr. Kuehn for
country club dues pursuant to Mr. Kuehns termination
and consulting agreement, $9,276 of imputed income, plus a gross
up payment of $768, related to insurance premiums paid by us for
Mr. Kuehns benefit, $1,179 for an airline ticket for
an occasion when the directors spouse accompanied him on a
business-related flight using a commercial carrier, as well as
$5,000 representing the amount of charitable matching
contributions made pursuant to our Educational Matching Gift
Program. |
|
(7) |
|
As described above, Mr. Kuehn receives the same
compensation and benefits as the other non-employee directors
for his service on the Board, plus a cash payment of $33,750 per
quarter to compensate him for additional time spent as Chairman
of the Board. |
EQUITY
COMPENSATION PLAN INFORMATION TABLE
The following table provides information concerning our equity
compensation plans as of December 31, 2008. All shares
remaining available for future issuance under our plans have
been approved by our stockholders. The table includes
(a) the number of securities to be issued upon exercise of
options, warrants and rights outstanding under our equity
compensation plans, (b) the weighted-average exercise price
of all outstanding options, warrants and rights and
(c) additional shares available for future grants under all
of our equity compensation plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
Number of
|
|
|
|
Number of Securities
|
|
|
Securities to
|
|
|
|
Remaining Available for
|
|
|
be Issued upon
|
|
|
|
Future Issuance under
|
|
|
Exercise
|
|
Weighted-Average
|
|
Equity Compensation
|
|
|
of Outstanding
|
|
Exercise Price of
|
|
Plans (Excluding
|
|
|
Options,
|
|
Outstanding Options,
|
|
Securities Reflected in
|
Plan Category
|
|
Warrants and Rights (1)
|
|
Warrants and Rights
|
|
Column (a)
|
|
Equity compensation plans approved by stockholders
|
|
|
13,380,179
|
|
|
$
|
14.83
|
|
|
|
22,045,194
|
(2)
|
Equity compensation plans not approved by stockholders
|
|
|
11,390,094
|
|
|
$
|
44.43
|
|
|
|
0
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
24,770,273
|
|
|
|
|
|
|
|
22,045,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Of the 24,770,237 shares listed in this column, 7,850,777
are stock options that have an exercise price of $40 or higher.
It is not likely that our stock price will reach $40 during the
remaining terms of these stock options, thus it is not likely
the stock options will be in-the-money before they expire by
their own terms. |
67
|
|
|
(2) |
|
This includes 2,436,651 shares available for future
issuance under our Employee Stock Purchase Plan. It also
includes 1,961,774 shares available for future issuance
under our 2005 Compensation Plan for Non-Employee Directors. |
|
(3) |
|
In 2005, our stockholders approved the adoption of our 2005
Omnibus Incentive Compensation Plan, which replaced all existing
stockholder approved and non-stockholder approved plans. All
shares remaining available for future issuance under the
terminated plans were canceled, although certain stock options
remain outstanding under them. Consequently, all shares
remaining available for future issuance under our plans have
been approved by our stockholders. |
Non-stockholder
Approved Plans Terminated Plans
Strategic Stock Plan, Restricted Stock Award Plan for
Management Employees and Omnibus Plan for Management
Employees Terminated Plans. These
equity compensation plans were not approved by our stockholders
and in each case have been terminated. The Strategic Stock Plan
provided for the grant of stock options, stock appreciation
rights, limited stock appreciation rights and shares of
restricted stock to non-employee members of our Board of
Directors, our officers and key employees and officers and key
employees of our subsidiaries primarily in connection with
strategic acquisitions. The Restricted Stock Award Plan for
Management Employees provided for the grant of restricted stock
to our management employees (other than executive officers and
directors) and management employees of our subsidiaries for
specific accomplishments beyond that which were normally
expected and which had a significant and measurable impact on
our long-term profitability. The Omnibus Plan for Management
Employees provided for the grant of stock options, stock
appreciation rights, limited stock appreciation rights and
shares of restricted stock to our salaried employees (other than
employees covered by a collective bargaining agreement) and
salaried employees of our subsidiaries. These plans have been
replaced by our 2005 Omnibus Incentive Compensation Plan.
Although these plans have been terminated with respect to new
grants, certain stock options remain outstanding under their
terms. In the event of a change in control,
outstanding stock options granted under the Strategic Stock Plan
and Omnibus Plan for Management Employees become fully
exercisable and restrictions placed on restricted stock lapse.
For purposes of the Strategic Stock Plan and Omnibus Plan for
Management Employees, the term change in control has
substantially the same meaning given such term in our Key
Executive Severance Protection Plan.
|
|
PROPOSAL NO. 2
|
Approval
of 2005 Omnibus Incentive Compensation Plan,
as amended and restated
|
The Board of Directors recommends that stockholders approve the
El Paso Corporation 2005 Omnibus Incentive Compensation
Plan, as amended and restated, to increase the number of shares
available for issuance by 12.5 million.
Description
of the Proposal and Material Plan Changes
On February 9, 2009, the Board of Directors approved an
amendment to the El Paso Corporation 2005 Omnibus Incentive
Compensation Plan, or omnibus plan, subject to
stockholder approval, to (i) increase the number of shares
of common stock available for issuance by 12.5 million
shares, (ii) decrease the number of full-value
awards (i.e., awards other than stock options and stock
appreciation rights) available for grant under the omnibus plan
by 3.0 million (from 17.5 million to
14.5 million), and (iii) clarify share counting
provisions. No other material changes were made to the plan. The
amendment has been incorporated into an amendment and
restatement of the omnibus plan, which is attached as
Appendix A hereto. The Board is submitting the omnibus
plan, as amended, for stockholder approval at the 2009 Annual
Meeting.
Stockholder approval of the omnibus plan, as amended, will also
constitute re-approval of the material terms of the performance
goals under which compensation intended to constitute
performance-based compensation, for purposes of
Section 162(m) of the Code, may be paid.
Section 162(m) places a limit of $1 million on the
amount we may deduct in any one year for compensation paid to
our chief executive officer and our other three most highly-paid
executive officers, other than our chief financial officer.
There is, however, an exception to this limit for certain
performance-based compensation. Awards
68
made pursuant to the omnibus plan may constitute
performance-based compensation not subject to the
$1 million deductibility limitation of 162(m). However, in
order to qualify for this exception, stockholders must approve,
at least every five years, the material terms of the performance
goals of the omnibus plan under which compensation will be paid.
Stockholders last approved the performance goals under the
omnibus plan in 2005.
The material terms of the performance goals being submitted for
approval for purposes of Section 162(m) of the Code
include: (i) the employees eligible to receive awards under
the omnibus plan, (ii) a description of the business
criteria on which the performance goals are based, and
(iii) either the maximum amount of compensation that could
be paid to any employee or the formula used to calculate the
amount of compensation to be paid to the employee if the
performance goals are attained. This information is provided in
the summary of the omnibus plan below.
Summary
of the Omnibus Plan
The complete text of the omnibus plan, as amended, is set
forth as Appendix A attached hereto. The following is a
general summary of the omnibus plan, which is qualified in its
entirety by reference to Appendix A.
Purpose
of the Omnibus Plan
The purpose of the omnibus plan is to promote the interests of
the company and its stockholders by enhancing the companys
ability to attract and retain salaried employees through
suitable recognition of their ability and industry. The omnibus
plan is further intended to align the employees interests
and efforts with the long-term interests of the companys
stockholders, and to provide employees with a direct incentive
to achieve the companys strategic and financial goals.
Effective
Date and Duration
The omnibus plan originally became effective on May 26,
2005 when it was approved by stockholders at the 2005 annual
meeting, and authorizes the granting of awards for up to ten
years. The plan, as amended and restated, will become effective
on May 6, 2009 if it is approved by stockholders at the
2009 annual meeting. The omnibus plan will remain in effect,
subject to the right of the Board of Directors to terminate the
plan at any time, until no awards remain outstanding.
Administration
of the Omnibus Plan
The Compensation Committee of our Board of Directors is the plan
administrator with respect to participants considered to be
Section 16 Insiders and participants subject to
Section 162(m). A management committee, consisting of our
CEO and other senior officers delegated by the CEO, is the plan
administrator with respect to all other participants.
The plan administrator has the full power to select employees to
receive awards under the omnibus plan; determine the terms and
conditions of awards; construe and interpret the plan and any
awards granted thereunder; and, subject to certain limitations,
amend the terms and conditions of outstanding awards. The plan
administrators determinations and interpretations under
the omnibus plan are binding on all interested parties.
Eligibility
and Participation
Eligible participants include all employees (other than an
employee who is a member of a unit covered by a collective
bargaining agreement) of the company or any subsidiary,
including employees who are members of our Board of Directors,
but excluding directors who are not employees, as determined by
the plan administrator. In addition, the plan administrator may
grant awards to any person who, in the sole discretion of the
plan administrator, holds a position of responsibility and is
able to contribute substantially to the success of our company.
The number of employees who are currently eligible to
participate in the omnibus plan is approximately 5,000, from
which the plan administrator has selected approximately
970 participants.
69
Shares
Subject to the Omnibus Plan
When it became effective in 2005, the omnibus plan authorized
the issuance of up to 35,000,000 shares of our common
stock; provided, however, that the maximum number of
full-value awards (i.e., restricted stock,
restricted stock units, performance shares, performance units
and other stock-based awards) that could be granted under the
plan was 17,500,000. As of December 31, 2008,
17,646,769 shares remained available for issuance under the
plan, of which 11,248,667 could be issued as
full-value awards.
The amended and restated omnibus plan, if approved by
stockholders, will increase the maximum number of shares of
common stock that may be issued under the plan by
12,500,000 shares. Based on the number of shares available
for issuance as of December 31, 2008, the 12,500,000
increase would result in 30,146,769 shares remaining
available for issuance under the plan. The amended and restated
omnibus plan will also reduce the number of
full-value awards available for grant under the plan
by 3,000,000 (from 17,500,000 to 14,500,000). Based on the
number of full-value awards available for issuance as of
December 31, 2008, the 3,000,000 reduction would result in
8,248,667 full-value awards remaining available for
issuance under the plan.
Any shares subject to an award which is granted under the
omnibus plan and which terminates by expiration, forfeiture,
cancellation or otherwise shall again be available for grant
under the omnibus plan. Likewise, shares that have been issued
in connection with an award of restricted stock that is canceled
or forfeited prior to vesting or settled in cash, causing the
shares to be returned to the company, will not be counted as
having been issued under the plan. Finally, any shares subject
to a restricted stock unit, performance share, performance unit
or other stock-based award which is settled in cash in lieu of
shares may again be available for grant under the plan.
Under the terms of the amended and restated omnibus plan, if
shares are returned to the company in satisfaction of taxes
related to restricted stock, in connection with cash out of
restricted stock (but excluding upon forfeiture of restricted
stock) or in connection with the tendering of shares by a
participant in satisfaction of the exercise price or taxes
relating to an award, such issued shares shall not become
available again for issuance under the plan. In addition, each
stock appreciation right issued under the plan will be counted
as one share issued under the plan without regard to the number
of shares issued to the participant upon exercise of such stock
appreciation right.
In the event of a change in capitalization, as defined in the
omnibus plan, the plan administrator shall make such adjustments
as it determines are appropriate and equitable to (i) the
maximum number and class of shares of common stock or other
stock or securities with respect to which awards may be granted
under the plan, (ii) the maximum number and class of shares
of common stock or other stock or securities that may be issued
upon exercise of stock options, (iii) the individual annual
grant limits for Section 162(m), (iv) the number and
class of shares of common stock or other stock or securities
which are subject to outstanding awards and the stock option
price or exercise price therefor, if applicable, and
(v) performance goals.
The shares to be delivered under the omnibus plan may be made
available from any combination of shares held in
El Pasos treasury or authorized but unissued shares
of El Pasos common stock. The closing price of a
share of El Paso common stock on the NYSE on
February 27, 2009 was $6.75.
Individual
Annual Grant Limits
For purposes of Section 162(m) of the Code, (i) the
maximum number of our shares with respect to which stock options
or stock appreciation rights may be granted to any participant
in any calendar year is 2 million shares; (ii) the
maximum number of our shares of restricted stock that may be
granted to any participant in any calendar year is
1 million shares; (iii) the maximum number of our
shares with respect to which restricted stock units, performance
shares, performance units or other stock-based awards may be
granted to any participant in any calendar year is
1 million shares; and (iv) the maximum amount of other
awards under the plan, including incentive awards, that may be
paid pursuant to the omnibus plan in any calendar year to any
participant is $10 million.
Awards
under the Omnibus Plan
Grants under the omnibus plan may be made in the form of stock
options, stock appreciation rights, restricted stock, restricted
stock units, performance shares, performance units, incentive
awards, and other cash or
stock-based
awards.
70
Types
of Awards
Following is a general description of the types of awards that
may be granted under the omnibus plan. Terms and conditions of
awards will be determined on a
grant-by-grant
basis by the plan administrator, subject to limitations
contained in the omnibus plan.
Stock Options. A stock option is the grant of
an option made to eligible employees to purchase a specific
number of shares of common stock under certain terms and
conditions and for a set price. The plan administrator will
determine the price of the shares of common stock covered by
each stock option, except that the stock option price may not be
less than 100 percent of the fair market value of the
shares of common stock on the date the stock options are
granted. The plan administrator will also set the term of each
stock option. The term of a stock option may not exceed ten
years from the date of the grant.
Stock options granted under the omnibus incentive plan may be
either incentive stock options which qualify under
the meaning of Section 422 of the Code or
non-qualified stock options which are not designed
to qualify under Section 422. With respect to each stock
option granted under the omnibus plan, the plan administrator
will determine the nature and extent of any restrictions to be
imposed on the shares of common stock that may be purchased,
including, but not limited to, restrictions on the
transferability of shares acquired upon exercise. Stock options
granted under the omnibus plan cannot be repriced without the
approval of the stockholders other than in connection with a
change in capitalization in which an adjustment is
permitted.
The actual purchase of shares of common stock pursuant to a
stock option is called the exercise of that stock
option. Stock options granted under the omnibus plan will be
exercisable at such time or times and subject to such terms and
conditions as determined by the plan administrator at the time
of grant. The plan administrator may waive such restrictions on
the exercisability of a stock option at any time on or after the
date of the grant in whole or in part, as the plan administrator
may determine in its sole discretion. Shares covered by a stock
option may be purchased at one time or in such installments over
the option period as determined by the plan administrator.
The plan administrator will determine the form of payment of the
stock option price, which may include cash, shares of common
stock already owned by the participant, or any combination of
cash and shares of common stock, with the fair market value of
the common stock valued as of the day prior to delivery. The
plan administrator may also designate additional forms of
payment that will be permitted, provided the methods are
permitted by applicable laws and regulations. A participant will
not have any of the rights of a stockholder until the shares of
common stock are issued to the participant.
Stock Appreciation Rights. A stock
appreciation right granted under the omnibus plan is a right to
receive, in shares of common stock, the appreciation in value of
a share of common stock between the date the stock appreciation
right or related award is granted and the date it is exercised.
A stock appreciation right may be granted freestanding or in
tandem or in combination with any other award under the omnibus
incentive plan. Upon exercise, each stock appreciation right
will entitle a participant to receive shares of common stock
with a fair market value determined by multiplying (i) the
difference between the fair market value of a share of common
stock on the date the stock appreciation right is exercised over
the price fixed at the date of grant (which shall not be less
than 100 percent of the fair market value of a share of
common stock on the date of grant) times (ii) the number of
shares of common stock with respect to which the stock
appreciation right is exercised.
A stock appreciation right granted in tandem with any other
award under the omnibus plan shall be exercisable only at such
times and to the extent that the award as to which it relates is
exercisable or at such other times as the plan administrator may
determine. A stock appreciation right expires at the same time
the associated award expires, but in no case shall the right be
exercisable later than the tenth anniversary of the date of its
grant. A holder of a stock appreciation right will not have any
of the rights of a stockholder until shares of common stock are
issued.
Performance Shares and Performance
Units. Performance shares granted under the
omnibus plan represent the right to receive a number of shares
of common stock for each performance share granted. Performance
units granted under the omnibus plan represent the right to
receive a payment, either in cash or shares of common stock,
equal to the value of a performance unit. Performance shares or
performance units may be granted to participants at any time and
from time to time as the plan administrator determines.
Performance shares and performance units may be granted alone or
in combination with any other award.
71
Prior to the grant of each performance share or performance
unit, the plan administrator will establish the initial number
of shares of common stock for each performance share and the
initial value for each performance unit. In addition, the plan
administrator will determine the performance goals used to
determine the extent to which the participant receives a payout
for the performance period. The plan administrator may assign
percentages or other relative values of performance which will
be applied to determine the extent to which the participant
receives a payout. After a performance period has ended, the
plan administrator will determine the extent to which the
performance goals have been met and the holder of a performance
share or performance unit is entitled to receive a payout of the
number of performance shares or value of performance units
awarded. No payout will be made without written certification by
the plan administrator that the applicable performance goals
have been satisfied. No dividends will be paid on unvested
performance shares or unvested performance units.
Restricted Stock. Restricted stock is common
stock that is subject to forfeiture if a participants
employment terminates before a specified date, if
pre-established performance goals for a specified time period
are not attained or upon such other factors or criteria as the
plan administrator may determine. Restricted stock may be
granted to participants under the omnibus plan at any time and
from time to time as the plan administrator determines.
Generally, there is no purchase price associated with restricted
stock. The restriction period on time-based restriction stock
will be at least three years and the restriction period on
performance-based restricted stock will be at least one year.
A participant who receives a grant of restricted stock will be
recorded as a stockholder of El Paso and will have all the
rights of a stockholder with respect to such shares (except with
respect to the restrictions on transferability during the
restriction period), including the right to vote the shares and
receive dividends and other distributions paid with respect to
the underlying shares. When all applicable conditions associated
with a participants restricted stock have been met, the
participant will be issued unrestricted shares of common stock
subject to any required share withholding to satisfy tax
withholding obligations.
Restricted Stock Units. A restricted stock
unit granted under the omnibus plan represents a right to
receive a payment, in cash or shares of common stock, equal to
the value of a share of common stock. Restricted stock units may
be granted to participants at any time and from time to time as
the plan administrator determines. The restriction period on
time-based restricted stock units will be at least three years
and the restriction period on performance-based restricted stock
units will be at least one year.
A participant who receives a grant of restricted stock units
will not be recorded as a stockholder of El Paso and will
not have any of the rights of a stockholder unless or until the
participant is issued shares of common stock in settlement of
the restricted stock units granted. The plan administrator may
determine that restricted stock units are entitled to dividend
equivalents equal to cash dividends, if any, paid on shares of
common stock. Dividend equivalents may be paid in cash or common
stock or credited to the participant as additional restricted
stock units. When all applicable conditions associated with a
participants restricted stock units have been met,
restricted stock units will be settled in any combination of
cash or shares of common stock subject to the payment of all
taxes required to be withheld.
Incentive Awards. An incentive award is a
percentage of a participants base salary, fixed dollar
amount or other measure of compensation to be awarded in cash or
other awards under the omnibus incentive plan at the end of a
performance period if certain performance goals or other
performance measures are achieved. Prior to the beginning of a
particular performance period, or not later than 90 days
following the beginning of the relevant fiscal year, the plan
administrator will establish the performance goals or other
performance measures which must be achieved for any participant
to receive an incentive award for that performance period. The
performance goals or other performance measures may be based on
any combination of corporate and business unit performance goals
or other performance measures. The plan administrator may also
establish one or more company-wide performance goals or other
performance measures which must be achieved. Incentive awards
become payable to the extent the plan administrator certifies in
writing that the performance goals or other performance measures
selected for a particular performance period have been attained.
At the end of each performance period and within 30 days
after the information necessary to make a determination is
available for the performance period, the plan administrator
will determine whether the
72
performance goals or other performance measures for the
performance period have been achieved and the amount of each
participants award. Incentive awards may be paid in any
combination of cash
and/or other
awards.
Cash and Other Stock-Based Awards. The plan
administrator may grant cash awards to participants in such
amounts and upon such terms, including the achievement of
specific performance criteria as the plan administrator may
determine. The plan administrator may also grant other types of
equity-based or equity-related awards known as other
stock-based awards under the omnibus plan. Other
stock-based awards may involve the transfer of actual shares of
common stock or payment in cash or otherwise of amounts based on
the value of shares of common stock. The plan administrator may
establish performance criteria applicable to such awards in its
sole discretion. Each cash award granted will specify a payment
amount or payment range as determined by the plan administrator.
Each other stock-based award will be expressed in terms of
shares of common stock or units based on shares of common stock,
as determined by the plan administrator.
Performance
Goals
The plan administrator may determine that performance criteria
will apply to awards granted under the omnibus plan. To the
extent that awards are intended to qualify as
performance-based compensation under
Section 162(m), the performance goals may include any one
or more of the following, either individually, alternatively or
in any combination, applied to either El Paso as a whole or
any subsidiary or business unit, either individually,
alternatively or in any combination, and measured either
annually or cumulatively over a period of years, on an absolute
basis or relative to the predetermined target, to previous
years results or to a designated comparison group, in each
case as specified by the plan administrator:
(i) financial goals earnings; earnings
per share; net income; revenues; operating cash flow; free cash
flow (defined as operating cash flow less capital expenditures
less dividends); debt level; equity ratios; expenses; cost
reduction targets; capital expended; working capital; weighted
average cost of capital; operating or profit margins;
interest-sensitivity gap levels; return on assets; return on
equity or capital employed; and return on total capital;
(ii) production and non-regulated business unit
goals amount of the oil and gas reserves; oil
and gas reserve additions; oil and gas reserve replacement
ratios; costs of finding oil and gas reserves; and daily natural
gas and/or
oil production;
(iii) regulated business unit goals
contracted capacity on pipelines; and throughput levels on
pipelines;
(iv) corporate and other total
shareholder return; market share; charge-offs; assets;
non-performing assets; asset sale targets; asset quality levels;
value of assets; fair market value of the common stock; employee
retention/attrition rates; investments; regulatory compliance;
satisfactory internal or external audits; improvement of
financial ratings; safety targets; economic value added; value
creation; or achievement of balance sheet or income statement
objectives.
The plan administrator shall adjust the performance goals to
include or exclude extraordinary charges, gain or loss on the
disposition of business units, losses from discontinued
operations, restatements and accounting changes and other
unplanned special charges such as restructuring expenses,
acquisitions, acquisition expenses, including expenses related
to goodwill and other intangible assets, stock offering, stock
repurchases and loan loss provisions.
Termination
of Employment
The award agreement applicable to each award granted under the
omnibus plan will set forth the effect of a participants
termination of employment upon such award. Unless explicitly set
forth otherwise in an award agreement or as determined by the
plan administrator, (i) all of a participants
unvested
and/or
unexercisable awards are automatically forfeited upon
termination of a participants employment for any reason,
and, with respect to stock options or stock appreciation rights,
a participant is permitted to exercise the vested portion of the
stock option or stock appreciation right for three months
following termination of employment, and (ii) all of a
participants awards whether vested or unvested,
exercisable or unexercisable are automatically forfeited upon
the termination of the participants employment for cause.
Provisions regarding the effect of a termination of employment
upon an
73
award are determined in the sole discretion of the plan
administrator and need not be uniform among all awards or among
all participants.
Change
in Control
Under the omnibus plan, a change in control occurs if:
(i) any person or entity becomes the beneficial owner of
20 percent or more of El Pasos common stock;
(ii) if the individuals who, as of the effective date, are
members of the board of directors (including any new director
who was approved by a vote of at least
2/3
by such incumbent directors) cease for any reason to constitute
at least a majority of the members of the board of directors;
(iii) consummation of a merger, consolidation or
reorganization (a) with or into the company or (b) in
which securities of the company are issued, unless such merger,
consolidation or reorganization is a non-control
transaction (as defined in the omnibus plan);
(iv) consummation of a complete liquidation of the company
or the sale or disposition of all or substantially all of
El Pasos assets. A change in control has not occurred
if El Paso is involved in a merger, consolidation or sale
of assets in which the same stockholders of El Paso before
the transaction own 80 percent of the outstanding common
stock after the transaction is complete.
Except as otherwise provided in an award agreement, in the event
of a participants termination of employment
(a) without cause or (b) by the participant for
good reason (as defined below), if applicable,
within two years following a change in control (i) all
stock options and stock appreciation rights will become fully
vested and exercisable, (ii) the restriction periods
applicable to all shares of restricted stock and restricted
stock units will immediately lapse, (iii) the performance
periods applicable to any performance shares, performance units
and incentive awards that have not ended will end and such
awards will become vested and payable in cash in an amount
assuming target levels of performance by both participants and
El Paso have been achieved within ten days following such
termination, and (iv) any restrictions applicable to cash
awards and other stock-based awards will immediately lapse and,
if applicable, become payable within ten days following such
termination. For purposes of the omnibus plan, the term
good reason means, as to any executive, the
occurrence of any of the following events or conditions
following a change in control: (a) a reduction in the
executives status, title, position or responsibilities,
(b) a reduction in the executives annual base salary,
(c) the requirement that the executives principal
place of employment be outside a fifty mile radius of his or her
principal place of employment immediately prior to the change in
control; (d) the termination of any material compensation
and benefits provided to the executive immediately prior to the
change in control, (e) any material breaches of any
provision of the plan and (f) any termination of the
executives employment for cause which does not comply with
the plan.
Transferability
Awards granted under the omnibus plan may not be transferred,
assigned, pledged, or encumbered in any manner except in the
case of the death of a participant. Non-qualified stock options
may be transferred to certain immediate family members, directly
or indirectly or by means of a trust, corporate entity or
partnership, as provided for in the omnibus plan and allowed by
the plan administrator. Any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of awards granted under the
omnibus plan, or any right or privilege conferred thereby,
contrary to the provisions of the omnibus plan, may result in
the forfeiture of any affected award.
Termination
and Amendment
The plan administrator, subject to the approval of the Board of
Directors, may from time to time amend the omnibus plan;
provided, however, (i) stockholder approval is required to
the extent required by applicable law, regulation or stock
exchange rule and (ii) no change in any award previously
granted under the omnibus plan may be made without the consent
of the participant which would impair the right of the
participant to acquire or retain common stock or cash that the
participant may have acquired as a result of the omnibus plan.
The board of directors may at any time suspend the operation of
or terminate the omnibus plan with respect to any shares of
common stock or rights which are not at that time subject to any
award outstanding. No award may be granted under the omnibus
plan on or after the tenth anniversary of the effective date of
the plan.
74
Tax
Withholding
We may deduct or withhold, or require a participant to remit, an
amount sufficient to satisfy federal, state, local, domestic or
foreign taxes required by law or regulation to be withheld with
respect to any taxable event arising as a result of the omnibus
plan.
Option
Grant Information
It is not possible at this time to determine the awards that
will be made in the future pursuant to the omnibus plan. Options
that have been granted in the past are set forth in the
following table.
Option
Grants under 2005 Omnibus Incentive Compensation Plan
|
|
|
|
|
|
|
Number of
|
|
|
Securities
|
|
|
Underlying
|
Name and Principal Position
|
|
Options Granted
|
|
Douglas L. Foshee, President & Chief Executive Officer
|
|
|
998,942
|
|
D. Mark Leland, Executive Vice President & Chief
Executive Officer
|
|
|
334,294
|
|
Brent J. Smolik, Executive Vice President & President
of Exploration & Production
|
|
|
214,431
|
|
James C. Yardley, Executive Vice President, Pipeline Group
|
|
|
259,783
|
|
Robert W. Baker, Executive Vice President & General
Counsel
|
|
|
270,321
|
|
All current executive officers as a group
|
|
|
2,399,077
|
|
All current directors who are not executive officers as a group
|
|
|
0
|
|
Each nominee for election as a director
|
|
|
0
|
|
Each associate of such executive officers, directors or nominees
|
|
|
0
|
|
Each other person who received or is to receive 5% of such
options
|
|
|
0
|
|
All employees, including all current officers who are not
executive officers, as a group
|
|
|
10,192,501
|
|
|
|
|
|
|
Total
|
|
|
12,591,578
|
|
|
|
|
|
|
United
States Federal Income Tax Consequences
The following is a brief discussion of the principal federal
income tax consequences relating to options awarded under the
omnibus plan. This summary is based on our understanding of
present federal income tax law and regulations. The summary does
not purport to be complete or applicable to every situation.
Consequences
to the Participant
Grant. There are no federal income tax
consequences to the participant solely by reason of the grant of
incentive stock options (ISO) or non-qualified stock options
(NQSO) under the omnibus plan.
Exercise. The exercise of an ISO is not a
taxable event for regular federal income tax purposes if certain
requirements are satisfied, including the requirement that the
participant generally must exercise the ISO no later than three
months following the termination of the participants
employment with El Paso. However, such exercise may give
rise to alternative minimum tax liability (see Alternative
Minimum Tax below).
Upon exercise of a NQSO, a participant will generally recognize
ordinary taxable income equal to the excess of the fair market
value of the shares of common stock at the time of exercise over
the amount paid by the participant as the exercise price. The
ordinary income, if any, recognized in connection with the
exercise by a participant of a NQSO will be subject to both wage
and employment tax withholding.
A participants tax basis in the shares of common stock
acquired upon the exercise of a stock option will be the amount
paid upon exercise plus, in the case of a NQSO, the amount of
ordinary income, if any, recognized by the participant upon
exercise thereof.
75
Qualifying Disposition. If a participant
disposes of shares of common stock acquired upon exercise of an
ISO in a taxable transaction, and such disposition occurs more
than two years from the date on which the option was granted and
more than one year after the date on which the shares were
transferred to the participant pursuant to the exercise of the
ISO, the participant will recognize long-term capital gain or
loss equal to the difference between the amount realized upon
such disposition and the participants adjusted basis in
such shares (generally the option exercise price).
Disqualifying Disposition. If the participant
disposes of shares of common stock acquired upon the exercise of
an ISO (other than in certain tax free transactions) within two
years from the date on which the ISO was granted or within one
year after the transfer of shares to the participant pursuant to
the exercise of the ISO, at the time of the disposition the
participant will generally recognize ordinary income equal to
the lesser of (i) the excess of each such shares fair
market value on the date of exercise over the exercise price
paid by the participant, or (ii) the participants
actual gain (i.e., the excess, if any, of the amount realized on
the disposition over the exercise price paid by the
participant). If the total amount realized in a taxable
disposition (including the return of capital gain) exceeds the
fair market value on the date of exercise of the shares of
common stock purchased by the participant under the option, the
participant will recognize a capital gain in the amount of such
excess. If the participant incurs a loss on the disposition
(i.e., if the total amount realized is less than the exercise
price paid by the participant) the loss will be a capital loss.
Other Disposition. If a participant disposes
of shares of common stock acquired upon exercise of a NQSO in a
taxable transaction, the participant will recognize capital gain
or loss in an amount equal to the difference between the
participants basis (as discussed above) in the shares sold
and the total amount realized upon disposition. Any such capital
gain or loss (and any capital gain or loss recognized on a
disqualifying disposition of shares of common stock acquired
upon exercise of ISOs as discussed above) will be short-term or
long-term depending on whether the shares of common stock were
held for more than one year from the date such shares were
transferred to the participant.
Alternative Minimum Tax. Alternative minimum
tax, to which we refer as AMT, is payable if and to the extent
the amount thereof exceeds the amount of the taxpayers
regular tax liability. Any AMT paid generally may be credited
against future regular tax liability (but not future AMT
liability). AMT applies to alternative minimum taxable income.
For AMT purposes, the spread on the exercise of an ISO (but not
a NQSO) will be included in alternative minimum taxable income,
and the taxpayer will receive a tax basis equal to the fair
market value of the shares of common stock at such time for
subsequent AMT purposes. However, if the participant disposes of
the ISO shares in the year of the exercise, the AMT income
cannot exceed the gain recognized for regular tax purposes,
provided that the disposition meets certain third-party
requirements for limiting the gain on a disqualifying
disposition. If there is a disqualifying disposition in a year
other than the year of exercise, the income on the disqualifying
disposition is not considered alternative minimum taxable income.
Consequences
to El Paso Corporation
There are no federal income tax consequences to El Paso by
reason of the grant of ISOs or NQSOs or the exercise of an ISO
(other than disqualifying dispositions).
At the time the participant recognizes ordinary income from the
exercise of a NQSO, El Paso will be entitled to an income
tax deduction in the amount of the ordinary income so recognized
(as described above), provided that we satisfy our reporting
obligations described below. To the extent the participant
recognizes ordinary income by reason of a disqualifying
disposition of the stock acquired upon exercise of an ISO,
El Paso will be entitled to a corresponding deduction in
the year in which the disposition occurs.
El Paso is required to report to the Internal Revenue
Service any ordinary income recognized by any participant by
reason of the exercise of a NQSO or upon a disqualifying
disposition of an ISO. We will be required to withhold income
and employment taxes (and pay the employers share of
employment taxes) with respect to ordinary income recognized by
the participant upon the exercise of a NQSO, but not upon a
disqualifying disposition of an ISO.
76
Other
Tax Consequences
The foregoing discussion is not a complete description of the
federal income tax aspects of options granted under the omnibus
plan. In addition, administrative and judicial interpretations
of the application of the federal income tax laws are subject to
change. Furthermore, the foregoing discussion may not address
state or local tax consequences.
OUR BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR THIS
PROPOSAL.
|
|
PROPOSAL NO. 3
|
Approval
of Employee Stock Purchase Plan, as amended and
restated
|
The Board of Directors recommends that stockholders approve the
El Paso Corporation Employee Stock Purchase Plan, as
amended and restated, to extend the term of the plan until such
time as no additional shares remain available for purchase.
Description
of the Proposal and Material Plan Changes
The El Paso Corporation Employee Stock Purchase Plan, or
ESPP, was originally adopted by the Board effective as of
January 20, 1999 and approved by our stockholders on
April 22, 1999. The ESPP is intended to meet the
requirements of Section 423 of the Code.
Pursuant to its terms, the ESPP will terminate upon the earlier
of December 31, 2009, or when no shares remain available
for purchase under the ESPP. As of February 27, 2009,
2,388,062 shares remain available for purchase under the
ESPP. However, pursuant to its terms, the ESPP is set to
terminate on December 31, 2009.
As a result, the Board of Directors approved an amendment to the
ESPP, subject to stockholder approval, to extend the term of the
ESPP until such time as all shares subject to the ESPP have been
purchased according to its terms. Stockholder approval of this
amendment is necessary pursuant to Section 423 of the Code
so that certain tax benefits of the ESPP will remain available
to our employees. No additional shares for the ESPP are being
authorized or requested and no other material changes were made
to the plan.
The amendment removing the term limit has been incorporated into
an amendment and restatement of the ESPP, which is attached as
Appendix B hereto. The Board is submitting the ESPP, as
amended, for stockholder approval at the 2009 Annual Meeting.
Summary
of the ESPP
The complete text of the ESPP, as amended, is set forth as
Appendix B attached hereto. The following is a general
summary of the ESPP, which is qualified in its entirety by
reference to Appendix B.
Purpose
of the ESPP
The purpose of the ESPP is to provide eligible employees with an
opportunity to purchase shares of El Paso common stock at a
discount from market prices and to increase employee ownership
of El Paso common stock through convenient payroll
deductions. The ESPP is further intended to align the interests
and efforts of employees with the interests of
El Pasos stockholders.
Administration
of the ESPP
The Compensation Committee of our Board of Directors is the
committee responsible for administering the ESPP with respect to
employees subject to Section 16 of the Securities and
Exchange Act of 1934. A management committee, consisting of our
CEO and other senior officers delegated by the CEO, is the
committee responsible for administering the ESPP with respect to
all other employee participants. For purposes of the
description, the relevant committees will be referred to
collectively as the committee.
77
The committee has full and exclusive discretionary authority to
construe, administer and interpret the ESPP, including the
authority to determine who is eligible to participate and to
make any rules and other determinations necessary to administer
the stock purchase plan. The ESPP is intended to qualify as an
employee stock purchase plan within the meaning of
Section 423 of the Code, and accordingly, the provisions of
the ESPP shall be construed so as to extend and limit
participation in a manner consistent with the requirements of
that Section of the Code. Every finding, decision and
determination made by the committee shall, to the fullest extent
allowed by law, be final and binding upon all parties.
El Paso pays for all expenses associated with the
administration of the ESPP, except for the costs associated with
the sale of shares, which is borne by the participants.
Eligibility
and Participation
Our full-time employees and full-time employees of our
participating subsidiaries are eligible to participate in the
ESPP. Certain part-time employees whose customary employment is
at least 20 hours per week and more than 5 months in a
calendar year are also eligible to participate in the ESPP.
Enrollment is voluntary and employees may elect to enroll in the
ESPP during an annual open enrollment period. The approximate
number of employees who are currently eligible to participate in
the ESPP is 5,000, and of such amount, 970 employees are
currently participating.
Shares
Subject to the ESPP
When it originally became effective in 1999, the ESPP authorized
the issuance of up to 2.0 million shares. In 2002,
stockholders approved an amendment to increase the number of
shares that could be purchased under the ESPP by
3.0 million shares, for a total of 5.0 million shares
available for purchase. As of February 27, 2009,
2,388,062 shares remain available for purchase under the
ESPP. No additional shares are being requested pursuant to this
proposal. The closing price of a share of El Paso common
stock on the NYSE on February 27, 2009 was $6.75.
Purchase
of Shares
The ESPP enables eligible employees to purchase shares during
certain offering periods, which generally encompass a calendar
year. To become a participant in the ESPP, an eligible employee
must file an election form during the open enrollment period. On
his or her election form, the participant will designate the
amount of his or her base salary he or she would like to have
deducted each pay period and credited to the ESPP. No
participant can have more than $23,750 deducted from his or her
salary in a calendar year. On the last trading day of each month
during an offering period, generally referred to as the
exercise date, amounts credited to a participants
account will be used to purchase whole shares. Shares so
purchased will be credited to a brokerage account established by
us. The purchase price per share is 95% of the fair market value
of El Paso common stock on the exercise date. The fair
market value is the average of the high and low trading prices
(as quoted on the NYSE or other comparable service the committee
may determine is reliable) on the date the purchase is made.
During an offering period, payroll deductions may not be
increased. A participant may decrease or discontinue his or her
participation by filing a new election form with the
companys designated record keeper.
Participants may not purchase more than 3,000 shares of
El Paso common stock under the ESPP during any calendar
year.
Termination
of Employment
If a participants employment with El Paso or a
participating subsidiary is terminated for any reason, including
retirement, disability or death, the participants
eligibility for participation in the ESPP will terminate as
well. Any funds deposited by the employee prior to such
termination will be used to purchase common stock on the next
exercise date or refunded, without interest to such employee, as
required by the ESPP.
78
Non-Transferability
of Rights
A participants rights under the ESPP are not transferable,
except by will or the laws of descent and distribution, and are
exercisable only by the participant during the
participants lifetime. No rights or payroll deductions of
a participant will be subject to execution, attachment, levy,
garnishment or similar process.
Amendment
or Termination of ESPP
The board of directors may amend or terminate the ESPP at any
time, provided that that any such amendment or termination may
not adversely affect the purchase rights previously granted
under the ESPP. To the extent necessary to comply with
Section 423 of the Code or any other applicable law,
regulation or stock exchange rule, the company shall obtain
stockholder approval of any amendment to the ESPP in such manner
and to such a degree as required.
New Plan
Benefits
Because benefits under the ESPP depend on an employees
election to participate in the ESPP and the fair market value of
the shares at various future dates, it is not possible at this
time to determine the future benefits or amounts that will be
received by participants under the ESPP.
United
States Federal Income Tax Consequences
The following is a brief discussion of the principal federal
income tax consequences relating to participation in the ESPP.
This summary is based on our understanding of present federal
income tax law and regulations and does not purport to be
complete.
Under the Code, a participant will not recognize taxable income
as a result of commencing participation in the ESPP or
purchasing shares of El Paso common stock under the terms
of the ESPP. However, amounts deducted from a participants
paycheck in order to purchase shares under the ESPP are taxable
as part of the participants compensation and are
deductible by El Paso.
Certain tax advantages apply to shares acquired under the ESPP
if specific holding requirements are met. If a participant holds
shares purchased under the stock purchase plan for the longer of
either (1) at least two years after the grant date or
(2) at least one year after the exercise date, before
disposing of the shares, the participant will realize ordinary
income in the year of the disposition equal to the lesser of
(i) the amount by which the fair market value of the shares
on the grant date exceeded the option price on the grant date
(i.e., 5% of such fair market value on the grant date), or
(ii) the amount by which the fair market value of the share
at the time of the disposition exceeded the price actually paid
for the shares on the exercise date. Any further gain realized
upon the sale will be considered long-term capital gain. If the
sale price is less than the option price, there will be no
ordinary income and the participant will have a long-term
capital loss for the difference.
If a participant disposes of shares purchased under the ESPP
within two years of the grant date or within one year of the
exercise date (a disqualifying disposition), the
participant will recognize ordinary income in the year of such
disposition in an amount equal to the excess of the fair market
value of such shares on the date of purchase over the purchase
price. The amount of the ordinary income will be added to the
participants basis in the shares, and any additional gain
or resulting loss recognized on the disposition of the shares
will be a capital gain or loss, either short-term or long-term,
depending on the holding period for such shares. A capital gain
or loss will be long-term if the participant holds the shares
for more than 12 months. We will be entitled to a deduction
in the year of a disqualifying disposition equal to the amount
of ordinary income recognized by the participant as a result of
the disposition.
OUR BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR THIS
PROPOSAL.
79
|
|
PROPOSAL NO. 4
|
Ratification
of the Appointment of Ernst & Young LLP as our
Independent Registered Public Accounting Firm
|
The Board of Directors, at the request of the Audit Committee,
is seeking stockholder ratification of the resolution appointing
Ernst & Young LLP, 5 Houston Center, Suite 1200,
1401 McKinney Street, Houston, Texas 77010, as our independent
registered public accounting firm for fiscal year 2009.
In the normal course of the Audit Committees duties, as
set forth in the Audit Committee Charter, the Audit Committee
performs a thorough evaluation of our independent registered
public accounting firm, including a review of the quality and
expertise assigned to our engagement team, the scope of the
audit work and the firms independence. These evaluations
are part of an overall review of our internal controls that are
designed to safeguard our financial and accounting integrity.
The Board of Directors, at the request of the Audit Committee,
is recommending the ratification of the appointment of
Ernst & Young LLP as our independent registered public
accounting firm for the fiscal year 2009.
If the appointment is not ratified by a majority of the votes
present or represented by proxy at the Annual Meeting, the
adverse vote will be considered as an indication to the Audit
Committee that it should consider selecting another independent
registered public accounting firm for the following fiscal year.
Given the difficulty and expense of making any substitution of
independent registered public accounting firms after the
beginning of the current fiscal year, it is contemplated that
the appointment for the fiscal year 2009 will stand unless the
Audit Committee finds other good reason to make a change.
Ernst & Young LLP audited our and certain of our
subsidiaries financial statements for fiscal years 2008
and 2007. Included in the table below are the aggregate fees for
professional services rendered to us by Ernst & Young
LLP for the years ended December 31, 2008 and 2007.
Principal
Accountant Fees and Services
Aggregate fees for professional services rendered to us by
Ernst & Young LLP for the years ended
December 31, 2008 and 2007 were (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
2008
|
|
2007
|
|
Audit
|
|
|
$
|
9,825
|
|
|
|
$
|
9,797
|
|
Audit Related
|
|
|
|
416
|
|
|
|
|
310
|
|
Tax
|
|
|
|
304
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
10,545
|
|
|
|
$
|
10,111
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit fees for the years ended December 31, 2008 and
2007 were primarily for professional services rendered for the
audits of our consolidated financial statements; the audits of
our internal control over financial reporting in compliance with
Section 404 of the Sarbanes-Oxley Act of 2002; subsidiary
audits required by statute, regulation or contract; the review
of documents filed with the SEC; consents; the issuance of
comfort letters; and certain financial accounting and reporting
consultations.
Audit Related fees for the year ended December 31,
2008 and 2007 were primarily for professional services rendered
for the audits of our employee benefit plans, financial
accounting and reporting consultations not reported under Audit
fees and other attest services.
Tax fees for the years ended December 31, 2008 and
2007 were for professional services related to tax compliance
and tax planning.
80
Our Audit Committee has adopted a pre-approval policy for audit
and non-audit services. See page 13 of this proxy statement
for a description of this policy. The Audit Committee has
considered whether the provision of
non-audit
services by Ernst &Young LLP is compatible with
maintaining auditor independence and has determined that auditor
independence has not been compromised.
A representative of Ernst & Young LLP will be at the
Annual Meeting, will have an opportunity to make a statement if
he or she desires to do so and is expected to be available to
answer appropriate questions.
OUR BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR THIS
PROPOSAL.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors,
certain officers and beneficial owners of more than
10 percent of a registered class of our equity securities
to file reports of ownership and reports of changes in ownership
with the SEC and the NYSE. Directors, officers and beneficial
owners of more than 10 percent of our equity securities are
also required by SEC regulations to furnish us with copies of
all such reports that they file. Based on our review of copies
of such forms and amendments provided to us, we believe that all
filing requirements were timely complied with during the fiscal
year ended December 31, 2008.
By Order of the Board of Directors
Marguerite N. Woung-Chapman
Corporate Secretary
Houston, Texas
March 26, 2009
81
APPENDIX A
El Paso
Corporation
2005 Omnibus Incentive Compensation Plan
(as amended and restated)
A-1
APPENDIX A
TABLE OF
CONTENTS
|
|
|
|
|
|
|
|
SECTION 1
|
|
|
ESTABLISHMENT AND
OBJECTIVES
|
|
1
|
|
|
|
|
|
|
|
|
SECTION 2
|
|
|
DEFINITIONS
|
|
1
|
|
2.1
|
|
|
Award
|
|
1
|
|
2.2
|
|
|
Award Agreement
|
|
1
|
|
2.3
|
|
|
Beneficiary
|
|
1
|
|
2.4
|
|
|
Board of Directors
|
|
1
|
|
2.5
|
|
|
Cash Awards
|
|
1
|
|
2.6
|
|
|
Cause
|
|
2
|
|
2.7
|
|
|
Change in Capitalization
|
|
2
|
|
2.8
|
|
|
Change in Control
|
|
2
|
|
2.9
|
|
|
Code
|
|
4
|
|
2.10
|
|
|
Common Stock
|
|
4
|
|
2.11
|
|
|
Covered Employee
|
|
4
|
|
2.12
|
|
|
Effective Date
|
|
4
|
|
2.13
|
|
|
Employer
|
|
4
|
|
2.14
|
|
|
Exchange Act
|
|
4
|
|
2.15
|
|
|
Fair Market Value
|
|
4
|
|
2.16
|
|
|
Good Reason
|
|
4
|
|
2.17
|
|
|
Incentive Award
|
|
5
|
|
2.18
|
|
|
Incentive Stock Option
|
|
5
|
|
2.19
|
|
|
Management Committee
|
|
5
|
|
2.20
|
|
|
Maximum Annual Employee Grant
|
|
5
|
|
2.21
|
|
|
Nonqualified Option
|
|
5
|
|
2.22
|
|
|
Option Price
|
|
5
|
|
2.23
|
|
|
Other Stock-Based Award
|
|
5
|
|
2.24
|
|
|
Participant
|
|
5
|
|
2.25
|
|
|
Performance Goals
|
|
6
|
|
2.26
|
|
|
Performance Period
|
|
7
|
|
2.27
|
|
|
Performance Shares
|
|
8
|
|
2.28
|
|
|
Performance Units
|
|
8
|
|
2.29
|
|
|
Plan Administrator
|
|
8
|
|
2.30
|
|
|
Prior Plans
|
|
8
|
|
2.31
|
|
|
Restricted Stock
|
|
8
|
|
2.32
|
|
|
Restricted Stock Units
|
|
8
|
|
2.33
|
|
|
Restriction Period
|
|
8
|
|
2.34
|
|
|
Rule 16b-3
|
|
8
|
|
2.35
|
|
|
Section 16 Insider
|
|
8
|
|
2.36
|
|
|
Section 162(m)
|
|
8
|
|
2.37
|
|
|
Subsidiary
|
|
8
|
2005 Omnibus Incentive Compensation
Plan
(as amended and restated)
APPENDIX A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SECTION 3
|
|
|
ADMINISTRATION
|
|
9
|
|
3.1
|
|
|
Plan Administrator
|
|
9
|
|
3.2
|
|
|
Authority of Plan Administrator
|
|
9
|
|
3.3
|
|
|
Indemnification of Plan Administrator
|
|
10
|
|
3.4
|
|
|
Delegation to Management Committee
|
|
10
|
|
|
|
|
|
|
|
|
SECTION 4
|
|
|
ELIGIBILITY
|
|
10
|
|
|
|
|
|
|
|
|
SECTION 5
|
|
|
SHARES AVAILABLE FOR THE PLAN
|
|
10
|
|
5.1
|
|
|
Aggregate Shares
|
|
10
|
|
5.2
|
|
|
Limitations
|
|
11
|
|
5.3
|
|
|
Adjustments in Authorized Shares
|
|
11
|
|
5.4
|
|
|
Effect of Certain Transactions
|
|
12
|
|
|
|
|
|
|
|
|
SECTION 6
|
|
|
STOCK OPTIONS
|
|
12
|
|
6.1
|
|
|
Grant of Options
|
|
12
|
|
6.2
|
|
|
Special Provisions Applicable to Incentive Stock Options
|
|
13
|
|
6.3
|
|
|
Terms of Options
|
|
13
|
|
|
|
|
|
|
|
|
SECTION 7
|
|
|
STOCK APPRECIATION RIGHTS
|
|
16
|
|
7.1
|
|
|
Grant of Stock Appreciation Rights
|
|
16
|
|
7.2
|
|
|
Exercise of Stock Appreciation Rights
|
|
16
|
|
7.3
|
|
|
Special Provisions Applicable to Stock Appreciation Rights
|
|
16
|
|
|
|
|
|
|
|
|
SECTION 8
|
|
|
PERFORMANCE SHARES AND PERFORMANCE UNITS
|
|
17
|
|
8.1
|
|
|
Grant of Performance Shares and Performance Units
|
|
17
|
|
8.2
|
|
|
Value of Performance Shares and Performance Units
|
|
17
|
|
8.3
|
|
|
Payment of Performance Shares and Performance Units
|
|
17
|
|
8.4
|
|
|
Form and Timing of Payment
|
|
17
|
|
8.5
|
|
|
Nontransferability of Performance Shares and Performance Units
|
|
18
|
|
|
|
|
|
|
|
|
SECTION 9
|
|
|
RESTRICTED STOCK
|
|
18
|
|
9.1
|
|
|
Grant of Restricted Stock
|
|
18
|
|
9.2
|
|
|
Restriction Period
|
|
18
|
|
9.3
|
|
|
Other Restrictions
|
|
18
|
|
9.4
|
|
|
Voting Rights; Dividends and Other Distributions
|
|
18
|
|
9.5
|
|
|
Issuance of Shares; Settlement of Awards
|
|
19
|
|
|
|
|
|
|
|
|
SECTION 10
|
|
|
RESTRICTED STOCK UNITS
|
|
19
|
|
10.1
|
|
|
Grant of Restricted Stock Units
|
|
19
|
|
10.2
|
|
|
Restriction Period
|
|
19
|
|
10.3
|
|
|
Other Restrictions
|
|
19
|
|
10.4
|
|
|
Dividend Equivalents
|
|
19
|
|
10.5
|
|
|
Issuance of Shares; Settlement of Awards
|
|
20
|
2005 Omnibus Incentive Compensation
Plan
(as amended and restated)
APPENDIX A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SECTION 11
|
|
|
INCENTIVE AWARDS
|
|
20
|
|
11.1
|
|
|
Incentive Awards
|
|
20
|
|
11.2
|
|
|
Performance Goal Certification
|
|
20
|
|
11.3
|
|
|
Discretion to Reduce Awards; Participants Performance
|
|
20
|
|
11.4
|
|
|
Required Payment of Incentive Awards
|
|
20
|
|
11.5
|
|
|
Restricted Stock Election
|
|
21
|
|
11.6
|
|
|
Nontransferability of Incentive Awards
|
|
21
|
|
|
|
|
|
|
|
|
SECTION 12
|
|
|
CASH AWARDS AND OTHER STOCK-BASED AWARDS
|
|
21
|
|
12.1
|
|
|
Grant of Cash Awards
|
|
21
|
|
12.2
|
|
|
Other Stock-Based Awards
|
|
21
|
|
12.3
|
|
|
Value of Cash Awards and Other Stock-Based Awards
|
|
22
|
|
12.4
|
|
|
Payment of Cash Awards and Other Stock-Based Awards
|
|
22
|
|
12.5
|
|
|
Transferability of Cash Awards and Other Stock-Based Awards
|
|
22
|
|
|
|
|
|
|
|
|
SECTION 13
|
|
|
TERMINATION OF EMPLOYMENT
|
|
22
|
|
|
|
|
|
|
|
|
SECTION 14
|
|
|
EFFECT OF A CHANGE IN CONTROL
|
|
22
|
|
|
|
|
|
|
|
|
SECTION 15
|
|
|
REGULATORY APPROVALS AND LISTING
|
|
23
|
|
|
|
|
|
|
|
|
SECTION 16
|
|
|
TERM OF PLAN
|
|
23
|
|
|
|
|
|
|
|
|
SECTION 17
|
|
|
GENERAL PROVISIONS
|
|
24
|
|
17.1
|
|
|
Forfeiture Events
|
|
24
|
|
17.2
|
|
|
No Individual Rights
|
|
24
|
|
17.3
|
|
|
Other Compensation
|
|
24
|
|
17.4
|
|
|
Nontransferability
|
|
24
|
|
17.5
|
|
|
Leaves of Absence
|
|
24
|
|
17.6
|
|
|
Transfers
|
|
25
|
|
17.7
|
|
|
Unfunded Obligations
|
|
25
|
|
17.8
|
|
|
Beneficiaries
|
|
25
|
|
17.9
|
|
|
Governing Law
|
|
25
|
|
17.10
|
|
|
Satisfaction of Tax Obligations
|
|
25
|
|
17.11
|
|
|
Participants in Foreign Jurisdictions
|
|
26
|
|
|
|
|
|
|
|
|
SECTION 18
|
|
|
COMPLIANCE WITH
RULE 16b-3,
SECTION 162(m) AND SECTION 409A
|
|
26
|
|
18.1
|
|
|
Rule 16b-3
of the Exchange Act and Section 162(m) of the Code
|
|
26
|
|
18.2
|
|
|
SECTION 409A of the Code
|
|
26
|
|
|
|
|
|
|
|
|
SECTION 19
|
|
|
AMENDMENT, TERMINATION OR DISCONTINUANCE OF THE PLAN
|
|
26
|
|
19.1
|
|
|
Amendment of Plan
|
|
26
|
|
19.2
|
|
|
Termination or Suspension of Plan
|
|
27
|
|
|
|
|
|
|
|
|
SECTION 20
|
|
|
DEFERRAL ELECTIONS
|
|
27
|
2005 Omnibus Incentive Compensation
Plan
(as amended and restated)
APPENDIX A
El Paso
Corporation
2005 Omnibus Incentive Compensation Plan
(as amended and restated)
SECTION 1 ESTABLISHMENT
AND OBJECTIVES
El Paso Corporation (hereinafter referred to as the
Company) hereby establishes an incentive
compensation plan to be known as the El Paso
Corporation 2005 Omnibus Incentive Compensation Plan
(hereinafter referred to as the Plan). The Plan
first became effective on May 26, 2005 (the Effective
Date). The Plan, as amended and restated, will become
effective on May 6, 2009 if it is approved by the
Companys stockholders at the 2009 annual meeting. The Plan
shall remain in effect as provided in Section 16 hereof.
The objectives of the Plan are to promote the interests of the
Company and its stockholders by strengthening its ability to
attract and retain salaried employees of the Company and its
Subsidiaries (as defined below) by furnishing suitable
recognition of their ability and industry, to align their
interests and efforts to the long-term interests of the
Companys stockholders, and to provide them with a direct
incentive to achieve the Companys strategic and financial
goals. In furtherance of these purposes, the Plan provides for
the grant of stock options, stock appreciation rights,
Restricted Stock, Restricted Stock Units, Performance Shares,
Performance Units, Incentive Awards, Cash Awards, and Other
Stock-Based Awards to Participants in accordance with the terms
and conditions set forth below.
SECTION 2 DEFINITIONS
Unless otherwise required by the context, the following terms
when used in the Plan shall have the meanings set forth in this
Section 2:
2.1 Award
An Award granted under the Plan means any stock
option, stock appreciation right, Restricted Stock, Restricted
Stock Unit, Performance Share, Performance Unit, Incentive
Award, Cash Award or Other Stock-Based Award, in each case
payable in cash or in shares of Common Stock as may be
designated by the Plan Administrator.
2.2 Award
Agreement
The Award Agreement is the written agreement setting
forth the terms and conditions applicable to an Award granted
under the Plan (which, in the discretion of the Plan
Administrator, need not be countersigned by a Participant). The
Plan Administrator may, in its discretion, provide for the use
of electronic, internet or other non-paper Award Agreements.
2.3 Beneficiary
The person or persons designated by the Participant pursuant to
Section 6.3(f) or Section 17.8 of this Plan to whom
payments are to be paid pursuant to the terms of the Plan in the
event of the Participants death.
2.4 Board
of Directors
The Board of Directors of the Company.
2.5 Cash
Awards
As defined in Section 12.1.
APPENDIX A
2.6 Cause
A termination of a Participant by his or her Employer shall be
for Cause if the Employer determines that the
Participant has (i) failed to substantially perform his or
her duties to the Employers satisfaction (other than a
failure resulting from the Participants incapacity due to
physical or mental illness) which has not been cured to the
Employers satisfaction; (ii) willfully engaged in
conduct which is injurious to the Company or any of its
affiliates, monetarily or otherwise; (iii) has been
convicted of any felony, or a misdemeanor involving moral
turpitude; or (iv) willfully engaged in conduct in
violation of the Companys policies or Code of Business
Conduct. Whether a Participant has been terminated for Cause
will be determined by the Employer in the exercise of its
discretion.
2.7 Change
in Capitalization
A Change in Capitalization means any increase or
reduction in the number of shares of Common Stock, any change
(including, without limitation, in the case of a spin-off,
dividend or other distribution in respect of shares, a change in
value) in the shares of Common Stock or any exchange of shares
of Common Stock for a different number or kind of shares of
Common Stock or other securities of the Company or another
corporation, by reason of a reclassification, recapitalization,
merger, consolidation, reorganization, spin-off,
split-up,
issuance of warrants, rights or debentures, stock dividend,
stock split or reverse stock split, cash dividend, property
dividend, combination or exchange of shares, repurchase of
shares, change in corporate structure or otherwise.
2.8 Change
in Control
A Change in Control shall mean the occurrence of any
of the following after the Effective Date:
(a) An acquisition (other than directly from the Company)
of any voting securities of the Company (the Voting
Securities) by any Person (as the term
person is used for purposes of Section 13(d) or
14(d) of the Exchange Act), immediately after which such Person
has Beneficial Ownership (within the meaning of
Rule 13d-3
promulgated under the Exchange Act) of more than twenty percent
(20%) of (1) the then-outstanding shares of Common Stock
(or any other securities into which such shares of Common Stock
are changed or for which such shares of Common Stock are
exchanged) (the Shares) or (2) the combined
voting power of the Companys then-outstanding Voting
Securities; provided, however, that in determining
whether a Change in Control has occurred pursuant to this
paragraph (a), the acquisition of Shares or Voting Securities in
a Non-Control Acquisition (as hereinafter defined)
shall not constitute a Change in Control. A Non-Control
Acquisition shall mean an acquisition by (i) an
employee benefit plan (or a trust forming a part thereof)
maintained by (A) the Company or (B) any corporation
or other Person the majority of the voting power, voting equity
securities or equity interest of which is owned, directly or
indirectly, by the Company (for purposes of this definition, a
Related Entity), (ii) the Company or any
Related Entity, or (iii) any Person in connection with a
Non-Control Transaction (as hereinafter defined);
(b) The individuals who, as of the Effective Date, are
members of the Board of Directors (the Incumbent Board of
Directors), cease for any reason to constitute at least a
majority of the members of the Board of Directors or, following
a Merger (as hereinafter defined), the board of directors of
(x) the corporation resulting from such Merger (the
Surviving Corporation), if fifty percent (50%) or
more of the combined voting
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
power of the then-outstanding voting securities of the Surviving
Corporation is not Beneficially Owned, directly or indirectly,
by another Person (a Parent Corporation) or
(y) if there is one or more than one Parent Corporation,
the ultimate Parent Corporation; provided,
however, that, if the election, or nomination for
election by the Companys common stockholders, of any new
director was approved by a vote of at least two-thirds of the
Incumbent Board of Directors, such new director shall, for
purposes of the Plan, be considered a member of the Incumbent
Board of Directors; and provided, further,
however, that no individual shall be considered a member
of the Incumbent Board of Directors if such individual initially
assumed office as a result of an actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board of Directors (a Proxy Contest),
including by reason of any agreement intended to avoid or settle
any Proxy Contest; or
(c) The consummation of:
(i) A merger, consolidation or reorganization (1) with
or into the Company or (2) in which securities of the
Company are issued (a Merger), unless such Merger is
a Non-Control Transaction. A Non-Control
Transaction shall mean a Merger in which:
(A) the stockholders of the Company immediately before such
Merger own directly or indirectly immediately following such
Merger at least fifty percent (50%) of the combined voting power
of the outstanding voting securities of (x) the Surviving
Corporation, if there is no Parent Corporation or (y) if
there is one or more than one Parent Corporation, the ultimate
Parent Corporation;
(B) the individuals who were members of the Incumbent Board
of Directors immediately prior to the execution of the agreement
providing for such Merger constitute at least a majority of the
members of the board of directors of (x) the Surviving
Corporation, if there is no Parent Corporation, or (y) if
there is one or more than one Parent Corporation, the ultimate
Parent Corporation; and
(C) no Person other than (1) the Company, (2) any
Related Entity, or (3) any employee benefit plan (or any
trust forming a part thereof) that, immediately prior to the
Merger, was maintained by the Company or any Related Entity, or
(4) any Person who, immediately prior to the Merger had
Beneficial Ownership of twenty percent (20%) or more of the then
outstanding Shares or Voting Securities, has Beneficial
Ownership, directly or indirectly, of twenty percent (20%) or
more of the combined voting power of the outstanding voting
securities or common stock of (x) the Surviving
Corporation, if fifty percent (50%) or more of the combined
voting power of the then outstanding voting securities of the
Surviving Corporation is not Beneficially Owned, directly or
indirectly by a Parent Corporation, or (y) if there is one
or more than one Parent Corporation, the ultimate Parent
Corporation;
(ii) A complete liquidation or dissolution of the
Company; or
(iii) The sale or other disposition of all or substantially
all of the assets of the Company and its Subsidiaries taken as a
whole to any Person (other than (x) a transfer to a Related
Entity, (y) a transfer under conditions that would
constitute a Non-Control Transaction, with the disposition of
assets being regarded as a Merger for this purpose or
(z) the distribution to the Companys stockholders of
the stock of a Related Entity or any other assets).
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the Subject
Person) acquired Beneficial Ownership of more than the
permitted amount of the then outstanding Shares or Voting
Securities as a result of the acquisition of Shares or Voting
Securities by the Company which, by reducing the number of
Shares or Voting Securities then outstanding, increases the
proportional number of shares Beneficially Owned by the Subject
Persons; provided, that if a Change in Control would
occur (but for the operation of this sentence) as a result of
the acquisition of Shares or Voting Securities by the Company
and, after such share acquisition by the Company, the Subject
Person becomes the Beneficial Owner of any additional Shares or
Voting Securities and such Beneficial Ownership increases the
percentage of the then outstanding Shares or Voting Securities
Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
2.9 Code
The Internal Revenue Code of 1986, as amended and in effect from
time to time, and the temporary or final regulations of the
Secretary of the U.S. Treasury adopted pursuant to the Code.
2.10 Common
Stock
The Common Stock of the Company, $3 par value per share, or
such other class of shares or other securities as may be
applicable pursuant to the provisions of Section 5.
2.11 Covered
Employee
A Covered Employee means, with respect to any grant
of an Award, a Participant who the Plan Administrator deems is
or may be or become a covered employee as defined in
Section 162(m)(3) of the Code for any year and who may
receive remuneration over $1 million in such year which
would not be deductible under Section 162(m).
2.12 Effective
Date
Effective Date shall have the meaning ascribed to
such term in Section 1 hereof.
2.13 Employer
Employer shall mean, as to any Participant on any
date, the Company or the affiliate of the Company that employs
the Participant on such date.
2.14 Exchange
Act
The Securities Exchange Act of 1934, as amended.
2.15 Fair
Market Value
The Fair Market Value of the Common Stock on any
date shall be deemed to be the average between the highest and
lowest quoted selling prices at which Common Stock is sold on
such date as reported in the NYSE-Composite Transactions by The
Wall Street Journal or any other comparable service the Plan
Administrator may determine is reliable for such date, or if no
Common Stock was traded on such date, on the next preceding day
on which Common Stock was so traded. If the Fair Market Value of
the Common Stock cannot be determined pursuant to the preceding
provisions, the Fair Market Value of the Common
Stock shall be determined by the Plan Administrator in good
faith.
2.16 Good
Reason
Good Reason shall mean, as to any Participant who is
an officer of his or her Employer, the occurrence of any of the
following events or conditions following a Change in Control:
(a) a change in the Participants status, position or
responsibilities (including reporting responsibilities) which
represents a substantial reduction of his or her status,
position or responsibilities as in effect immediately prior
thereto; the assignment to the Participant of any duties or
responsibilities which are inconsistent with such status,
position or responsibilities; or any removal of the Participant
from or failure to reappoint or reelect him or her to any of
such positions, except in connection with the termination of his
or her employment for Cause, Permanent Disability, as a result
of his or her death, or by the Participant other than for Good
Reason;
(b) a reduction in the Participants annual base
salary;
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
(c) the requirement by the Participants Employer
(without the consent of the Participant) that he or she have a
principal place of employment which is outside a fifty
(50) mile radius of his or her principal place of
employment immediately prior to a Change in Control;
(d) the failure by the Company or any of its affiliates to
(i) continue in effect any material compensation or benefit
plan, program or practice in which the Participant was
participating immediately prior to the Change in Control,
including, without limitation, this Plan, the El Paso
Corporation Pension Plan, the El Paso Corporation
Supplemental Benefits Plan and the El Paso Corporation
Retirement Savings Plan, with any amendments and restatements of
such plans made prior to such Change in Control, or
(ii) provide the Participant with compensation and benefits
at least equal (in terms of benefit levels
and/or
reward opportunities) to those provided for under each
compensation or employee benefit plan, program and practice of
the Company and its affiliates as in effect immediately prior to
the Change in Control (or as in effect following the Change in
Control, if greater);
(e) any material breach by the Company of any provision of
this Plan; or
(f) any purported termination of the Participants
employment for Cause by the Employer which does not otherwise
comply with the terms of this Plan.
2.17 Incentive
Award
A percentage of base salary, fixed dollar amount or other
measure of compensation which Participants are eligible to
receive, in cash
and/or other
Awards under the Plan, at the end of a Performance Period if
certain performance measures are achieved.
2.18 Incentive
Stock Option
An option intended to meet the requirements of an Incentive
Stock Option as defined in Section 422 of the Code, as in
effect at the time of grant of such option, or any statutory
provision that may hereafter replace such Section.
2.19 Management
Committee
A committee consisting of the Chief Executive Officer and such
other officers of the Company appointed by the Chief Executive
Officer.
2.20 Maximum
Annual Employee Grant
The Maximum Annual Employee Grant set forth in Section 5.2.
2.21 Nonqualified
Option
An option which is not intended to meet the requirements of an
Incentive Stock Option as defined in Section 422 of the
Code.
2.22 Option
Price
The price per share of Common Stock at which an option is
exercisable.
2.23. Other
Stock-Based Award
As defined in Section 12.2.
2.24 Participant
An eligible employee to whom Awards are granted under the Plan
as set forth in Section 4.
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
2.25 Performance
Goals
The Plan Administrator may grant Awards subject to Performance
Goals to any Participant, including, without limitation, to any
Covered Employee. As to any such Awards, the Plan Administrator
shall establish one or more of the following Performance Goals
for each Performance Period in writing. Each Performance Goal
selected for a particular Performance Period shall include any
one or more of the following, either individually, alternatively
or in any combination, applied to either the Company as a whole
or to a Subsidiary or business unit, either individually,
alternatively or in any combination, and measured either
annually or cumulatively over a period of years, on an absolute
basis or relative to the pre-established target, to previous
years results or to a designated comparison group, in each
case as specified by the Plan Administrator:
Financial Goals
|
|
|
|
|
earnings;
|
|
|
|
earnings per share;
|
|
|
|
net income;
|
|
|
|
revenues;
|
|
|
|
operating cash flow;
|
|
|
|
free cash flow (defined as operating cash flow less capital
expenditures less dividends);
|
|
|
|
debt level;
|
|
|
|
equity ratios;
|
|
|
|
expenses;
|
|
|
|
cost reduction targets;
|
|
|
|
capital expended;
|
|
|
|
working capital;
|
|
|
|
weighted average cost of capital;
|
|
|
|
operating or profit margins;
|
|
|
|
interest-sensitivity gap levels;
|
|
|
|
return on assets;
|
|
|
|
return on equity or capital employed;
|
|
|
|
return on total capital;
|
Production and Non-Regulated Business Unit Goals
|
|
|
|
|
amount of the oil and gas reserves;
|
|
|
|
oil and gas reserve additions;
|
|
|
|
oil and gas reserve replacement ratios;
|
|
|
|
costs of finding oil and gas reserves;
|
|
|
|
daily natural gas
and/or oil
production;
|
Regulated Business Unit Goals
|
|
|
|
|
contracted capacity on pipelines;
|
|
|
|
throughput levels on pipelines;
|
Corporate and Other
|
|
|
|
|
total shareholder return;
|
|
|
|
market share;
|
|
|
|
charge-offs;
|
|
|
|
assets;
|
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
|
|
|
|
|
non-performing assets;
|
|
|
|
asset sale targets;
|
|
|
|
asset quality levels;
|
|
|
|
value of assets;
|
|
|
|
Fair Market Value of the Common Stock;
|
|
|
|
employee retention/attrition rates;
|
|
|
|
investments;
|
|
|
|
regulatory compliance;
|
|
|
|
satisfactory internal or external audits;
|
|
|
|
improvement of financial ratings;
|
|
|
|
safety targets;
|
|
|
|
economic value added;
|
|
|
|
value creation; or
|
|
|
|
achievement of balance sheet or income statement objectives.
|
The Plan Administrator shall adjust the Performance Goals to
include or exclude extraordinary charges, gain or loss on the
disposition of business units, losses from discontinued
operations, restatements and accounting changes and other
unplanned special charges such as restructuring expenses,
acquisitions, acquisition expenses, including expenses related
to goodwill and other intangible assets, stock offerings, stock
repurchases and loan loss provisions. The Plan Administrator may
also provide for the manner in which performance will be
measured against the Performance Goals (or may adjust the
Performance Goals) to reflect the impact of specified corporate
transactions (such as a stock split, stock dividend or other
Change in Capitalization), special charges, and tax law changes.
In addition, the Plan Administrator may make such adjustments to
the Performance Goals applicable to Participants who are not
Covered Employees as it determines are appropriate. Such
adjustments may occur at the time of the granting of an Award,
or at any time thereafter, but, in the case of Covered
Employees, only to the extent permitted by Section 162(m).
The foregoing terms shall have the same meaning as used in the
Companys financial statements, or if the terms are not
used in the Companys financial statements, they shall have
the meaning generally applied pursuant to general accepted
accounting principles. Performance Goals may include a threshold
level of performance below which no Award shall be earned,
target levels of performance at which specific Awards will be
earned, and a maximum level of performance at which the maximum
level of Awards will be earned.
In establishing Performance Goals with respect to Covered
Employees, the Plan Administrator shall ensure such Performance
Goals (i) are established no later than the end of the
first 90 days of the Performance Period (or such other time
permitted by the Internal Revenue Service), and
(ii) satisfy all other applicable requirements imposed by
Section 162(m), including the requirement that such
Performance Goals be stated in terms of an objective formula or
standard, and the Plan Administrator may not in any event
increase the amount of compensation payable to a Covered
Employee upon the satisfaction of any Performance Goal. Prior to
the payment of any performance-based compensation
within the meaning of Section 162(m), the Plan
Administrator shall certify in writing the extent to which the
applicable Performance Goals were, in fact, achieved and the
amounts to be paid, vested or delivered as a result thereof;
provided, that the Plan Administrator may reduce, but not
increase, such amount.
2.26 Performance
Period
That period of time during which Performance Goals are evaluated
to determine the vesting or granting of Awards under the Plan,
as the Plan Administrator may determine.
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
2.27 Performance
Shares
An award granted under the Plan representing the right to
receive a number of shares of Common Stock for each performance
share granted, as the Plan Administrator may determine.
2.28 Performance
Units
An award granted under the Plan representing the right to
receive a payment equal to the value of a performance unit, as
the Plan Administrator may determine.
2.29 Plan
Administrator
Those committees appointed and authorized pursuant to
Section 3 to administer the Plan.
2.30 Prior
Plans
El Paso Corporation 2001 Omnibus Incentive Compensation
Plan, El Paso Corporation Strategic Stock Plan,
El Paso Corporation Restricted Stock Award Plan for
Management Employees and El Paso Corporation Omnibus Plan
for Management Employees.
2.31 Restricted
Stock
Common Stock granted under the Plan that is subject to the
requirements of Section 9 and such other restrictions as
the Plan Administrator deems appropriate. References to
Restricted Stock in this Plan shall include Restricted Stock
awarded in conjunction with Incentive Awards pursuant to
Section 11 unless the context otherwise requires.
2.32 Restricted
Stock Units
An award granted under the Plan representing a right to receive
a payment equal to the value of a share of Common Stock.
2.33 Restriction
Period
As defined in Section 9.2.
2.34 Rule 16b-3
Rule 16b-3
of the General Rules and Regulations under the Exchange Act.
2.35 Section 16
Insider
Any person who is selected by the Plan Administrator to receive
an Award pursuant to the Plan and who is or may be or become
subject to the requirements of Section 16 of the Exchange
Act, and the rules and regulations promulgated thereunder.
2.36 Section 162(m)
Section 162(m) of the Code, and regulations promulgated
thereunder.
2.37 Subsidiary
An entity that is designated by the Plan Administrator as a
subsidiary for purposes of the Plan and that is a corporation,
partnership, joint venture, limited liability company, limited
liability partnership, or other entity in which the Company owns
directly or indirectly, fifty percent (50%) or more of the
voting power or profit interests,
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
or as to which the Company or one of its affiliates serves as
general or managing partner or in a similar capacity.
Notwithstanding the foregoing, for purposes of options intended
to qualify as Incentive Stock Options, the term
Subsidiary shall mean a corporation (or other entity
treated as a corporation for tax purposes) in which the Company
directly or indirectly holds more than fifty percent (50%) of
the voting power.
SECTION 3
ADMINISTRATION
3.1 Plan
Administrator
(a) The Compensation Committee of the Board of Directors
shall be the Plan Administrator with respect to all Covered
Employees and all Section 16 Insiders. As to these
officers, the Plan Administrator shall be constituted at all
times so as to (i) be independent as such term
is defined pursuant to the rules of any stock exchange on which
the Common Stock may then be listed, and (ii) meet the
non-employee director standards of
Rule 16b-3
and the outside director requirements of Section 162(m), so
long as any of the Companys equity securities are
registered pursuant to Section 12(b) or 12(g) of the
Exchange Act.
(b) Other than as set forth in Section 3.1(a), the
Management Committee shall be the Plan Administrator. The Chief
Executive Officer may from time to time remove members from, or
add members to, the Management Committee.
(c) Notwithstanding Sections 3.1(a) and 3.1(b), the
Board of Directors may designate itself or the Compensation
Committee of the Board of Directors as the Plan Administrator as
to any Participant or groups of Participants.
3.2 Authority
of Plan Administrator
Subject to the express terms and conditions set forth herein,
the Plan Administrator shall have the power from time to time to:
(a) determine those individuals to whom Awards shall be
granted under the Plan and the number of shares or amount of
cash subject to such Awards and prescribe the terms and
conditions (which need not be identical) of each such Awards,
including, in the case of stock options and stock appreciation
rights, the Option Price, vesting schedule and duration;
(b) set the terms and conditions of any Award consistent
with the terms of the Plan (which may be based on Performance
Goals or other performance measures as the Plan Administrator
shall determine), and make any amendments, modifications or
adjustments to such Awards as are permitted by the Plan;
(c) construe and interpret the Plan and the Awards granted
hereunder and establish, amend and revoke rules and regulations
for the administration of the Plan, including, without
limitation, correcting any defect or supplying any omission, or
reconciling any inconsistency in the Plan or in any Award
Agreement, in the manner and to the extent it shall deem
necessary or advisable, including so that the Plan and the
operation of the Plan comply with
Rule 16b-3,
the Code to the extent applicable and other applicable law, and
otherwise to make the Plan fully effective;
(d) exercise its discretion with respect to the powers and
rights granted to it as set forth in the Plan; and
(e) generally, exercise such powers and perform such acts
as are deemed necessary or advisable to promote the best
interests of the Company with respect to the Plan.
All decisions and determinations by the Plan Administrator in
the exercise of the above powers shall be final, binding and
conclusive upon the Company, its Subsidiaries, the Participants
and all other persons having or claiming any interest therein.
The Plan Administrator shall cause the Company at the
Companys expense to take any action related to the Plan
which may be necessary to comply with the provisions of any
federal or state law or any regulations issued thereunder, which
the Plan Administrator determines are intended to be complied
with.
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
Notwithstanding the foregoing, the Plan Administrator shall not
be entitled to exercise any discretion otherwise authorized
hereunder with respect to any Awards held by Covered Employees
if the ability to exercise such discretion or the exercise of
such discretion itself would cause the compensation attributable
to such Awards to fail to qualify as performance-based
compensation under Section 162(m).
3.3 Indemnification
of Plan Administrator
Each member of any committee acting as Plan Administrator, while
serving as such, shall be entitled, in good faith, to rely or
act upon any advice of the Companys independent auditors,
counsel or consultants hired by the committee, or other agents
assisting in the administration of the Plan. The Plan
Administrator and any officers or employees of the Company
acting at the direction or on behalf of the Company shall not be
personally liable for any action or determination taken or made,
or not taken or made, in good faith with respect to the Plan,
and shall, to the extent permitted by law, be fully indemnified
and protected under the Companys charter or by-laws with
respect to any such action or determination.
3.4 Delegation
to Management Committee
To the maximum extent permitted by applicable law, the Board of
Directors may delegate to the Management Committee the authority
(i) to designate the officers and employees who shall be
Participants, (ii) to determine the Awards to be granted to
any such Participants or (iii) both (i) and (ii);
provided, however, that the Management Committee
shall not have the authority to grant Awards to any member of
the Management Committee. Any such delegation shall be made by
resolution of the Board of Directors, and such resolution shall
set forth the total number of shares of Common Stock subject to
such delegation.
SECTION 4 ELIGIBILITY
To be eligible for selection by the Plan Administrator to
participate in the Plan, an individual must be an employee
(other than an employee who is a member of a unit covered by a
collective bargaining agreement) of the Company, or of any
Subsidiary, as of the date on which the Plan Administrator
grants to such individual an Award under the Plan, or a person
who, in the judgment of the Plan Administrator, holds a position
of responsibility and is able to contribute substantially to the
Companys continued success. Members of the Board of
Directors who are employees of the Company shall be eligible to
participate in the Plan. Members of the Board of Directors who
are not employees are not eligible to participate in the Plan.
Each grant of an Award under the Plan shall be evidenced by an
Award Agreement.
SECTION 5 SHARES
AVAILABLE FOR THE PLAN
5.1 Aggregate
Shares
Subject to adjustment as provided in Section 5.3, the
maximum number of shares of Common Stock that may be issued upon
the exercise or settlement of Awards granted under the Plan is
47,500,000 shares of Common Stock.
Any shares of Common Stock subject to an Award which is granted
under this Plan and which terminates by expiration, forfeiture,
cancellation or otherwise shall be available for grants of
Awards under the Plan. Likewise, shares of Common Stock that
have been issued in connection with an Award of Restricted Stock
that is canceled or forfeited prior to vesting or settled in
cash, causing the shares to be returned to the Company, shall
not be counted as having been delivered under the Plan. In
addition, any shares of Common Stock subject to a Restricted
Stock Unit, Performance Share, Performance Unit or Other
Stock-Based Award which is granted under this Plan and which is
settled in cash in lieu of the issuance of shares may again be
available for grants of Awards under the Plan.
If shares of Common Stock are returned to the Company in
satisfaction of taxes relating to Restricted Stock, in
connection with a cash out of Restricted Stock (but excluding
upon forfeiture of Restricted Stock) or in
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
connection with the tendering of shares by a Participant in
satisfaction of the exercise price or taxes relating to an
Award, such issued shares shall not become available again under
the Plan. Each stock appreciation right issued under the Plan
will be counted as one share issued under the Plan without
regard to the number of shares issued to the Participant upon
exercise of such stock appreciation right.
Notwithstanding any other provision in this Section 5.1,
the grant of any Award that cannot by its terms be settled in
shares of Common Stock shall not result in the reduction of the
number of shares of Common Stock available for Awards under the
Plan.
Shares of Common Stock may be issued under the Plan from shares
held in the Companys treasury or out of authorized but
unissued shares of the Company, or partly out of each, as shall
be determined by the Plan Administrator.
5.2 Limitations
Subject to adjustment as provided in Section 5.3, the
following limitations shall apply:
(a) All of the shares of Common Stock that may be issued
under this Plan may be granted as stock options (including
Incentive Stock Options) or stock appreciation rights.
(b) The number of shares of Common Stock issued under this
Plan with respect to Restricted Stock, Restricted Stock Units,
Performance Shares, Performance Units and Other Stock-Based
Awards may not exceed 14,500,000 shares of Common Stock.
(c) The maximum number of shares, as calculated in
accordance with the provisions of Section 5.1, and maximum
amount with respect to which Awards under this Plan may be
granted to any eligible employee in any one calendar year shall
not exceed: (a) 2,000,000 shares, in the case of
options or stock appreciation rights;
(b) 1,000,000 shares in the case of Restricted Stock,
Restricted Stock Units, Performance Shares, Performance Units or
Other Stock-Based Awards; and (c) $10,000,000 worth of
other Awards under the Plan, including Incentive Awards.
Collectively, the foregoing maximums referred to in this
Section 5.2(c) shall be referred to as the Maximum
Annual Employee Grants.
5.3 Adjustments
in Authorized Shares
(a) In the event of a Change in Capitalization, the Plan
Administrator shall make such adjustments, if any, as it
determines are appropriate and equitable to (a) the maximum
number and class of shares of Common Stock or other stock or
securities with respect to which Awards may be granted under the
Plan, (b) the maximum number and class of shares of Common
Stock or other stock or securities that may be issued upon
exercise of Nonqualified Options and Incentive Stock Options,
(c) the Maximum Annual Employee Grants, (d) the number
and class of shares of Common Stock or other stock or securities
which are subject to outstanding Awards granted under the Plan
and the Option Price or exercise price therefor, if applicable
and (e) the Performance Goals. Any such adjustment shall be
final, binding and conclusive on all persons claiming any right
or interest under the Plan.
(b) Any such adjustment in the shares of Common Stock or
other stock or securities (x) subject to outstanding
Incentive Stock Options (including any adjustments in the
exercise price) shall be made in such manner as not to
constitute a modification as defined by Section 424(h)(3)
of the Code and only to the extent otherwise permitted by
Sections 422 and 424 of the Code or (y) subject to
outstanding Awards that are intended to qualify as
performance-based compensation under Section 162(m) shall
be made in such a manner as not to adversely affect the
treatment of the Awards as performance-based compensation.
(c) If, by reason of a Change in Capitalization, a
Participant shall be entitled to, or shall be entitled to
exercise an option or stock appreciation right with respect to,
new, additional or different shares of stock or securities of
the Company or any other corporation, such new, additional or
different shares shall thereupon be subject to all of the
conditions, restrictions and performance criteria which were
applicable to the shares of
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
Common Stock subject to the option or stock appreciation right,
as the case may be, prior to such Change in Capitalization.
5.4 Effect
of Certain Transactions
Following (a) the liquidation or dissolution of the Company
or (b) a merger or consolidation of the Company (a
Transaction), (i) each outstanding Award shall
be treated as provided for in the agreement entered into in
connection with the Transaction (which treatment may be
different as among different types of Awards and different
holders thereof) or (ii) if not so provided in such
agreement, each Participant shall be entitled to receive in
respect of each share of Common Stock subject to any outstanding
Awards, upon exercise of any stock option or stock appreciation
right or payment or transfer in respect of any other Award, the
same number and kind of stock, securities, cash, property or
other consideration that each holder of a share of Common Stock
was entitled to receive in the Transaction in respect of a share
of Common Stock; provided, however, that such
stock, securities, cash, property, or other consideration shall
remain subject to all of the conditions, restrictions and
performance criteria which were applicable to Awards prior to
such Transaction, but giving effect to any applicable provision
of this Plan or any Award Agreement if the Transaction is a
Change in Control. Without limiting the generality of the
foregoing, the treatment of outstanding stock options and stock
appreciation rights pursuant to clause (i) of this
Section 5.4 in connection with a Transaction in which the
consideration paid or distributed to the Companys
stockholders is not entirely shares of common stock of the
acquiring or resulting corporation may include the cancellation
of outstanding stock options and stock appreciation rights upon
consummation of the Transaction provided either (x) the
holders of affected stock options and stock appreciation rights
have been given a period of at least fifteen (15) days
prior to the date of the consummation of the Transaction to
exercise the stock options and stock appreciation rights
(whether or not they were otherwise exercisable) or (y) the
holders of the affected stock options and stock appreciation
rights are paid (in cash or cash equivalents) in respect of each
share of Common Stock covered by the stock options or stock
appreciation rights being cancelled an amount equal to the
excess, if any, of the per share price paid or distributed to
stockholders in the Transaction (the value of any non-cash
consideration to be determined by the Plan Administrator in its
sole discretion) over the exercise price thereof. For avoidance
of doubt, (1) the cancellation of stock options and stock
appreciation rights pursuant to clause (y) of the preceding
sentence may be effected notwithstanding anything to the
contrary contained in this Plan or any Award Agreement and
(2) if the amount determined pursuant to clause (y) of
the preceding sentence is zero or less, the affected stock
options and stock appreciation rights may be cancelled without
any payment therefor. The treatment of any Award as provided in
this Section 5.4 shall be conclusively presumed to be
appropriate for purposes of Section 5.3.
SECTION 6 STOCK
OPTIONS
6.1 Grant
of Options
(a) Options may be granted to eligible employees in such
number, and at such times during the term of the Plan as the
Plan Administrator shall determine, the Plan Administrator
taking into account the duties of the respective employees,
their present and potential contributions to the success of the
Company or its Subsidiaries, and such other factors as the Plan
Administrator shall deem relevant in accomplishing the purposes
of the Plan. The Plan Administrator may grant an option or
provide for the grant of an option, either from time to time in
the discretion of the Plan Administrator or automatically upon
the occurrence of specified events, including, without
limitation, the achievement of Performance Goals or other
performance measures, the satisfaction of an event or condition
within the control of the recipient of the option or within the
control of others. The granting of an option shall take place
when the Plan Administrator by resolution, written consent or
other appropriate action determines to grant such an option to a
particular Participant at a particular price.
(b) An option granted under the Plan may be either an
Incentive Stock Option or a Nonqualified Option.
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
6.2 Special
Provisions Applicable to Incentive Stock Options
Each provision of the Plan and each Incentive Stock Option
granted thereunder shall be construed so that each such option
shall qualify as an Incentive Stock Option, and any provision
thereof that cannot be so construed shall be disregarded, unless
the Participant agrees otherwise. The total number of shares
which may be purchased upon the exercise of Incentive Stock
Options granted under the Plan shall not exceed the total
specified in Section 5.2(a), as adjusted pursuant to
Section 5.3. Incentive Stock Options, in addition to
complying with the other provisions of the Plan relating to
options generally, shall be subject to the following conditions:
(a) Ten Percent (10%) Stockholders
A Participant must not, immediately before an Incentive Stock
Option is granted to him or her, own stock representing more
than ten percent (10%) of the voting power or value of all
classes of stock of the Company or of a Subsidiary. This
requirement is waived if (i) the Option Price of the
Incentive Stock Option to be granted is at least one hundred ten
percent (110%) of the Fair Market Value of the stock subject to
the option, determined at the time the option is granted, and
(ii) the option is not exercisable more than five
(5) years from the date the option is granted.
(b) Annual Limitation
To the extent that the aggregate Fair Market Value (determined
at the time of the grant of the option) of the stock with
respect to which Incentive Stock Options are exercisable for the
first time by the Participant during any calendar year exceeds
One Hundred Thousand Dollars ($100,000), such options shall be
treated as Nonqualified Options. In applying the limitation in
the preceding sentence in the case of multiple option grants,
unless otherwise required by applicable law, options which were
intended to be Incentive Stock Options shall be treated as
Nonqualified Options according to the order in which they were
granted such that the most recently granted options are first
treated as Nonqualified Options.
(c) Additional Terms
Any other terms and conditions which the Plan Administrator
determines, upon advice of counsel, must be imposed for the
option to be an Incentive Stock Option.
(d) Notice of Disqualifying Disposition
If a Participant shall make any disposition of shares of Common
Stock issued pursuant to an Inventive Stock Option under the
circumstances described in Section 421(b) of the Code
(relating to disqualifying distributions), the Participant shall
notify the Company of such disposition within twenty days
thereof.
6.3 Terms
of Options
Except as otherwise provided in Section 6.2, all Incentive
Stock Options and Nonqualified Options under the Plan shall be
granted subject to the following terms and conditions:
(a) Option Price
The Option Price shall be determined by the Plan Administrator
in any reasonable manner, but shall not be less than the Fair
Market Value of the Common Stock on the date the option is
granted.
(b) Duration of Options
Options shall be exercisable at such time and under such
conditions as set forth in the Award Agreement, but in no event
shall any stock option (whether a Nonqualified Option or an
Incentive Stock Option) be exercisable later than the tenth
(10th) anniversary of the date of its grant.
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
(c) Exercise of Options
Shares of Common Stock covered by an option may be purchased at
one time or in such installments over the option period as may
be provided in the Award Agreement. Any shares not purchased on
an applicable installment date may be purchased thereafter at
any time prior to the expiration of the option in accordance
with its terms. To the extent that the right to purchase shares
has accrued thereunder, options may be exercised from time to
time by written notice to the Company setting forth the number
of shares with respect to which the option is being exercised.
(d) Payment
The purchase price of shares purchased under options shall be
paid in full to the Company upon the exercise of the option by
delivery of consideration equal to the product of the Option
Price and the number of shares of Common Stock purchased (the
Purchase Price). Such consideration may be either
(i) in cash or (ii) at the discretion of the Plan
Administrator, in Common Stock (by either actual delivery of
Common Stock or by attestation presenting satisfactory proof of
beneficial ownership of such Common Stock) already owned by the
Participant, or any combination of cash and Common Stock. The
Fair Market Value of such Common Stock as delivered shall be
valued as of the day prior to delivery. The Plan Administrator
can determine that additional forms of payment will be
permitted. To the extent permitted by the Plan Administrator and
applicable laws and regulations (including, without limitation,
federal tax and securities laws, regulations and state corporate
law), an option may also be exercised in a cashless
exercise by delivery of a properly executed exercise notice
together with irrevocable instructions to a broker selected by
the Company to promptly deliver to the Company sufficient
proceeds to pay the Purchase Price. A Participant shall have
none of the rights of a stockholder until the shares of Common
Stock are issued to the Participant.
The Plan Administrator may permit a Participant to pay all or a
portion of the Purchase Price by having shares of Common Stock
with a Fair Market Value equal to all or a portion of the
Purchase Price be withheld from the shares issuable to the
Participant upon the exercise of the option. The Fair Market
Value of such Common Stock as is withheld shall be determined as
of the same day as the exercise of the option.
(e) Restrictions
The Plan Administrator shall determine and reflect in the Award
Agreement, with respect to each option, the nature and extent of
the restrictions, if any, to be imposed on the shares of Common
Stock which may be purchased thereunder, including, without
limitation, restrictions on the transferability of such shares
acquired through the exercise of such options for such periods
as the Plan Administrator may determine and, further, that in
the event a Participants employment by the Company, or a
Subsidiary, terminates during the period in which such shares
are nontransferable, the Participant shall be required to sell
such shares back to the Company at such prices as the Plan
Administrator may specify. In addition, to the extent permitted
by applicable laws and regulations, the Plan Administrator may
require that a Participant who wants to effectuate a
cashless exercise of options be required to sell the
shares of Common Stock acquired in the associated exercise to
the Company, or in the open market through the use of a broker
selected by the Company, at such price and on such terms as the
Plan Administrator may determine at the time of grant, or
otherwise. Without limiting the foregoing, the Plan
Administrator may impose such restrictions, conditions or
limitations as it determines appropriate as to the timing and
manner of any resales by the Participant or other subsequent
transfers by the Participant of any shares issued as a result of
the exercise of an option, including without limitation
(i) restrictions under an insider trading policy,
(ii) restrictions designed to delay
and/or
coordinate the timing and manner of sales by the Participant and
other participants and (iii) restrictions as to the use of
a specified brokerage firm for such resales or other transfers.
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
(f) Nontransferability of Options
Options granted under the Plan and the rights and privileges
conferred thereby shall not be subject to execution, attachment
or similar process and may not be transferred, assigned, pledged
or hypothecated in any manner (whether by operation of law or
otherwise) other than by will or by the applicable laws of
descent and distribution. Notwithstanding the foregoing and only
as provided by the Plan Administrator or the Company, as
applicable, Nonqualified Options may be transferred to a
Participants immediate family members, directly or
indirectly or by means of a trust, corporate entity or
partnership (a person who thus acquires this option by such
transfer, a Permitted Transferee). A transfer of an
option may only be effected by the Company at the request of the
Participant and shall become effective upon the Permitted
Transferee agreeing to such terms as the Plan Administrator may
require and only when recorded in the Companys record of
outstanding options. In the event an option is transferred as
contemplated hereby, the option may not be subsequently
transferred by the Permitted Transferee except a transfer back
to the Participant or by will or the laws of descent and
distribution. A transferred option may be exercised by a
Permitted Transferee to the same extent as, and subject to the
same terms and conditions as, the Participant (except as
otherwise provided herein), as if no transfer had taken place.
As used herein, immediate family shall mean, with
respect to any person, such persons child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law,
father-in-law,
son-in-law,
daughter-in-law,
brother-in-law,
sister-in-law,
and shall include adoptive relationships. In the event of
exercise of a transferred option by a Permitted Transferee, any
amounts due to (or to be withheld by) the Company upon exercise
of the option shall be delivered by (or withheld from amounts
due to) the Participant, the Participants estate or the
Permitted Transferee, in the reasonable discretion of the
Company.
In addition, to the extent permitted by applicable law and Rule
16b-3, the
Plan Administrator may permit a recipient of a Nonqualified
Option to designate in writing during the Participants
lifetime a Beneficiary to receive and exercise the
Participants Nonqualified Options in the event of such
Participants death. Except as otherwise provided for
herein, if any Participant attempts to transfer, assign, pledge,
hypothecate or otherwise dispose of any option under the Plan or
of any right or privilege conferred thereby, contrary to the
provisions of the Plan or such option, or suffers the sale or
levy or any attachment or similar process upon the rights and
privileges conferred hereby, all affected options held by such
Participant shall be immediately forfeited.
(g) Purchase for Investment
The Plan Administrator shall have the right to require that each
Participant or other person who shall exercise an option under
the Plan, and each person into whose name shares of Common Stock
shall be issued pursuant to the exercise of an option, represent
and agree that any and all shares of Common Stock purchased
pursuant to such option are being purchased for investment only
and not with a view to the distribution or resale thereof and
that such shares will not be sold except in accordance with such
restrictions or limitations as may be set forth in the option or
by the Plan Administrator. This Section 6.3(g) shall be
inoperative during any period of time when the Company has
obtained all necessary or advisable approvals from governmental
agencies and has completed all necessary or advisable
registrations or other qualifications of shares of Common Stock
as to which options may from time to time be granted as
contemplated in Section 15.
(h) No Repricing
The Plan Administrator shall have no authority to make any
adjustment (other than in connection with a Change in
Capitalization in which an adjustment is permitted or required
under the terms of the Plan) or amendment, and no such
adjustment or amendment shall be made, that reduces or would
have the effect of reducing the exercise price of a stock option
previously granted under the Plan, whether through amendment,
cancellation or replacement grants, or other means, unless the
Companys shareholders shall have approved such adjustment
or amendment.
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
SECTION 7 STOCK
APPRECIATION RIGHTS
7.1 Grant
of Stock Appreciation Rights
Stock appreciation rights may be granted to eligible employees
in such number, and at such times during the term of the Plan as
the Plan Administrator shall determine, the Plan Administrator
taking into account the duties of the respective employees,
their present and potential contributions to the success of the
Company or its Subsidiaries, and such other factors as the Plan
Administrator shall deem relevant in accomplishing the purposes
of the Plan. The Plan Administrator may grant a stock
appreciation right or provide for the grant of a stock
appreciation right, either from time to time in the discretion
of the Plan Administrator or automatically upon the occurrence
of specified events, including, without limitation, the
achievement of Performance Goals or other performance measures,
the satisfaction of an event or condition within the control of
the recipient of the stock appreciation right or within the
control of others. The granting of a stock appreciation right
shall take place when the Plan Administrator by resolution,
written consent or other appropriate action determines to grant
such a stock appreciation right to a particular Participant at a
particular price. A stock appreciation right may be granted
freestanding or in tandem or in combination with any other Award
under the Plan.
7.2 Exercise
of Stock Appreciation Rights
A stock appreciation right may be exercised upon such terms and
conditions and for a term such as the Plan Administrator shall
determine; provided, however, no stock
appreciation right shall be exercisable later than the tenth
(10th)
anniversary of the date of its grant. Upon exercise of a stock
appreciation right, a Participant shall be entitled to receive
shares of Common Stock with an aggregate Fair Market Value
determined by multiplying (i) the difference between the
Fair Market Value of a share of Common Stock on the date of
exercise of the stock appreciation right over the price fixed at
the date of grant (which price shall not be less than 100% of
the Fair Market Value of a share of Common Stock on the date of
grant) times (ii) the number of shares of Common Stock with
respect to which the stock appreciation right is exercised. The
value of any fractional shares shall be paid in cash.
7.3 Special
Provisions Applicable to Stock Appreciation Rights
Stock appreciation rights are subject to the following
restrictions:
(a) A stock appreciation right granted in tandem with any
other Award under the Plan shall be exercisable at such time or
times as the Award to which it relates shall be exercisable, or
at such other times as the Plan Administrator may determine.
(b) The right of a Participant to exercise a stock
appreciation right granted in tandem with any other Award under
the Plan shall be canceled if and to the extent the related
Award is exercised or canceled. To the extent that a stock
appreciation right is exercised, the related Award shall be
deemed to have been surrendered unexercised and canceled.
(c) A holder of stock appreciation rights shall have none
of the rights of a stockholder until shares of Common Stock, if
any, are issued to such holder pursuant to such holders
exercise of such rights.
(d) The acquisition of Common Stock pursuant to the
exercise of a stock appreciation right shall be subject to the
same restrictions as would apply to the acquisition of Common
Stock acquired upon exercise of an option, as set forth in
Section 6.3.
(e) Except as may otherwise be permitted by the Plan
Administrator, stock appreciation rights granted under the Plan
and the rights and privileges conferred thereby shall not be
subject to execution, attachment or similar process and may not
be transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise) other than by will or
by the applicable laws of descent and distribution.
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
SECTION 8 PERFORMANCE
SHARES AND PERFORMANCE UNITS
8.1 Grant
of Performance Shares and Performance Units
Subject to the limitations in Section 5.2, Performance
Shares or Performance Units may be granted to eligible employees
at any time and from time to time as the Plan Administrator
shall determine. The Plan Administrator shall have complete
discretion in determining the number of Performance Shares or
Performance Units granted to each Participant and the terms and
conditions thereof, taking into account the duties of the
respective Participants, their present and potential
contributions to the success of the Company or its Subsidiaries,
and such other factors as the Plan Administrator shall deem
appropriate. Performance Shares and Performance Units may be
granted alone or in combination with any other Award under the
Plan.
8.2 Value
of Performance Shares and Performance Units
The Plan Administrator shall set Performance Goals over
Performance Periods. Prior to each grant of Performance Shares
or Performance Units, the Plan Administrator shall establish an
initial number of shares of Common Stock for each Performance
Share and an initial value for each Performance Unit granted to
each Participant for that Performance Period. Prior to each
grant of Performance Shares or Performance Units, the Plan
Administrator also shall set the Performance Goals that will be
used to determine the extent to which the Participant receives
the number of shares of Common Stock for the Performance Shares
or payment of the value of the Performance Units awarded for
such Performance Period. With respect to each such Performance
Goal utilized during a Performance Period, the Plan
Administrator may assign percentages or other relative values to
various levels of performance which shall be applied to
determine the extent to which the Participant shall receive a
payout of the number of Performance Shares or value of
Performance Units awarded.
8.3 Payment
of Performance Shares and Performance Units
After a Performance Period has ended, the holder of a
Performance Share or Performance Unit shall be entitled to
receive the value thereof as determined by the Plan
Administrator. The Plan Administrator shall make this
determination by first determining the extent to which the
Performance Goals set pursuant to Section 8.2 have been
met. The Plan Administrator shall then determine the applicable
percentage or other relative value to be applied to, and will
apply such percentage or other relative value to, the number of
Performance Shares or value of Performance Units to determine
the payout to be received by the Participant. In addition, with
respect to Performance Shares and Performance Units granted to
each Participant, no payout shall be made hereunder except upon
written certification by the Plan Administrator that the
applicable Performance Goals have been satisfied to a particular
extent.
8.4 Form
and Timing of Payment
The payment described in Section 8.3 shall be made in
shares of Common Stock, or in cash, or partly in shares of
Common Stock and partly in cash, at the discretion of the Plan
Administrator and set forth in the Award Agreement. The value of
any fractional shares shall be paid in cash. Payment shall be
made in a lump sum or installments as prescribed by the Plan
Administrator and set forth in the Award Agreement; provided
that each Award Agreement shall comply with the timing of
payment requirements set forth in Section 409A of the Code,
including, but not limited to the timing of payments to
specified employees as defined in
Section 409A(a)(2)(B)(i) of the Code. If a number of shares
of Common Stock is to be converted into an amount of cash on any
date, or if an amount of cash is to be converted into a number
of shares of Common Stock on any date, such conversion shall be
done at the then-current Fair Market Value of the Common Stock
on such date.
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
8.5 Nontransferability
of Performance Shares and Performance Units
Except as otherwise provided by the Plan Administrator,
Performance Shares and Performance Units granted under the Plan
and the rights and privileges conferred thereby shall not be
subject to execution, attachment or similar process and may not
be transferred, assigned, pledged or hypothecated in any manner
(whether by operation or law or otherwise) other than by will or
by the applicable laws of descent and distribution.
SECTION 9 RESTRICTED
STOCK
9.1 Grant
of Restricted Stock
Subject to the limitations in Section 5.2, Restricted Stock
may be granted to eligible employees in such number and at such
times during the term of the Plan as the Plan Administrator
shall determine, the Plan Administrator taking into account the
duties of the respective Participants, their present and
potential contributions to the success of the Company or its
Subsidiaries, and such other factors as the Plan Administrator
shall deem relevant in accomplishing the purposes of the Plan.
The Plan Administrator may grant Restricted Stock or provide for
the grant of Restricted Stock, either from time to time in the
discretion of the Plan Administrator or automatically upon the
occurrence of specified events.
9.2 Restriction
Period
Except as permitted by the Plan Administrator and specified in
the Award Agreement, during a period following the date of
grant, as determined by the Plan Administrator, which in no
event shall be less than three (3) years with respect to
Restricted Stock subject to restrictions based upon time and one
(1) year with respect to Restricted Stock subject to
restrictions based upon the achievement of specific Performance
Goals or other performance measures (the Restriction
Period), the Restricted Stock may not be sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered or
disposed of by the recipient. In the event of any attempt by the
Participant to sell, exchange, transfer, pledge or otherwise
dispose of Restricted Stock in violation of the terms of the
Plan without the Companys prior written consent, such
Restricted Stock shall be forfeited to the Company. During the
Restriction Period, the Plan Administrator shall evidence the
restrictions on the shares of Restricted Stock in such a manner
as it determines is appropriate (including, without limitation,
(i) by means of appropriate legends on shares of Restricted
Stock that have been certificated and (ii) by means of
appropriate stop-transfer orders on shares of Restricted Stock
credited to book-entry accounts).
9.3 Other
Restrictions
The Plan Administrator shall impose such other restrictions on
Restricted Stock granted pursuant to the Plan as it may deem
advisable, including Performance Goals or other performance
measures. The Plan Administrator may require, under such terms
and conditions as it deems appropriate or desirable, that the
certificates for Restricted Stock delivered under the Plan may
be held in custody by a bank or other institution, or that the
Company may itself hold such shares in custody until the
Restriction Period expires or until restrictions thereon
otherwise lapse, and may require, as a condition of any issuance
of Restricted Stock that the Participant shall have delivered a
stock power endorsed in blank relating to the shares of
Restricted Stock.
9.4 Voting
Rights; Dividends and Other Distributions
A Participant receiving a grant of Restricted Stock shall be
recorded as a stockholder of the Company. Each Participant who
receives a grant of Restricted Stock shall have all the rights
of a stockholder with respect to such shares (except as provided
in the restrictions on transferability), including the right to
vote the shares and receive dividends and other distributions
paid with respect to the underlying shares of Restricted Stock;
provided, however, that no Participant awarded
Restricted Stock shall have any right as a stockholder with
respect to any shares subject
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
to the Participants Restricted Stock grant prior to the
date of issuance to the Participant of a certificate or
certificates, or the establishment of a book-entry account, for
such shares.
9.5 Issuance
of Shares; Settlement of Awards
When the restrictions imposed by Section 9.2 expire or
otherwise lapse with respect to one or more shares of Restricted
Stock, the Participant shall be obligated to return to the
Company such shares of Restricted Stock (if applicable), and the
Company shall deliver to the Participant one (1) share of
Common Stock in satisfaction of each share of Restricted Stock,
which shares so delivered shall not contain any legend. The
delivery of shares pursuant to this Section 9.5 shall be
subject to any required share withholding to satisfy tax
withholding obligations pursuant to Section 17.10. Any
fractional shares subject to such Restricted Stock shall be paid
to the Participant in cash.
SECTION 10 RESTRICTED
STOCK UNITS
10.1 Grant
of Restricted Stock Units
Subject to the limitations in Section 5.2, Restricted Stock
Units may be granted to eligible employees in such number and at
such times during the term of the Plan as the Plan Administrator
shall determine, the Plan Administrator taking into account the
duties of the respective Participants, their present and
potential contributions to the success of the Company or its
Subsidiaries, and such other factors as the Plan Administrator
shall deem relevant in accomplishing the purposes of the Plan.
The Plan Administrator may grant Restricted Stock Units or
provide for the grant of Restricted Stock Units, either from
time to time in the discretion of the Plan Administrator or
automatically upon the occurrence of specified events.
10.2 Restriction
Period
Except as permitted by the Plan Administrator and specified in
the Award Agreement, during the Restriction Period as defined in
Section 9.2, Restricted Stock Units may not be sold,
assigned, transferred, pledged, hypothecated or otherwise
encumbered or disposed of by the recipient. In the event of any
attempt by the Participant to sell, exchange, transfer, pledge
or otherwise dispose of Restricted Stock Units in violation of
the terms of the Plan without the Companys prior written
consent, such Restricted Stock Units shall be forfeited to the
Company.
10.3 Other
Restrictions
The Plan Administrator shall impose such other restrictions on
Restricted Stock Units granted pursuant to the Plan as it may
deem advisable. A Participant receiving a grant of Restricted
Stock Units shall not be recorded as a stockholder of the
Company and shall not acquire any rights of a stockholder unless
or until the Participant is issued shares of Common Stock in
settlement of such Restricted Stock Units.
10.4 Dividend
Equivalents
The Plan Administrator may provide that Restricted Stock Units
awarded under the Plan shall be entitled to an amount per
Restricted Stock Unit equal in value to the cash dividend, if
any, paid per share of Common Stock on issued and outstanding
shares, on the dividend payment dates occurring during the
period between the date on which the Restricted Stock Units are
granted to the Participant and the date on which such Restricted
Stock Units are settled, cancelled, forfeited, waived,
surrendered or terminated under the Plan. Such paid amounts
called dividend equivalents shall be (i) paid
in cash or Common Stock or (ii) credited to the Participant
as additional Restricted Stock Units, or any combination
thereof, as the Plan Administrator shall determine. A Restricted
Stock Unit credited to a Participant as a dividend equivalent
shall vest at such time as the Restricted Stock Unit to which it
relates vests.
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
10.5 Issuance
of Shares; Settlement of Awards
When the restrictions imposed by Section 10.2 expire or
otherwise lapse with respect to one or more Restricted Stock
Units, Restricted Stock Units shall be settled (i) in cash
or (ii) by the delivery to the Participant of the number of
shares of Common Stock equal to the number of the
Participants Restricted Stock Units that are vested, or
any combination thereof, as the Plan Administrator shall
determine. The payment hereunder shall comply with the timing of
payment requirements set forth in Section 409A of the Code,
including, but not limited to the timing of payments to
specified employees as defined in
Section 409A(a)(2)(B)(i) of the Code. The delivery of
shares pursuant to this Section 10.5 shall be subject to
any required share withholding to satisfy tax withholding
obligations pursuant to Section 17.10. Any fractional
shares subject to such Restricted Stock Units shall be paid to
the Participant in cash.
SECTION 11 INCENTIVE
AWARDS
11.1 Incentive
Awards
Prior to the beginning of each Performance Period, or not later
than 90 days following the commencement of the relevant
fiscal year, the Plan Administrator shall establish Performance
Goals or other performance measures which must be achieved for
any Participant to receive an Incentive Award for that
Performance Period. The Performance Goals or other performance
measures may be based on any combination of corporate and
business unit Performance Goals or other performance measures.
The Plan Administrator may also establish one or more
Company-wide Performance Goals or other performance measures
which must be achieved for any Participant to receive an
Incentive Award for that Performance Period. Such Performance
Goals or other performance measures may include a threshold
level of performance below which no Incentive Award shall be
earned, target levels of performance at which specific Incentive
Awards will be earned, and a maximum level of performance at
which the maximum level of Incentive Awards will be earned. Each
Incentive Award shall specify the amount of cash and the amount
of any other Awards subject to such Incentive Award.
11.2 Performance
Goal Certification
An Incentive Award shall become payable to the extent provided
herein in the event that the Plan Administrator certifies in
writing prior to payment of the Incentive Award that the
Performance Goals or other performance measures selected for a
particular Performance Period have been attained. In no event
will an Incentive Award be payable under this Plan if the
threshold level of performance set for each Performance Goal or
other performance measure for the applicable Performance Period
is not attained.
11.3 Discretion
to Reduce Awards; Participants Performance
The Plan Administrator, in its sole and absolute discretion,
prior to a Change in Control, may reduce the amount of any
Incentive Award otherwise payable to a Participant upon
attainment of any Performance Goal or other performance measure
for the applicable Performance Period. A Participants
individual performance must be satisfactory, regardless of the
Companys performance and the attainment of Performance
Goals or other performance measures, before he or she may be
paid an Incentive Award. In evaluating a Participants
performance, the Plan Administrator shall consider the
Performance Goals or other performance measures, the
Participants responsibilities and accomplishments, and
such other factors as it deems appropriate.
11.4 Required
Payment of Incentive Awards
The Plan Administrator shall make a determination within thirty
(30) days after the information that is necessary to make
such a determination is available for a particular Performance
Period whether the Performance Goals or other performance
measures for the Performance Period have been achieved and the
amount of the Incentive Award for each Participant. The Plan
Administrator shall certify the foregoing determinations in
writing.
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
In the absence of an election by the Participant pursuant to
Section 11.5, the Incentive Award shall be paid not later
than December 31 of the calendar year in which the foregoing
determinations have been made as follows.
(a) Participants shall receive their Incentive Awards in
any combination of cash and/or other Awards under the Plan as
determined by the Plan Administrator. The payment hereunder
shall comply with the timing of payment requirements set forth
in Section 409A of the Code, including, but not limited to
the timing of payments to specified employees as
defined in Section 409A(a)(2)(B)(i) of the Code.
(b) Because the Participant bears forfeiture, price
fluctuation, and other attendant risks during the Restriction
Period associated with Restricted Stock, the Plan Administrator
may determine, as set forth in the Award Agreement, that
Participants who are awarded Restricted Stock as part of their
Incentive Award shall be awarded additional Restricted Stock up
to the amount of Restricted Stock which a Participant is awarded
pursuant to Section 11.4(a). No additional Restricted Stock
is required to be awarded pursuant to this Section 11.4(b).
11.5 Restricted
Stock Election
To the extent permitted by applicable law, in lieu of receiving
all or any portion of cash awarded as part of a
Participants Incentive Award pursuant to
Section 11.4(a), the Plan Administrator may determine, as
set forth in the Award Agreement, that Participants may elect to
receive Restricted Stock with a value equal to the portion of
the Incentive Award which the Participant would otherwise have
received in cash, but has elected to receive in Restricted Stock
(Restricted Stock Election). Participants must make
their Restricted Stock Election at such time and in such a
manner as prescribed by the Plan Administrator, which may
determine, as set forth in the Award Agreement, that each
Participant who makes the Restricted Stock Election shall be
awarded additional shares of Restricted Stock granted pursuant
to Section 11.4(b) up to the amount of the
Participants Restricted Stock Election. Notwithstanding
the foregoing, no additional shares of Restricted Stock are
required to be awarded pursuant to this Section 11.5.
11.6 Nontransferability
of Incentive Awards
Except as otherwise determined by the Plan Administrator,
Incentive Awards may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by
will or by the laws of descent and distribution.
SECTION 12 CASH
AWARDS AND OTHER STOCK-BASED AWARDS
12.1 Grant
of Cash Awards
Subject to the terms and provisions of this Plan, the Plan
Administrator, at any time and from time to time, may grant cash
awards to Participants in such amounts and upon such terms,
including the achievement of specific performance criteria, as
the Plan Administrator may determine (each, a Cash
Award).
12.2 Other
Stock-Based Awards
The Plan Administrator may grant other types of equity-based or
equity-related Awards not otherwise described by the terms of
this Plan (including the grant or offer for sale of unrestricted
shares of Common Stock) in such amounts and subject to such
terms and conditions, as the Plan Administrator shall determine
(each, an Other Stock-Based Award). Such Other
Stock-Based Awards may involve the transfer of actual shares of
Common Stock to Participants, or payment in cash or otherwise of
amounts based on the value of shares of Common Stock.
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
12.3 Value
of Cash Awards and Other Stock-Based Awards
Each Cash Award granted pursuant to this Section 12 shall
specify a payment amount or payment range as determined by the
Plan Administrator. Each Other Stock-Based Award shall be
expressed in terms of shares of Common Stock or units based on
shares of Common Stock, as determined by the Plan Administrator.
The Plan Administrator may establish performance criteria
applicable to such awards in its discretion. If the Plan
Administrator exercises its discretion to establish performance
criteria, the number and/or value of such cash awards or Other
Stock-Based Awards that will be paid out to the Participant will
depend on the extent to which the performance goals are met.
12.4 Payment
of Cash Awards and Other Stock-Based Awards
Payment, if any, with respect to a Cash Award or an Other
Stock-Based Award shall be made in accordance with the terms of
the Award, in cash or shares of Common Stock as the Plan
Administrator determines. The value of any fractional shares
shall be paid in cash. The payment hereunder shall comply with
the timing of payment requirements set forth in
Section 409A of the Code, including, but not limited to the
timing of payments to specified employees as defined
in Section 409A(a)(2)(B)(i) of the Code.
12.5 Transferability
of Cash Awards and Other Stock-Based Awards
Except as otherwise determined by the Plan Administrator,
neither Cash Awards nor Other Stock-Based Awards may be sold,
transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution.
SECTION 13 TERMINATION
OF EMPLOYMENT
The Award Agreement applicable to each Award shall set forth the
effect of a termination of the holders employment upon
such Award; provided, however, that, unless
explicitly set forth otherwise in an Award Agreement or as
determined by the Plan Administrator, (1) all of a
Participants unvested and/or unexercisable Awards shall
automatically be forfeited upon termination of the
Participants employment for any reason, and, as to Awards
consisting of stock options or stock appreciation rights, the
Participant shall be permitted to exercise the vested portion of
the option or stock appreciation right for at least three months
following termination of his or her employment, and (2) all
of a Participants Awards (whether vested or unvested,
exercisable or unexercisable) shall automatically be forfeited
upon termination of the Participants employment for Cause.
Provisions relating to the effect of a termination of employment
upon an Award shall be determined in the sole discretion of the
Plan Administrator and need not be uniform among all Awards or
among all Participants. Unless the Plan Administrator determines
otherwise, the transfer of employment of a Participant as
between the Company and its affiliates and Subsidiaries shall
not constitute a termination of employment. The Plan
Administrator shall have the discretion to determine the effect,
if any, that a sale or other disposition of a Participants
Employer will have on the Participants Awards.
SECTION 14 EFFECT
OF A CHANGE IN CONTROL
Except as otherwise provided in an Award Agreement, in the event
of a Participants termination of employment (i) by
his or her Employer without Cause or (ii) if
Section 2.16 is applicable to the Participant, by the
Participant for Good Reason, in each case within two years
following a Change in Control:
(a) all options and stock appreciation rights then held by
the Participant shall become fully vested and exercisable;
(b) the Restriction Periods applicable to all shares of
Restricted Stock and all Restricted Stock Units then held by the
Participant shall immediately lapse;
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
(c) the performance periods applicable to any Performance
Shares, Performance Units and Incentive Awards that have not
ended shall end and such Awards shall become vested and payable
in cash in an amount equal to the target amount thereof
(assuming achievement of target levels by both Participants and
the Company) within ten days following such termination; and
(d) any restrictions applicable to Cash Awards and Other
Stock-Based Awards shall immediately lapse and, if applicable,
become payable within ten days following such termination.
SECTION 15 REGULATORY
APPROVALS AND LISTING
The Company shall not be required to issue any certificate for
shares of Common Stock under the Plan prior to:
(a) obtaining any approval or ruling from the Securities
and Exchange Commission, the Internal Revenue Service or any
other governmental agency which the Company, in its sole
discretion, shall determine to be necessary or advisable;
(b) listing of such shares on any stock exchange on which
the Common Stock may then be listed; and
(c) completing any registration or other qualification of
such shares under any federal or state laws, rulings or
regulations of any governmental body which the Company, in its
sole discretion, shall determine to be necessary or advisable.
All certificates, or book-entry accounts, for shares of Common
Stock delivered under the Plan shall also be subject to such
stop-transfer orders and other restrictions as the Plan
Administrator may deem advisable under the rules, regulations
and other requirements of the Securities and Exchange
Commission, any stock exchange upon which Common Stock is then
listed and any applicable federal or state securities laws, and
the Plan Administrator may cause a legend or legends to be
placed on any such certificates, or notations on such book-entry
accounts, to make appropriate reference to such restrictions.
The foregoing provisions of this paragraph shall not be
effective if and to the extent that the shares of Common Stock
delivered under the Plan are covered by an effective and current
registration statement under the Securities Act of 1933, as
amended, or if and so long as the Plan Administrator determines
that application of such provisions are no longer required or
desirable. In making such determination, the Plan Administrator
may rely upon an opinion of counsel for the Company. Without
limiting the foregoing, the Plan Administrator may impose such
restrictions, conditions or limitations as it determines
appropriate as to the timing and manner of any resales by the
Participant or other subsequent transfers by the Participant of
any shares issued under this Plan, including without limitation
(i) restrictions under an insider trading policy,
(ii) restrictions designed to delay and/or coordinate the
timing and manner of sales by the Participant and other
Participants and (iii) restrictions as to the use of a
specified brokerage firm for such resales or other transfers.
SECTION 16 TERM
OF PLAN
The Plan shall remain in effect, subject to the right of the
Board of Directors to terminate the Plan at any time pursuant to
Section 19, until all shares of Common Stock subject to it
shall have been purchased or acquired according to the
provisions herein. However, in no event may an Award be granted
under the Plan on or after the tenth
(10th)
anniversary of the Effective Date. After this Plan is
terminated, no future Awards may be granted pursuant to the
Plan, but Awards previously granted shall remain outstanding in
accordance with their applicable terms and conditions and this
Plans terms and conditions. The Plan replaced the Prior
Plans, and no further Awards may be made under the Prior Plans.
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
SECTION 17 GENERAL
PROVISIONS
17.1 Forfeiture
Events
(a) The Plan Administrator may specify in an Award
Agreement that the Participants rights, payments, and
benefits with respect to an Award shall be subject to reduction,
cancellation, forfeiture, or recoupment upon the occurrence of
certain specified events, in addition to any otherwise
applicable vesting or performance conditions of an Award. Such
events may include, without limitation, termination of
employment for Cause, violation of material policies that may
apply to the Participant, breach of noncompetition,
confidentiality, or other restrictive covenants that may apply
to the Participant, or other conduct by the Participant that is
detrimental to the business or reputation of the Company or any
of its affiliates or Subsidiaries.
(b) If the Company is required to prepare an accounting
restatement due to the material noncompliance of the Company, as
a result of misconduct, with any financial reporting requirement
under the securities laws, and if a Participant knowingly
engaged in the misconduct, was grossly negligent with respect to
such misconduct, or knowingly or grossly negligently failed to
prevent the misconduct (whether or not the Participant is one of
the individuals subject to automatic forfeiture under
Section 304 of the Sarbanes-Oxley Act of 2002), the
Participant shall reimburse the Company the amount of any
payment in settlement of an Award earned or accrued during the
twelve-month period following the first public issuance or
filing with the United States Securities and Exchange Commission
(whichever first occurred) of the financial document embodying
such financial reporting requirement.
17.2 No
Individual Rights
Nothing contained in the Plan, or in any Award granted pursuant
to the Plan, shall confer upon any employee any right with
respect to continuance of employment by the Company or a
Subsidiary, nor interfere in any way with the right of the
Company or a Subsidiary to terminate the employment of such
employee at any time with or without assigning any reason
therefor.
17.3 Other
Compensation
Unless determined otherwise by the Plan Administrator or
required by contractual obligations, the grant, vesting or
payment of Awards under the Plan shall not be considered as part
of a Participants salary or used for the calculation of
any other pay, allowance, pension or other benefit unless
otherwise permitted by other benefit plans provided by the
Company or its Subsidiaries, or required by law or by
contractual obligations of the Company or its Subsidiaries.
17.4 Nontransferability
Unless otherwise provided in the Plan, the right of a
Participant or Beneficiary to the payment of any Award under the
Plan may not be assigned, transferred, pledged or encumbered,
nor shall such right or other interests be subject to
attachment, garnishment, execution or other legal process.
17.5 Leaves
of Absence
Leaves of absence for such periods and purposes conforming to
the personnel policy of the Company, or of its Subsidiaries, as
applicable, shall not be deemed terminations or interruptions of
employment, unless a Participant commences a leave of absence
from which he or she is not expected to return to active
employment with the Company or its Subsidiaries. The foregoing
notwithstanding, with respect to Incentive Stock Options,
employment shall not be deemed to continue beyond the first
ninety (90) days of such leave unless the
Participants reemployment rights are guaranteed by statute
or contract. With respect to any Participant who, after the date
an Award is granted under this Plan, ceases to be employed by
the Company or a Subsidiary on a full-time basis but remains
employed on a part-time basis, the Plan Administrator may make
appropriate adjustments, as
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
determined in its sole discretion, as to the number of shares
issuable under, the vesting schedule of or the amount payable
under any unvested Awards held by such Participant.
17.6 Transfers
In the event a Participant is transferred from the Company to a
Subsidiary, or vice versa, or is promoted or given different
responsibilities, Awards granted to the Participant prior to
such date shall not be affected.
17.7 Unfunded
Obligations
Any amounts (deferred or otherwise) to be paid to Participants
pursuant to the Plan are unfunded obligations. Neither the
Company nor any Subsidiary is required to segregate any monies
from its general funds, to create any trusts or to make any
special deposits with respect to this obligation. The Plan
Administrator, in its sole discretion, may direct the Company to
share with its Subsidiaries the costs of a portion of the
Incentive Awards paid to Participants who are executives of
those companies. Beneficial ownership of any investments,
including trust investments which the Company may make to
fulfill this obligation, shall at all times remain in the
Company. Any investments and the creation or maintenance of any
trust or any Participant account shall not create or constitute
a trust or a fiduciary relationship between the Plan
Administrator, the Company or any Subsidiary and a Participant,
or otherwise create any vested or beneficial interest in any
Participant or the Participants Beneficiary or the
Participants creditors in any assets of the Company or its
Subsidiaries whatsoever. The Participants shall have no claim
against the Company for any changes in the value of any assets
which may be invested or reinvested by the Company with respect
to the Plan.
17.8 Beneficiaries
The designation of a Beneficiary shall be on a form provided by
the Company, executed by the Participant (with the consent of
the Participants spouse, if required by the Company for
reasons of community property or otherwise), and delivered to a
designated representative the Company. A Participant may change
his or her Beneficiary designation at any time. A designation by
a Participant under any predecessor plans shall remain in effect
under the Plan unless such designation is revoked or changed
under the Plan. If no Beneficiary is designated, if the
designation is ineffective, or if the Beneficiary dies before
the balance of a Participants benefit is paid, the balance
shall be paid to the Participants spouse, or if there is
no surviving spouse, to the Participants lineal
descendants, pro rata, or if there is no surviving spouse or any
lineal descendant, to the Participants estate.
Notwithstanding the foregoing, however, a Participants
Beneficiary shall be determined under applicable state law if
such state law does not recognize Beneficiary designations under
plans of this sort and is not preempted by laws which recognize
the provisions of this Section 17.8.
17.9 Governing
Law
The Plan shall be construed and governed in accordance with the
laws of the State of Texas.
17.10 Satisfaction
of Tax Obligations
Appropriate provision shall be made for all taxes required to be
withheld in connection with the exercise, grant, vesting or
other taxable event of Awards under the applicable laws and
regulations of any governmental authority, whether federal,
state or local and whether domestic or foreign, including,
without limitation, the required withholding of a sufficient
number of shares of Common Stock otherwise issuable to a
Participant to satisfy the said required minimum tax withholding
obligations. To the extent provided by the Plan Administrator, a
Participant is permitted to deliver shares of Common Stock
(including shares acquired pursuant to the exercise of an option
or stock appreciation right other than the option or stock
appreciation right currently being exercised, to the extent
permitted by applicable regulations) for payment of withholding
taxes on the exercise of an option or stock appreciation right,
upon the grant or vesting of Restricted Stock or Restricted
Stock Units or upon the payout of
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
Performance Shares, Performance Units or Incentive Awards.
Shares of Common Stock may be required to be withheld from the
shares issuable to the Participant upon the exercise of an
option or stock appreciation right, upon the vesting of
Restricted Stock or Restricted Stock Units or upon the payout of
Performance Shares or Performance Units to satisfy tax
withholding obligations. The Fair Market Value of Common Stock
as delivered pursuant to this Section 17.10 shall be
determined as of the day prior to delivery, and shall be
calculated in accordance with Section 2.15.
Any Participant who makes a Section 83(b) election under
the Code shall, within ten (10) days of making such
election, notify the Company in writing of such election and
shall provide the Company with a copy of such election form
filed with the Internal Revenue Service.
A Participant is solely responsible for obtaining, or failing to
obtain, tax advice with respect to participation in the Plan
prior to the Participants (i) entering into any
transaction under or with respect to the Plan,
(ii) designating or choosing the times of distributions
under the Plan, or (iii) disposing of any shares of Common
Stock issued under the Plan.
17.11 Participants
in Foreign Jurisdictions
The Plan Administrator shall have the authority to adopt such
modifications, procedures and subplans as may be necessary or
desirable to comply with provisions of the laws of any countries
in which the Company may operate to ensure the viability of the
benefits from Awards granted to Participants employed in such
countries, to meet the requirements of local laws that permit
the Plan to operate in a qualified or tax-efficient manner, to
comply with applicable foreign laws and to meet the objectives
of the Plan.
SECTION 18 COMPLIANCE
WITH
RULE 16b-3,
SECTION 162(m) AND SECTION 409A
18.1 Rule 16b-3
of the Exchange Act and Section 162(m) of the
Code
The Companys intention is that, so long as any of the
Companys equity securities are registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, the Plan shall
comply in all respects with the rules of any exchange on which
the shares of Common Stock are traded and with
Rule 16b-3.
In addition, it is the Companys intention that, as to
Covered Employees, unless otherwise indicated in an Award
Agreement, stock options, stock appreciation rights, Performance
Shares, Performance Units and Incentive Awards shall qualify as
performance-based compensation under Section 162(m). If any
Plan provision is determined not to be in compliance with the
foregoing intentions, that provision shall be deemed modified as
necessary to meet the requirements of any such exchange,
Rule 16b-3
and Section 162(m).
18.2 Section 409A
of the Code
The Plan is intended to be administered, operated and construed
in compliance with Section 409A of the Code and any
guidance issued thereunder. Notwithstanding this or any other
provision of the Plan to the contrary, the Board of Directors
and the Plan Administrator may amend the Plan in any manner, or
take any other action, that either of them determines, in its
sole discretion, is necessary, appropriate or advisable to cause
the Plan to comply with Section 409A and any guidance
issued thereunder. Any such action, once taken, shall be deemed
to be effective from the earliest date necessary to avoid a
violation of Section 409A and shall be final, binding and
conclusive on all Participants and other individuals having or
claiming any right or interest under the Plan.
SECTION 19 AMENDMENT,
TERMINATION OR DISCONTINUANCE OF THE PLAN
19.1 Amendment
of Plan
Subject to the Board of Directors, the Plan Administrator may
from time to time make such amendments to the Plan as it may
deem proper and in the best interest of the Company, including,
without limitation, any
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX A
amendment necessary to ensure that the Company may obtain any
regulatory approval referred to in Section 15;
provided, however, that (a) to the extent
required by applicable law, regulation or stock exchange rule,
stockholder approval shall be required, and (b) no change
in any Award previously granted under the Plan may be made
without the consent of the Participant if such change would
impair the right of the Participant under the Award to acquire
or retain Common Stock or cash that the Participant may have
acquired as a result of the Plan.
19.2 Termination
or Suspension of Plan
The Board of Directors may at any time suspend the operation of
or terminate the Plan with respect to any shares of Common Stock
or rights which are not at that time subject to any Award
outstanding under the Plan.
SECTION 20 DEFFERAL
ELECTIONS
The Plan Administrator may, to the extent permitted by
applicable law, including, but not limited to Section 409A
of the Code, permit Participants to defer Awards under the Plan.
Any such deferrals shall be subject to such terms, conditions
and procedures that the Plan Administrator may establish from
time to time in its sole discretion.
|
|
2005
Omnibus Incentive Compensation Plan
(as amended and restated)
|
|
APPENDIX B
El Paso Corporation
Employee Stock Purchase Plan
(as amended and restated)
B-1
APPENDIX B
El Paso
Corporation
Employee Stock Purchase Plan
(as amended and restated)
1. Purposes
This Employee Stock Purchase Plan (the Plan)
provides Eligible Employees of El Paso Corporation, a Delaware
corporation, and its Subsidiaries an opportunity to
(i) purchase shares of Common Stock of the Company at a
discount from market prices, and (ii) increase ownership of
the Companys Common Stock, on the terms and conditions set
forth below. It is the intention of the Company that options
issued pursuant to the Plan shall constitute stock options
issued pursuant to an employee stock purchase plan
within the meaning of Section 423 of the Code. The
provisions of the Plan shall be construed so as to extend and
limit participation in the Plan in a manner consistent with the
requirements of that section of the Code. The Plan was
originally adopted by the Board of Directors effective as of
January 20, 1999 and approved by stockholders on
April 22, 1999. The Plan, as currently amended and
restated, will become effective as of May 6, 2009 if it is
approved by the Companys stockholders at the 2009 annual
meeting.
2. Definitions
(a) Board of Directorsmeans the Board of
Directors of El Paso Corporation.
(b) Companymeans El Paso Corporation, a
Delaware corporation.
(c) Compensationmeans the total annual cash
remuneration (before taxes) which an Eligible Employee receives
as salary or wages, including base pay, payments for overtime,
shift premium, bonuses, holiday pay, paid time off, short-term
disability and other similar remuneration
(grossed-up
to reflect salary deferrals, if any, under Section 401(k)
plans, Section 125 cafeteria plans, Section 132 plans
and other qualified and nonqualified elective deferrals).
Compensation shall not include other cash or non-cash
remuneration such as payments under this or any other form of
equity or fringe benefit program, expense reimbursements,
allowances and payments attributable to foreign assignments,
long-term disability and workers compensation payments,
and lump-sum payments due to death, termination of employment or
layoff.
(d) Codemeans the Internal Revenue Code of
1986, as amended.
(e) Committeemeans the Compensation Committee
of the Board of Directors with respect to Participants who are
subject to Section 16 of the Securities Exchange Act of
1934, as amended (the Exchange Act), if required,
and the Management Committee (consisting of the Chief Executive
Officer and such other senior officers of the Company as he or
she may designate) with respect to all other Participants.
(f) Common Stockmeans the common stock, par
value $3.00 per share, of the Company.
(g) Eligible Employeesmeans those employees of
the Company and its Subsidiaries who are eligible to participate
in the Plan pursuant to Section 4.
(h) Exercise Datemeans the last Trading Day of
each calendar month.
(i) Exercise Pricemeans 95% of the Fair Market
Value of a share of the Companys Common Stock on the
Exercise Date. In no event shall the Exercise Price be less than
$1.00 per share of Company Common Stock.
(j) Fair Market Valuemeans the average between
the highest and lowest quoted selling prices at which the
Company Common Stock is sold for a particular date as reported
in the NYSE-Composite Transactions by The Wall Street
Journal (or such other source as the Committee deems
reliable) for such date, or if no Common Stock was traded on
such date, on the next preceding day on which Common Stock was
so traded. In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined
in good faith by the Committee.
|
|
El Paso
Corporation
|
Page 1
|
|
|
Employee
Stock Purchase Plan
(as amended and restated)
|
|
APPENDIX B
(k) Grant Datemeans January 1 of the calendar
year.
(l) Offering Periodmeans any twelve-month
period beginning on January 1 of a particular calendar year and
ending on the last Trading Day of such calendar year.
(m) Participating Employeemeans an Eligible
Employee who elects to participate in the Plan pursuant to
Section 5 hereof.
(n) Plan Accountmeans an account maintained by
the Company or its designated record keeper/custodian for each
Eligible Employee participating in the Plan to which payroll
deductions are credited, against which funds used to purchase
shares of Common Stock are charged, and to which shares of
Common Stock purchased are credited.
(o) Subsidiarymeans a corporation (or other
form of business association that is treated as a corporation
for tax purposes) that is designated by the Committee from time
to time from among a group consisting of the Company and its
subsidiary corporations, for the purposes of participation in
the Plan, of which shares (or other ownership interests) having
more than fifty percent (50%) of the voting power are owned or
controlled, directly or indirectly, by the Company so as to
qualify such corporation as a subsidiary corporation
within the meaning of Section 424(f) of the Code. The
participating Subsidiaries are set forth on Appendix A
hereto, and are subject to change by the Committee.
(p) Trading Daymeans any day on which the New
York Stock Exchange (or any other established stock exchange or
national market system the Committee deems appropriate) is open
for trading.
3. Common
Stock Subject to the Plan
(a) Subject to Section 3(b), the Company shall make
available five million (5,000,000) shares of its Common Stock
for purchase under the Plan from shares held in the
Companys treasury or out of authorized but unissued shares
of the Company, or partly out of each, as shall be determined by
the Committee.
(b) In the event of a recapitalization, stock split, stock
dividend, exchange of shares, merger, reorganization, change in
corporate structure or shares of the Company or similar event,
the Board of Directors or the Committee shall make such
adjustments, if any, as it determines are appropriate and
equitable (i) to the number of shares authorized for
issuance under the Plan and (ii) with respect to the number
of shares credited to each Participating Employees Plan
Account. Any such adjustment shall be final, binding and
conclusive on all persons claiming any right or interest under
the Plan.
4. Eligible
Employees
(a) An Eligible Employee is any individual who,
as of the October 1st preceding the Grant Date of an
Offering Period, is a common law employee of the Company or a
Subsidiary and whose customary employment with the Company or
such Subsidiary is at least twenty (20) hours per week and
more than five (5) months in any calendar year. For
purposes of the Plan, the employment relationship shall be
treated as continuing while the individual is on a short-term
leave, approved by the Company or any Subsidiary, during which
the employee receives no Compensation. To the extent required
under Section 423 of the Code, where the period of unpaid
leave exceeds ninety (90) days and the individuals
right to reemployment is not guaranteed by statute or by
contract, the employee relationship will be deemed to have
terminated on the 91st day of such leave.
(b) No Eligible Employee shall be granted an option to
purchase shares of Common Stock on any Grant Date if such
employee, immediately after the option is granted, owns stock
possessing five percent (5%) or more of the Companys
outstanding Common Stock or five percent (5%) or more of the
total combined voting power or value of all classes of stock of
the Company or any Subsidiary. For purposes of this
Section 4(b), the rules of Code Section 424(d)
(relating to attribution of stock ownership) shall apply in
determining the stock ownership of an
|
|
El Paso
Corporation
|
Page 2
|
|
|
Employee
Stock Purchase Plan
(as amended and restated)
|
|
APPENDIX B
Eligible Employee, and stock which the employee may purchase
under outstanding options (whether or not subject to the special
tax treatment provided by the Plan) shall be treated as stock
owned by such employee.
(c) Notwithstanding any other provision of the Plan to the
contrary, no Eligible Employee shall be granted an option to
purchase shares of Common Stock under the Plan which permits
such employees rights to purchase stock under all employee
stock purchase plans that are intended to qualify under Code
Section 423 and that are maintained by the Company and its
Subsidiaries to accrue at a rate which exceeds twenty-five
thousand U.S. dollars ($25,000) (or the equivalent thereof in
other currencies) worth of stock determined at the Fair Market
Value of the shares on the Grant Date for each calendar year.
This paragraph shall be interpreted in accordance with
applicable Code rules and regulations.
5. Participation
in the Plan
An Eligible Employee may participate in the Plan by completing
and filing with the Company, or its designated record
keeper/custodian, an election form or responding to enrollment
procedures as set forth via an Internet website or a voice
response system which authorizes payroll deductions from the
employees Compensation during an enrollment period as
specified by the Company. Such deductions shall commence with
the first pay period in the Offering Period beginning after such
form is filed and recorded with the Company or its designated
record keeper/custodian and shall continue until the employee
ceases participation in the Plan or the Plan is terminated.
6. Payroll
Deductions
Payroll deductions shall be made from the Compensation paid to
each Participating Employee for each regular payroll period in
such amounts as the Participating Employee shall authorize. The
minimum payroll deduction shall be ten U.S. dollars ($10) per
month up to a maximum of twenty-three thousand seven hundred
fifty U.S. dollars ($23,750) per calendar year, with such
deductions to be made from only the regular base salary payroll
processing cycle (and not from bonus or other special payroll
processing events). All payroll deductions made for a
Participating Employee shall be credited to his or her Plan
Account. Unless the Committee otherwise provides, if a
Participating Employees Compensation is insufficient in
any pay period to allow the entire payroll deduction
contemplated under the Plan, all such available amounts shall be
deducted and credited to the Participating Employees Plan
Account for such pay period. Payroll deductions under the Plan
shall be made only after all other withholdings, deductions,
garnishments and similar deductions have been made.
Notwithstanding any other provision to the contrary, the
Committee may allow, subject to such terms and conditions as the
Committee determines appropriate, Participating Employees to
provide other sources of funds to satisfy such Participating
Employees elected contributions, but in no event shall the total
annual contribution by a Participating Employee exceed such
Participating Employees Compensation.
7. Changes
in the Payroll Deductions
(a) Increases. A Participating Employee
may increase the amount of his or her payroll deduction by
filing a new election form with the Company or its designated
record keeper/custodian or responding via an Internet website or
a voice response system during an enrollment period, as
specified by the Company. The change shall become effective for
the next Offering Period.
(b) Decreases. A Participating Employee
may decrease the amount of his or her payroll deduction by
filing a new election form with the Company or its designated
record keeper/custodian or responding via an Internet website or
a voice response system sufficiently in advance, generally ten
(10) Trading Days, to process such change before the next
pay period.
(c) Except as set forth in Section 8(a), other changes
shall not be allowed during an Offering Period.
|
|
El Paso
Corporation
|
Page 3
|
|
|
Employee
Stock Purchase Plan
(as amended and restated)
|
|
APPENDIX B
8. Termination
of Participation in the Plan
(a) Voluntary Cessation of Plan
Participation. A Participating Employee, at any
time and for any reason, may voluntarily terminate participation
in the Plan by written notification, or appropriate procedures
set forth via an Internet website or a voice response system or
otherwise as the Company may determine, of withdrawal delivered
to the appropriate payroll office or designated record
keeper/custodian sufficiently in advance, generally ten
(10) Trading Days, to process such change before the next
pay period. In such event, payroll deductions will cease and any
payroll deductions and other funds credited to such
Participating Employees Plan Account shall be used to
purchase shares of Common Stock on the next Exercise Date. An
employee whose participation in the Plan has voluntarily
terminated may not rejoin the Plan until the next Offering
Period following the date of such termination.
(b) Employment Termination and Death. A
Participating Employees participation in the Plan shall be
terminated involuntarily upon (i) termination of his or her
employment with the Company or its Subsidiaries for any reason,
or (ii) death of the Participating Employee. In each event,
payroll deductions shall cease and any payroll deductions and
other funds credited to the Participating Employees Plan
Account shall be used to purchase additional shares of Common
Stock on the next Exercise Date.
(c) Retirement and Permanent
Disability. In the event the Participating
Employee retires or becomes permanently disabled, payroll
deduction will cease and any payroll deductions and other funds
credited to such employees Plan Account shall be used to
purchase shares of Common Stock on the next Exercise Date unless
the employee requests to receive such amounts, in a manner
determined by the Committee and such notice is received
sufficiently in advance of the next Exercise Date, generally ten
(10) Trading Days, to process such request.
In the event a Participating Employees participation in
the Plan is terminated pursuant to this Section 8, then
such Participating Employee may allow shares of Common Stock
credited to the Participating Employees (or former
employees) Plan Account to remain therein (at such
persons expense, if any), or at any time, request
withdrawal of all or a portion of such account in the manner
specified in the Plan or by the Committee.
9. Purchase
of Shares
(a) On each Grant Date, each Participating Employee shall
be deemed to have been granted an option to purchase up to that
number shares of Common Stock as provided in this Section 9.
(b) Each option shall be for a number of shares up to the
maximum number acquirable through the payroll deductions allowed
under Section 6 above, but no more than three thousand
(3,000) shares during any one Offering Period. Each option shall
be for a term of not more than one year and shall be exercised
as provided below.
(c) On each Exercise Date, each Participating Employee who
is a common law employee of the Company or a Subsidiary shall be
deemed to have exercised his or her option granted, pursuant to
Section 9(a). On each Exercise Date, the Company shall
apply the funds (exclusive of dividends and other distributions,
if any) credited to each Participating Employees Plan
Account, pursuant to Section 6 above, to the purchase
(without commissions or fees) of that number of shares of Common
Stock determined by dividing the Exercise Price into the balance
in the employees Plan Account on the Exercise Date,
subject to the limitations in Sections 4(b) and 4(c).
(d) As soon as practicable after each Exercise Date, a
statement shall be delivered to each Participating Employee
regarding his or her Plan Account, which may include, among
other things and to the extent necessary and appropriate,
(i) the name, address and federal identification number of
the Company and the Participating Employee; (ii) the
amounts of payroll deductions or other funds credited to the
Plan Account; (iii) the Exercise Price; (iv) the date
of purchase or transfer; (v) the number of shares purchased
or transferred; (vi) a statement that the purchase of
shares is pursuant to a Code Section 423 plan; and
(vii) the balance in the Plan Account.
|
|
El Paso
Corporation
|
Page 4
|
|
|
Employee
Stock Purchase Plan
(as amended and restated)
|
|
APPENDIX B
10. Rights
as a Stockholder
(a) As promptly as practicable after each Exercise Date, a
Participating Employee shall be treated as the beneficial owner
of his or her shares purchased pursuant to the Plan, and such
shares shall be credited to a book-entry account maintained for
the benefit of the Participating Employee by the record
keeper/custodian selected by the Company. A Participating
Employee may request that a stock certificate for all or a
portion of the shares credited to the Participating
Employees Plan Account be issued, provided the shares have
been held by the Participating Employee more than two
(2) years from the beginning of the Offering Period during
which they were purchased or one (1) year from the Exercise
Date, whichever is longer, and the Participating Employee pays
any fees associated with the issuance of such stock certificate.
A Participating Employee may request that a stock certificate
for all or a portion of the shares credited to the Participating
Employees Plan Account which have been held by the
Participating Employee less than two (2) years from the
beginning of the Offering Period during which they were
purchased or one (1) year from the Exercise Date, whichever
is longer, be issued only in the event the Plan Administrator
determines the request is a result of a gratuitous disposition
of the shares. A cash payment (less any applicable fees to sell
a fractional share) shall be made for any fraction of a share of
Common Stock in such account, if necessary to close the account.
(b) A Participating Employee shall have all ownership
rights with respect to the whole number of shares credited to
the Plan Account, including the right to vote such shares of
Common Stock and to receive dividends or other distributions, if
any. Unless the Committee shall determine otherwise, any
dividends or distributions which may be declared thereon by the
Board of Directors will be reinvested by the record
keeper/custodian in additional shares of Common Stock for the
Participating Employee within a reasonable time (as determined
by the Committee) following such dividend payment date or
distribution date, and shall be invested based upon the Fair
Market Value on the date of such investment (without any
discount).
11. Rights
Not Transferable
Rights under the Plan are not transferable by a Participating
Employee other than by will or the laws of descent and
distribution, and are exercisable during the employees
lifetime only by the employee or by the employees guardian
or legal representative. No rights or payroll deductions of a
Participating Employee under the Plan shall be subject to
execution, attachment, levy, garnishment or similar process.
12. Sale
of Shares
Should a Participating Employee choose to sell shares purchased
under the Plan, such Participating Employee shall be responsible
to pay any and all applicable brokerage fees and associated
costs related to such sale. Sales requested by a Participating
Employee shall occur as soon as administratively feasible after
the receipt of such request, but neither the Committee nor the
Company nor any Subsidiary shall be liable for any delay in the
execution of such request. Participating Employees bear the risk
of stock price fluctuation between the time they place the order
to sell and the time the shares are actually sold. Additionally,
Participating Employees who have requested to sell shares may
receive the average of the prices of all shares sold under the
Plan for a particular day.
13. Application
of Funds
All funds of Participating Employees received or held by the
Company under the Plan before purchase of the shares of Common
Stock may be held in bank accounts of the Company or may be used
by the Company for general corporate purposes. The Company shall
not be obligated to segregate payroll deductions. No interest
shall accrue on the payroll deductions which are received and
held by the Company under the Plan or credited to the
Participating Employees Plan Account.
|
|
El Paso
Corporation
|
Page 5
|
|
|
Employee
Stock Purchase Plan
(as amended and restated)
|
|
APPENDIX B
14. Administration
of the Plan
The Plan shall be administered by the Committee, which shall
have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine
eligibility and to adjudicate all disputed claims filed under
the Plan. Without limiting the full discretion of the Committee
in the administration of the Plan, the Committee may limit the
percentage or dollar amount of Compensation that may be
contributed under the Plan, change the frequency of payroll
deductions, modify the frequency or number of changes in the
amount of payroll deductions to be made during an Offering
Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a
Participating Employee in order to adjust for delays or mistakes
in the Companys processing of properly completed
withholding elections, establish reasonable waiting and
adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of shares of
Common Stock for each Participating Employee properly correspond
with amounts withheld from the Participating Employees
Compensation, establish, collect, amend or waive administrative
or other fees to be assessed Participating Employees incident to
their participation in the Plan (including those fees set forth
in Section 12), and establish such other limitations or
procedures as the Committee determines in its sole discretion
are advisable and consistent with the Plan and with the
requirements (including any non-discrimination requirements) of
the Code. The Plan is intended to qualify as an employee
stock purchase plan within the meaning of Section 423
of the Code. Accordingly, the provisions of the Plan shall be
construed so as to extend and limit participation in a manner
consistent with the requirements of that Section of the Code.
Every finding, decision and determination made by the Committee
shall, to the fullest extent permitted by law, be final and
binding upon all parties.
15. Amendments
to the Plan
The Board of Directors may at any time and for any reason
terminate or amend the Plan, and/or delegate authority for any
amendments to the Committee. Except as provided in
Section 16 hereof, no such termination or amendment shall
affect options previously granted or adversely affect the rights
of any Participating Employee with respect thereto. Without
shareholder consent and without regard to whether any
Participating Employee rights may have been considered to have
been adversely affected, the Plan may be amended to
change the Offering Periods, change the Exercise Dates, increase
the Exercise Price or change the amount of allowable payroll
deductions. To the extent necessary to comply with
Section 423 of the Code (or any successor rule or provision
or any other applicable law, regulation or stock exchange rule),
the Company shall obtain shareholder approval of any amendment
to the Plan in such a manner and to such a degree as required.
16. Change
in Control
In the event of a Change in Control of the Company, any Offering
Period then in progress shall be shortened by setting a new
Exercise Date (the Change of Control Exercise Date)
and any Offering Period then in progress shall end on the Change
of Control Exercise Date. The Change of Control Exercise Date
shall be before the date of the Companys proposed sale or
merger. The Committee shall notify each Participating Employee
in writing, at least ten (10) Trading Days prior to the
Change of Control Exercise Date, that the Exercise Date for the
Participating Employees option has been changed to the
Change of Control Exercise Date and that the Participating
Employees option shall be exercised automatically on the
Change of Control Exercise Date, unless prior to such date the
Participating Employee has withdrawn from the Offering Period,
as provided for in Sections 5 and 8 hereof. For purposes of
this Plan, a Change in Control shall be deemed to
occur upon the occurrence of any of the following:
(i) An acquisition (other than directly from the Company)
of any voting securities of the Company (the Voting
Securities) by any Person (as the term
person is used for purposes of Section 13(d) or
14(d) of the Exchange Act), immediately after which such Person
has Beneficial Ownership (within the meaning of
Rule 13d-3
promulgated under the Exchange Act) of more than twenty percent
(20%) of (A) the then-outstanding shares of Common Stock
(or any other securities into which such shares of Common Stock
are changed or for which such shares of Common Stock are
|
|
El Paso
Corporation
|
Page 6
|
|
|
Employee
Stock Purchase Plan
(as amended and restated)
|
|
APPENDIX B
exchanged) (the Shares) or (B) the combined
voting power of the Companys then-outstanding Voting
Securities; provided, however, that in determining
whether a Change in Control has occurred pursuant to this
paragraph (i), the acquisition of Shares or Voting Securities in
a Non-Control Acquisition (as hereinafter defined)
shall not constitute a Change in Control. A Non-Control
Acquisition shall mean an acquisition by (1) an
employee benefit plan (or a trust forming a part thereof)
maintained by (a) the Company or (b) any corporation
or other Person the majority of the voting power, voting equity
securities or equity interest of which is owned, directly or
indirectly, by the Company (for purposes of this definition, a
Related Entity), (2) the Company or any Related
Entity, or (3) any Person in connection with a
Non-Control Transaction (as hereinafter defined);
(ii) The individuals who, as of the date of this amendment
and restatement, are members of the Board of Directors (the
Incumbent Board of Directors), cease for any reason
to constitute at least a majority of the members of the Board of
Directors or, following a Merger (as hereinafter defined), the
board of directors of (x) the corporation resulting from
such Merger (the Surviving Corporation), if fifty
percent (50%) or more of the combined voting power of the
then-outstanding voting securities of the Surviving Corporation
is not Beneficially Owned, directly or indirectly, by another
Person (a Parent Corporation) or (y) if there
is one or more than one Parent Corporation, the ultimate Parent
Corporation; provided, however, that, if the
election, or nomination for election by the Companys
common stockholders, of any new director was approved by a vote
of at least two-thirds of the Incumbent Board of Directors, such
new director shall, for purposes of the Plan, be considered a
member of the Incumbent Board of Directors; and provided,
further, however, that no individual shall be
considered a member of the Incumbent Board of Directors if such
individual initially assumed office as a result of an actual or
threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board of Directors (a Proxy
Contest), including by reason of any agreement intended to
avoid or settle any Proxy Contest; or
(iii) The consummation of:
(A) A merger, consolidation or reorganization (1) with
or into the Company or (2) in which securities of the
Company are issued (a Merger), unless such Merger is
a Non-Control Transaction. A Non-Control
Transaction shall mean a Merger in which:
(a) the stockholders of the Company immediately before such
Merger own directly or indirectly immediately following such
Merger at least fifty percent (50%) of the combined voting power
of the outstanding voting securities of (x) the Surviving
Corporation, if there is no Parent Corporation or (y) if
there is one or more than one Parent Corporation, the ultimate
Parent Corporation;
(b) the individuals who were members of the Incumbent Board
of Directors immediately prior to the execution of the agreement
providing for such Merger constitute at least a majority of the
members of the board of directors of (x) the Surviving
Corporation, if there is no Parent Corporation, or (y) if
there is one or more than one Parent Corporation, the ultimate
Parent Corporation; and
(c) no Person other than (i) the Company,
(ii) any Related Entity, or (iii) any employee benefit
plan (or any trust forming a part thereof) that, immediately
prior to the Merger, was maintained by the Company or any
Related Entity, or (iv) any Person who, immediately prior
to the Merger had Beneficial Ownership of twenty percent (20%)
or more of the then outstanding Shares or Voting Securities, has
Beneficial Ownership, directly or indirectly, of twenty percent
(20%) or more of the combined voting power of the outstanding
voting securities or common stock of (x) the Surviving
Corporation, if fifty percent (50%) or more of the combined
voting power of the then outstanding voting securities of the
Surviving Corporation is not Beneficially Owned, directly or
indirectly by
|
|
El Paso
Corporation
|
Page 7
|
|
|
Employee
Stock Purchase Plan
(as amended and restated)
|
|
APPENDIX B
a Parent Corporation, or (y) if there is one or more than
one Parent Corporation, the ultimate Parent Corporation;
(B) A complete liquidation or dissolution of the Company; or
(C) The sale or other disposition of all or substantially
all of the assets of the Company and its Subsidiaries taken as a
whole to any Person (other than (x) a transfer to a Related
Entity, (y) a transfer under conditions that would
constitute a Non-Control Transaction, with the disposition of
assets being regarded as a Merger for this purpose or
(z) the distribution to the Companys stockholders of
the stock of a Related Entity or any other assets).
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the Subject
Person) acquired Beneficial Ownership of more than the
permitted amount of the then outstanding Shares or Voting
Securities as a result of the acquisition of Shares or Voting
Securities by the Company which, by reducing the number of
Shares or Voting Securities then outstanding, increases the
proportional number of shares Beneficially Owned by the Subject
Persons; provided, that if a Change in Control would
occur (but for the operation of this sentence) as a result of
the acquisition of Shares or Voting Securities by the Company
and, after such share acquisition by the Company, the Subject
Person becomes the Beneficial Owner of any additional Shares or
Voting Securities and such Beneficial Ownership increases the
percentage of the then outstanding Shares or Voting Securities
Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
17. Effective
Date and Termination of the Plan
(a) The Plan was originally adopted by the Board of
Directors effective as of January 20, 1999, and the
stockholders approved the Plan on April 22, 1999. The Board
of Directors amended and restated the Plan effective as of
January 29, 2002 to increase the number of shares available
for issuance under the Plan, and the amended and restated Plan
was approved by the stockholders of the Company on May 20,
2002. The Plan, as currently amended and restated, will become
effective as of May 6, 2009 if it is approved by the
Companys stockholders at the 2009 annual meeting.
(b) The Plan shall terminate upon the earlier of
(i) the termination of the Plan by the Board of Directors,
as specified below, or (ii) when no more shares remain to
be purchased under the Plan. The Board of Directors may
terminate the Plan, but only as of the Trading Day immediately
following an Exercise Date. If on an Exercise Date,
Participating Employees in the aggregate have options to
purchase more shares of Common Stock than are available for
purchase under the Plan, each Participating Employee shall be
eligible to purchase a reduced number of shares of Common Stock
on a pro rata basis and any excess payroll deductions or other
monies contributed by such employee shall be returned to such
employees, all as provided by rules and regulations adopted by
the Committee.
18. Costs
All costs and expenses incurred in administering the Plan shall
be paid by the Company, except that any brokerage fees or
certificate costs incurred in the sale of the shares of Common
Stock by any Participating Employee shall be handled in
accordance with Sections 10 and 12 of the Plan, and any
administrative or other fees established by the Committee
pursuant to Section 14 of the Plan shall be handled as
specified by the Committee.
19. Purchase
for Investment Purposes
The Plan is intended to provide shares of Common Stock for
investment and not for resale. The Company does not, however,
intend to restrict or influence any Participating Employee in
the conduct of such employees own affairs. A Participating
Employee may therefore sell shares of Common Stock purchased
under the Plan at any time the Participating Employee chooses,
subject to compliance with any applicable federal or state
securities laws. Because of certain federal tax requirements,
each Participating Employee agrees, by enrolling in the Plan, to
notify the Company of any sale or other disposition of shares of
Common Stock held by the Participating Employee less
|
|
El Paso
Corporation
|
Page 8
|
|
|
Employee
Stock Purchase Plan
(as amended and restated)
|
|
APPENDIX B
than two (2) years from the beginning of the Offering
Period during which they were purchased or one (1) year
from the Exercise Date, whichever is longer, indicating the
number of such shares of Common Stock disposed of. The Company
shall be entitled to presume that a Participating Employee has
disposed of any shares of Common Stock for which the
Participating Employee has requested a certificate. All
certificates for shares of Common Stock delivered under the Plan
shall be subject to such stock transfer orders and other
restrictions as the Company may deem advisable under all
applicable laws, rules, and regulations, and the Company may
cause a legend or legends to be put on any such certificates to
make appropriate references to such restrictions.
20. Governmental
Regulations
Notwithstanding anything else in the Plan, options shall not be
exercisable or exercised and shares of Common Stock shall not be
issued with respect to an option to purchase unless the exercise
of such option and the issuance and delivery of shares of Common
Stock pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Exchange
Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares of
Common Stock may then be listed. As a condition to the exercise
of an option, the Company may require a Participating Employee
to represent and warrant at the time of any such exercise that
the shares of Common Stock are being purchased only for
investment and without any present intention to sell or
distribute such shares of Common Stock if, in the opinion of
counsel for the Company, such a representation is required by
any of the aforementioned applicable provisions of law.
21. Applicable
Law
The Plan shall be interpreted under the laws of the State of
Texas, unless preempted by federal law. The Plan is not to be
subject to the Employee Retirement Income Security Act of 1974,
as amended, but is intended to comply with Section 423 of
the Code. Any provisions required to be set forth in the Plan by
such Code section are hereby included as fully as if set forth
in the Plan in full.
22. Effect
on Employment
The provisions of the Plan shall not affect the right of the
Company or any Subsidiary or any Participating Employee to
terminate his or her employment with the Company or Subsidiary.
Any income Participating Employees may realize as a result of
participating in the Plan shall not be considered as part of a
Participating Employees salary or used for the calculation
of any other pay, allowance, pension or other benefit unless
otherwise permitted by other benefit plans provided by the
Company or its Subsidiaries, or required by law or by
contractual obligations of the Company or its Subsidiaries.
23. Taxes
At the time an option to purchase is exercised, in whole or in
part, or at the time all or a portion of the shares of Common
Stock purchased under the Plan are disposed of, the
Participating Employee must make adequate provision for the
Companys federal, state, or other tax withholding
obligations, if any, which arise upon the exercise of the option
or the disposition of the shares of Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from
the Participating Employees Compensation or other wages or
amounts payable to the Participating Employee (whether or not
such person at the time continues to participate or to be
eligible to participate in the Plan, and regardless of whether
or not such person at the time continues to be employed by the
Company or any Subsidiary) the amount necessary for the Company
to meet applicable withholding obligations, including any
withholding required to make available to the Company any tax
deductions or benefits attributable to any sale or early
disposition of shares of Common Stock by the Participating
Employee.
|
|
El Paso
Corporation
|
Page 9
|
|
|
Employee
Stock Purchase Plan
(as amended and restated)
|
|
APPENDIX B
24. Loans
Subject to applicable laws, the Committee may allow
Participating Employees to borrow money against the value of the
Common Stock held in such Participating Employees Plan
Account. In such event, the Participating Employee and his or
her Plan Account will be subject to certain terms, conditions
and restrictions as the Committee, its designated record
keeper/custodian, or financial institution may deem necessary or
appropriate to secure the shares in the Plan Account as
collateral for such loan.
25. Beneficiaries
A Participating Employee may file with the Company or its
designated record keeper/custodian, a written designation of a
beneficiary who is entitled to receive any shares of Common
Stock, accumulated payroll deductions, dividends or other
distributions, if any, held for the Participating Employee under
the Plan, in the event of the employees death. If the
Participating Employee is married and the designated beneficiary
is not the spouse, written spousal consent shall be required for
such designation to be effective. A Participating Employee may
change the designation of a beneficiary at any time by written
notice, unless the current designated beneficiary is a spouse,
in which case, written spousal consent shall be required. If no
beneficiary is designated, the designation is ineffective, or in
the event the beneficiary dies before the balance of a
Participating Employees Plan Account is paid, the balance
shall be paid to the Participating Employees spouse or, if
there is no surviving spouse, to his or her lineal descendants,
pro rata, or, if there is no surviving spouse or any lineal
descendant, to the employees estate.
26. Notices
All notices or other communications by an Eligible Employee to
the Company or a Subsidiary under or in connection with the Plan
shall be deemed to have been duly given when received in the
form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof. All notices
and other communications to any Eligible Employee or
Participating Employee shall be made to the address maintained
on the Companys payroll records.
|
|
El Paso
Corporation
|
Page
10
|
|
|
Employee
Stock Purchase Plan
(as amended and restated)
|
|
EL PASO CORPORATION 1001 LOUISIANA STREET ROOM 2950 HOUSTON, TX 77002 VOTE BY INTERNET -
www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery
of information up until 11:59 P.M. Eastern Time, Tuesday, May 5, 2009. Have your proxy card in hand
when you access the website and follow the instructions to vote these shares. ELECTRONIC DELIVERY
OF FUTURE STOCKHOLDER COMMUNICATIONS If you would like to reduce the costs incurred by EI Paso
Corporation in mailing proxy materials, you can consent to receiving all future proxy statements,
proxy cards and annual reports electronically via e-mail or the Intemet. To sign up for electronic
delivery, please follow the instructions above to vote using the Internet and, when prompted,
indicate that you agree to receive or access stockholder communications electronically in future
years. VOTE BY PHONE 1-800-690-6903 Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time, Tuesday, May 5, 2009. Have your proxy card in hand
when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card
and return it in the postagepaid envelope we have provided or return it to EI Paso Corporation, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717, so that it is received on or before May 4, 2009.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: ELPAS1 KEEP THIS PORTION FOR YOUR
RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY EL
PASO CORPORATION THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH DIRECTOR UNDER PROPOSAL
1. 1. Election of Directors Nominees: For Against Abstain 1a. Juan Carlos Braniff 0 0 0 1b.
James L. Dunlap For Against Abstain 0 0 0 THE BOARD OF DIRECTORS RECOMMENDS A VOTE 1c. Douglas L.
Foshee 0 0 0 FOR PROPOSAL 2. 2. Approval of the El Paso Corporation 2005 Omnibus 1d. Robert W.
Goldman 0 0 0 Incentive Compensation Plan, as amended and 0 0 0 restated, to increase the number of
shares available 1e. Anthony W. Hall, Jr. for issuance by 12.5 million. 0 0 0 THE BOARD OF
DIRECTORS RECOMMENDS A VOTE 1f. Thomas R. Hix FOR PROPOSAL 3. 0 0 0 3. Approval of the El Paso
Corporation Employee Stock Purchase Plan, as amended and restated, to extend 1g. Ferrell P. McClean
0 0 0 the term of the plan until such time as no additional 0 0 0 shares remain available for
purchase. 1h. Steven J. Shapiro 0 0 0 THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 4.
1i. J. Michael Talbert 0 0 0 4. Ratification of the Appointment of Ernst & Young 0 0 0 LLP as our
Independent Registered Public Accounting 1j. Robert F. Vagt Firm for the fiscal year ending
December 31, 2009. 0 0 0 1k. John L. Whitmire 0 0 0 Note: Please sign as name appears on this card.
Joint owners should each sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. |
EL PASO CORPORATION
THIS PROXY lS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
MAY 6, 2009
YOUR VOTE IS IMPORTANT PLEASE
VOTE YOUR PROXY
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice of Annual Meeting and Proxy Statement and Annual Report on Form 10-K are available at
www.proxyvote.com.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS,
MAY 6, 2009
The undersigned hereby appoints Douglas L. Foshee and Robert W. Baker, and each or any of them
individually, with power of substitution, proxies for the undersigned and authorizes them to
represent and vote, as designated, all of the shares of common stock of EI Paso Corporation, held
of record by the undersigned at the close of business on March 11, 2009 (the record date), at the
Annual Meeting of Stockholders of EI Paso Corporation to be held on Wednesday, May 6, 2009, at 9:00
a.m. Central Time, at the Doubletree Hotel Houston Downtown, 400 Dallas Street, Houston, Texas
77002, and at any adjournment(s) or postponements of such meeting for the purposes identified on
the reverse side of this proxy and with discretionary authority as to any other matters that may
properly come before the Annual Meeting of Stockholders, including substitute nominees if any of
the named nominees for Director should be unavailable to serve for election, in accordance with and
as described in the Notice of Annual Meeting of Stockholders and Proxy Statement. The shares
represented hereby shall be voted as specified. If no specification is made, such shares shall be
voted FOR Proposals 1, 2, 3 and 4.
FOR SHARES HELD IN THE EL PASO CORPORATION BENEFITS PROTECTION TRUST AND THE EL PASO CORPORATION
RETIREMENT SAVINGS PLAN:
In accordance with the terms of the EI Paso Corporation Benefits Protection Trust (the BPT) and
the EI Paso Corporation Retirement Savings Plan (the RSP), the undersigned hereby directs State
Street Bank and Trust Company (State Street), trustee of the BPT and JPMorgan Chase Bank, N.A.
(JP Morgan), trustee of the RSP, to vote in person or by proxy, the full and fractional shares of
common stock of EI Paso Corporation allocated to the respective accounts in each of the BPT and the
RSP on the record date, at the Annual Meeting of Stockholders, in accordance with the instructions
provided on the reverse side of this card, and in accordance with the judgment of State Street and
JP Morgan upon other business as may properly come before the Annual Meeting of Stockholders and
any adjournments or postponements thereof. The shares represented by this card for the BPT and the
RSP shall be voted as specified. If no instructions are provided or if this card is not received on
or before May 4, 2009, the shares represented by this card for the BPT will be voted by State
Street in its discretion. If no instructions are provided or if this card is not received on or
before May 4, 2009, the shares represented by this card for the RSP will be voted by JP Morgan in
the same proportion as the shares for which timely instructions were received by JP Morgan.
FOR SHARES HELD IN THE VALERO ARUBA THRIFT FOUNDATION VALERO ARUBA N.V. THRIFT PLAN:
In accordance with the terms of the Valero Aruba Thrift Foundation Valero Aruba N.V. Thrift Plan
(the Aruba Thrift Plan), the undersigned hereby directs the Management Board of the Valero Aruba
Thrift Foundation Valero Aruba N.V. Thrift Plan (the Management Board), to vote in person or by
proxy, the shares of common stock of EI Paso Corporation allocated to the respective accounts in
the Aruba Thrift Plan on the record date, at the Annual Meeting of Stockholders in accordance with
the instructions provided on the reverse side of this card, and in accordance with the judgment of
the
Management Board upon other business as may properly come before the Annual Meeting of
Stockholders and any adjournments or postponements thereof. The shares represented by this card for
the Aruba Thrift Plan shall be voted as specified. The Management Board, in its discretion, has
decided if no instructions are provided or if this card is not received on or before May 4, 2009,
the shares represented by this card for the Aruba Thrift Plan will not be voted by the Management
Board. |