Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934.
(Amendment No. _____)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropirate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
EL PASO ENERGY 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):
[X] No fee required
[ ] 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:
---------------------------------------------------------------
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing:
(1) Amount previously Paid:
-----------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------
<PAGE>
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of
Stockholders (the "Annual Meeting") of El Paso Energy Corporation (the
"Company"), which will be held on Thursday, April 22, 1999, at 9:00 a.m.
(central daylight time), at The Windsor Court Hotel, 300 Gravier Street,
New Orleans, Louisiana 70130. The accompanying Notice of Annual Meeting
of Stockholders and Proxy Statement describe the business to be
transacted at the Annual Meeting.
The Company is pleased to offer you the option of voting your
shares (1) electronically via the Internet by accessing following the
instructions on your proxy card, (2) by telephone by following the
instructions on your proxy card, or (3) by using the enclosed traditional
paper proxy card. Whether or not you plan to attend the Annual Meeting,
please vote by one of the foreging methods to ensure that your shares are
represented and voted in accordance with your wishes. This will help
the Company avoid the expense of sending follow-up letters to ensure
that a quorum is represented.
Sincerely,
WILLIAM A. WISE
Chairman of the Board
President and Chief Executive
Officer
Houston, Texas
March 19, 1999
<PAGE>
EL PASO ENERGY CORPORATION
1001 Louisiana Street
Houston, Texas 77002
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
April 22, 1999
The 1999 Annual Meeting of Stockholders (the "Annual Meeting") of
El Paso Energy Corporation (the "Company"), will be held on Thursday,
April 22, 1999, at 9:00 a.m. (central daylight time), at The Windsor
Court Hotel, 300 Gravier Street, New Orleans, Louisiana 70130 for the
following purposes:
1. To elect eight Directors, each to hold office for a term of
one year;
2. To approve the El Paso Energy Corporation 1999 Omnibus
Incentive Compensation Plan;
3. To approve the El Paso Energy Corporation Employee Stock
Purchase Plan;
4. To amend the Restated Certificate of Incorporation of El
Paso Natural Gas Company to eliminate the provision relating
to Section 251(g) of the Delaware General Corporation Law;
5. To ratify the appointment of PricewaterhouseCoopers LLP as
independent certified public accountants to audit the
Company's financial statements for the fiscal year ending
December 31, 1999; and
6. To transact any other business which may be properly brought
before the Annual Meeting. The Board of Directors is aware
of one stockholder proposal that may be presented at the
Annual Meeting, which is described in the attached proxy
statement.
Only stockholders of record at the close of business on February
24, 1999, are entitled to notice of, and to vote at, the Annual Meeting
and any adjournment or postponement thereof. As an alternative to using
the paper proxy card to vote, stockholders may vote electronically via
the Internet or by telephone. Please see "Additional Information -
Internet and Telephone Voting" in the Proxy Statement for more details.
Whether or not you plan to attend the Annual Meeting, please complete,
date, sign and return the proxy in the accompanying envelope,
electronically via the Internet or by telephone as promptly as possible
to ensure that your shares are represented and voted in accordance with
your wishes.
By Order of the Board of Directors
DAVID L. SIDDALL
Corporate Secretary
Houston, Texas
March 19, 1999
<PAGE>
EL PASO ENERGY CORPORATION
1001 Louisiana Street
Houston, Texas 77002
PROXY STATEMENT
1999 ANNUAL MEETING OF STOCKHOLDERS - April 22, 1999
This Proxy Statement with the accompanying Notice of Annual Meeting
of Stockholders and proxy card are being mailed to stockholders beginning
on or about March 19, 1999. The proxy is solicited by the Board of
Directors of El Paso Energy Corporation (the "Company") for use at the
1999 Annual Meeting of Stockholders (the "Annual Meeting") to be held on
Thursday, April 22, 1999. Shares of the Company's common stock, par value
$3.00 per share (the "Common Stock"), represented by a properly executed
proxy submitted either in the accompanying form, via the Internet, or by
telephone, will be voted at the Annual Meeting. The proxy may be revoked
at any time before its exercise by sending written notice of revocation to
Mr. David L. Siddall, Corporate Secretary, El Paso Energy Corporation, 1001
Louisiana Street, Houston, Texas 77002, by signing and delivering a
subsequently dated proxy card; by attending the Annual Meeting in person
and giving notice of revocation to the Inspector of Election; or by
following the appropriate revocation procedures via the Internet or by
telephone.
Effective August 1, 1998, El Paso Natural Gas Company ("EPNG")
reorganized into a holding company form of organizational structure,
whereby the Company, a Delaware corporation, became the holding company
(the "Reorganization"). The Reorganization was effected by a merger
conducted pursuant to Section 251(g) of the Delaware General Corporation
Law ("DGCL"), which permits the formation of a holding company structure
without a vote of the stockholders of EPNG. By virtue of the
Reorganization, EPNG became a direct, wholly owned subsidiary of the
Company, and all of EPNG's outstanding capital stock was converted, on a
share-for-share basis, into capital stock of the Company. As a result of
the Reorganization, all outstanding securities of EPNG (including common
stock) were converted into equivalent securities of the Company. Because
the Reorganization involved companies under common control, the
stockholders' equity, and components related thereto, of EPNG became the
basis for the Company stockholders' equity. References to the "Company" in
this Proxy Statement refer to El Paso Energy Corporation, as successor to
EPNG after August 1, 1998, and to EPNG for information prior to August 1,
1998.
February 24, 1999, was the record date for the determination of
stockholders entitled to notice of, and to vote at, the Annual
Meeting, or adjournments or postponements of the Annual Meeting. On
that date there were 122,309,755 shares of Common Stock
outstanding and entitled to vote, which is the Company's only class
of voting securities. For a period of at least ten days prior to the
Annual Meeting, a complete list of stockholders entitled to vote at
the Annual Meeting will be available for examination by any
stockholder during ordinary business hours at The Windsor Court
Hotel, 300 Gravier Street, New Orleans, Louisiana 70130.
Each stockholder is entitled to cast one vote on each proposal
presented at the Annual Meeting for each share of Common Stock held
as of the record date. One Inspector of Election, a representative
from BankBoston, N.A., and appointed by the Board of Directors, shall
have authority to receive, inspect, electronically tally and
determine the validity of the proxies which are received. In
accordance with the Company's By-laws, in determining the number of
votes cast for or against a proposal, an abstention by a stockholder
will be a vote of abstention with respect to the proposal voted upon
and will not be treated as a vote "for" or "against" the proposal;
however, an abstention and a broker non-vote will be included when
determining whether a quorum is present. The Company's By-laws also
provide that a non-vote by a broker will be treated as if the broker
never voted, but a non-vote by a stockholder will be deemed a vote
"for" the management proposal. Stockholders may vote for all, some
or none of the director nominees, and they may vote "for" or
"against" the other proposals or abstain from voting.
<PAGE>
INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held nine meetings during the fiscal year
ended December 31, 1998. The standing committees of the Board of
Directors are the Audit Committee and the Compensation Committee.
The Board of Directors does not have a nominating committee or any
committee performing similar functions, and all matters which would
be considered by such committee are acted upon by the full Board of
Directors. During the 1998 fiscal year, and during his term, each
Director attended at least 75% of the meetings of the Board of
Directors and the committees on which he served, except for Mr. Juan
Carlos Braniff.
The Audit Committee
The Audit Committee held five meetings during the 1998 fiscal year.
The Audit Committee currently consists of Kenneth L. Smalley
(Chairman), Juan Carlos Braniff, Peter T. Flawn and Malcolm Wallop,
each a non-employee Director. The Audit Committee makes a
recommendation to the Board of Directors for a firm of independent
certified public accountants to audit the Company's annual financial
statements. In addition, the Audit Committee reviews with
management and the Company's independent certified public
accountants the Company's financial statements, the adequacy of the
Company's internal accounting controls, the Company's basic
accounting and financial policies and practices, the Company's risk
management practices and Year 2000 readiness efforts.
The Compensation Committee
The Compensation Committee held four meetings during the 1998 fiscal
year. The Compensation Committee currently consists of Ben F. Love
(Chairman), Byron Allumbaugh and James F. Gibbons, each a non-
employee Director. The Compensation Committee currently administers
the Company's executive stock option plan, long-term incentive
compensation plan, annual incentive compensation plan and other
executive compensation plans. In addition, the Compensation
Committee considers proposals with respect to the creation of and
changes to executive compensation plans and reviews appropriate
criteria for establishing performance targets and determining annual
corporate and executive performance ratings. The policies and
mission of the Compensation Committee are set forth in the
"Compensation Committee Report on Executive Compensation," which
begins on page 13 of this Proxy Statement.
Director Compensation
Each member of the Board of Directors is reimbursed for the usual
and ordinary expenses of meeting attendance. Employee Directors
receive no additional compensation for serving on the Board of
Directors or committees thereof. Pursuant to the Company's 1995
Compensation Plan for Non-Employee Directors, non-employee Directors
receive an annual retainer of $60,000, with $10,000 of said amount
required to be paid in deferred shares of Common Stock (plus a
conversion premium), and the remaining $50,000 to be paid, at the
option of the Director, in cash, deferred cash or deferred shares of
Common Stock (plus a conversion premium) or a combination thereof.
Each non-employee Director receives a retirement benefit credit in
the form of deferred shares of Common Stock equal to the annual
retainer (without the conversion premium) pursuant to the Company's
1995 Compensation Plan for Non-Employee Directors. Each non-employee
Director receives a stock option grant of 3,000 options under the
Company's Stock Option Plan for Non-Employee Directors upon initial
election to the Board of Directors and an annual stock option grant
of 2,000 options upon each re-election to the Board of Directors.
<PAGE>
As part of its overall program to support charitable organizations,
the Company has a Director Charitable Award Plan. The plan provides
for the designation of up to four charitable organizations to
receive a maximum of $1,000,000 in the aggregate upon the death of
each Director participant. Pursuant to the plan, each Director is
entitled to participate upon the completion of two consecutive years
of service on the Board of Directors. Currently, all Directors
other than Mr. Braniff are eligible to participate in the plan.
PROPOSALS
PROPOSAL NO. 1 - Election of Directors
In accordance with the Company's By-laws, the Board of Directors has
fixed at eight the number of Directors constituting the full Board
of Directors. The Company proposes to elect eight Directors, each
to hold office for a term of one year and until his successor has
been duly elected and shall qualify. With the exception of broker
non-votes and unless otherwise instructed by stockholders, the
persons named on the enclosed proxy card will vote the shares of
Common Stock represented by such proxy "for" the election of the
eight nominees named in this Proxy Statement. However, if any of
the named nominees should be unavailable for election, the Board of
Directors may substitute nominees, in which event the shares of
Common Stock represented by proxy will be voted "for" such
substitute nominees unless an instruction to the contrary is
contained on the proxy card. No circumstances are presently known
which would render any nominee named herein unavailable to serve as
a member of the Board of Directors. Pursuant to the Company's By-
laws, the election of each Director requires an affirmative vote of
a plurality of the shares of Common Stock represented at the Annual
Meeting in person or by proxy and entitled to vote on the proposal.
Holders of Common Stock may not cumulate their votes for the
election of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE ELECTION OF EACH OF THE NOMINEES NAMED BELOW.
Each of the following nominees is currently a Director of the Company:
Name, Principal Occupation
and Other Selected Information
Concerning Nominees for Director
BYRON ALLUMBAUGH Director since 1992
Retired.
Age - 67
Member - Compensation Committee
Mr. Allumbaugh has been retired since February 1, 1997. From February
1996 to February 1997, Mr. Allumbaugh was Chairman of the Board of Ralphs
Grocery Company. He served as Chief Executive Officer of Ralphs Grocery
Company from June 1995 until February 1996. From 1976 to 1995, Mr.
Allumbaugh served as Chairman of the Board and Chief Executive
Officer of Ralphs Grocery Company. Mr. Allumbaugh is a member of
the Board of Directors of CKE Restaurants, Inc. and Ultramar Diamond
Shamrock Inc.
<PAGE>
JUAN CARLOS BRANIFF Director since 1997
Deputy Chief Executive Officer of Service Banking,
BANCOMER,
Mexico City, Mexico - Commercial Banking Institution.
Age - 41
Member - Audit Committee
Mr. Braniff has served as the Deputy Chief Executive Officer of Service
Banking at BANCOMER since September 1994. He served as Executive Vice
President of Capital Investments and Mortgage Banking of BANCOMER from
December 1991 to September 1994. For more than five years prior to that
date he held several positions in the real estate, corporate finance and
brewing division of Valores Industriales, S.A.-Fomento Economico Mexicano,
S.A. de C.V. ("FEMSA") and its affiliates. Mr. Braniff is currently a
member of the Board of Directors of FEMSA, S.A. de C.V., Coca Cola
FEMSA, S.A. de C.V. and Grupo Financiero Bancomer.
PETER T. FLAWN, Ph.D. Director since 1997
Retired.
Age - 73
Member - Audit Committee
Dr. Flawn has been retired since 1985. He was President ad interim of
The University of Texas at Austin from July 1, 1997 until April 15,
1998. For more than five years prior to his retirement, Dr. Flawn was
President of The University of Texas at Austin and currently holds the
title of President Emeritus. He is a member of the Board of Directors
of Harte-Hanks, Inc. and Hester Capital Management, L.L.C.
JAMES F. GIBBONS, Ph.D. Director since 1994
Professor, Electrical Engineering,
Stanford University,
Stanford, California - Higher Education.
Age - 67
Member - Compensation Committee
Dr. Gibbons has been on the faculty of Stanford University since 1957
and was Dean of the School of Engineering from September 1984 until
June 1996. Currently, he is Professor of Electrical Engineering
and special counsel to the President for Industry Relations at Stanford
University. He is a member of the Board of Directors of Centigram
Communications Corporation, Cisco Systems, Inc., Lockheed Martin
Corporation and Raychem Corporation.
BEN F. LOVE Director since 1992
Investor.
Age - 74
Chairman - Compensation Committee
Since December 1989, Mr. Love's principal occupation has been as a
private investor. For more than five years prior to that date, Mr. Love
was Chairman of the Board and Chief Executive Officer of Texas Commerce
Bancshares, Inc. He is a member of the Board of Directors of Mitchell
Energy & Development Corp.
<PAGE>
KENNETH L. SMALLEY Director since 1992
Retired.
Age - 69
Chairman - Audit Committee
Mr. Smalley has been retired since February 1992. For more than five
years prior to that date, Mr. Smalley was a Senior Vice President of
Phillips Petroleum Company and President of Phillips 66 Natural Gas
Company, a Phillips Petroleum Company subsidiary. He is a member of the
Board of Directors of El Paso Tennessee Pipeline Co.
MALCOLM WALLOP Director since 1995
President,
Frontiers of Freedom Foundation,
Arlington, Virginia - Political Foundation.
Age - 66
Member - Audit Committee
Since January 1995, Mr. Wallop's principal occupation has been President
of Frontiers of Freedom Foundation. For eighteen years prior to that
date, Mr. Wallop was a member of the United States Senate. He is a
member of the Board of Directors of Hubbell Inc., Sheridan State Bank and
Leviathan Gas Pipeline Company, the general partner of Leviathan Gas
Pipeline Partners, L.P.
WILLIAM A. WISE Director since 1984
Chairman of the Board, President
and Chief Executive Officer,
El Paso Energy Corporation,
Houston, Texas - Diversified Energy Company.
Age - 53
Mr. Wise has been Chairman of the Board of the Company since January 1994
and Chief Executive Officer of the Company (the "CEO") since January
1990. Mr. Wise has been President of the Company from January 1990 to
April 1996 and from July 1998 to present. He was President and Chief
Operating Officer of the Company from April 1989 to December 1989. From
March 1987 to April 1989, Mr. Wise was an Executive Vice President of the
Company. From January 1984 to February 1987, he was a Senior Vice
President of the Company. He is a member of the Board of Directors of
Battle Mountain Gold Company and is Chairman of the Board of El Paso
Tennessee Pipeline Co. and Leviathan Gas Pipeline Company, the general
partner of Leviathan Gas Pipeline Partners, L.P.
<PAGE>
SECURITY OWNERSHIP OF A CERTAIN BENEFICIAL OWNER AND MANAGEMENT
The following table sets forth certain information as of February 1, 1999,
regarding the beneficial ownership of Common Stock by (i) each Director of the
Company, (ii) the Company's Chief Executive Officer and the four other most
highly compensated executives officers in the last fiscal year (together, the
"named executives"), (iii) all Directors and executive officers of the Company
as a group, and (iv) each person or entity known by the Company to own
beneficially more than 5% of its outstanding shares of Common Stock. No
family relationship exists between any of the Directors and executive officers
of the Company.
<TABLE>
<CAPTION>
Beneficial
Ownership
excluding Stock Percent
Title of Class Name options)(1) Options(3) Total of Class
-------------- ---- ------------ ----------- --------- --------
<S> <C> <C> <C> <C> <C>
Common Stock Morgan Stanley,
Dean Witter,
Discover & Co.
1585 Broadway,
38th Floor
New York, NY 10036.... 8,196,634 0 8,196,634 6.71%
Common Stock B. Allumbaugh......... 25,417 18,000 43,417 *
Common Stock J.C. Braniff.......... 2,361 8,000 10,361 *
Common Stock P.T. Flawn............ 7,013 10,000 17,013 *
Common Stock J.F. Gibbons.......... 15,816 16,000 31,816 *
Common Stock B.F. Love............. 42,921 4,000 46,921 *
Common Stock K.L. Smalley.......... 28,763 14,000 42,763 *
Common Stock M. Wallop............. 9,654 14,000 23,654 *
Common Stock W.A. Wise............. 1,295,980(2) 1,275,356 2,571,336 2.08%
Common Stock H.B. Austin........... 217,064 229,676 446,740 *
Common Stock R.O. Baish............ 216,189 137,466 353,655 *
Common Stock J.W. Somerhalder II... 200,756 213,132 413,888 *
Common Stock B. White Jr........... 209,006 199,466 408,472 *
Common Stock Directors and
executive officers
as a group (17,persons
total,including those
individuals listed
above)................. 3,443,165 2,797,278 6,240,443 4.99%
__________
<FN>
* Less than 1%
(1) Directors and executive officers have sole voting and investment power over the shares
of Common Stock reflected in the table above, except that each of Messrs.
Allumbaugh, Gibbons, Wise, Austin and White shares with one or more other individuals
voting and investment power with respect to 4,575, 2,000, 11,694, 318 and 2,000 shares
of Common Stock, respectively. Some shares of Common Stock reflected in this column for
certain individuals are subject to restrictions. As of December 31, 1998,
Morgan Stanley, Dean Witter, Discover & Co. had shared voting power over 8,155,681
shares of Common Stock and shared dispositive power over 8,196,634 shares of
Common Stock.
(2) Mr. Wise's beneficial ownership excludes 400 shares of Common Stock owned by his children
under the Uniform Gifts to Minors Act, of which Mr. Wise disclaims beneficial
ownership.
(3) The Directors and executive officers have the right to acquire the shares of Common
Stock reflected in this column within 60 days of February 1, 1999, through the
exercise of stock options and/or tandem stock appreciation rights ("SARs").
</FN>
</TABLE>
EXECUTIVE COMPENSATION
Compensation of Executive Officers
The following table sets forth information
concerning compensation awarded to, earned by or
paid to any person serving as the Company's CEO or
acting in a similar capacity during the last
completed fiscal year, and the named executives
for services rendered to the Company and its
subsidiaries in all capacities during each
of the last three fiscal years. The table also
identifies the principal capacity in which each of
the named executives served the Company at the end
of fiscal year 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------- --------------------------------
Awards Payouts
---------------------- --------
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Awards Options Payouts Compensation
Position Year ($) ($)(2) ($)(3) ($)(4) (#) ($)(6) ($)(7)
- ------------------ ---- ------ ---------- ----------- ---------- -------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William A. Wise 1998 -- $1,600,000 $152,939 $1,599,985 98,000 -- $105,227
Chairman, 1997 -- $1,105,000 $203,182 $1,104,971 -- -- $106,209
President & CEO 1996 --(1) $1,275,000 $124,967 $3,537,481(5) 395,000 $740,000 $ 69,731
H. Brent Austin 1998 $305,417 $ 438,000 $ 201 $ 437,972 26,250 -- $ 32,410
Executive Vice 1997 $300,000 $ 330,000 $ 93,435 $ 329,970 -- -- $ 36,150
President & Chief 1996 $228,125 $ 450,000 $ 178 $ 149,987 60,000 $176,658 $ 22,855
Financial Officer
Richard Owen Baish 1998 $302,500 $ 396,000 $ 590 $ 395,987 26,250 -- $ 37,034
President, El Paso 1997 $300,000 $ 472,500 -- -- -- -- $ 39,382
Natural Gas Company 1996 $228,125 $ 450,000 -- $ 149,987 60,000 $176,658 $ 29,826
John W. Somerhalder II 1998 $302,500 $ 396,000 $ 575 $ 395,987 25,250 -- $ 30,335
President, 1997 $300,000 $ 330,000 $ 578 $ 329,970 -- -- $ 34,837
Tennessee Gas 1996 $206,458 $ 450,000 $ 15,597 $ 149,987 60,000 $154,927 $ 19,664
Britton White Jr. 1998 $279,584 $ 396,000 $ 284 $ 395,987 26,250 -- $ 32,774
Executive Vice 1997 $275,000 $ 302,500 $ 34,899 $ 302,472 -- -- $ 35,219
President & 1996 $203,125 $ 412,500 $ 223 $ 137,472 60,000 $133,145 $ 20,550
General Counsel
<FN>
(1) Mr. Wise's base salary was eliminated in 1996 and replaced with long-term awards of
stock options and restricted stock, the majority of which vest only after the
expiration of specified time periods and only if certain performance targets are met
within those periods. This change was consistent with Company-wide cost reduction
initiatives and was intended to align Mr. Wise's compensation more directly with
stockholder value.
(2) Except for a small amount of cash payable for a fractional share of Common Stock, the
value reflected represents the value of restricted Common Stock awarded to each of the
named executives for their incentive bonus. Pursuant to the Company's 1995 Incentive
Compensation Plan, the named executives are required to receive a substantial part of
their annual bonus in restricted Common Stock. The amounts reflected in this column
represent a combination of the market value of the restricted Common Stock and cash
awarded under that plan. Dividends are paid directly to the holders of the restricted
Common Stock during the four-year vesting schedule. The amounts reflected for 1996
include an additional one-time cash bonus awarded under the Company's 1995 Incentive
Compensation Plan in recognition of the extraordinary accomplishments achieved
during 1996.
(3) The amount reflected for Mr. Wise in fiscal year 1998 includes, among other things,
$90,000 for a perquisite and benefit allowance and $36,088 in value attributed to
use of the Company's aircraft. In fiscal year 1997, the amount for Mr. Wise includes,
among other things, a tax gross-up associated with his relocation to Houston
and $85,167 for a perquisite and benefit allowance. The amount reflected for Mr.
Wise for fiscal year 1996 includes a $48,000 perquisite and benefit allowance and a one-
time living allowance in the amount of $45,833 paid prior to the compensation
changes discussed in Note 1 above. The amounts reflected for fiscal year 1997 for
the other named executives, except for Messrs. Baish and Somerhalder, are tax
gross-ups associated with their relocation to Houston. The aggregate value of the
perquisites and other personal benefits received by the other named executives in
fiscal years 1998, 1997 and 1996 have not been reflected because the amounts were
below the Securities and Exchange Commission's (the "SEC") required reporting
threshold.
(4) The Company's 1995 Incentive Compensation Plan provides for and encourages
participants to elect to take the cash portion of their annual bonus award in
shares of restricted Common Stock. The amounts reflected in this column include the
market value of restricted Common Stock on the date of grant, subject to a four-year
vesting schedule, received by each of the named executives pursuant to such election.
The total shares of restricted Common Stock, including those shares reflected in this
column, held on December 31, 1998 by Messrs. Wise, Austin, Baish, Somerhalder and White
was 978,876, 175,096, 164,296, 167,732, and 166,080, respectively. The aggregate dollar
value on December 31, 1998, of all shares of restricted Common Stock held by Messrs.
Wise, Austin, Baish, Somerhalder and White was $34,077,121, $6,095,530, $5,719,555,
$5,839,170 and $5,781,660, respectively. Dividends are paid directly to the holders
of the restricted Common Stock. Most of the foregoing values can be realized by the
named executives if, and only if, they remain employees of the Company for the
specified time period and the Company's stockholders realize the required total
stockholder value during the specified time period.
(5) The amount reflected for Mr. Wise also includes the market value of a one-time
retention oriented restricted Common Stock grant of 200,000 shares, which began vesting
on January 19, 1997 at the rate of 20% per year for five years.
(6) The amounts in this column for fiscal year 1996 represent the market value of Common
Stock and/or cash paid as an interim payout of performance units ("PUs") under the
Company's 1995 Omnibus Compensation Plan. The interim payment was made in recognition
of the Company's total stockholder return in relation to that of its peer group of
companies during the first two years of the performance period. No named executive
received a long-term incentive plan payout from the Company during fiscal years 1997
and 1998.
(7) The compensation reflected in this column for fiscal year 1998 is comprised of Company
contributions to the Company's Retirement Savings Plan, supplemental Company
contributions under the Supplemental Benefits Plan and the above-market interest
earned on deferred compensation. Specifically, these amounts for fiscal year
1998 were $0, $88,536 and $16,690 for Mr. Wise; $7,200, $21,392 and $3,818 for Mr.
Austin; $7,200, $21,263 and $8,572 for Mr. Baish; $7,200, $21,261 and $1,874 for Mr.
Somerhalder; and $7,200, $18,993 and $6,582 for Mr. White, respectively.
</FN>
</TABLE>
Stock Option Grants
The following table sets forth the number of
stock options granted at fair market value to each
of the named executives during the fiscal year
1998. In satisfaction of applicable SEC
regulations, the table further sets forth the
potential realizable value of such stock options
in the year 2008 (the expiration date of the stock
options) at arbitrarily assumed annualized rates
of stock price appreciation of 5% and 10% over the
full ten-year term of the stock options. As the
table indicates, the annualized stock price
appreciation of 5% and 10% will result in stock
prices in the year 2008 of approximately $57.67
and $91.83, respectively. The amounts shown in
the table as potential realizable values for all
stockholders' stock (approximately $2.7 billion
and $6.8 billion), represent the corresponding
increases in the market value of 121,645,011
shares of the Common Stock outstanding as of
December 31, 1998. No gain to the named
executives is possible without an increase in
stock price, which would benefit all stockholders
proportionately. Actual gains, if any, on stock
option exercises and Common Stock holdings are
dependent on the future performance of the Common
Stock and overall stock
market conditions. There can be no assurances
that the potential realizable values shown in this
table will be achieved.
Option Grants in 1998
<TABLE>
<CAPTION
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Individual Grants (1) Appreciation for Option Term
___________________________________________ _____________________________________
_______________ ______________
Number of % of Total If Stock Price If Stock Price
Securities Options at $57.67 at $91.83
Underlying Granted to Exercise in 2008 in 2008
Options Employees Price Expiration _____________ _____________
Name Granted(#) in 1998 ($/Share) Date 5% ($) 10% ($)
------ ---------- ---------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
All Stockholders'
Stock Appreciation N/A N/A N/A N/A $2,708,645,177 $6,864,238,688
William A. Wise 98,000 4.23% $35.40625 7/24/08 $ 2,182,146 $ 5,529,988
H. Brent Austin 26,250 1.13% $35.40625 7/24/08 $ 584,504 $ 1,481,247
Richard Owen Baish 26,250 1.13% $35.40625 7/24/08 $ 584,504 $ 1,481,247
John W. Somerhalder II 26,250 1.13% $35.40625 7/24/08 $ 584,504 $ 1,481,247
Britton White Jr. 26,250 1.13% $35.40625 7/24/08 $ 584,504 $ 1,481,247
_________
<FN>
(1) The stock options granted in 1998 by the Company to the named executives are not
immediately exercisable. Each grant will become exercisable on the first anniversary
of the date of grant thereof. There were no SARs granted in 1998. Any unvested stock
options become fully exercisable in the event of a "change in control" (see page 16
of this Proxy Statement for a description of the Company's 1995 Omnibus Compensation Plan
and the definition of the term "change in control"). Under the terms of the Company's
1995 Omnibus Compensation Plan, the Compensation Committee may, in its sole
discretion and at any time, change the vesting of the stock options. Certain non-
qualified stock options may be transferred to immediate family members, directly or
indirectly or by means of a trust, corporate entity or partnership. Further, stock
options are subject to forfeiture and/or time limitations in the event of a
termination of employment. Upon termination of employment for certain reasons, all stock
options and SARs held by Mr. Wise vest immediately according to his letter
agreement dated January 13, 1995 (as described on page 15 of this Proxy
Statement).
</FN>
</TABLE>
Option Exercises and Year-End Value Table
The following table sets forth information concerning option exercises and
the fiscal year-end values of the unexercised stock options (and SARs),
provided on an aggregate basis, for each of the named executives.
AGGREGATED OPTION/SAR EXERCISES IN 1998
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Shares Options/SARs at Fiscal Money Options/SARs at Fiscal
Acquired Value Year-End (#) Year-End ($) (2)
on Exercise Realized -------------------------- ----------------------------
Name # ($) (1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William A. Wise 0 $ 0 1,173,184 572,000 $23,719,943 $8,501,063
H. Brent Austin 0 $ 0 203,010 66,250 $ 3,831,066 $ 716,249
Richard Owen Baish 100,000 $2,212,813 110,800 66,250 $ 2,020,701 $ 716,249
John W. SomerhalderII 9,000(3) $ 177,750 186,466 66,250 $ 3,476,310 $ 716,249
Britton White Jr. 0 $ 0 172,800 66,250 $ 3,086,201 $ 716,249
_________
<FN>
(1) The figures presented in this column have been calculated based upon the difference
between the fair market value of the securities underlying each stock option/SAR
on the date of exercise and its exercise price.
(2) The figures presented in these columns have been calculated based upon the difference
between $34.15625, the fair market value of the Common Stock on December 31, 1998, for
each in-the-money stock option/SAR, and its exercise price. No cash is realized until
the shares received upon exercise of an option are sold. Mr. Wise has tandem SARs
attached to some of his stock options. If his stock options are exercised, the tandem
SARs expire and vice versa. The exercise of a tandem SAR would have a market value
equivalent to the exercise of a stock option.
(3) Mr. Somerhalder exercised stock options pursuant to a qualified domestic relations
order for a former spouse.
</FN>
</TABLE>
PENSION PLAN
Set forth below is a table describing the Company's Pension Plan
in which the named executives, as well as other Company employees,
may be entitled to participate. The following table lists current
annual retirement benefits payable under the Pension Plan and the
Company's Supplemental Benefits Plan (collectively, the "Plans") for
the assumed average annual earnings and years of credited service
shown for a participant retiring at the normal retirement age of 65.
Under the Pension Plan and applicable Internal Revenue Code ("IRC")
provisions, compensation in excess of $160,000 cannot be taken into account
and the maximum payable benefit in 1998 is $130,000. Any excess
benefits otherwise accruing under the Pension Plan are payable under
the Supplemental Benefits Plan.
Estimated annual benefit levels under the Plans, based on earnings
and years of credited service at the normal retirement age, are
reflected in the following table:
PENSION PLAN TABLE
Years of Service at Normal Retirement Age
Final Average ________________________________________________
Pension Earnings 15 20 25 30
---------------- ------- --------- -------- -------
$ 400,000........ 94,185 125,580 156,975 188,370
$ 800,000........ 190,185 253,580 316,975 380,370
$1,200,000......... 286,185 381,580 476,975 572,370
$1,600,000......... 382,185 509,580 636,975 764,370
$1,900,000......... 454,185 605,580 756,975 908,370
$2,100,000......... 502,185 669,580 836,975 1,004,370
$2,300,000......... 550,185 733,580 916,975 1,100,370
$2,500,000......... 598,185 797,580 996,975 1,196,370
Benefits which accrue under the Plans are
based upon the gross salary amount of each
individual, including base incentive bonus
amounts, but excluding all commissions and other
compensation or benefits of any kind (including
risk premium restricted stock, as described on
page 17 of this Proxy Statement). For the named
executives, the amounts reflected in the Salary
and Bonus columns of the "Summary Compensation
Table" are considered to calculate benefits under
the Plans. The Pension Plan formula for
retirement at age 65 is 1.1% of the highest five-
year average earnings, plus 0.5% of the highest
five-year average earnings in excess of one-third
of the FICA taxable wage base in effect during the
year of termination, times the number of years of
credited service up to a maximum of 30 years.
There is no deduction for Social Security amounts
paid; however, an early retirement supplement
equal to 1% of the highest five-year average
earnings up to one-third of the FICA taxable wage
base in effect in the year of termination, times
the number of years of credited service up to a
maximum of 30 years, is payable from retirement
until age 62. Both the basic benefit and the
early retirement supplement are reduced by 2% for
each year the participant's actual retirement date
precedes the date the participant would have
attained age 65, or the date the participant could
have retired after attaining age 60 with 30 years
of credited service, if earlier. Years of
credited service under the Pension Plan at age 65
for Messrs. Wise, Austin, Baish, Somerhalder and
White are 30, 30, 30, 30, and 25 (including 7
years of credited service pursuant to Mr. White's
employment agreement, which is described on page
16 of this Proxy Statement), respectively.
Effective January 1, 1997, the Company
amended its noncontributory defined benefit
Pension Plan to determine benefits by a cash
balance formula in which the named executives, as
well as other Company employees, may be entitled
to participate. During a five-year transition
period, ending December 31, 2001, eligible
participants will continue to accrue a minimum
benefit under the previous formula, as described
above. On December 31, 2001, this benefit will be
frozen. The actual benefit paid to participants
with a minimum benefit will be the greater of the
minimum benefit and the cash balance benefit.
Under the cash balance formula, each participant
has a cash account which is credited quarterly
with a percentage of earnings. The annual
percentage is based on a combination of age and
service as shown below:
If age plus pay credit
service on the preceding The applicable annual %
December 31 is: of earnings is:
----------------------- ------------------------
Under 35.............. 4%
35 through 49......... 5%
50 through 64......... 6%
65 or over............ 7%
At the end of each quarter, accounts are
also credited with interest applied to the
beginning quarter balance. Participants, who were
participants on December 31, 1996 and eligible
employees on January 1, 1997, were credited with
an initial cash balance equivalent to accrued
benefits on December 31, 1996.
Estimated annual benefits payable upon
retirement at the normal retirement age for each
of the named executives is reflected below (based
on assumptions that each named executive receives
no pay increases, receives maximum bonuses and
cash balances are credited with interest at a rate
of 3% per annum):
Estimated Annual
Name Benefit
---- ----------------
William A. Wise...............$1,144,769
H. Brent Austin...............$ 202,191
Richard Owen Baish............$ 304,440
John W. Somerhalder II........$ 258,588
Britton White Jr..............$ 196,562
<PAGE>
PERFORMANCE GRAPHS
The following graphs show the changes in the
value of $100 invested since December 31, 1993 and
since March 12, 1992 (the date on which the
Common Stock was initially offered to the public),
respectively, in the Common Stock, the Standard &
Poor's Natural Gas Index and the Standard & Poor's
500 Stock Index.
The Company has made previous filings and
may make future filings under the Securities Act of
1933, as amended, or the Securities Exchange Act
of 1934, as amended, that incorporate future
filings, including this Proxy Statement, in whole
or in part. However, the following Performance
Graphs and the Compensation Committee Report
on Executive Compensation shall not be incorporated
by reference into any such filings.
COMPARISON OF ANNUAL CUMULATIVE TOTAL VALUES FROM 1993-1998
FOR THE COMPANY, THE S&P NATURAL GAS INDEX
AND THE S&P 500 STOCK INDEX
[GRAPH INSERTED HERE]
- ----------------------------------------------------------------------
12/93 12/94 12/95 12/96 12/97 12/98
- ----------------------------------------------------------------------
[S] [C] [C] [C] [C] [C] [C]
The Company $100.0 $ 87.9 $ 86.8 $157.5 $212.6 $227.5
- ----------------------------------------------------------------------
S&P Natural Gas Index $100.0 $ 95.4 $134.9 $179.3 $211.6 $232.2
- ----------------------------------------------------------------------
S&P 500 Stock Index $100.0 $101.3 $139.4 $171.4 $228.6 $293.9
- ----------------------------------------------------------------------
COMPARISON OF ANNUAL CUMULATIVE TOTAL VALUES FROM 1992-1998
FOR THE COMPANY, THE S&P NATURAL GAS INDEX
AND THE S&P 500 STOCK INDEX
[GRAPH INSERTED HERE]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
3/12/92 12/92 12/93 12/94 12/95 12/96 12/97 12/98
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Company $100.0 $167.6 $200.4 $176.1 $173.9 $315.6 $426.0 $455.8
- ----------------------------------------------------------------------------------------
S&P Natural Gas Index $100.0 $122.6 $145.6 $138.9 $196.4 $261.0 $308.0 $337.9
- ----------------------------------------------------------------------------------------
S&P 500 Stock Index $100.0 $108.3 $119.2 $120.7 $166.1 $204.3 $272.4 $350.3
- ----------------------------------------------------------------------------------------
</TABLE>
The annual values of each investment are based on the
share price appreciation and assumes cash dividend
reinvestment. The calculations exclude any applicable
brokerage commissions and taxes. Cumulative total
stockholder return from each investment can be calculated
from the annual values given above.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
The Company's executive officer compensation
program is administered and reviewed by the
Compensation Committee. The Compensation
Committee consists of Messrs. Allumbaugh, Gibbons
and Love. The Compensation Committee has neither
interlocks nor insider participation.
Policies and Mission
The Compensation Committee has determined
that the compensation program of executive
officers should not only be adequate to attract,
motivate and retain competent executive personnel,
but should also be directly and materially related
to the short-term and long-term objectives and
operating performance of the Company. To achieve
these ends, executive compensation (including base
salary, year-end bonus, restricted stock awards,
stock option grants and other long-term incentive
awards) is, to a significant extent, dependent
upon the Company's financial performance and the
return on its Common Stock. However, to ensure
that the Company is strategically and
competitively positioned for the future, the
Compensation Committee also has the discretion to
attribute significant weight to other factors in
determining executive compensation, such as
maintaining competitiveness, implementing capital
improvements, expanding markets, pursuing growth
opportunities and achieving other long-range
business and operating objectives.
In order to determine appropriate levels of
executive compensation, the Compensation Committee
periodically conducts a thorough competitive
evaluation, reviews proprietary and proxy
information, and consults with and receives advice
from an independent compensation consulting firm.
The Compensation Committee also considers relevant
industry and market changes when evaluating the
Company's performance as well as each individual
executive's performance. The independent
consulting firm provides data and information that
compares the Company with a peer group of
companies for evaluation purposes. The peer group
consists of a majority of the companies included
in the S&P Natural Gas Index (reflected in the
Performance Graphs found on page 12 of this Proxy
Statement) along with certain additional companies
which the consulting firm and the Compensation
Committee believe represent the Company's most
direct competition for executive talent.
A primary mission of the Compensation
Committee is to ensure that each executive
officer's compensation is directly related to the
performance of the Company and its Common Stock,
and the performance of the individual executive
officer. Toward that end, the Compensation
Committee has established an executive
compensation program with a strong performance-
based orientation. In particular, the
Compensation Committee has determined, in
consultation with the independent consulting firm,
that the value of long-term incentive awards for
executive officers, including the CEO, should be
targeted in the top one-half of the peer group.
These long-term incentive awards should tie
directly to the performance of the Common Stock
and consist of approximately 50% in stock options
and 50% in PUs. With respect to cash
compensation, the base salary of executive
officers is targeted at or near the 50th
percentile of the peer group (described above).
Total cash compensation under the Company's
current plans can reach approximately the 90th
percentile of such peer group with the year-end
incentive bonuses ranging from 0% to 160% of base
salary for the CEO and from 0% to 120% for the
other named executives. Based on objectives
established each year, the Compensation Committee
determines the specific percentage bonus to be
awarded to each recipient based upon both the
Company's and the individual executive's
performance. Mr. Wise's employment agreement, as
described on page 15 of this Proxy Statement,
does not affect the amount of his compensation.
Mr. Wise's compensation and benefits are
determined under Company plans and programs in
effect from time to time in accordance with the
policies described above. However, the Company
entered into a letter agreement with Mr. Wise to
eliminate his base salary and other cash
compensation and to encourage him to elect
(pursuant to terms of the applicable Company
plans) to have all incentive awards payable in
shares of restricted Common Stock. As a result,
Mr. Wise's employment agreement was amended to
establish an illustrative base salary for certain
of the Company's benefits and welfare plans. See
page 15 of this Proxy Statement for a
description of the letter agreement and the
employment agreement with Mr. Wise. None of the
other named executives received compensation
governed or affected by employment agreements.
Section 162(m) of the IRC ("Section 162(m)")
was enacted in 1993 and generally affects the
Company's federal income tax deduction for
compensation paid to the Company's CEO and four
other highest paid executive officers. To the
extent compensation is "performance-based" within
the meaning of Section 162(m), the Section's
limitations will not apply. In 1995, the Board of
Directors adopted, and the stockholders approved,
certain Company compensation plans which were
structured to qualify as performance-based
compensation under Section 162(m). In addition to
requiring and encouraging stock ownership by
Company executives, these plans are designed to
allow the Compensation Committee to provide
appropriate compensation when certain performance
goals have been achieved. The Compensation
Committee awards under the Company plans during
1998 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 the Company's CEO and
other executive officers will not meet the
standards of deductibility under 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.
Company Performance and Chief Executive Officer
Compensation
The Compensation Committee reviewed the
Company's 1998 financial goals (consisting of
earnings before interest and taxes, earnings per
share, return, cash flow and operating and
maintenance cost objectives) and the Company's
1998 non-financial goals, consisting of achieving
certain progress in the regulatory segment
(primarily the recontracting effort of Tennessee
Gas Pipeline Company capacity and developing new
opportunities for El Paso Natural Gas Company in
Mexico); optimizing and rationalizing assets in
the field services segment; increasing margin
contributions from certain restructurings in the
marketing segment; restructuring certain holdings
of the international segment in South America; and
certain operating matters (primarily safety
goals), and this Committee hereby certifies that
this Company has attained the necessary
performance goals for the 1998 performance period
to make incentive awards under the Company's 1995
Incentive Compensation Plan or the Company's 1995
Omnibus Compensation Plan, as applicable.
Although the attainment of all performance targets
is not required, all such performance targets are
evaluated to determine the maximum incentive award
opportunity in a given year and what incentive
awards are actually made. The Compensation
Committee does not assign relative weights to each
of the factors and criteria used in determining
executive compensation. Moreover, any publication
of sensitive and proprietary quantifiable targets
and other specific goals for both the Company and
the CEO which are established and applied each
year could adversely affect the Company.
The Compensation Committee, consistent with
its policies and mission, applied the information
and performance factors for 1998 to determine the
appropriate compensation for Mr. Wise and other
executive officers. Mr. Wise's accomplishments
during 1998 resulted in a successful year that was
full of challenges, including final integration of
the El Paso/Tenneco organizations, pursuing and
closing significant acquisitions such as DeepTech
International Inc./Leviathan Gas Pipeline
Partners, L.P., and KLT Power, Inc., developing
several strategic international projects,
restructuring the marketing function and
implementing expansion projects. In 1998, Mr.
Wise displayed exceptional foresight and
responsiveness to rapidly changing industry-wide
and general economic conditions by continuing to
leverage the Company's expertise and assets
through a carefully planned strategic growth
program. These achievements, along with his
implementation of innovative marketing strategies
for excess pipeline capacity and continued
operating efficiencies, resulted in a successful
year for the Company and its stockholders. Having
reviewed the contribution that Mr. Wise made
to the Company's performance in 1998, the
Compensation Committee believes that he continues
to demonstrate the motivational, planning and
leadership qualities that the executive
compensation program was designed to foster and
reward.
In recognition of Mr. Wise's overall
performance and his responsibility for the
Company's exceptional successes during 1998, the
Compensation Committee determined that he should
receive the highest rating, and awarded him the
maximum incentive bonus available under the
incentive award opportunity discussed above (160%
of illustrative base salary). In support of the
Compensation Committee's long-term compensation
mission to provide competitive compensation
incentives to retain and motivate executive
officers, Mr. Wise was granted 98,000 stock
options. The number of options granted to Mr. Wise
and the other named executives was determined in
accordance with the targets and formulas
recommended by the Company's independent
consulting firm, as described in more detail
above. The Compensation Committee, in
consultation with the independent consulting firm,
adjusted the Mr. Wise's illustrative base salary
to $1,000,000 (though not paid to Mr. Wise,
the base salary is used to determine other Company
benefits) to remain competitive for executive
talent.
Compensation of Other Executive Officers
The Compensation Committee, in consultation
with the independent consulting firm, applied the
information and performance factors outlined above
in reviewing and approving the compensation of the
Company's other executive officers. This process
resulted in a determination that, based upon
individual performance and their significant
individual contributions to overall Company
performance during the fiscal year 1998, each of
the other four named executive officers should be
awarded the maximum incentive bonus available
under the incentive award opportunity discussed
above (120% of base salary). Stock options were
granted in 1998 to executive officers to provide
continuing incentives for future performance. The
number of options granted to such executives was
determined in accordance with the targets and
formulas recommended by the Company's independent
consulting firm, as described in more detail
above. Base salaries were adjusted for the other
named executive officers, determined in
consultation with the independent consulting firm,
to remain competitive for executive talent.
The 1998 Compensation Committee of the Board of
Directors
Byron Allumbaugh James F. Gibbons Ben F. Love
(Member) (Member) (Chairman)
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE IN CONTROL ARRANGEMENTS
The Company entered into an employment
agreement with Mr. Wise effective July 31, 1992.
The term of the agreement is three years from its
initial effective date and is automatically
renewed at the end of every month (re-establishing
a three-year term on the first of each month),
unless either party notifies the other that it
elects not to extend the term of the agreement.
Mr. Wise's compensation and benefits are
determined under Company plans and programs in
effect from time to time. If Mr. Wise's
employment is terminated involuntarily, without
cause, or is voluntarily terminated by Mr. Wise
for "good reason" (as defined in the Severance
Plan, which is discussed below), Mr. Wise will
receive his salary, bonus (equal to fifty percent
of the maximum bonus opportunity in effect at the
time of termination, but not less than fifty
percent of annual salary) and benefits through the
end of the term of the employment agreement.
Unless termination follows a "change in control"
(as defined in the Severance Plan), any continued
salary, bonus or benefits (not including defined
benefit pension plan payments) will be reduced by
comparable compensation from subsequent
employment. If Mr. Wise's employment is
terminated because of death, involuntary
termination for cause or is voluntarily terminated
by Mr. Wise other than for "good reason," Mr.
Wise's right to receive his salary shall terminate
on the date of termination of his employment and
his right to receive benefits will be determined
according to the terms of the Company's applicable
plans. Mr. Wise will also be entitled to pension
benefits under the terms of the Company's
Supplemental Benefits Plan, however, such pension
benefits will be based on one additional year of
"age" and "service" credit for each year of the
term. Upon termination of his employment, this
benefit will be funded through a trust. If Mr.
Wise's employment is terminated prior to the end
of the term, other than as a result of either a
"change in control" of the Company or his
voluntary termination of the agreement for "good
reason" pursuant to six months prior written
notice to the Company of such termination, Mr.
Wise will be subject to a noncompetition provision
through the end of the term. Any compensation and
benefits received by Mr. Wise under the Severance
Plan will offset obligations of a similar nature
under Mr. Wise's employment agreement. The
Company entered into a letter agreement with Mr.
Wise dated January 13, 1995, which provides that
in the event of termination of Mr. Wise's
employment due to death, retirement, permanent
disability, any other involuntary termination
without cause or any other voluntary termination
for "good reason," the restriction period for
restricted Common Stock held by Mr. Wise shall
lapse and all restrictions thereon shall end (but
only to the extent the performance targets have
been achieved on the performance-based restricted
Common Stock), and unvested stock options shall
become immediately exercisable, subject to
applicable law, for a period of thirty-six months,
unless such stock options expire sooner in
accordance with their terms. In order to squarely
align Mr. Wise's compensation with the interests
of the Company's stockholders, the Compensation
Committee replaced his salary with a long-term
incentive in the form of restricted Common Stock
(the majority of which will not vest unless
certain performance measures are attained and, in
that event, only after a certain specified time)
and a grant of stock options. As a result, Mr.
Wise's employment agreement was amended to
establish an illustrative base salary for certain
of the Company's benefits and welfare plans during
1996. During 1997, the Company loaned Mr. Wise
$1,564,000 for the purchase of his residence in
Houston in connection with the Company's
relocation. The loan and interest (at 6.8%)
thereon is payable at the end of ten years, or at
the time of Mr. Wise's retirement from the
Company, whichever is earlier. The loan is
secured by Mr. Wise's Houston residence. In the
event of a "change in control" (as defined in the
Severance Plan) and Mr. Wise meets all the
requirements for a severance benefit under the
Severance Plan, he will not be required to repay
the loan and accrued interest and he may be
entitled to a payment to cover any adverse tax
consequences (as provided in the Severance Plan).
The Company entered into a letter agreement
with Mr. White dated February 22, 1991, which
provides that Mr. White is entitled to additional
years of credited service with respect to pension
benefits which are payable under the Company's
Supplemental Benefits Plan if he remains employed
with the Company until the specified age set forth
in his letter agreement.
The Company has a Key Executive Severance
Protection Plan (the "Severance Plan") which
provides severance benefits following a "change in
control" (as defined below) of the Company for all
officers of the Company and certain of its
subsidiaries in an amount equal to three times
annual salary, including maximum bonus amounts as
specified in the plan. The Severance Plan also
provides for the continuation of life and health
insurance for a period of 18 months subsequent to
a participant's termination of employment
following a "change in control" of the Company, as
well as a supplemental pension payable under the
Company's Supplemental Benefits Plan calculated by
adding three years of additional credited pension
service and certain other benefits. Benefits are
payable under the Severance Plan for any
termination of employment within two years of the
date of a "change in control" of the Company,
except where termination is by reason of death,
disability, for cause or instituted by the
employee for other than "good reason." The
Severance Plan provides that certain additional
payments will be made to terminated participants
following a "change in control" of the Company if
the participant's payments are subjected to a
specified adverse excise tax. The Severance Plan
also provides that the Company will pay legal fees
and expenses incurred by a participant to enforce
rights or benefits under the plan. For purposes
of the Severance Plan, a "change in control" of
the Company is deemed to occur if (a) any person
or entity becomes the beneficial owner of 20% or
more of the Company's outstanding voting
securities, (b) any person or entity purchases the
Common Stock pursuant to a tender offer or
exchange offer, other than a tender offer or
exchange offer made by the Company, (c) the
stockholders of the Company approve a merger or
consolidation, a sale or disposition of all or
substantially all of the Company's assets or a
plan of liquidation or dissolution of the Company,
or (d) during any period of two consecutive years,
individuals who at the beginning of such period
constitute the Board of Directors cease for any
reason to constitute at least a majority thereof.
Notwithstanding the foregoing, a "change in
control" will not be deemed to have occurred if
the Company is involved in a merger, consolidation
or sale of assets which is in connection with a
corporate restructuring wherein stockholders of
the Company immediately before such transaction
own at least 80% of the combined voting power of
all outstanding classes of securities of the
company resulting from such transaction in
substantially the same proportion as their
ownership in the Company immediately prior to such
transaction.
The Company's 1995 Omnibus Compensation Plan
provides that stock options, SARs, limited stock
appreciation rights ("LSARs"), PUs and restricted
stock may be granted to officers and key employees
of the Company and its subsidiaries. The Plan
Administrator (as defined in the plan) determines
which employees are eligible to participate, the
amount of any grant and the terms and conditions
(not otherwise specified in the plan) of such
grant. Pursuant to the terms of the plan, if a
"change in control" of the Company occurs, all
outstanding stock options become fully
exercisable, SARs and LSARs become immediately
exercisable, designated amounts of PUs become
fully vested and all restrictions placed on awards
of restricted Common Stock automatically lapse.
For purposes of the plan, the term "change in
control" has the same meaning given such term in
the Severance Plan. This plan will be terminated,
except with respect to outstanding stock options,
SARs, LSARs, PUs and restricted stock, if
stockholders approve the 1999 Omnibus Incentive
Compensation Plan pursuant to Proposal No. 2.
The Company's Omnibus Compensation Plan,
which is the predecessor to the Company's 1995
Omnibus Compensation Plan, provided for the grant
of stock options, SARs, LSARs, performance share
units and restricted Common Stock to officers and
key employees of the Company and its subsidiaries.
Although this plan has been terminated with
respect to any new grants, certain stock options
and SARs remain outstanding thereunder. Pursuant
to the terms of the plan, if a "change in control"
of the Company occurs, all outstanding stock
options become fully exercisable and SARs become
immediately exercisable. For purposes of the
plan, the term "change in control" has the same
meaning given such term in the Severance Plan,
except that the definition does not contain the
exclusion dealing with mergers, consolidations or
sales of assets of the Company in connection with
a corporate restructuring of the Company.
Under the Company's 1995 Incentive
Compensation Plan, awards of cash and/or shares of
restricted Common Stock may be granted to eligible
officers of the Company and its subsidiaries. The
amount of awards available (subject to a plan
maximum and as established by the Plan
Administrator (as defined in the plan) per
participant annually) and the performance goals
upon which the awards are contingent are
determined by the Plan Administrator. Depending
upon the participant's position and the terms of
the grant, each participant is required to take
between 25% and 100% of the incentive award in
shares of restricted Common Stock, but any
participant may elect to receive the entire
incentive award in shares of restricted Common
Stock. A participant who receives any shares of
restricted Common Stock shall receive additional
shares of restricted Common Stock of an equal
amount because the participant bears the risk of
forfeiture, price fluctuation and other attendant
risks during the period in which the restrictions
apply ("risk premium restricted stock"). Pursuant
to the terms of the plan, if a "change in control"
of the Company occurs, the current year's maximum
incentive award for each officer becomes fully
payable within 30 days following such "change in
control." For purposes of the plan, the term
"change in control" has the same meaning given
such term in the Severance Plan. This plan will
be terminated, except with respect to outstanding
incentive awards and restricted stock, if
stockholders approve the 1999 Omnibus Incentive
Compensation Plan pursuant to Proposal No. 2.
The El Paso Energy Corporation Strategic
Stock Plan provides that stock options,
SARs, LSARs and shares of restricted Common
Stock may be granted to officers and key
employees of the Company and its
subsidiaries in connection with the
Company's strategic acquisitions. The Plan
Administrator (as defined in the plan)
determines which employees are eligible to
participate, the amount of any grant and the
terms and conditions (not otherwise
specified in the plan) of such grant.
Pursuant to the terms of the plan, if a
"change in control" of the Company occurs,
all outstanding stock options become fully
exercisable, SARs and LSARs become
immediately exercisable and all restrictions
placed on awards of restricted Common Stock
automatically lapse. For purposes of the
plan, the term "change in control" has the
same meaning given such term in the
Severance Plan.
The Company's Supplemental Benefits Plan
provides benefits to officers and key
management employees of the Company and its
subsidiaries. The benefits equal the amount
that a participant failed to receive under
the Company's Pension Plan because the
Pension Plan does not consider deferred
compensation (whether in deferred cash or
deferred restricted Common Stock) for
purposes of calculating benefits and is
subject to IRC limitations on the amount of
compensation to be considered when
calculating benefits and on the amount of
benefits that can be paid to a participant.
The plan also provides an additional benefit
equal to the amount of the Company's
matching contribution to the Company's
Retirement Savings Plan that cannot be made
because of deferred compensation and IRC
limitations. The plan may not be terminated
so long as the Pension Plan and/or
Retirement Savings Plan remain in effect.
The Management Committee (as defined in the
plan) designates who may participate and
administers the plan. Benefits under the
Company's Supplemental Benefits Plan are
paid upon termination of employment in a
lump-sum payment, in annuity or in periodic
installments. In the event of a "change in
control," the supplemental pension benefits
become fully vested and nonforfeitable. For
purposes of the plan, the term "change in
control" has the same meaning given such
term in the Severance Plan.
The Company's Deferred Compensation Plan
allows eligible executives and key
management employees of the Company and its
subsidiaries to defer all or a portion of
their base salaries and any other deferrals
made in accordance with certain of the
Company's compensation plans. The
Management Committee (as defined in the
plan) designates the executives and key
management employees who may participate.
Amounts deferred are payable upon
termination of employment in a lump-sum
payment or in periodic installments, except
that the Management Committee may, in its
discretion, accelerate payments. Any
amounts deferred shall be credited with
interest, gains/losses based on investments
or other indices specified by the Management
Committee.
The Company has a Senior Executive Survivor
Benefits Plan which provides certain senior
executives of the Company and its
subsidiaries, who are designated by the
Management Committee (as defined in the
plan), with survivor benefit coverage in
lieu of the coverage provided generally for
employees under the Company's group life
insurance plan. The amount of benefits
provided, on an after-tax basis, is two and
one half times the executive's annual
salary. Benefits are payable in
installments over 30 months beginning within
31 days after the executive's death, except
that the Management Committee may, in its
discretion, accelerate payments.
The Company had a Domestic Relocation Plan,
under which the Company is obligated, upon
the termination of employment (as a result
of death, retirement, permanent disability
or in the event of a change in control, as
defined in the Severance Plan described above)
of the named executives, to purchase their
residences in Houston which they acquired
during the Company's relocation from El Paso
to Houston in 1997.
PROPOSAL NO. 2 - Approval of the El Paso Energy
Corporation 1999 Omnibus Incentive
Compensation Plan
The Company adopted, and the stockholders
approved, the current 1995 Omnibus Compensation
Plan and 1995 Incentive Compensation Plan
(collectively, the "1995 Plans") in 1995. The
1995 Plans were adopted so equity awards would
qualify as "performance-based" compensation for
purposes of Section 162(m) of the IRC, and thereby
continue to be deductible by the Company without
regard to the deduction limit otherwise imposed by
Section 162(m). However, Section 162(m) requires
that stockholders reapprove "performance-based"
plans every five years to continue the
deductibility of the awards. Since 1995, the
Company has made several significant and value
adding acquisitions (including, but not limited
to, Tenneco Inc., Eastex Energy Inc., Cornerstone
Natural Gas, Inc., TPC Corporation, KLT Power Inc.,
and several others) which has more than doubled
the number of eligible participants in the 1995
Plans. As a result, the number of shares authorized
under the 1995 Plans have been depleted sooner
than the Company had anticipated in 1995, and the
Company's increased size has necessitated the need
to provide more competitive stock-based incentives
for management.
Accordingly, on January 20, 1999, the Board
of Directors adopted the El Paso Energy
Corporation 1999 Omnibus Incentive
Compensation Plan (the "1999 Omnibus
Compensation Plan") and is herein seeking
approval of such plan by the stockholders of
the Company at the Annual Meeting. If the
1999 Omnibus Compensation Plan is approved,
it will succeed both the 1995 Omnibus
Compensation Plan and the 1995 Incentive
Compensation Plan will be terminated, except
as to currently outstanding awards under
each of those plans.
An affirmative vote of a majority of the
shares of Common Stock represented at the
Annual Meeting in person or by proxy and
entitled to vote on the proposal will
constitute approval.
The following is a general summary of the
1999 Omnibus Compensation Plan and is
qualified in its entirety by the full text
of the plan which is attached to this Proxy
Statement as Exhibit A.
Purposes. The purposes of the 1999 Omnibus
Compensation Plan are to promote the
interests of the Company and its
stockholders by strengthening the Company's
ability to attract and retain officers and
key management employees (defined for
purposes of the plan as those employees who
hold the position of department director) in
the employ of the Company and its
subsidiaries by furnishing suitable
recognition of their ability and industry
which contributed materially to the success
of the Company and to align the interests
and efforts of the Company's officers and
key management employees to the long-term
interests of the Company's stockholders and
to provide a direct incentive to achieve the
Company's strategic and financial goals.
Administration. The plan will be
administered by the Compensation Committee
(the "Plan Administrator") with respect to
those officers and directors of the
Company who are subject to the requirements
of Section 16 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")
(the "Section 16 Insiders"). The Compensation
Committee will be constituted to meet the
non-employee director standards of Rule 16b-3
of the Exchange Act ("Rule 16b-3") and to
meet the "outside directors" requirements of
Section 162(m). For all other participants,
the Plan Administrator will be the Management
Committee (consisting of the CEO and other
such senior officers as he may designate).
Except as otherwise explicitly set forth in
the plan, the Plan Administrator will be
authorized to construe and interpret the plan,
establish, amend and rescind rules and
regulations relating to the plan, to select
individuals eligible to participate in the
plan, to grant awards under the plan and to
take all other actions necessary or advisable
for the administration of the plan.
Participants. The Plan Administrator will
designate the officers, including salaried
officers who are members of the Board of
Directors, and key management employees of
the Company or any subsidiary of the Company
who will be eligible to participate in the
plan. Members of the Board of Directors who
are not full-time salaried officers will not
be eligible to participate in the plan. As
of February 1, 1999, approximately 156
employees were eligible to participate in
the plan.
Shares and Units Available for the Plan.
Subject to adjustment as provided in the
plan (e.g., in the event of a
recapitalization, stock split, stock
dividend, merger, reorganization or similar
event), the maximum number of shares of
Common Stock which may be issued pursuant to
awards under the plan is 6,000,000, which
may be shares of original issuance, treasury
shares or a combination thereof. The
maximum number of shares of restricted stock
which may be granted under the plan is
limited to 2,000,000. The maximum number of
PUs which may be granted under the plan is
limited to 2500,000 units. The maximum number
of shares of Common Stock which may be
granted to any eligible participant in
any one year may not exceed:
(a) 1,000,000 in the case of options (and
related SARs and LSARs) or in satisfaction
of PUs (b) 500,000 in the case of shares
of restricted stock (whether or not such
restricted stock is performance-based
restricted stock) and (c) $5,000,000 in cash,
restricted stock or a combination thereof in
the case of Incentive Awards (as defined
below). With respect to PUs, the maximum
number of units which may be granted to any
eligible participant may not exceed 100,000
PUs in any performance cycle (as hereinafter
defined). The Plan Administrator will determine
the method of share counting under the plan.
Awards. The plan authorizes the granting of
stock options (both incentive stock options
and non-qualified stock options), SARs,
LSARs, PUs, Incentive Awards and restricted
stock. The terms and features of these
various forms of awards are set forth below
and described more fully in the plan itself,
attached hereto as Exhibit A.
Stock Options. Stock options may be granted
to participants in such number, at such
times and subject to such terms and
conditions as the Plan Administrator may
determine, except that (i) the option
exercise price may not be less than 100% of
the fair market value of the Common Stock on
the date of grant, (ii) an option may not be
exercised until the participant has
completed at least one year of continuous
employment with the Company or its
subsidiaries after the date of grant
(subject to the Plan Administrator's sole
discretion to waive or modify such period at
any time), and (iii) no option may be
exercised more than ten years after the date
of grant. Options granted under the plan
may be either "incentive stock options"
within the meaning of Section 422 of the IRC
or options that are not intended to so
qualify. With respect to each option
granted under the plan, the Plan
Administrator may determine and reflect in
the option grant, the nature and extent of
any restrictions to be imposed on the shares
of Common Stock which may be purchased
thereunder, including, but not limited to,
restrictions on the transferability of
shares acquired upon exercise.
The Plan Administrator will determine the
form of payment of the option exercise
price, which may include cash, Common Stock
previously acquired by the participant and
held for at least six months, or any
combination of cash and Common Stock having
a fair market value on the exercise date
equal to the relevant exercise price. At
the time of grant, the Plan Administrator
may also designate additional forms of
payment that will be permitted, including
the payment of all or a portion of the
exercise price from the shares of Common
Stock issuable to a participant upon such
exercise. A participant will have no rights
as a stockholder of the Company until the
shares of Common Stock are issued to the
participant. Options granted under the plan
will be exercisable only by the participant
or a "Permitted Transferee," (as defined in
the plan) and will not be transferable or
assignable except to a Permitted Transferee
or by will or by applicable laws of descent
and distribution. Any other attempt to
transfer or assign an option, or any right
or privilege conferred thereby, will result
in such affected option being immediately
forfeited.
A participant may exercise options only
while he or she is an employee of the
Company or its subsidiaries and before the
expiration date of the option, or for a
period not to exceed thirty-six months after
the participant retires, becomes permanently
disabled, resigns or is terminated under
certain circumstances, as the Plan
Administrator may determine at the time of
grant or otherwise. If a participant is
terminated for cause (as defined in the
plan), any options held by such participant
will expire upon such termination. Options
will vest in accordance with the schedule
established by the Plan Administrator at the
time of grant and will not be exercisable
until vested. All outstanding unvested
options may become exercisable in full upon
the occurrence of a Change in Control (as
hereinafter defined) of the Company.
SARs and LSARs. SARs and LSARs may be
granted under the plan in tandem with stock
options, either at the time the stock
options are granted or any time thereafter
during the term of the stock options. SARs
and LSARs will cover the same number of
shares of Common Stock covered by the
related stock option (or such lesser number
of shares of Common Stock as the Plan
Administrator may determine), and will be
subject to the same terms and conditions as
the related stock options and such further
terms and conditions as determined by the
Plan Administrator. Each SAR and LSAR will
entitle the holder of the related stock
option to surrender the unexercised portion
of the related stock option (and, in the
case of a SAR, any portion thereof), and to
receive from the Company in exchange
therefor an amount of cash and/or Common
Stock equal to the difference between the
exercise price per share specified for the
stock option and the fair market value of
one share of Common Stock on the date of
exercise times the number of shares of
Common Stock covered by the stock option
(or, in the case of a SAR, any portion
thereof) surrendered. At the discretion of
the Plan Administrator, payments with
respect to SARs may be made in Common Stock
or in cash. Payments with respect to LSARs,
however, may be made only in cash.
No SAR can be exercised until the
participant has completed six months of
continuous employment with the Company or
its subsidiaries following the date the SAR
is granted. In the event of a Change in
Control, however, such six-month requirement
will be waived with respect to each
participant who is employed by the Company
at the time of the Change in Control and
who, within the six-month period,
voluntarily terminates employment for good
reason (as defined in the plan) or is
terminated by the Company at the time of the
Change in Control other than for cause. No
participant who receives a grant of SARs
will have any rights as a stockholder of the
Company until shares of Common Stock, if
any, are issued to the participant upon
exercise of such SARs.
LSARs are exercisable only in the event of a
Change in Control. A participant's right to
exercise an LSAR will be canceled if and to
the extent the related stock option is
exercised.
Performance Units. The Plan Administrator
may grant Performance Units representing the
right to receive specified compensation upon
the Company's attainment of shareholder
return objectives established by the Plan
Administrator for a performance cycle.
Generally, Performance Units will be granted
only at the beginning of a performance
cycle, except in cases where prorated grants
may be made in mid-cycle to a newly eligible
participant or a participant whose job
responsibilities have significantly changed
during the performance cycle. Each grant of
Performance Units will specify the number of
Performance Units, the vesting schedule, the
Company's targeted total shareholder return
requirements for such cycle, and such other
terms and conditions as the Plan
Administrator may determine.
The initial value of each Performance Unit
will be $100. The adjusted value of the
Performance Unit at the end of the
performance cycle (or at the end of the
second year of the performance cycle in the
event of an interim payment) will be
determined based upon the Company's relative
total shareholder return for the applicable
performance cycle compared to the total
shareholder return for each other company in
the performance peer group selected by the
Plan Administrator for such cycle. The
value of the Performance Unit at the end of
the performance cycle will be based on the
following schedule:
Company's Performance
Ranking Position Against Adjusted Value
Peer Group Companies of a Performance Unit
------------------------ -----------------------
1st Quartile $150
2nd Quartile $100
3rd Quartile $ 50
4th Quartile $ 0
For example, if the Company's total
shareholder return is equal to or greater than 75%
of the total shareholder return for the peer group
companies, the Company will be in the 1st quartile
and the adjusted value would be $150.
Upon the expiration of each performance
cycle, all uncanceled Performance Units granted
with respect to such performance cycle will vest
and the benefits, if any, with respect to such
performance cycle will become payable. The Plan
Administrator may determine at the time of grant
or otherwise that an interim payment will be
permitted, an interim payment of up to 50% of the
adjusted value of vested Performance Units may be
made to participants then employed at the end of
the second year of the performance cycle;
provided, however, that the Company's performance
ranking position is in the 1st or 2nd quartile.
The benefit which a participant will be
entitled to receive from the Company at the end of
a performance cycle will equal the product of the
adjusted value of such Performance Units at the
end of the applicable performance cycle times the
number of vested Performance Units which a
participant holds less the amount of any interim
payment made with respect to such Performance
Units. In no event will such amount be less than
zero. No benefits will be paid under the plan
unless the Plan Administrator has certified the
Company's performance ranking position for such
performance cycle in writing prior to the payment
of the benefit. No benefits will be paid to
participants if the Company's performance ranking
is in the 4th quartile.
In the absence of a Change in Control or an
election by a participant to defer payment of cash
benefits, benefits payments with respect to
Performance Units will be paid as follows, unless
otherwise determined by the Plan Administrator:
(i) 50% in cash and 50% in Common Stock to
participants employed by the Company holding the
positions of Chairman of the Board, President or
CEO (or equivalent positions in the case of
Company subsidiary executives); (ii) 60% in cash
and 40% in Common Stock to participants employed
by the Company holding the position of Vice
Chairman of the Board, Chief Operating Officer, or
Executive Vice President (or equivalent positions
in the case of Company subsidiary executives); and
(iii) 75% in cash and 25% in Common Stock to
participants employed by the Company holding the
position of Senior Vice President (or equivalent
position in the case of Company subsidiary
executives). Participants (or their beneficiaries
in the case of their deaths) who have retired,
died, became permanently disabled or who have
terminated their employment prior to the end of
the performance cycle shall not be entitled to
receive payment for any Performance Units which
were not vested as of the time such participants
ceased active employment with the Company or its
subsidiaries. Vested units held by such
participants (or their beneficiaries in the case
of their deaths) will be paid in accordance with
the plan. Cash benefits may, at the election of
the participant, be deferred according to the
terms of the Company's Deferred Compensation Plan.
Any amounts (deferred or otherwise) to be paid to
participants pursuant to the plan are unfunded
obligations of the Company. The Company will not
be required to segregate any monies from its
general account, to create any trusts or to make
any special deposits with respect to such
obligations.
In the event of a Change in Control, the
then current performance cycle will immediately
end and all vested Performance Units will be paid
to participants within ten days following the
Change in Control. Such payment will be made in
the form of a lump-sum cash payment based on a
value of $150 per Performance Unit. Any amount
due as a result of a Change in Control of the
Company will be reduced by the amount of any
interim benefit payment made by the Company to the
participant. In addition, in the event of a
Change in Control, all unvested Performance Units
shall become fully vested on a pro-rata basis
measured in the nearest whole year between the
date of grant and the date of the Change in
Control.
Restricted Stock. Restricted stock,
including performance-based restricted stock, may
be granted under the plan in such number and at
such times during the term of the plan as the Plan
Administrator may determine. Each participant who
receives a grant of restricted stock under the
plan will have all the rights of a stockholder
with respect to such shares (subject to certain
restrictions on transferability), including the
right to vote such shares and receive dividends
and other distributions following issuance of a
certificate or certificates, or the establishment
of book-entry accounts, for such shares.
Restricted stock issued under the plan may
not be sold, assigned, transferred, pledged,
hypothecated or otherwise encumbered or disposed
of by the participant, except in the event of
death or permanent disability, during a period of
years determined by the Plan Administrator. Such
restrictions may never be for a period of less
than one year. Except as provided below, if a
participant terminates employment with the Company
for any reason before the expiration of the
applicable restrictive period, or attempts to
sell, exchange, transfer, pledge or otherwise
dispose of the restricted stock in violation of
the terms of the plan, such shares of restricted
stock will be forfeited by the participant to the
Company.
Performance-based restricted stock may not
be granted or vested, as applicable, unless the
Plan Administrator has determined the performance
goals applicable to the particular performance
period relating to such shares, and the Plan
Administrator has certified in writing that the
performance goals for such performance period have
been attained.
The restrictive period for any participant's
restricted stock will be deemed to end and all
restrictions on such shares will lapse upon the
participant's death, permanent disability or any
termination of employment determined by the Plan
Administrator to end the restrictive period. In
addition, in the event of a Change in Control the
restrictive period for any participant shall be
deemed to end and all restrictions on shares of
restricted stock will terminate immediately.
Incentive Awards. The Plan Administrator
will determine prior to the beginning of a
particular performance period or at such other
time allowed by the IRC, the participants who will
be eligible to receive an Incentive Award (meaning
a percentage of base salary, fixed dollar amount
or other measure of compensation to be awarded)
for such performance period, the performance goals
applicable to the performance period and the
maximum amount payable to each participant if the
performance goals for such performance period are
attained. The Plan Administrator will set the
target level of performance required for each
performance goal selected for a particular
performance period and may specify that a
percentage less than 100% of an award may be
payable if a designated level of performance of a
performance goal is attained that is less than the
established target level for such performance
goal. Performance goals may be based on one or
more of the following criteria: operating income,
pre-tax profit, earnings per share, cash flow,
return on capital, return on equity, return on net
assets, net income, debt reduction, safety, return
on investment, total stockholder return, revenues
or Common Stock price. The foregoing terms
shall have the same meaning as used in the
Company's financial statements, in the generally
accepted accounting principles or in the industry,
as applicable.
Within thirty days after the Company's
financial information is available for a
particular performance period, the Plan
Administrator will calculate the extent to which
the performance goals have been attained and the
amount of the award for each participant. No
Incentive Awards under the plan may be made by the
Plan Administrator, unless the Plan Administrator
has certified in writing prior to payment of the
award that the performance goals for such
performance period have been attained. No
Incentive Awards will be payable under the plan if
the threshold level of performance set for the
performance goals for the applicable performance
period have not been attained. The Plan
Administrator will have the sole and absolute
discretion to reduce the amount of any award
otherwise payable to a participant upon attainment
of any performance goal established for a
performance period. No participant will be
entitled to receive an Incentive Award under the
plan unless his or her performance is
satisfactory.
Generally, Incentive Awards under the plan
will be paid not later than the end of the
month following the month in which the Plan
Administrator determines the amount of the
award. Incentive Awards will be paid as
follows (unless the Plan Administrator
elects a different combination of cash and
restricted stock (and shall be treated as
performance-based restricted stock)): (i) 50%
in cash and 50% in restricted stock to any
participant employed by the Company holding
the position of Chairman of the Board,
President, CEO, Vice Chairman of the Board,
Chief Operating Officer, Executive Vice
President or Senior Vice President (or
equivalent positions in the case of Company
subsidiary executives), and (ii) 75% in cash
and 25% in restricted stock to participants
employed by the Company holding the position
of Vice President (or equivalent position in
the case of Company subsidiary executives).
Because participants will bear the
forfeiture, price fluctuation and other
attendant risks during the period in which
the restricted stock remains restricted, the
participants will also be awarded an
additional amount of restricted stock equal
to the amount of restricted stock which they
receive pursuant to the award.
In lieu of receiving all or any portion of
any cash award under the plan, participants
will be entitled to elect to receive
additional shares of restricted stock with a
value equal to the portion of the cash award
foregone. Any participant who makes such an
election will, on account of the attendant
risks, as described above, receive
additional shares of restricted stock in an
amount equal to the shares a participant
elected to receive in lieu of cash. Cash
awards under the plan may, at the election
of the participant, be deferred according to
the terms of the Company's Deferred
Compensation Plan.
In addition to, or in the place of (as
applicable) the terms and conditions of the
restricted stock discussed above, the
restrictive period for restricted stock
awarded as additional restricted stock under
the circumstances described above will lapse
on a pro rata basis measured in years
between the amount of time which has elapsed
between the date of the Incentive Award and
the participant's death, retirement,
permanent disability or any other
involuntary termination without cause and
the restrictive period for such shares. All
restricted stock for which the restrictive
period has not lapsed will be forfeited to
the Company. Notwithstanding the foregoing,
the plan provides that the Plan
Administrator may determine that any
restrictive period should not lapse or that
the restrictive period on additional shares
of restricted stock should lapse. In the
event of a Change in Control, the
restrictive period for all outstanding
shares of restricted stock for any
participant will be deemed to end and all
restrictions on such shares of restricted
stock will immediately lapse.
In the event of a Change in Control, all
Incentive Awards attributable to the
performance period in which a Change in
Control occurs will become fully vested and
distributable in cash within thirty days
after the date of the Change in Control in
an amount equal to the greater of the annual
incentive percentage of Annual Salary (as
hereinafter defined) established by the Plan
Administrator (subject to the plan maximum
Incentive Award) or the following: 100% of
Annual Salary for participants who are
employees of the Company holding the
positions of Chairman of the Board,
President, CEO, Vice Chairman of the Board
or Chief Operating Officer (or equivalent
positions in the case of Company subsidiary
executives); 80% of Annual Salary for any
participant employed by the Company holding
the positions of Executive Vice President or
Senior Vice President (or equivalent
positions in the case of Company subsidiary
executives); and 60% of Annual Salary for
any participant employed by the Company
holding the position of Vice President (or
equivalent position in the case of Company
subsidiary executives). For the purposes of
the plan, the term "Annual Salary" means a
participant's annual base salary in effect
on the date of a Change in Control.
In the event that the Change in Control is
deemed to occur after the end of a
performance period but before the Plan
Administrator has calculated whether the
applicable performance goals have been
achieved and has set each participant's
award amount for such performance period,
then the participant will be entitled to
receive in cash, within thirty days after
the date of the Change in Control, the
amounts set forth in the preceding
paragraph. Any such amounts payable under
the plan are in addition to any amounts
which participants may be entitled to for
the performance period in which the Change
in Control is deemed to occur.
Change in Control. Under the plan, a Change
in Control will be deemed to have occurred
(i) if any person (as defined in Sections
13(d) and 14(d)(2) of the Exchange Act) is or
becomes the beneficial owner (as defined in
Section 13d-3 of the Exchange Act) directly
or indirectly, of securities of the Company
representing 20% or more of the combined
voting power of the Company's then
outstanding securities, (ii) upon the first
purchase of Common Stock pursuant to a
tender offer or exchange offer (other than a
tender offer or exchange offer made by the
Company), (iii) upon the approval by the
Company's stockholders of a merger,
consolidation, sale or disposition of all or
substantially all of the Company's assets,
or a plan of dissolution of the Company, or
(iv) if during any period of two consecutive
years, individuals who at the beginning of
such period constitute the Board cease for
any reason to constitute at least a majority
thereof, unless the election or nomination
for election by the Company's stockholders
of each new director was approved by a vote
of at least two-thirds of the directors then
still in office who were directors at the
beginning of the period. Notwithstanding
the foregoing, the plan provides that a
Change in Control will not be deemed to have
occurred if the Company either merges or
consolidates with or into another company or
sells or disposes of all or substantially
all of its assets to another company, if
such merger, consolidation, sale or
disposition is in connection with a
corporate restructuring wherein the
stockholders of the Company immediately
before such merger, consolidation, sale or
disposition own, directly or indirectly,
immediately following such merger,
consolidation, sale or disposition, at least
80% of the combined voting power of all
outstanding classes of securities of the
company resulting from such merger or
consolidation or to which the Company sells
or disposes of its assets, in substantially
the same proportion as their ownership in
the Company immediately before such merger,
consolidation sale or disposition.
Termination and Amendment. Subject to
certain plan provisions, the Plan
Administrator may from time to time amend
the plan as it may deem proper and in the
best interest of the Company without any
further approval of the stockholders of the
Company, provided, however, that no change
in any option, SAR, LSAR, restricted stock,
Incentive Award or Performance Unit
previously granted, 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 plan, may be made without the consent of
the participant. Notwithstanding the
foregoing, the Plan Administrator and the
Board of Directors may not, to the extent
required for compliance with applicable laws
and regulations, including Rule 16b-3 of
the Exchange Act and Section 162(m) of the
IRC, amend the plan without the approval of
the stockholders of the Company to: (i)
materially increase the number of shares,
options, rights, Incentive Awards or PUs
that may be issued under the plan to Section
16 Insiders, (ii) with respect to incentive
stock options and any related SARs and
LSARs, change the description of the
participants or class of participants
eligible for participation in the plan, or,
with respect to all other grants under the
plan, materially modify the requirements as
to eligibility for participation in the plan
to add a class of Section 16 Insiders, and
(iii) otherwise materially increase the
benefits accruing to the participants under
the plan. The plan will terminate ten years
after the date of stockholder approval.
Federal Income Tax Consequences. The
following discussion briefly summarizes the
material federal income tax consequences of
participation in the plan. This discussion
is general in nature and does not address
issues related to the tax circumstances of
any particular participant. The discussion
is based on federal income tax laws
currently in effect and is, therefore,
subject to possible future changes in the
law. This discussion does not address
state, local or foreign tax consequences.
The grant of a stock option, SAR or LSAR
will have no tax consequences for the
participant or the Company. The participant
will have no taxable income upon exercising
an incentive stock option (except that an
alternative minimum tax may apply), and the
Company will not receive a deduction when an
incentive stock option is exercised. If the
participant does not dispose of the shares
of Common Stock acquired upon exercise of an
incentive stock option within the two-year
period beginning on the day after the grant
of the incentive stock option or within one
year after the exercise, the gain or loss on
a subsequent sale will be a capital gain or
loss to the participant. The Company would
not be entitled to any deduction in such
event. If the participant disposes of the
shares within the two-year or one-year
periods described above, the participant
generally will realize ordinary income and
the Company will be entitled to a
corresponding deduction. Upon exercising a
SAR, LSAR or stock option (other than an
incentive stock option), the participant
must recognize ordinary income in an amount
equal to the difference between the exercise
price and the fair market value of the
Common Stock on the exercise date. The
Company is entitled to a deduction for the
same amount.
Because an LSAR is exercisable only upon the
occurrence of a Change in Control of the
Company, exercise by a participant could
result in the imposition of an additional
20% excise tax on, and denial of a deduction
to the Company for, all or a portion of the
total payments made to the participant upon
the Change in Control. Similarly,
accelerated vesting resulting from a Change
in Control in the case of any other awards
under the plan could trigger the 20% excise
tax and the loss of the deduction. The
amount of the excise tax will depend on the
amount of the payments subject to the Change
in Control provisions and the other
circumstances of the participant.
Awards, including Incentive Awards, granted
under the plan that are settled in cash or
shares of Common Stock are taxable as
ordinary income when received. Awards of
restricted stock granted under the plan are
taxable as ordinary income, as of the
earlier of the date that the shares become
transferable or are not subject to a
substantial risk of forfeiture, in an amount
equal to the fair market value of the shares
on such date, unless the participant makes
an election under Section 83(b) of the IRC.
If a Section 83(b) election is made, the
participant must include in income the value
of the shares as of the date of grant. The
Company will receive a deduction for the
amount recognized as income by the
participant, subject to the provisions of
Section 162(m).
Benefits Under the Plan. During 1998, the
Plan Administrator granted awards of
options, Performance Units and Incentive
Awards to certain participants in the 1995
Omnibus Compensation Plan and 1995 Incentive
Compensation Plan. The following table sets
forth the awards made to (i) each of the
named executive officerss (ii) all current
executives as a group, (iii) all current
Directors who are not executive officers, as
a group, and (iv) all employees (who would,
have been participating in the plan including
all current officers who are not executive
officers, as a group. While the grants
reflected below were made from existing
plans and not pursuant to the 1999
Omnibus Incentive Compensation Plan, such
awards would have been substantially the same
if issued pursuant to the 1999 Omnibus
Incentive Compensation Plan. The Compensation
Committee has determined that the overall
compensation structure submitted to stockholders
is important as a whole. If stockholders do
not approve one or more pieces of the
structure, the Compensation Committee intends
to design other compensation programs to
achieve an appropriate aggregate compensation
structure.
1999 OMNIBUS INCENTIVE COMPENSATION PLAN
<TABLE>
<CAPTION>
Stock Option Awards
Number of Securities Number of Incentive Awards
Name and Position Underlying Options Performance Units(1) Ranges of $ Value(2)
----------------- -------------------- -------------------- --------------------
<S> <C> <C> <C>
William A Wise
Chairman, President & CEO 98,000 35,500 0-1,600,000
H. Brent Austin
Executive Vice President & Chief 26,250 10,000 0-438,000
Financial Officer
Richard Owen Baish
President, El Paso Natural Gas 26,250 10,000 0-396,000
Company
John W. Somerhalder II
President, Tennessee Gas Pipeline 26,250 10,000 0-396,000
Company
Britton White Jr.
Executive Vice President & General 26,250 10,000 0-396,000
Counsel
Executive Officer Group 334,250 122,600 0-4,911,000
Non-Executive Officer Director Group 0 0 0
Non-Executive Officer Employee Group 490,000 14,200 0-3,274,061
_______
<FN>
(1) The Performance Units were granted for a four-year performance cycle which began
on January 1, 1999 and ends on December 31, 2002. Although overlapping
cycles are allowed, it is not currently contemplated that another Performance Unit
grant will be made before the year 2003.
(2) The amounts reflected do not include the value of the risk premium, if any,
associated with the Incentive Award.
</FN>
</TABLE>
Recommendation. The Board of Directors believes
that approval of the 1999 Omnibus Incentive Compensation
Plan is in the best interests of the Company and its
stockholders because the plan will enable the Company to
attract and retain officers and key management employees
and provide these employees with competitive incentives
which also align their interests with those of the
Company stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE "FOR" THE APPROVAL OF THE 1999 OMNIBUS INCENTIVE
COMPENSATION PLAN.
PROPOSAL NO. 3 - Approval of the El Paso Energy Corporation
Employee Stock Purchase Plan
On January 20, 1999, the Board of Directors
adopted the El Paso Energy Corporation Employee Stock
Purchase Plan (the "Stock Purchase Plan") and is herein
seeking approval of such plan by the stockholders of the
Company at the Annual Meeting. The Stock Purchase Plan
will be effective, subject to stockholder approval, on
January 20, 1999.
The purpose of the Stock Purchase Plan is to
permit Company employees to purchase Common Stock over a
period of time at a 15% discount in order to continue to
attract and retain dedicated and reliable employees. The
Board of Directors believes that the Stock Purchase Plan
will align employees' interests with those of
stockholders, and will provide an attractive incentive
to the employees and promote a greater interest of such
employees in the future growth and success of the
Company.
There are reserved for issuance under the Stock
Purchase Plan 2,000,000 shares of the Common Stock,
which shares will be issued from the Company's treasury
or from authorized but unissued shares.
The Stock Purchase Plan is being presented to the
stockholders for approval at the Annual Meeting to
enable such plan to qualify under Section 423 of the
IRC. A discussion of the tax consequences under the
Stock Purchase Plan is set forth below. The Stock
Purchase Plan is not subject to any of the provisions of
the Employee Retirement Income Security Act of 1974, as
amended, or Section 401(a) of the IRC.
An affirmative vote of a majority of shares of
Common Stock represented at the Annual Meeting in person
or by proxy and entitled to vote on the proposal will
constitute approval.
The following is a general summary of the El Paso
Energy Corporation Employee Stock Purchase Plan and is
qualified in its entirety by full text of the plan which
is attached to this Proxy Statement as Exhibit B.
Purposes. The purposes in establishing the Stock
Purchase Plan are to permit employees of the Company and
designated subsidiaries to purchase Common Stock over a
period of time at a discount from market prices and to
increase employee stock ownership in order to continue
to attract and retain dedicated and reliable employees.
The Board of Directors believes that the Stock Purchase
Plan will align employees' interests with those of
stockholders, and will provide an attractive incentive
to the employees and promote a greater interest of such
employees in the future growth and success of the
Company.
Administration. The Stock Purchase Plan will be
administered by "Plan Administrator," meaning the
Compensation Committee of the Board of Directors with
respect to Section 16 Insiders and by the Management
Committee (consisting of the CEO and such other senior
officers as he may designate) for all other participants.
The Plan Administrator will have authority to establish
rules and regulations for the administration of the
Plan, and its interpretations and decisions with regard
to the Stock Purchase Plan will be final.
Shares Available for the Plan. There are
reserved for issuance under the Plan 2,000,000 shares of
the Company's Common Stock, which shares will be issued
from the Company's treasury account or from authorized
but unissued shares.
Participants. Participation in the Stock
Purchase Plan is open to all active employees of the
Company and of its designated Subsidiaries (as that term
is defined by the Plan). At December 31, 1998
approximately 3,530 employees are currently eligible to
participate in the Stock Purchase Plan; however, no
employee is eligible who would own, after purchasing
Common Stock under the Plan, shares of capital stock
equaling 5% or more of the total combined voting stock
of the Company.
Terms and Conditions. The Stock Purchase Plan
provides for consecutive, one-year offering periods (the
"Offering Periods") commencing on the first trading
day of a particular calendar year and ending on the
last trading day of such year. The initial Offering
Period will be from January 20, 1999 to December 31, 1999.
As of each Grant Date (as that term is defined in
the plan), eligible employees will be entitled to
allocate payroll deductions ranging from a minimum of
$10 per month up to an overall annual maximum amount of
$21,250. Participants' payroll deductions will be
invested in shares of the Company's Common Stock on the
last trading day of each calendar quarter (the "Exercise
Date"). Shares will be purchased from the Company at
85% of the lower of the Fair Market Value (defined as
the average of the high and low selling prices of the
Common Stock for a particular day) of such Common Stock
on (i) the Grant Date for the calendar year in which the
Exercise Date falls or (ii) the Exercise Date for the
particular quarter.
The Company makes no contributions to the Stock
Purchase Plan, other than making Common Stock available
for purchase at a discount and paying the costs of
administering the plan.
Participation in the plan will be cancelled (i) at
any time upon the election of the employee, or (ii) on
the date that such person ceases to be an employee of
the Company or its designated subsidiaries. Any funds
deposited by the employee prior to such cancellation
will be used to purchase Common Stock on the next
Exercise Date or refunded, without interest to such
employee, as required by the Plan. An employee who
elects to cancel participation may not rejoin the Stock
Purchase Plan until the next Offering Period.
The rights of employees participating in the Stock
Purchase Plan are not transferable other than by will or
the laws of descent and distribution, and are
exercisable during the employee's lifetime only by the
employee or by the employee's guardian or legal
representative. No rights or payroll deductions of a
participating employee will be subject to execution,
attachment, levy, garnishment or similar process.
In the event of a change in control (defined the
same as in the 1999 Omnibus Incentive Compensation Plan,
described on page 24 of this Proxy Statement), the
current Offering Period shall be shortened and a new
Exercise Date shall be the day before the proposed
merger or sale.
Termination and Amendment. The Board of Directors
may amend, suspend or terminate the Stock Purchase Plan
at any time; provided, however, that no such amendment
may increase or decrease the number of shares authorized
for the plan, except as provided by its terms. Further,
except to conform the plan to the requirements of the
IRC, no amendment may (i) change the formula for
determining the Exercise Price per share, (ii) withdraw
the administration of the plan from the Plan
Administrator, (iii) affect the rights of participating
employees to purchase stock on an Exercise Date with
funds previously credited to Plan Accounts, as defined
by the plan, or (iv) cause the Stock Purchase Plan not
to meet the requirements of Section 423(b) of the IRC.
Summary of Tax Consequences of the Stock Purchase
Plan. The following discussion of certain federal
income tax consequences of the Stock Purchase Plan is
based on the IRC provisions in effect on the date of
this Proxy Statement, current regulations thereunder and
existing administrative rulings of the Internal Revenue
Service. The discussion is limited to the United
States tax consequences and the tax consequences may vary
depending on the personal circumstances of individual
employees.
If the Stock Purchase Plan is approved by the
stockholders of the Company at the Annual Meeting, the
Stock Purchase Plan will qualify under Section 423 of
the IRC. As such, the amount of the discount will not
be taxed until the employee disposes of the stock, and
the determination of the ordinary and capital portion of
the resulting gain or loss will depend on the length of
time the employee has held the stock. The Company will
be entitled to a deduction equal to the amount of the
employee's ordinary income if the disposition occurs
within two years of the applicable Grant Date or within
one year of the Exercise Date; otherwise the Company
will have no tax consequences.
Benefits Under the Plan. Since participation in
the plan is subject to the discretion of the individual
employee, within the limits of the Stock Purchase Plan,
and enrollment for the initial Offering Period is not
yet complete, actual participation in the Stock Purchase
Plan for the current fiscal year is not determinable.
Recommendation. The Board of Directors believes
that approval of the El Paso Energy Corporation Employee
Stock Purchase Plan is in the best interest of the
Company and its stockholders because the plan will
enable the Company to attract and retain exceptional
employees and provide these employees with competitive
incentives which also align their interests with those
of the Company stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL NO. 4 - To Amend the Restated Certificate of
Incorporation of El Paso Natural Gas
Company, to eliminate the provision
relating to Section 251(g) of the DGCL.
Effective August 1, 1998, the Company completed a
holding company reorganization in which EPNG became a
wholly owned subsidiary of the Company. This
reorganization was conducted in accordance with Section
251(g) of the DGCL and did not require a vote of EPNG's
stockholders. In connection with the reorganization and
pursuant to the requirements of Section 251(g), EPNG's
charter was restated to add the following language:
"ARTICLE 13. VOTE OF STOCKHOLDERS OF EL PASO
ENERGY CORPORATION REQUIRED TO APPROVE
CERTAIN ACTIONS
Any act or transaction by or involving
this corporation that requires
for its adoption under the
General Corporation Law of the
State of Delaware of this
Restated Certificate of
Incorporation the approval of
the stockholders of this
corporation shall, pursuant to
Section 251(g) of the General
Corporation Law of the State of
Delaware, require, in addition,
the approval of the stockholders
of El Paso Energy Corporation, a
Delaware corporation, or any
successor thereto by merger, by
the same vote that is required
by the General Corporation Law
of the State of Delaware and/or
the Restated Certificate of
Incorporation of this corporation."
This provision requires EPNG to obtain a vote of
Company stockholders in connection with certain actions
taken by EPNG, such as mergers, sale of all or
substantially all of its assets, charter amendments and
corporate dissolutions. Absent such a provision, there
is no general requirement under Delaware law that
stockholders of a parent entity, such as the Company, be
entitled to vote on these types of transactions
involving its wholly owned subsidiaries, such as EPNG.
The amendment would have no effect on the right of
stockholders of the Company to vote on transactions
occurring at the Company level. In order to provide
maximum flexibility and efficiency under the holding
company structure that has been established, the Company
proposes to eliminate this Article 13 from EPNG's
restated charter. The Board of Directors believes that
the deletion of Article 13 of EPNG's restated charter
will allow the Company to manage its entire organization
more effectively.
The affirmative votes of a majority of the
outstanding shares of Common Stock are required for
approval of this amendment to EPNG's restated charter.
If this proposed amendment is approved by the
stockholders, the Company intends to promptly effect the
amendment by filing an appropriate amendment to EPNG's
restated charter with the State of Delaware.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE AMENDMENT TO EPNG'S RESTATED
CERTIFICATE OF INCORPORATION.
PROPOSAL NO. 5 - Ratification of the Appointment of
PricewaterhouseCoopers LLP as Independent
Certified Public Accountants
The Board of Directors desires to obtain
stockholder ratification of the resolution appointing
PricewaterhouseCoopers LLP, 1100 Louisiana Street, Suite
4100, Houston, Texas 77002, as independent certified
public accountants for the Company for fiscal year 1999.
PricewaterhouseCoopers LLP has served continuously in
such capacity for the Company since 1983.
If the appointment is not ratified, the adverse
vote will be considered as an indication to the Board of
Directors that it should select other independent
certified public accountants for the following fiscal
year. Given the difficulty and expense of making any
substitution of accountants after the beginning of the
current fiscal year, it is contemplated that the
appointment for the fiscal year 1999 will be permitted
to stand unless the Board of Directors finds other good
reason for making a change.
A representative from PricewaterhouseCoopers LLP
will attend the Annual Meeting to respond to appropriate
questions raised during the Annual Meeting or submitted
to PricewaterhouseCoopers LLP in writing prior to the
Annual Meeting, and to make a statement if he or she
desires to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS FOR THE COMPANY FOR THE FISCAL YEAR
1999.
PROPOSAL NO. 6 - Stockholder Proposal on Corporate
Democracy
Rear Admiral J.F. Quilter, 500 Westridge Drive,
Portola Valley, CA 94028-7721, the beneficial owner of
291.797 registered shares of Common Stock on December
31, 1998, has indicated that he will present a proposal
for action at the 1999 Annual Meeting as follows:
"CORPORATE DEMOCRACY
WHEREAS, it is the usual practice for annual
stockholders' meeting announcements to
include a statement to the effect that if no
direction is made the proxy will be voted
for the nominations made or positions held
by management.
This clouds the voting results as to votes
for directors and auditors, does not
accurately reflect the desires of voting
stockholders and skews the results. In a
political election it would be tantamount to
counting votes of those who do not vote as
being in favor of the incumbent.
THEREFORE it is resolved that the
shareholders recommend that the Board of
Directors take the necessary action to cause
proxy balloting on nominees and items
contained in the notice of the annual
meeting to be tabulated for each nominee and
proposal as in favor, opposed, abstain and
returned unmarked. The decision shall be
determined by the number of those voted in
favor and opposed.
Unmarked ballots shall be considered only
for the demonstration of a quorum.
For each nominee and proposal, stockholders
shall be advised of the official results in
the normal course of communication with
stockholders."
STATEMENT OF THE BOARD OF DIRECTORS IN OPPOSITION TO THE
STOCKHOLDER PROPOSAL
Your Board of Directors believes that the proposal
is contrary to the interests of the Company and our
stockholders and, accordingly, is recommending that
stockholders vote AGAINST the proposal for the following
reasons:
Under Delaware law, a stockholder is entitled to
participate at stockholders' meetings in person or by
proxy. If our stockholders intend to participate at a
meeting by proxy, they can direct how their votes will
be cast by either (i) marking a box for each item to be
voted on and signing the proxy card, or (ii) simply
signing and returning the proxy card or electronic proxy
media. The adoption of Rear Admiral Quilter's proposal
would deny stockholders their right to participate at
stockholders' meetings when they return a signed, but
unmarked proxy card ro electronic proxy media. This is
unfair, unnecessary, contrary to Delaware law and
contrary to the customary practices of the substantial
majority of all publicly held United States companies.
Rear Admiral Quilter apparently assumes that
stockholders who sign but do not otherwise mark their
proxy card are not making a conscious decision as to how
their shares are to be voted. Your Board of Directors
disagrees with his assumption. The proxy card states
explicitly in boldface type how shares will be voted in
this situation. This year's proxy card, for example,
states: "This proxy when properly executed will be
voted in the manner directed herein by the undersigned
stockholder. If this proxy is returned without direction
being given, this proxy will be voted FOR proposals
1, 2, 3, 4 and 5 and AGAINST Proposal 6. Neither the Board
of Directors nor the persons appointed as Proxies have
the authority or discretion to ignore a stockholder's
instructions on a properly signed proxy, whether those
instructions are indicated by marked boxes or by the
alternative method of merely signing and returning the
proxy card or electronic proxy media. Thus, your Board
of Directors believes that those stockholders who take
advantage of this alternative method by signing and
returning unmarked proxies fully understand how their
shares will be voted.
Your Board of Directors further believes that our
procedures, which facilitate the execution and return of
proxy cards, result in a higher stockholder response
than could be expected if stockholders were required to
complete each item on the proxy card. This, in turn,
helps to minimize the time and expense incurred in
connection with the solicitation of proxies. The
adoption of the proposal would also make it more
difficult to ascertain the wishes of our stockholders
because a signed but unmarked proxy card would have to
be ignored. Your Board of Directors believes that our
procedures, which follow Securities and Exchange
Commission rules and customary practice in the United
States, are appropriate and essential for good corporate
governance.
The Board is not aware of any valid reason to
adopt Rear Admiral Quilter's proposal. It would not
give stockholders any new rights or powers and would
deny our stockholders rights that make it easier for
their participation at stockholders' meetings.
Adoption of Rear Admiral Quilter's proposal
requires an affirmative vote of a majoirty of shares of
Common Stock represented at the Annual Meeting in person
or by proxy and entitled to vote on the proposal.
THE BOARD OF DIRECTORS URGES A VOTE "AGAINST" THIS
STOCKHOLDER PROPOSAL. THE PROXIES RECEIVED BY THE BOARD
OF DIRECTORS WILL BE VOTED "AGAINST" UNLESS STOCKHOLDERS
SPECIFY A CONTRARY CHOICE ON THEIR SIGNED PROXIES.
COST OF SOLICITATION
The cost of preparing, printing and mailing this
Proxy Statement and the accompanying proxy card, and the
cost of solicitation of proxies on behalf of the
Company's Board of Directors will be borne by the
Company. The Company has retained Georgeson & Company
Inc. to assist in the solicitation of proxies from
stockholders at an estimated fee of $10,000, plus
reimbursement of out-of-pocket expenses. In addition to
the use of the mail, proxies may be solicited personally
or by telephone by regular employees of the Company
without additional compensation, as well as by Georgeson
& Company Inc. Brokerage houses and other custodians
and nominees will be asked whether other persons are
beneficial owners of the shares of Common Stock which
they hold of record and, if so, they will be supplied
with additional copies of the proxy materials for
distribution to such beneficial owners. The Company
will reimburse banks, nominees, fiduciaries, brokers and
other custodians for their costs of sending the proxy
materials to the beneficial owners of Common Stock.
OTHER MATTERS
The Board of Directors knows of no other matters
which will be brought before the Annual Meeting. If,
however, any other matters should come before the Annual
Meeting all proxies which have been signed and returned
without further instruction will give the persons
designated thereon discretionary authority to vote
according to their best judgment.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the
Company's directors, certain officers and beneficial
owners of more than 10% of a registered class of the
Company's equity securities to file reports of ownership
and reports of changes in ownership with the SEC and the
New York Stock Exchange. Directors, officers and
beneficial owners of more than 10% of the Company's
equity securities are also required by SEC regulations
to furnish the Company with copies of all such reports
that they file. Based on the Company's review of copies
of such forms and amendments provided to it, the Company
believes that all filing requirements were complied with
during the fiscal year ended December 31, 1998.
SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholder proposals submitted for inclusion in
the Proxy Statement for the Company's 2000 Annual
Meeting of Stockholders must be mailed to the Corporate
Secretary, El Paso Energy Corporation, 1001 Louisiana
Street, Houston, Texas 77002, and must be received by
the Corporate Secretary on or before November 19, 1999.
The Company will consider only proposals meeting the
requirements of applicable SEC rules. Pursuant to the
Company's By-laws, in order for stockholder proposals
that are not included in such Proxy Statement to be
brought before the 2000 Annual Meeting of Stockholders,
such proposals must be mailed to the Corporate
Secretary at the foregoing address and received not less
than 60 days nor more than 90 days prior to the
scheduled date of such annual meeting.
ADDITIONAL INFORMATION - INTERNET AND TELEPHONE VOTING
You may vote shares registered in your name, as
well as shares that you beneficially own and hold in
"street name" through a broker, via the Internet or by
telephone. Votes submitted electronically via the
Internet or by telephone must be received by 5:00 p.m.
central daylight time, on April 21, 1999. The giving
of such a proxy will not affect your right to vote in
person at the Annual Meeting.
To vote via the Internet or by telephone, please
follow the instructions on your proxy card.
The Internet voting procedures are designed to
authenticate stockholder identities, to allow
stockholders to give voting instructions, and to confirm
the accurate recording of stockholder instructions.
Stockholders voting via the Internet should understand
that there may be costs associated with electronic
access, such as usage charges from Internet access
providers and telephone companies, that must be paid by
the stockholder.
ANNUAL REPORT
A copy of the Company's 1998 Annual Report to
Stockholders is being mailed with this Proxy Statement
to each stockholder entitled to vote at the Annual
Meeting. Stockholders not receiving a copy of such
Annual Report may obtain one free of charge by writing
or calling Mr. David L. Siddall, Corporate Secretary,
El Paso Energy Corporation, 1001 Louisiana Street,
Houston, Texas 77002, telephone (713) 420-6195.
By Order of the Board of Directors
DAVID L. SIDDALL
Corporate Secretary
Houston, Texas
March 19, 1999
<PAGE>
EXHIBIT A
EL PASO ENERGY CORPORATION
1999 OMNIBUS INCENTIVE
COMPENSATION PLAN
<PAGE>
Effective as of January 20, 1999
TABLE OF CONTENTS
SECTION 1 PURPOSES.........................................1
SECTION 2 DEFINITIONS......................................1
2.1 Adjusted Value.............................1
2.2 Beneficiary................................1
2.3 Board of Directors.........................1
2.4 Cause......................................1
2.5 Change in Control..........................2
2.6 Code.......................................3
2.7 Common Stock...............................3
2.8 Exchange Act...............................3
2.9 Fair Market Value..........................3
2.10 Good Reason................................4
2.11 Incentive Award............................5
2.12 Incentive Stock Option.....................5
2.13 Management Committee.......................5
2.14 Maximum Annual Employee Grant..............5
2.15 Nonqualified Option........................5
2.16 Option Price...............................5
2.17 Participant................................5
2.18 Performance Cycle..........................5
2.19 Performance Goals..........................6
2.20 Performance Peer Group.....................6
2.21 Performance Period.........................6
2.22 Performance Ranking Position...............7
2.23 Performance Unit or Units..................7
2.24 Permanent Disability or Permanently
Disabled..................................7
2.25 Plan Administrator.........................7
2.26 Restricted Stock...........................7
2.27 Rule 16b-3.................................7
2.28 Section 16 Insider.........................8
2.29 Section 162(m).............................8
2.30 Subsidiary.................................8
2.31 Total Shareholder Return...................8
2.32 Valuation Date.............................8
SECTION 3 ADMINISTRATION................................................8
SECTION 4 ELIGIBILITY...................................................10
SECTION 5 SHARES AND UNITS AVAILABLE FOR THE PLAN.......................10
SECTION 6 STOCK OPTIONS.................................................11
SECTION 7 STOCK APPRECIATION RIGHTS.....................................18
SECTION 8 LIMITED STOCK APPRECIATION RIGHTS.............................19
SECTION 9 PERFORMANCE UNITS.............................................20
9.1 Grants of Units..............................20
9.2 Notice to Participants.......................20
9.3 Vesting......................................20
9.4 Valuation of Performance Units...............21
9.5 Entitlement to Payment.......................22
9.6 Deferred Payment.............................25
9.7 Acceleration of Payment Due to Change
in Control...................................25
SECTION 10 RESTRICTED STOCK.............................................25
SECTION 11 INCENTIVE AWARDS.............................................28
11.1 Procedures for Incentive Awards..............28
11.2 Performance Goal Certification...............28
11.3 Maximum Incentive Award Payable..............28
11.4 Discretion to Reduce Awards; Participant's
Performance..................................29
11.5 Required Payment of Incentive Awards.........29
11.6 Restricted Stock Election....................30
11.7 Deferred Payment.............................30
11.8 Payment Upon Change in Control...............30
SECTION 12 REGULATORY APPROVALS AND LISTING.............................31
SECTION 13 EFFECTIVE DATE AND TERM OF PLAN..............................32
SECTION 14 GENERAL PROVISIONS...........................................32
SECTION 15 COMPLIANCE WITH RULE 16b-3 AND SECTION
162(m)................................................35
SECTION 16 AMENDMENT, TERMINATION OR DISCONTINUANCE OF THE PLAN.........35
<PAGE>
EL PASO ENERGY CORPORATION
1999 OMNIBUS INCENTIVE COMPENSATION PLAN
SECTION 1 PURPOSES
The purposes of the El Paso Energy Corporation 1999
Omnibus Incentive Compensation Plan (the "Plan")
are to promote the interests of El Paso Energy
Corporation (the "Company") and its stockholders
by strengthening its ability to attract and retain
officers and key management employees ("key
management employees" means those employees who
hold the position of department director) in the
employ of the Company and its Subsidiaries (as
defined below) by furnishing suitable recognition
of their ability and industry which contribute
materially to the success of the Company and to
align the interests and efforts of the Company's
officers and key management employees to the long-
term interests of the Company's stockholders, and
to provide a direct incentive to the Participants
(as defined below) to achieve the Company's
strategic and financial goals. The Plan provides
for the grant of stock options, limited stock
appreciation rights, stock appreciation rights,
restricted stock, incentive awards and performance
units 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 Adjusted Value
The dollar value of Performance Units determined as of
a Valuation Date.
2.2 Beneficiary
The person or persons designated by the Participant
pursuant to Section 6.4(f) or Section 14.7 of this
Plan to whom payments are to be paid pursuant to
the terms of the Plan in the event of the
Participant's death.
2.3 Board of Directors
The Board of Directors of the Company.
2.4 Cause
The Company may terminate the Participant's employment
for Cause. A termination for Cause is a termination
evidenced by a resolution adopted in good faith by two-
thirds (2/3) of the Board of Directors that the
Participant (i) willfully and continually failed to
substantially perform the Participant's duties with the
Company (other than a failure resulting from the
Participant's incapacity due to physical or mental
illness) which failure continued for a period of at
least thirty (30) days after a written notice of demand
for substantial performance has been delivered to the
Participant specifying the manner in which the
Participant has failed to substantially perform or (ii)
willfully engaged in conduct which is demonstrably and
materially injurious to the Company, monetarily or
otherwise; provided, however, that no termination of
the Participant's employment shall be for Cause as set
forth in clause (ii) above until (A) there shall have
been delivered to the Participant a copy of a written
notice setting forth that the Participant was guilty of
the conduct set forth in clause (ii) above and
specifying the particulars thereof in detail and (B)
the Participant shall have been provided an opportunity
to be heard by the Board of Directors (with the
assistance of the Participant's counsel if the
Participant so desires). No act, nor failure to act, on
the Participant's part shall be considered "willful"
unless the Participant has acted, or failed to act,
with an absence of good faith and without a reasonable
belief that the Participant's action or failure to act
was in the best interest of the Company.
Notwithstanding anything contained in the Plan to the
contrary, no failure to perform by the Participant
after notice of termination is given by the Participant
shall constitute Cause.
2.5 Change in Control
As used in the Plan, a Change in Control shall be
deemed to occur (i) if any person (as such term is used
in Sections 13(d) and 14(d)(2) of the Exchange Act) is
or becomes the "beneficial owner" (as defined in Rule
13d-3 of the Exchange Act), directly or indirectly, of
securities of the Company representing twenty percent
(20%) or more of the combined voting power of the
Company's then outstanding securities, (ii) upon the
first purchase of the Common Stock pursuant to a tender
or exchange offer (other than a tender or exchange
offer made by the Company), (iii) upon the approval by
the Company's stockholders of a merger or
consolidation, a sale or disposition of all or
substantially all of the Company's assets or a plan of
liquidation or dissolution of the Company, or (iv) if,
during any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the Board of Directors cease for any reason
to constitute at least a majority thereof, unless the
election or nomination for the election by the
Company's stockholders of each new director was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who were directors at
the beginning of the period. Notwithstanding the
foregoing, a Change in Control shall not be deemed to
occur if the Company either merges or consolidates with
or into another company or sells or disposes of all or
substantially all of its assets to another company, if
such merger, consolidation, sale or disposition is in
connection with a corporate restructuring wherein the
stockholders of the Company immediately before such
merger, consolidation, sale or disposition own,
directly or indirectly, immediately following such
merger, consolidation, sale or disposition at least
eighty percent (80%) of the combined voting power of
all outstanding classes of securities of the company
resulting from such merger or consolidation, or to
which the Company sells or disposes of its assets, in
substantially the same proportion as their ownership in
the Company immediately before such merger,
consolidation, sale or disposition.
2.6 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.
2.7 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.
2.8 Exchange Act
The Securities Exchange Act of 1934, as amended.
2.9 Fair Market Value
Unless otherwise provided by the Plan Administrator
prior to the date of a Change in Control as applied to
a specific date, Fair Market Value shall be deemed to
be the mean 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 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.
Notwithstanding the foregoing, upon the exercise,
(a) during the thirty (30) day period following a
Change in Control, of a limited stock appreciation
right or stock appreciation right granted in
connection with a Nonqualified Option more than
six (6) months prior to a Change in Control, or
(b) during the seven (7) month period following a
Change in Control, of a limited stock appreciation
right or of a stock appreciation right granted in
connection with a Nonqualified Option less than
six (6) months prior to a Change in Control,
on or after a Change in Control, Fair Market Value
on the date of exercise shall be deemed to be the
greater of (i) the highest price per share of
Common Stock as reported in the NYSE-Composite
Transactions by The Wall Street Journal during the
sixty (60) day period ending on the day preceding
the date of exercise of the stock appreciation
right or limited stock appreciation right, as the
case may be, and (ii) if the Change in Control is
one described in clause (ii) or (iii) of Section
2.5, the highest price per share paid for Common
Stock in connection with such Change in Control.
2.10 Good Reason
For purposes of the Plan, a Participant's termination
of employment for Good Reason, following a Change in
Control, shall mean the occurrence of any of the following
events or conditions:
(a) a change in the Participant's status, title,
position or responsibilities (including reporting
responsibilities) which, in the Participant's
reasonable judgment, represents a substantial reduction
of the status, title, position or responsibilities as
in effect immediately prior thereto; the assignment to
the Participant of any duties or responsibilities
which, in the Participant's reasonable judgment, are
inconsistent with such status, title, position or
responsibilities; or any removal of the Participant
from or failure to reappoint or reelect the Participant
to any of such positions, except in connection with the
termination of the Participant's employment for Cause,
for Permanent Disability or as a result of his or her
death, or by the Participant other than for Good
Reason;
(b) a reduction in the Participant's annual base
salary;
(c) the Company's requiring the Participant
(without the consent of the Participant) to be
based at any place outside a thirty-five (35) mile
radius of his or her place of employment prior to
a Change in Control, except for reasonably
required travel on the Company's business which is
not materially greater than such travel
requirements prior to the Change in Control;
(d) the failure by the Company to (i) continue in
effect any material compensation or benefit plan
in which the Participant was participating at the
time of the Change in Control, including, but not
limited to, the Plan, the El Paso Energy
Corporation Pension Plan, the El Paso Energy
Corporation Supplemental Benefits Plan, the El
Paso Energy Corporation Deferred Compensation Plan
and the El Paso Energy Corporation Retirement
Savings Plan, with any amendments and restatements
of such plans (or substantially similar successor
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 employee benefit plan,
program and practice 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 the Plan; or
(f) any purported termination of the Participant's
employment for Cause by the Company which does not
otherwise comply with the terms of the Plan.
2.11 Incentive Award
A percentage of base salary, fixed dollar amount or
other measure of compensation for which Participants are
eligible to receive, in cash and/or shares of Restricted
Stock, at the end of a Performance Period if certain
Performance Goals are achieved.
2.12 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.
2.13 Management Committee
A committee consisting of the Chief Executive Officer
and such other senior officers as the Chief Executive
Officer shall designate.
2.14 Maximum Annual Employee Grant
The Maximum Annual Employee Grant set forth in Section
5.4.
2.15 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.
2.16 Option Price
The price per share of Common Stock at which an option
is exercisable.
2.17 Participant
An eligible employee to whom an option, limited stock
appreciation right, stock appreciation right, Restricted
Stock, Incentive Award or Performance Unit is granted under
the Plan as set forth in Section 4.
2.18 Performance Cycle
That period commencing with January 1 of each year in
which the grant of a Performance Unit is made and ending on
December 31 of the third succeeding year, or such other time
period as the Plan Administrator may determine. The Plan
Administrator, it its discretion, may initiate an
overlapping Performance Cycle that begins before an existing
Performance Cycle has ended.
2.19 Performance Goals
The Plan Administrator shall establish one or more
performance goals ("Performance Goals") for each Performance
Period in writing. Such Performance Goals shall be set no
later than the commencement of the applicable Performance
Period, or such later date as may be permitted with respect
to "performance-based" compensation under Section 162(m) of
the Code, and shall establish the amount of any Incentive
award to be granted to each Participant, subject to Section
5.4 below.
Each Performance Goal selected for a particular
Performance Period shall be 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: Total
Shareholder Return, operating income, pre-tax profit,
earnings per share, cash flow, return on capital, return on
equity, return on net assets, net income, debt reduction,
safety, return on investment, revenues, or Common Stock
price. The foregoing terms shall have the same meaning as
used in the Company's financial statements, or if the terms
are not used in the Company's financial statements, they
shall have the meaning generally applied pursuant to general
accepted accounting principles, or as used in the industry,
as applicable. The Plan Administrator may appropriately
adjust any evaluation of performance under a Performance
Goal to exclude any of the following events that occurs
during a Performance Period: (i) asset write-downs, (ii)
litigation or claim judgments or settlements, (iii) the
effect of changes in tax law, accounting principles or other
such laws or provisions affecting reported results, (iv)
accruals for reorganization and restructuring programs, and
(v) extraordinary non-recurring items as described in
Accounting Principles Board Opinion No. 30 and/or in
management's discussion and analysis of financial condition
and results of operations appearing in the Company's annual
report to stockholders for the applicable year.
2.20 Performance Peer Group
Those publicly held companies selected by the Plan
Administrator prior to the commencement of a Performance
Period, or such later date as may be permitted under Section
162(m) of the Code, consistent with maintaining the status
of Performance Units as "performance-based compensation," to
form a comparative performance group in applying Section
9.4.
2.21 Performance Period
That period of time during which Performance Goals are
measured to determine the vesting or granting of options,
limited stock appreciation rights, stock appreciation
rights, Restricted Stock, Performance Units or Incentive
Awards, as the Plan Administrator may determine.
2.22 Performance Ranking Position
The relative placement of the Company's Total
Shareholder Return measured against the Total Shareholder
Return of the other companies in the Performance Peer Group
for which purposes rank shall be determined by quartile,
with a ranking in the first (1st) quartile (e.g., the
Company's Total Shareholder Return is equal to or greater
than the Total Shareholder Return of at least seventy-five
percent (75%) of the Performance Peer Group) corresponding
to the highest quartile of Total Shareholder Return.
2.23 Performance Unit or Units
Units of long-term incentive compensation granted to a
Participant with respect to a particular Performance Cycle.
2.24 Permanent Disability or Permanently Disabled
A Participant shall be deemed to have become
Permanently Disabled for purposes of the Plan if the Chief
Executive Officer of the Company shall find upon the basis
of medical evidence satisfactory to the Chief Executive
Officer that the Participant is totally disabled, whether
due to physical or mental condition, so as to be prevented
from engaging in further employment by the Company or any of
its Subsidiaries, and that such disability will be permanent
and continuous during the remainder of the Participant's
life; provided, that with respect to Section 16 Insiders
such determination shall be made by the Plan Administrator.
2.25 Plan Administrator
The Board of Directors or the committee appointed
and/or authorized pursuant to Section 3 to administer the
Plan.
2.26 Restricted Stock
Common Stock granted under the Plan that is subject to
the requirements of Section 10 and such other restrictions
as the Plan Administrator deems appropriate. References to
Restricted Stock in this Plan shall include Performance
Restricted Stock (as defined in Section 5.2) unless the
context otherwise requires.
2.27 Rule 16b-3
Rule 16b-3 of the General Rules and Regulations under
the Exchange Act.
2.28 Section 16 Insider
Any person who is selected by the Plan Administrator to
receive options, limited stock appreciation rights, stock
appreciation rights, Restricted Stock, Incentive Award
and/or Performance Units pursuant to the Plan and who is
subject to the requirements of Section 16 of the Exchange
Act, and the rules and regulations promulgated thereunder.
2.29 Section 162(m)
Section 162(m) of the Code, and regulations promulgated
thereunder.
2.30 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, or as
to which the Company or one of its affiliates serve 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.
2.31 Total Shareholder Return
The sum of (i) the appreciation or depreciation in the
price of a share of a company's common stock, and (ii) the
dividends and other distributions paid during the applicable
Performance Cycle, expressed as a percentage basis of the
Fair Market Value of such share on the first day of the
applicable Performance Cycle, as calculated in a manner
determined by the Plan Administrator.
2.32 Valuation Date
The date for determining the Adjusted Value of vested
Units that will be paid or credited to the Participant or
Beneficiary in accordance with Section 9.5 or 9.6. The
Valuation Date shall occur on the last day of the applicable
Performance Cycle, or such other time as provided in this
Plan, or as the Plan Administrator may select. The
Valuation Date for each Performance Cycle shall be set forth
in the grant of Performance Units and shall be established
no later than the date on which the Performance Goals for a
particular Performance Cycle are selected, except as
otherwise specifically provided herein.
SECTION 3 ADMINISTRATION
3.1 With respect to awards made under the Plan to
Section 16 Insiders, the Plan shall be administered by the
Board of Directors or Compensation Committee of the Board
of Directors, which shall be constituted at all times
so as to 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 Company's equity securities are
registered pursuant to Section 12(b) or 12(g) of the Exchange
Act. Subject to the Board of Directors, and as may be
required by the foregoing sentence, the Plan shall be
administered by the Management Committee.
No member of the Board of Directors or the Plan
Administrator shall vote with respect directly to the
granting of options, limited stock appreciation rights,
stock appreciation rights, Restricted Stock, Incentive
Awards and/or Performance Units hereunder to himself or
herself, as the case may be, and, if state corporate law
does not permit a committee to grant options, limited stock
appreciation rights, stock appreciation rights, Restricted
Stock, Incentive Awards and Performance Units to directors,
then any option, limited stock appreciation right, stock
appreciation right, Restricted Stock, Incentive Award or
Performance Unit granted under the Plan to a director for
his or her services as such shall be approved by the full
Board of Directors.
3.2 Except for the terms and conditions explicitly set
forth in the Plan, the Plan Administrator shall have sole
authority to construe and interpret the Plan, to establish,
amend and rescind rules and regulations relating to the
Plan, to select persons eligible to participate in the Plan,
to grant options, limited stock appreciation rights, stock
appreciation rights, Restricted Stock, Incentive Awards and
Performance Units thereunder, to administer the Plan, to
make recommendations to the Board of Directors, and to take
all such steps and make all such determinations in
connection with the Plan and the options, limited stock
appreciation rights, stock appreciation rights, Restricted
Stock, Incentive Awards and Performance Units granted
thereunder as it may deem necessary or advisable, which
determination shall be final and binding upon all
Participants, so long as such interpretation and
construction with respect to Incentive Stock Options
corresponds to any applicable requirements of Section 422 of
the Code. The Plan Administrator shall cause the Company at
its 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.
3.3 Each member of any committee acting as Plan
Administrator, while serving as such, shall be considered to
be acting in his or her capacity as a director of the
Company. Members of the Board of Directors and members of
any committee acting under the Plan shall be fully protected
in relying in good faith upon the advice of counsel and
shall incur no liability except for gross negligence or
willful misconduct in the performance of their duties.
SECTION 4 ELIGIBILITY
To be eligible for selection by the Plan Administrator
to participate in the Plan, an individual must be an officer
or key management employee of the Company, or of any
Subsidiary, as of the date on which the Plan Administrator
grants to such individual an option, limited Stock
appreciation right, stock appreciation right, Restricted
Stock, Incentive Award or Performance Unit or a person who,
in the judgment of the Plan Administrator, holds a position
of responsibility and is able to contribute substantially to
the Company's continued success. Members of the Board of
Directors of the Company who are full-time salaried officers
shall be eligible to participate. Members of the Board of
Directors who are not employees are not eligible to
participate in this Plan.
SECTION 5 SHARES AND UNITS AVAILABLE FOR THE PLAN
5.1 Subject to Section 5.5, the maximum number of
shares that may be issued upon settlement of Incentive
Awards or Performance Units and exercise of options, limited
stock appreciation rights, stock appreciation rights and
Restricted Stock granted under the Plan is six million
(6,000,000) shares of Common Stock, from shares held in the
Company's treasury or out of authorized but unissued shares
of the Company, or partly out of each, as shall be
determined by the Board of Directors. For purposes of
Section 5.1, the aggregate number of shares of Common Stock
issued under this Plan at any time shall equal only the
number of shares actually issued upon exercise or settlement
of options, limited stock appreciation rights, stock
appreciation rights, Restricted Stock, Incentive Awards and
Performance Units and not returned to the Company upon
cancellation, expiration or forfeiture of any such award or
delivered (either actually or by attestation) in payment or
satisfaction of the purchase price, exercise price or tax
obligation of the award.
5.2 Notwithstanding the foregoing, and subject to
Section 5.5, the number of shares for which Restricted Stock
may be granted pursuant to Section 10 of the Plan may not
exceed two million (2,000,000) shares of Common Stock,
including the granting or vesting of Restricted Stock that
is in compliance with the performance-based requirements of
Section 162(m) (the "Performance Restricted Stock").
5.3 Subject to Section 5.5, the number of Performance
Units which may be granted under the Plan is set at five
hundred thousand (500,000) Units. Units that have been
granted and are fully vested or that still may become fully
vested under the terms of the Plan shall reduce the number
of outstanding Units that are available for use in making
future grants under the Plan.
5.4 The maximum number of shares, as calculated in
accordance with the provisions of Section 5.1, and maximum
dollar amount with respect to which awards under this Plan
may be granted to any eligible employee in any one year
shall not exceed: (a) one million (1,000,000) in the case of
options (and related limited stock appreciation rights or
stock appreciation rights) or issuable upon settlement of
Performance Units; (b) one million (500,000) in the case of
shares of Restricted Stock (whether or not such Restricted
Stock is Performance Restricted Stock); and (c) five million
dollars ($5,000,000) in cash, Restricted Stock or a
combination thereof, in the case of Incentive Awards. With
respect to Performance Units, the maximum Units granted to
any eligible employee for any Performance Cycle shall not
exceed one hundred thousand (100,000) Performance Units.
Collectively, the foregoing maximums referred in this
Section 5.5 shall be referred to as the "Maximum Annual
Employee Grant."
5.5 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, upon the
recommendation of the Plan Administrator, may make
appropriate adjustments in the number of shares authorized
for the Plan, the Maximum Annual Employee Grant and, with
respect to outstanding options, limited stock appreciation
rights, stock appreciation rights, and Restricted Stock, the
Plan Administrator may make appropriate adjustments in the
number of shares and the Option Price, except that any such
adjustments for purposes of Sections 5.4 and 6.3 shall be
consistent with the requirements under Code Sections 162(m)
and 422, respectively.
SECTION 6 STOCK OPTIONS
6.1 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, and such other
factors as the Plan Administrator shall deem relevant in
accomplishing the purposes of the Plan. 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. Each option shall be
evidenced by a written instrument delivered by or on behalf
of the Company containing provisions not inconsistent with
the Plan, which may (but need not) require the Participant's
signature.
6.2 An option granted under the Plan may be either an
Incentive Stock Option or a Nonqualified Option.
6.3 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 5.1.
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.
(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.
6.4 Except as otherwise provided in Section 6.3, 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, but shall not be less than one hundred
percent (100%) of 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 option grant,
but in no event shall any Incentive Stock Option be
exercisable subsequent to the day before the tenth
anniversary of the date on which the option is granted,
nor shall any other option be exercisable later than
the tenth anniversary of the date of its grant.
(c) Exercise of Options
Subject to Section 6.4(j), a Participant may not
exercise an option until the Participant has completed
one (1) year of continuous employment with the Company
or any of its Subsidiaries from and including the date
on which the option is granted, or such longer period
as the Plan Administrator may determine in a particular
case. This requirement is waived in the event of
death, Permanent Disability of a Participant or a
Change in Control before such period of continuous
employment is completed and may be waived or modified
in the agreement evidencing the option or by resolution
adopted at any time by the Plan Administrator.
Thereafter, shares of Common Stock covered by an option
may be purchased at one time or in such installments
over the balance of the option period as may be
provided in the option grant. Any shares not purchased
on the applicable installment date may be purchased
thereafter at any time prior to the final expiration of
the option. 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 purchased (the "Purchase Price"). Such
consideration may be either (i) in cash or (ii) at the
discretion of the Plan Administrator, in Common Stock
already owned by the Participant for at least six (6)
months, 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, but not limited to, 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 to promptly deliver to the Company the amount of
sale or loan 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.
If specifically authorized in the option grant, a
Participant may elect 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;
provided that such shall be permitted of a Participant
who is a Section 16 Insider only if approved in advance
by the Board of Directors or the Compensation
Committee, if required by Section 16, and rules
promulgated thereunder, of the Exchange Act. 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.
Notwithstanding any other provision in this Plan
to the contrary and unless the Plan Administrator shall
otherwise determine, in the event of a "cashless"
exercise, and for that purpose only under this Plan, a
Participant's compensation shall be equal to the
difference between the actual sales price received for
the underlying Common Stock and the Option Price. For
all other purposes under this Plan, the Fair Market
Value shall be the value against which compensation is
determined.
(e) Restrictions
The Plan Administrator shall determine and reflect
in the option grant, 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, but not limited to,
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 Participant's 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 the option. In addition, 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.
(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 Participant's 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 Company's 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 person's 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 Participant's 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 Participant's lifetime a Beneficiary
to receive and exercise the Participant's Nonqualified
Options in the event of such Participant's death (as
provided in Section 6.4(i)). A designation by a
Participant under the Company's Omnibus Compensation
Plan dated as of January 1, 1992, as amended, or the
Company's 1995 Omnibus Compensation Plan effective as
of January 13, 1995, as amended and restated (the
"Predecessor Plans"), shall remain in effect under the
Plan for any options unless such designation is revoked
or changed under the Plan. 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 6.4(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 12.
(h) Termination of Employment
Upon the termination of a Participant's employment
for any reason other than death or Permanent
Disability, the Participant's option shall be
exercisable only to the extent that it was then
exercisable and, unless the term of the options expires
sooner, such options shall expire according to the
following schedule; provided, that the Plan
Administrator may at any time determine in a particular
case that specific limitations and restrictions under
the Plan shall not apply:
(i) Retirement
The option shall expire, unless exercised,
thirty-six (36) months after the Participant's
retirement from the Company or any Subsidiary.
(ii) Disability
The option shall expire, unless exercised,
thirty-six (36) months after the Participant's
termination on account of Permanent Disability.
(iii) Termination
Subject to subparagraphs (iv) and (v) below,
the option shall expire, unless exercised, for a
period not to exceed thirty-six (36) months, as
specified in the grant letter, after a Participant
resigns or is terminated as an employee of the
Company or any of its Subsidiaries, unless the
Chief Executive Officer of the Company shall have
determined in a specific case that the option
should expire sooner or should terminate when the
Participant's employment status ceases; provided,
however, that for Section 16 Insiders, such
determination shall be made by the Plan
Administrator.
(iv) Termination Following a Change in Control
The option shall expire, unless exercised or
expiring earlier in accordance with its original
terms, thirty-six (36) months after a
Participant's termination of employment (other
than a termination by the Company for Cause or a
voluntary termination by the Participant other
than for Good Reason) following a Change in
Control, provided that said termination of
employment occurs within two (2) years following a
Change in Control.
(v) All Other Terminations
Notwithstanding subparagraphs (iii) and (iv)
above, the option shall expire upon termination of
employment for Cause and any option intended to
qualify as an Incentive Stock Option shall expire,
unless exercised, one year after the Participant's
termination of employment on account of disability
(as defined in Section 22(e)(3) of the Code) and
shall expire three (3) months after the
Participant's termination of employment other than
on account of death, Permanent Disability or
termination for Cause.
(i) Death of Participant
Upon the death of a Participant, whether during
the Participant's period of employment or during the
thirty-six (36) month period referred to in Sections
6.4(h)(i), (ii) and (iii), the option shall expire,
unless the original term of the option expires sooner,
twelve (12) months after the date of the Participant's
death, unless the option is exercised within such
twelve (12) month period by the Participant's
Beneficiary, legal representatives, estate or the
person or persons to whom the deceased's option rights
shall have passed by will or the laws of descent and
distribution; provided, that the Plan Administrator may
determine in a particular case that specific
limitations and restrictions under the Plan shall not
apply. Notwithstanding any other Plan provisions
pertaining to the times at which options may be
exercised, no option shall continue to be exercisable,
pursuant to Section 6.4(h) or this Section 6.4(i), at a
time that would violate the maximum duration of Section
6.4(b).
(j) Change in Control
Notwithstanding other Plan provisions pertaining
to the times at which options may be exercised, all
outstanding options, to the extent not then currently
exercisable, shall become exercisable in full upon the
occurrence of a Change in Control. No option (whether
or not intended to be an Incentive Stock Option) shall
continue to be exercisable, pursuant to Sections 6.4(h)
and 6.4(i), at a time that would violate the maximum
duration of Section 6.4(b).
(k) Deferral Election
A Participant may elect irrevocably (at a time and
in a manner determined by the Plan Administrator or the
Company, as appropriate) prior to exercising an option
granted under the Plan that issuance of shares of
Common Stock upon exercise of such option and/or
associated stock appreciation right shall be deferred
until a pre-specified date in the future or until the
Participant ceases to be employed by the Company or any
of its Subsidiaries, as elected by the Participant.
After the exercise of any such option and prior to the
issuance of any deferred shares, the number of shares
of Common Stock issuable to the Participant shall be
credited to the deferred stock account (or such other
account(s) as the management committee shall deem
necessary and appropriate) under a memorandum deferred
account established pursuant the Company's then-
existing Deferred Compensation Plan (as it may be
further amended) (the "Deferred Compensation Plan"),
and any dividends or other distributions paid on the
Common Stock (or its equivalent) shall be deemed
reinvested in additional shares of Common Stock (or its
equivalent) until all credited deferred shares shall
become issuable pursuant to the Participant's election,
unless the management committee of the Deferred
Compensation Plan shall otherwise determine.
SECTION 7 STOCK APPRECIATION RIGHTS
7.1 The Plan Administrator may grant stock
appreciation rights to Participants in connection with any
option granted under the Plan, either at the time of the
grant of such option or at any time thereafter during the
term of the option. Such stock appreciation rights shall
cover the same number of shares covered by the options (or
such lesser number of shares of Common Stock as the Plan
Administrator may determine) and shall, except as provided
in Section 7.3, be subject to the same terms and conditions
as the related options and such further terms and conditions
not inconsistent with the Plan as shall from time to time be
determined by the Plan Administrator.
7.2 Each stock appreciation right shall entitle the
holder of the related option to surrender to the Company
unexercised the related option, or any portion thereof, and
to receive from the Company in exchange therefor an amount
equal to the excess of the Fair Market Value of one share of
Common Stock on the date the right is exercised over the
Option Price per share times the number of shares covered by
the option, or portion thereof, which is surrendered.
Payment shall be made in shares of Common Stock valued at
Fair Market Value as of the date the right is exercised, or
in cash, or partly in shares and partly in cash, at the
discretion of the Plan Administrator; provided, however,
that payment shall be made solely in cash with respect to a
stock appreciation right which is exercised within seven (7)
months following a Change in Control. Stock appreciation
rights may be exercised from time to time upon actual
receipt by the Company of written notice stating the number
of shares of Common Stock with respect to which the stock
appreciation right is being exercised. The value of any
fractional shares shall be paid in cash.
7.3 Stock appreciation rights are subject to the
following restrictions:
(a) Each stock appreciation right shall be
exercisable at such time or times as the option to
which it relates shall be exercisable, or at such other
times as the Plan Administrator may determine. In the
event of death or Permanent Disability of a Participant
during employment but before the Participant has
completed such period of continuous employment, such
stock appreciation right shall be exercisable; but only
within the period specified in the related option. In
the event of a Change in Control, the requirement that
a Participant shall have completed a six (6) month
period of continuous employment is waived with respect
to a Participant who is employed by the Company at the
time of the Change in Control but who, within the six
(6) month period, voluntarily terminates employment for
Good Reason or is terminated by the Company other than
for Cause.
(b) Except following a Change in Control, each
request to exercise a stock appreciation right
shall be subject to approval or denial in whole or
in part by the Plan Administrator in its sole
discretion. Denial or approval of such request
shall not require a subsequent request to be
similarly treated by the Plan Administrator.
(c) The right of a Participant to exercise a stock
appreciation right shall be canceled if and to the
extent the related option is exercised. To the
extent that a stock appreciation right is
exercised, the related option shall be deemed to
have been surrendered unexercised and canceled.
(d) 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 holder's exercise of such
rights.
(e) 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 the related option, as set forth in
Section 6.4.
SECTION 8 LIMITED STOCK APPRECIATION RIGHTS
8.1 The Plan Administrator may grant limited stock
appreciation rights to Participants in connection with any
options granted under the Plan, either at the time of the
grant of such option or at any time thereafter during the
term of the option. Such limited stock appreciation rights
shall cover the same number of shares covered by the options
(or such lesser number of shares of Common Stock as the Plan
Administrator may determine) and shall, except as provided
in Section 8.3, be subject to the same terms and conditions
as the related options and such further terms and conditions
not inconsistent with the Plan as shall from time to time be
determined by the Plan Administrator.
8.2 Each limited stock appreciation right shall
entitle the holder of the related option to surrender to the
Company the unexercised portion of the related option and to
receive from the Company in exchange therefor an amount in
cash equal to the excess of the Fair Market Value of one (1)
share of Common Stock on the date the right is exercised
over the Option Price per share times the number of shares
covered by the option, or portion thereof, which is
surrendered.
8.3 Limited stock appreciation rights are subject to
the following restrictions:
(a) Each limited stock appreciation right shall be
exercisable in full for a period of seven (7) months
following the date of a Change in Control regardless of
whether the holder is employed by the Company or any of
its Subsidiaries on the date the right is exercised.
Limited stock appreciation rights shall be exercisable
only to the same extent and subject to the same
conditions as the options related thereto are
exercisable, as provided in Section 6.4(j).
(b) The right of a Participant to exercise a
limited stock appreciation right shall be canceled
if and to the extent the related option is
exercised. To the extent that a limited stock
appreciation right is exercised, the related
option shall be deemed to have been surrendered
unexercised and canceled.
SECTION 9 PERFORMANCE UNITS
9.1 Grants of Units
Subject to the Maximum Annual Employee Grant, Units may
be granted to Participants in such number as the Plan
Administrator shall determine, taking into account the
duties of the respective Participants, their present and
potential contributions to the success of the Company or its
Subsidiaries, their compensation provided by other incentive
plans, their salaries, and such other factors as the Plan
Administrator shall deem appropriate. Normally, Units will
be granted only at the beginning of each Performance Cycle
except in cases where a prorated grant may be made in mid-
cycle to a newly eligible Participant or a Participant whose
job responsibilities have significantly changed during the
cycle.
9.2 Notice to Participants
The Plan Administrator shall notify each Participant in
writing of the grant of Units to the Participant. Such
notice shall set forth the Total Shareholder Return
requirements, vesting schedule and other terms and
conditions applicable to such Units, and may (but need not)
require the Participant's signature.
9.3 Vesting
(a) Vesting Schedule
The Plan Administrator shall adopt a vesting
schedule for each year of a Performance Cycle. Vesting
of Units for each year may (i) occur automatically
after a Participant has completed the specified period
of continuous employment with the Company or any of its
Subsidiaries from the date of grant of such Units, (ii)
be contingent upon attaining certain levels of Total
Shareholder Return for the year in which the Units are
eligible to vest, or (iii) occur at such other times or
subject to such other criteria as the Plan
Administrator may determine. The Plan Administrator
may, in its discretion, alter the vesting guidelines in
the event of unusual circumstances provided that to the
extent applicable any such discretion shall be
exercised in a manner consistent with Section 162(m).
Vesting of Units with respect to Participants who begin
participation or receive an additional grant of Units
during the Performance Cycle will be determined by the
Plan Administrator at the time of grant.
(b) Change in Control
Notwithstanding the foregoing vesting provisions,
upon a Change in Control all unvested Units shall
become fully vested on a pro rata basis measured in the
next higher whole year between (i) the date of grant
and (ii) the date of a Change in Control.
9.4 Valuation of Performance Units
All Performance Units granted to Participants under the
Plan shall be valued as follows:
(a) Initial and Continuing Value
Each Performance Unit shall have an initial value
of one hundred dollars ($100) as of the date of the
grant of Performance Units. Except where the Adjusted
Value of Performance Units is determined as provided
under Section 9.4(b), each Performance Unit shall
continue to have a dollar value of one hundred dollars
($100) on each date subsequent to the date of grant of
the Performance Unit.
(b) Adjusted Value
The determination of the Adjusted Value of
Performance Units for benefit payments under Sections
9.5(b)(i) and 9.5(b)(ii) as of any relevant Valuation
Date shall be made based on the Company's Performance
Ranking Position for the applicable Performance Cycle
compared to the Performance Ranking Position of the
Performance Peer Group, based on the following
schedule:
Company's
Performance Ajusted
Ranking Position Value
---------------- ---------
1st Quartile $ 150
2nd Quartile $ 100
3rd Quartile $ 50
4th Quartile $ 0
If any company which is a member of the Performance
Peer Group that (i) ceases to exist by reason of a
liquidation, merger or other transaction; (ii)
undergoes a significant alternation in size, through
recapitalization or otherwise, such that its total
market capitalization as determined from its published
financial statements is more than fifty (50%) greater
or less than its total market capitalization as of the
grant date for the applicable Performance Cycle; or
(iii) otherwise changes its line of business
significantly to make it inappropriate to use such
company in comparison, and if such event(s) occurs
after the time the Plan Administrator can alter the
Performance Peer Group under Section 2.20 above, then
such company shall be considered to remain in the
Performance Peer Group, and to have achieved a Total
Shareholder Return less than the Company's Total
Shareholder Return without regard to any actual Total
Shareholder Return actually achieved by such company,
provided, however, that the Plan Administrator shall
have the authority to reduce the Adjusted Value of
Performance Units in such event if it determines that
such reduction is appropriate in view of the Company's
performance relative to those companies in the
Performance Peer Group and not described in clauses
(i), (ii) or (iii), above.
9.5 Entitlement to Payment
(a) Performance Certification
The Plan Administrator shall certify in writing,
prior to payment of the Performance Units pursuant to
this Section 9.5, the Company's Performance Ranking
Position. In no event will an award be payable under
this Section 9 if the Company's Performance Ranking
Position is in the fourth (4th) quartile.
(b) Eligibility for Benefit Payments
Benefit payments with respect to vested
Performance Units shall be paid under the following
circumstances:
(i) Primary Benefit Payment
Upon the expiration of each Performance
Cycle, all uncanceled Performance Units granted
with respect to such Performance Cycle shall vest
and benefit payments with respect to such
Performance Units shall become payable. A
Participant who has remained an employee
continuously from the date of the grant of the
Performance Units for a Performance Cycle through
the last day of such Performance Cycle shall be
eligible to receive a benefit payment equal to the
Adjusted Value, as provided for in Section 9.4(b),
of the Performance Units (the "Primary Benefit")
with respect to and as of the close of such
Performance Cycle. The Valuation Date for
determining such Adjusted Value shall be
established by the Plan Administrator at the time
the Performance Units are granted. The amount of
any benefit payment payable with respect to
Performance Units shall be reduced by the amount
of any interim benefit payments made pursuant to
Section 9.5(b)(ii) with respect to such
Performance Units. If the interim benefit
payments exceed the Primary Benefit, no payment
shall be made.
(ii) Interim Benefit Payments
The Plan Administrator may in its sole
discretion provide for an interim benefit payment
to be made to a Participant with respect to
Performance Units granted for any particular
Performance Cycle. The right to any interim
benefit payment shall be set forth in the grant of
Performance Units to a Participant, or at such
other time as the Plan Administrator shall
determine, and must establish the terms and
conditions of such interim benefit payment
(including the Company's Total Shareholder Return
which must be attained during such Performance
Period). An interim benefit payment may be
provided for after the second year of a
Performance Cycle. The interim benefit payment
shall be based upon the Adjusted Value of the
Performance Units, as provided for in Section
9.4(b) for the period up to the date of the
interim payment valuation, and the amount of any
such payment shall not exceed fifty percent (50%)
of such Adjusted Value for the Performance Units
which are vested at the end of the second year;
provided, however, that such interim payment will
be made only if the Company's Performance Ranking
Position is in the first (1st) or second (2nd)
quartile. The Valuation Date for determining such
Adjusted Value shall be set forth in the grant of
Performance Units, or at such other time as
determined by the Plan Administrator. The
Performance Units which are valued for the interim
benefit payment shall also be valued in accordance
with Section 9.5(b)(i) or Section 9.7 if
applicable, to determine what, if any, additional
value the Participant may be entitled to. Interim
benefit payments may be made to those Participants
who have remained employees continuously from the
date of the grant of the applicable Performance
Units until the date of the interim benefit
payment relating to such Performance Units. The
amount of any benefit payment payable with respect
to Performance Units pursuant to Sections
9.5(b)(i) and 9.5(d) shall be reduced by the
amount of any interim benefit payment made
pursuant to this Section 9.5(b)(ii), but not below
zero.
(c) Form of Payment
A Participant or a Participant's Beneficiary shall
be entitled to receive from the Company a benefit
payment as provided pursuant to Sections 9.5(b)(i) or
9.5(b)(ii), as applicable, equal to the product of the
Adjusted Value and the number of vested Units of a
Participant. Such payment shall be made as soon as
practicable following the applicable Valuation Date in
accordance with this Section 9.5(c).
Except as provided in Sections 9.5(d) and 9.7 (or
unless the Plan Administrator otherwise determines at
any time that the form of payment should be changed),
each benefit payment made to a Participant pursuant to
this Section 9, shall be made as follows:
(i) Participants employed by the Company holding
the position of Chairman of the Board, President
or Chief Executive Officer and Participants
employed by Company Subsidiaries holding
equivalent positions, but not necessarily the same
title, shall receive their Performance Unit payout
as follows:
(A) 50% (fifty percent) in cash and
(B) 50% (fifty percent) in Common Stock.
(ii) Participants employed by the Company holding
the position of Vice Chairman of the Board, Chief
Operating Officer, or Executive Vice President and
Participants employed by Company Subsidiaries
holding equivalent positions, but not necessarily
the same title, shall receive their Performance
Unit payout as follows:
(A) 60% (sixty percent) in cash and
(B) 40% (forty percent) in Common Stock.
(iii)Participants employed by the Company holding
the position of Senior Vice President and
Participants employed by Company Subsidiaries
holding equivalent positions, but not necessarily
the same title, shall receive their Performance
Unit payout as follows:
(A) 75% (seventy-five percent) in cash and
(B) 25% (twenty-five percent) in Common
Stock.
(d) Retirement, Death, Disability or Termination of
Employment
Participants (or their Beneficiaries in the case
of their deaths) who have retired, died, become
Permanently Disabled, or who have terminated their
employment, prior to the end of a Performance Cycle
shall not be entitled to receive payment from the
Company or its Subsidiaries for any Units which were
not vested as of the time such Participants ceased
active employment with the Company or its Subsidiaries.
Notwithstanding Section 9.5(c), such Participants (or
their Beneficiaries in the case of their deaths) will
be entitled to receive a cash payment for vested Units
in accordance with Section 9.5(b)(i). No payments
shall be made to such Participants (or Beneficiaries)
pursuant to Section 9.5(b)(ii). Unless the Plan
Administrator otherwise determines, a Participant who
is terminated with Cause shall receive no benefit under
this Section 9.
9.6 Deferred Payment
Prior to the time that Units first vest pursuant to
Section 9.3, the Participant may, subject to the consent of
the Management Committee and in accordance with procedures
that the Management Committee has approved, elect to have
all or a portion (subject to a $1,000 minimum) of the lump-
sum cash payment payable pursuant to Section 9.5(c) with
respect to such vested Units deferred according to the terms
and conditions of the Company's Deferred Compensation Plan.
9.7 Acceleration of Payment Due to Change In Control
Upon a Change in Control, the current Performance Cycle
shall immediately end and all vested Units (including Units
that vest pursuant to Section 9.3(b)) shall be paid in cash
to Participants based on a value of one hundred fifty
dollars ($150) per Unit. This payment will be reduced to
reflect any interim benefit payments made in accordance with
Section 9.5(b)(ii) and shall be made (i) in a lump sum in
cash that is in lieu of any otherwise applicable form and
time of payment for such Unites under the Plan and (ii)
within ten (10) days after the Change in Control.
SECTION 10 RESTRICTED STOCK
10.1 Subject to Sections 5.2 and 5.4, Restricted Stock
(including Performance Restricted Stock) may be granted to
Participants 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, and such other
factors as the Plan Administrator shall deem relevant in
accomplishing the purposes of the Plan. The granting of
Restricted Stock shall take place when the Plan
Administrator by resolution, written consent or other
appropriate action determines to grant such Restricted Stock
to a particular Participant. Each grant shall be evidenced
by a written instrument delivered by or on behalf of the
Company containing provisions not inconsistent with the
Plan, which may (but need not) require the Participant's
signature. The 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; provided,
however, that no Participant awarded Restricted Stock shall
have any right as a stockholder with respect to any shares
subject to the Participant's 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.
10.2 Notwithstanding any other provision to the
contrary in this Section 10, before Performance Restricted
Stock can be granted or vested, as applicable, the Plan
Administrator shall:
(a) Determine the Performance Goals, if any,
applicable to the particular Performance Period; and
(b) Certify in writing that any such Performance Goals
for a particular Performance Period have been attained.
10.3 A grant of Restricted Stock shall entitle a
Participant to receive, on the date or dates designated by
the Plan Administrator, or, if later, upon payment to the
Company of the par value of the Common Stock, if required,
in a manner determined by the Plan Administrator, the number
of shares of Common Stock selected by the Plan
Administrator. 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 (as defined
in Section 10.4) 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.
10.4 During a period of years following the date of
grant, as determined by the Plan Administrator, which shall
in no event be less than one (1) year (the "Restriction
Period"), the Restricted Stock may not be sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered
or disposed of by the recipient, except in the event of
death or termination of employment on account of Permanent
Disability, the transfer to the Company as provided under
the Plan, the Plan Administrator's waiver or modification of
such restrictions in the agreement evidencing the grant of
Restricted Stock, or by resolution of the Plan Administrator
adopted at any time.
10.5 Except as provided in Sections 10.4, 10.6 or 10.7,
if a Participant terminates employment with the Company for
any reason before the expiration of the Restriction Period,
all shares of Restricted Stock still subject to restriction
shall be forfeited by the Participant to the Company. In
addition, in the event of any attempt by the Participant to
sell, exchange, transfer, pledge or otherwise dispose of
shares of Restricted Stock in violation of the terms of the
Plan without the Company's prior written consent, such
shares shall be forfeited to the Company.
10.6 The Restriction Period for any Participant shall
be deemed to end and all restrictions on shares of
Restricted Stock shall lapse, upon the Participant's death
or termination of employment on account of Permanent
Disability or any termination of employment determined by
the Plan Administrator to end the Restriction Period.
10.7 The Restriction Period for any Participant shall
be deemed to end and all restrictions on shares of
Restricted Stock shall terminate immediately upon a Change
in Control.
10.8 When the restrictions imposed by Section 10.4
expire or otherwise lapse with respect to one or more shares
of Restricted Stock, the Company shall deliver to the
Participant (or the Participant's legal representative,
Beneficiary or heir) one (1) share of Common Stock for each
share of Restricted Stock.
10.9 Subject to Section 10.3 (and Section 10.2 in the
case of Performance Restricted Stock), a Participant
entitled to receive Restricted Stock under the Plan shall be
issued a certificate, or have a book-entry account
established, for such shares. Such certificate, or book-
entry account, shall be registered in the name of the
Participant, and shall bear an appropriate legend reciting
the terms, conditions and restrictions, if any, applicable
to such shares and shall be subject to appropriate stop-
transfer orders.
10.10 Restricted Stock awarded to Participants pursuant
to Section 11 in lieu of cash shall be considered
Performance Restricted Stock for purposes of the Plan.
10.11 The Restriction Period for any Participant shall
be deemed to end and all restrictions on shares of
Restricted Stock awarded pursuant to Sections 11.5(a)(ii),
11.5(b)(ii), and 11.6 (except for Restricted Stock awarded
pursuant to Section 11.5(c)) shall lapse upon the
Participant's death, retirement, Permanent Disability, or
any other involuntary termination without Cause. The
Restriction Period shall be deemed to end and all
restrictions on a Participant's shares of Restricted Stock
awarded pursuant to Section 11.5(c) shall lapse on a pro
rata basis measured in years between (i) the amount of time
which has elapsed between the Award Date and the
Participant's death, retirement, Permanent Disability, or
any other involuntary termination without Cause and (ii) the
Restriction Period for such shares. All shares of
Restricted Stock for which the Restriction Period has not
lapsed as described above shall be forfeited to the Company.
Notwithstanding the foregoing, the Plan Administrator, or
the Management Committee in the case of Participants other
than Section 16 Insiders, may determine that such
Restriction Period should not lapse or that the Restriction
Period on additional shares of Restricted Stock should
lapse.
10.12 A Participant may elect irrevocably (at a time and
in the manner determined by the Plan Administrator or the
Company, as appropriate), prior to vesting of Restricted
Stock, that the Participant relinquishes any and all rights
in the shares of Restricted Stock in exchange for an
interest in the Deferred Compensation Plan, in which case
receipt of such shares shall be deferred until a pre-
specified date in the future or until the Participant ceases
to be employed by the Company or any of its Subsidiaries, as
elected by the Participant. At the time the restrictions
would have otherwise lapsed on the shares of Restricted
Stock (as specified at the time of grant, or otherwise if
changed by the Plan Administrator), the number of shares of
Common Stock issuable to the Participant shall be credited
to the deferred stock account (or such other account(s) as
the Management Committee shall deem necessary and
appropriate) under a memorandum deferred account established
pursuant to the Deferred Compensation Plan, and any
dividends or other distributions paid on the Common Stock
(or its equivalent) shall be deemed reinvested in additional
shares of Common Stock (or its equivalent) until all
credited deferred shares shall become issuable pursuant to
the Participant's election, unless the Management Committee
of the Deferred Compensation Plan shall otherwise determine.
SECTION 11 INCENTIVE AWARDS
11.1 Procedures for Incentive Awards
Prior to the beginning of a particular Performance
Period, or such other date as the Code may allow, the Plan
Administrator shall specify in writing:
(a) the Participants who shall be eligible to receive
an Incentive Award for a Performance Period,
(b) the Performance Goals for such Performance Period,
and
(c) the maximum Incentive Award amount payable to each
Participant if the Performance Goals are met.
Any Participant chosen to participate in under this
Section 11 for a given Performance Period shall receive the
maximum Incentive Award amount if the designated Performance
Goals are achieved, subject to the discretion of the Plan
Administrator to reduce such award, as described in Section
11.4.
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 award that the
Performance Goal or Goals selected for a particular
Performance Period has or have been attained. In no event
will an award be payable under this Plan if the threshold
level of performance set for each Performance Goal for the
applicable Performance Period is not attained.
11.3 Maximum Incentive Award Payable
The maximum Incentive Award payable under this Plan to
any Participant for any Performance Period shall be five
million dollars ($5,000,000) in cash, Restricted Stock, or a
combination of cash and Restricted Stock.
11.4 Discretion to Reduce Awards; Participant's Performance
The Plan Administrator, in its sole and absolute
discretion, may reduce the amount of any Incentive Award
otherwise payable to a Participant upon attainment of any
Performance Goal for the applicable Performance Period. A
Participant's individual performance must be satisfactory,
regardless of the Company's performance and the attainment
of Performance Goals, before he or she may be granted an
Incentive Award. In evaluating a Participant's performance,
the Plan Administrator shall consider the Performance Goals
of the Company and the Participant's responsibilities and
accomplishments, and such other factors as it deems
appropriate.
11.5 Required Payment of Incentive Awards
The Plan Administrator, or the Management Committee in
the case of Participants other than Section 16 Insiders,
shall make a determination within thirty (30) days after the
Company's financial information is available for a
particular Performance Period (the "Award Date") whether the
Performance Goals for that Performance Period have been
achieved and the amount of the award for each Participant.
In the absence of an election by the Participant pursuant to
Sections 11.6 or 11.7, the award shall be paid not later
than the end of the month following the month in which the
Plan Administrator determines the amount of the award and
shall be paid as follows:
(a) Participants employed by the Company holding
the position of Chairman of the Board, President, Chief
Executive Officer, Vice Chairman of the Board, Chief
Operating Officer, Executive Vice President, or Senior
Vice President and Participants employed by Company
subsidiaries with equivalent positions thereto, but not
necessarily the same titles, shall receive their
incentive award as follows:
(i) 50% (fifty percent) in cash and
(ii) 50% (fifty percent) in Restricted Stock.
(b) Participants employed by the Company holding
the position of Vice President and Participants employed by
Company subsidiaries with an equivalent position thereto,
but not necessarily the same title, shall receive their
incentive award as follows:
(i) 75% (seventy-five percent) in cash and
(ii) 25% (twenty-five percent)in Restricted Stock.
(c) Because the Participant bears forfeiture, price
fluctuation, and other attendant risks during the
Restriction Period (as defined in Section 10.4) associated
with the Restricted Stock awarded under this Plan,
Participants shall be awarded an additional amount of
Restricted Stock equal to the amount of Restricted Stock
which a Participant is awarded pursuant to Sections
11.5(a)(ii) or 11.5(b)(ii), as applicable.
(d) Notwithstanding subsections (a) and (b) above, the
Plan Administrator or Management Committee, as appropriate,
may determine that a Participant must receive a greater
amount of his or her award in Restricted Stock, up to and
including the entire award in Restricted Stock. (For
purposes of the Plan, such required shares shall be treated
as being awarded pursuant to Section 11.5(a)(ii) or Section
11.5(b)(ii), as applicable.) In such event, a Participant
shall be entitled to the additional shares of Restricted
Stock, awarded pursuant to Section 11.5(c) above.
The value of awards payable in Restricted Stock
pursuant to this Section 11 shall be calculated by using
Fair Market Value.
11.6 Restricted Stock Election
In lieu of receiving all or any portion of the cash in
accordance with Sections 11.5(a)(i) or 11.5(b)(i), a
Participant may elect to receive additional 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 Management Committee. If required by Rule
16b-3 promulgated under Section 16(b) of the Exchange Act,
any Restricted Stock Election made by a Participant who is a
Section 16 Insider shall be made at least six months prior
to the Award Date, or at such other time as is allowed by
Section 16(b) of the Exchange Act. Each Participant who
makes the Restricted Stock Election shall be entitled to the
additional Restricted Stock granted pursuant to Section
11.5(c) with respect to the amount of the Participant's
Restricted Stock Election. Except as provided in Section
10, all shares of Restricted Stock awarded pursuant to the
Restricted Stock Election are subject to the same terms and
conditions as the Restricted Stock a Participant receives
pursuant to Sections 11.5(a)(ii) or 11.5(b)(ii), as
applicable.
11.7 Deferred Payment
Each Participant may elect to have the payment of all
or a portion of any Incentive Award made pursuant to
Sections 11.5(a)(i) or 11.5(b)(i), as applicable, for the
year deferred according to the terms and conditions of the
Company's Deferred Compensation Plan. The election shall be
irrevocable and shall be made at such time and in such a
manner as prescribed by the Management Committee. The
election shall apply only to that year. If a Participant
has not made an election under this Section, any incentive
award granted to the Participant for that year shall be paid
pursuant to Sections 11.5 or 11.6, as applicable.
11.8 Payment Upon Change in Control
Notwithstanding any other provision of this Plan, in
the event of a Change in Control of the Company, the
Incentive Award attributable to the Performance Period in
which the Change in Control occurs shall become fully vested
and distributable, in cash, within 30 days after the date of
the Change in Control, in an amount equal to the greater of
the annual incentive percentage of Annual Salary established
by the Plan Administrator, or the following:
Participants employed by the Company
holding any of the following positions
and Participants employed by Company
subsidiaries with positions equivalent
thereto, but not necessarily with the
Percentage of Annual Salary same titles:
--------------------------- -------------------------------------
100% of Annual Salary Chairman of the Board, President, Chief
Executive Officer, Vice Chairman of the
Board, Chief Operating Officer, or
Executive Vice President
80% of Annual Salary Senior Vice President
60% of Annual Salary Vice President
The term "Annual Salary" as used in this Plan
shall mean a Participant's annual base salary
(whether actual or illustrative) in effect on the
date of a Change in Control.
In the event a Change in Control is deemed to have
occurred after the end of a Performance Period, but before
the Award Date, each Participant shall be entitled to
receive in cash, within 30 days after the date of the Change
in Control, those amounts set forth above in this Section
11.8 for such Performance Period. Such amounts are in
addition to the amount to which Participants shall be
entitled for the Performance Period in which a Change in
Control is deemed to occur.
SECTION 12 REGULATORY APPROVALS AND LISTING
The Company shall not be required to issue any
certificate for shares of Common Stock upon the exercise of
an option or a stock appreciation right granted under the
Plan, in payment of an Incentive Award, with respect to a
grant of Restricted Stock or Common Stock awarded as payment
of vested Units 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.
SECTION 13 EFFECTIVE DATE AND TERM OF PLAN
The Plan was adopted by the Board of Directors on
January 20, 1999, and is subject to approval by the
Company's stockholders within the earlier of the date of the
Company's next annual meeting of stockholders and twelve
(12) months after the date the Plan is adopted by the Board
of Directors. Subject to the foregoing condition, options,
limited stock appreciation rights, stock appreciation
rights, Restricted Stock, Incentive Awards and Performance
Units may be granted pursuant to the Plan from time to time
within the period commencing upon adoption of the Plan by
the Board of Directors and ending ten (10) years after the
earlier of such adoption and the approval of the Plan by the
stockholders. Options, limited stock appreciation rights,
stock appreciation rights, Restricted Stock, Incentive
Awards and Performance Units theretofore granted may extend
beyond that date and the terms and conditions of the Plan
shall continue to apply thereto and to shares of Common
Stock acquired thereunder. To the extent required to
qualify as "performance-based compensation" under Section
162(m), shares of Common Stock underlying options, limited
stock appreciation rights, stock appreciation rights,
Restricted Stock and Common Stock granted, subject to
stockholder approval of the Plan may not be vested, paid,
exercised or sold until such stockholder approval is
obtained.
SECTION 14 GENERAL PROVISIONS
14.1 Nothing contained in the Plan, or in any option,
limited stock appreciation right, stock appreciation right,
Restricted Stock, Incentive Award or Performance Unit
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.
14.2 Grants, vesting or payment of stock options,
limited stock appreciation rights, stock appreciation
rights, Restricted Stock, Incentive Awards or Performance
Units shall not be considered as part of a Participant's
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.
Notwithstanding the preceding sentence, the Restricted Stock
awarded pursuant to Section 11.5(c) shall not be considered
as part of a Participant's salary or used for the
calculation of any other pay, allowance, pension, or other
benefit unless required by contractual obligations of the
Company or its subsidiaries.
14.3 Unless otherwise provided in the Plan, the right
of a Participant or Beneficiary to the payment of any
compensation 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.
14.4 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 Participant's reemployment rights
are guaranteed by statute or contract.
14.5 In the event a Participant is transferred from the
Company to a Subsidiary, or vice versa, or is promoted or
given different responsibilities, the stock options, limited
stock appreciation rights, stock appreciation rights,
Restricted Stock, Incentive Awards and Performance Units
granted to the Participant prior to such date shall not be
affected.
14.6 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 Management Committee, 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 Management Committee, the Company or any
Subsidiary and a Participant, or otherwise create any vested
or beneficial interest in any Participant or the
Participant's Beneficiary or the Participant's 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.
14.7 The designation of a Beneficiary shall be on a
form provided by the Management Committee, executed by the
Participant (with the consent of the Participant's spouse,
if required by the Management Committee for reasons of
community property or otherwise), and delivered to the
Management Committee. A Participant may change his or her
Beneficiary designation at any time. A designation by a
Participant under the Predecessor Plans shall remain in
effect under the Plan for any Restricted Stock, Incentive
Awards or Performance Units 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 Participant's
account is paid, the balance shall be paid to the
Participant's spouse, or if there is no surviving spouse, to
the Participant's lineal descendants, pro rata, or if there
is no surviving spouse or any lineal descendant, to the
Participant's estate. Notwithstanding the foregoing,
however, a Participant's 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 14.7.
14.8 The Plan shall be construed and governed in
accordance with the laws of the State of Texas, except that
it shall be construed and governed in accordance with
applicable federal law in the event that such federal law
preempts state law.
14.9 Appropriate provision shall be made for all taxes
required to be withheld in connection with the exercise,
grant or other taxable event with respect to options,
limited stock appreciation rights, stock appreciation
rights, Restricted Stock, Incentive Awards and Performance
Units under the applicable laws and regulations of any
governmental authority, whether federal, state or local and
whether domestic or foreign, including, but not limited to,
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.
Unless otherwise provided in the grant, 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, stock
appreciation right, or limited stock appreciation right,
upon the grant or vesting of Restricted Stock or upon the
payout of Incentive Awards or Performance Units. At the
election of the Plan Administrator or, subject to approval
of the Plan Administrator at its sole discretion, at the
election of a Participant, shares of Common Stock may be
withheld from the shares issuable to the Participant upon
the exercise of an option or stock appreciation right, upon
the vesting of the Restricted Stock or upon the payout of
Performance Units to satisfy tax withholding obligations.
The Fair Market Value of Common Stock as delivered pursuant
to this Section 14.9 shall be determined as of the day prior
to delivery, and shall be calculated in accordance with
Section 2.9.
Any Participant that 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.
Tax advice should be obtained by the Participant prior
to the Participant's (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.
14.10 The Plan administrator may in its discretion
provide financing to a Participant in a principal amount
sufficient to pay the purchase price of any award under the
Plan and/or to pay the amount of taxes required by law to be
withheld with respect to any award. Any such loan shall be
subject to all applicable legal requirements and
restrictions pertinent thereto, including Regulation G
promulgated by the Federal Reserve Board. The grant of an
award shall in no way obligate the Company or the Plan
Administrator to provide any financing whatsoever in
connection therewith.
SECTION 15 COMPLIANCE WITH RULE 16b-3 AND SECTION 162(m)
The Company's intention is that, so long as any of the
Company's equity securities are registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, with respect to
awards granted to or held by Section 16 Insiders, the Plan
shall comply in all respects with Rule 16b-3 and Section
162(m) and, if any Plan provision is later found not to be
in compliance with Rule 16b-3 or Section 162(m), that
provision shall be deemed modified as necessary to meet the
requirements of Rule 16b-3 and Section 162(m).
Notwithstanding the foregoing, and subject to Section 5.2,
the Plan Administrator may grant or vest Restricted Stock in
a manner which is not in compliance with Section 162(m) if
the Plan Administrator determines that it would be in the
best interests of the Company.
Notwithstanding anything in the Plan to the contrary,
the Board of Directors, in its absolute discretion, may
bifurcate the Plan so as to restrict, limit or condition the
use of any provision of the Plan to Participants who are
Section 16 Insiders without so restricting, limiting or
conditioning the Plan with respect to other Participants.
SECTION 16 AMENDMENT, TERMINATION OR DISCONTINUANCE
OF THE PLAN
16.1 Subject to the Board of Directors and Section
16.2, 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 without further approval of the
stockholders of the Company, including, but not limited to,
any amendment necessary to ensure that the Company may
obtain any regulatory approval referred to in Section 12;
provided, however, that after a Change in Control no change
in any option, limited stock appreciation right, stock
appreciation right, Restricted Stock, Incentive Award or
Performance Unit theretofore granted 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
Plan.
16.2 The Plan Administrator and the Board of Directors
may not amend the Plan without the approval of the
stockholders of the Company to
(a) materially increase the number of shares,
rights, Incentive Awards or Units that may be issued
under the Plan to Section 16 Insiders; or
(b) lower the Option Price at which options may
be granted pursuant to Section 6.4(a) or lower the
Option Price of any outstanding options, except as
provided by Section 5.5.
16.3 The Board of Directors may at any time suspend the
operation of or terminate the Plan with respect to any
shares of Common Stock, rights or Performance Units which
are not at that time subject to option, limited stock
appreciation right, stock appreciation right or grant of
Restricted Stock, Incentive Awards or Performance Units.
<PAGE>
EXHIBIT B
EL PASO ENERGY CORPORATION
EMPLOYEE STOCK
PURCHASE PLAN
Effective as of January 20, 1999
<PAGE>
EL PASO ENERGY CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
1. Purposes
This Employee Stock Purchase Plan (the "Plan"),
effective as of January 20, 1999, provides Eligible
Employees of El Paso Energy 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
Company's 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.
2. Definitions
(a) Board of Directors-means the Board of Directors of
El Paso Energy Corporation.
(b) Company-means El Paso Energy Corporation, a
Delaware corporation.
(c) Compensation-means 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) Code-means the Internal Revenue Code of 1986, as
amended.
(e) Committee-means 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, 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 Stock-means the common stock, par value
$3.00 per share, of the Company.
(g) Eligible Employees-means those employees of the
Company and its Subsidiaries who are eligible to
participate in the Plan pursuant to Section 4.
(h) Exercise Date-means the last Trading Day of each
calendar quarter; provided, however, that with respect
to the first Offering Period, the first Exercise Date
shall be the last Trading Day of the calendar quarter
following stockholder approval of the Plan.
(i) Exercise Price-means, with respect to any Offering
Period, the lesser of (i) 85% of the Fair Market Value
of a share of the Company's Common Stock on the Grant
Date, and (ii) 85% of the Fair Market Value of such
share on the Exercise Date.
(j) Fair Market Value-means 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.
(k) Grant Date-means the first Trading Day of the
calendar year, or with respect to the 1999 calendar
year, the first Trading Day of the Plan's first
Offering Period.
(l) Offering Period-means any twelve-month period
beginning on the first Trading Day of a particular
calendar year and ending on the last Trading Day of
such calendar year, except that with respect to the
1999 calendar year, the Offering Period shall begin on
the effective date of the Plan and end on the last
Trading Day of such calendar year.
(m) Participating Employee-means an Eligible Employee
who elects to participate in the Plan pursuant to
Section 5 hereof.
(n) Plan Account-means 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) Subsidiary-means 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 Day-means 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 two million (2,000,000) shares of its Common Stock
for purchase under the Plan from shares held in the
Company's 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, upon the
recommendation of the Committee, may make appropriate
adjustments in the number of shares authorized for the Plan
and with respect to number of shares credited to each
Participating Employee's Plan Account.
4. Eligible Employees
(a) An "Eligible Employee" is any individual who, as
of the beginning 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
90 days and the individual's 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
Company's 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 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 employee's 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 in a
voice response system which authorizes payroll
deductions from the employee's Compensation. 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. Notwithstanding the foregoing, with respect
to the first Offering Period, payroll deductions will
commence in the month immediately following stockholder
approval of the Plan.
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 in his or her election form.
The minimum payroll deduction shall be ten U.S. dollars
($10) per month up to a maximum of twenty-one thousand
two hundred fifty U.S. dollars ($21,250) 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 Employee's 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
Employee's Plan Account for such pay period. Payroll
deductions under the Plan shall be made only after all
other withholdings, deductions, garnishments and the
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
Employee's Compensation.
7.Changes in the Payroll Deductions
Subject to Section 8 below, a Participating Employee
may change 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 to a
voice response enrollment system during an enrollment
period, as specified by the Company. The change shall
become effective for the next Offering Period. Except
as set forth in Section 8, other changes shall not be
allowed during an Offering Period.
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 in 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 changes before the
next pay period. In such event, any payroll deductions
and other funds credited to such Participating
Employee's Plan Account shall be used to purchase
shares of Common Stock on the next Exercise Date unless
such Participating Employee requests to receive such
amounts, in a manner determined by the Committee. 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. Unless
otherwise provided in this Section 8, a Participating
Employee's 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 as of such termination and all payroll deductions
and other funds (exclusive of dividends and other
distributions, if any) credited to the Participating
Employee's Plan Account, but not yet used to purchase
shares of Common Stock, shall be refunded, without
interest, to the Participating Employee or his or her
beneficiary or estate, as applicable, as soon as
practicable following such termination. However, if
such termination occurs without sufficient time,
generally ten (10) Trading Days, to process such
termination prior to an Exercise Date, the Committee
may allow all payroll deductions, dividends and other
distributions credited to such Participating Employee's
Plan Account to 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, any payroll deductions and other
funds credited to such employee's 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 Employee's 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 Employee's
(or former employee's) Plan Account to remain therein
(at such person's 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 two thousand (2,000) 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
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 Employee's Plan Account, pursuant to
Section 6 above, to the purchase (without commissions
or fees) that number of shares of Common Stock
determined by dividing the Exercise Price into the
balance in the employee's 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.
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 Employee's Plan Account be issued,
provided the Participating Employee pays any fees
associated with the issuance of such stock certificate.
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. 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 employee's lifetime only by the employee or by the
employee's 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 Employee's Plan Account.
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 Company's
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
Employee's 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 Company's
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 Employee's option has
been changed to the Change of Control Exercise Date and that
the Participating Employee's 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 the Plan, a "Change in Control"
shall be deemed to occur: (a) if any person (as such term
is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 of
the Exchange Act), directly or indirectly, of securities of
the Company representing twenty percent (20%) or more of the
combined voting power of the Company's then outstanding
securities; (b) upon the first purchase of the Common Stock
pursuant to a tender or exchange offer (other than a tender
or exchange offer made by the Company); (c) upon the
approval by the Company's stockholders of a merger or
consolidation, a sale, or disposition of all or
substantially all the Company's assets or a plan of
liquidation or dissolution of the Company; or (d) if, during
any period of two (2) consecutive years, individuals who at
the beginning of such period constitute the Board cease for
any reason to constitute at least a majority thereof, unless
the election or nomination for the election by the Company's
stockholders of each new director was approved by a vote of
at least two-thirds (2/3) of the directors then still in
office who were directors at the beginning of the period.
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur if the Company either merges or
consolidates with or into another company or sells or
disposes of all or substantially all of its assets to
another company, if such merger, consolidation, sale or
disposition is in connection with a corporate restructuring
wherein the stockholders of the Company immediately before
such merger, consolidation, sale or disposition own,
directly or indirectly, immediately following such merger,
consolidation, sale or disposition at least eighty percent
(80%) of the combined voting power of all outstanding
classes of securities of the company resulting from such
merger or consolidation, or to which the Company sells or
disposes of its assets, in substantially the same proportion
as their ownership in the Company immediately before such
merger, consolidation, sale or disposition.
17. Effective Date, Suspension and Termination of the Plan
(a) The Board of Directors adopted the Plan effective
January 20, 1999, provided that it is approved within twelve
months therefrom by the stockholders of the Company. Should
the Plan fail to become effective because of lack of
approval by the stockholders of the Company, then any credit
balances in the respective employees' Plan Accounts shall be
returned to the employees for whom such Plan Accounts were
established, without the payment of interest.
(b) The Plan shall terminate upon the earliest of (i)
the termination of the Plan by the Board of Directors, as
specified below, (ii) December 31, 2009, or (iii) 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 employee's 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 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 Securities Exchange Act of
1934, as amended, 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 Employee's 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 Company's 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 Employee's 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.
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 Employee's 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
employee's 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 Employee's Plan Account is paid,
the balance shall be paid to the Participating Employee's
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 employee's 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
Company's payroll records.
<PAGE>
SOLICITED BY THE BOARD OF DIRECTORS
EL PASO ENERGY CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
APRIL 22, 1999
The undersigned hereby appoints William A. Wise and Britton White Jr., and
each or any of them, 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 El Paso Energy Corporation, held of record by the
undersigned on February 24, 1999 at the Annual Meeting of Stockholders to be
held at The Windsor Court Hotel, 300 Gravier Street, New Orleans, Louisiana
on April 22, 1999, and at any adjournment(s) or postponement(s) of such meeting
for the purposes identified on the reverse side of this proxy and with
discretionary authority as to any other matter that may properly come
before the Annual Meeting, 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. THIS PROXY WHEN PROPERLY EXECUTED WILL
BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF
THIS PROXY IS RETURNED WITHOUT DIRECTION BEING GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3, 4, AND 5 AND AGAINST PROPOSAL 6.
[See Reverse Side] [See Reverse Side]
(IMPORTANT-TO BE SIGNED AND DATED ON REVERSE SIDE)
EL PASO ENERGY CORPORATION
c/o EquiServe
P.O. Box 8040
Boston, MA 02266-8040
[VOTE BY TELEPHONE] [VOTE BY INTERNET]
It's fast, convenient, and immediate! It's fast, convenient and you vote is
Call Toll-Free on a Touch-Tone Phone immediately confirmed and posted.
1-877-PRX-VTE (1-877-779-8683)
In addition, after your vote, you will
have the opportunity to sign up and
indicate your consent to receive future
shareholder communications via the
internet, if available.
Follow these four easy steps: Follow these four easy steps:
1. Read the accompanying Proxy 1. Read the accompanying Proxy
Statement and Proxy Card. Statement and Proxy Card.
2. Call the toll-free number 2. Go to the Website
1-877-PRX-VOTE (1-877-779-8683) http://www.eproxyvote.com/epg
3. Enter your 14-digit Control Number 3. Enter your 14-digit Control Number
located on your Proxy Card above located on your Proxy Card above
your name. your name.
4. Follow the recorded instructions. 4. Follow the instructions provided.
Your Vote is important! Your vote is important!
Call 1-877-PRX-VOTE (1-877-779-8683) Go to http://www.eproxyvote.com/epg
anytime! anytime!
[X] Please mark votes as in this example
[The Board of Directors recommends a vote
FOR proposals 1,2,3,4 and 5.]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For Against Abstain
1. Election of Directors. (2) Approval of El Paso Energy Corporation
Nominees: (01) Byron Allumbaugh (2) Juan 1999 Omnibus Incentive Compensation Plan. [ ] [ ] [ ]
Carlos Braniff, (03) Peter T. Flawn,
(04) James F. Gibbons, (05) Ben F. Love, (3) Approval of El Paso Energy Corporation
(06) Kenneth L. Smalley, (07) Malcolm Employee Stock Purchase Plan [ ] [ ] [ ]
Wallop, (08) William A. Wise
FOR ALL NOMINEES LISTED ABOVE [ ] (4) Approval of Amendment to Restated
WITHHOLD AUTHORITY TO VOTE FOR Certificate of Incorporation of
ALL NOMINEES LISTED ABOVE [ ] El Paso Natural Gas Company to
to eliminate the provision relating
[ ]____________________________ to Section 251(g) of the Delaware
For all nominees except as noted General Corporation Law. [ ] [ ] [ ]
above
(5) Ratification of the appointment of
PricewaterhouseCoopers LLP as
Independent Certified Public Accountants
of the Company for fiscal year 1999. [ ] [ ] [ ]
---------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 6.
---------------------------------------------------------------------
For Against Abstain
(6) Approval of Stockholder Proposal relating
to Corporate Democracy [ ] [ ] [ ]
---------------------------------------------------------------------
MARK HERE FOR ADDRESS CHANGE [ ] MARK HERE FOR COMMENDS [ ]
AND NOTE AT LEFT
Please sign exactly as your name appears. If acting as attorney,
executor, trustee or in other representative capacity, sign name
and title. If a corporation, please sign full corporate name by
President or other authorized officer. If a partnership, please
sign in partnership name by authorized person. If held jointly,
both parties must sign and date.
Signature: ______________________ Date: Signature: __________________ Date:______________
</TABLE>
<PAGE>
CONFIDENTIAL VOTING INSTRUCTIONS
EL PASO ENERGY CORPORATION
ANNUAL MEETING OF STOCKHOLDERS - APRIL 22, 1999
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
TO: BANKERS TRUST COMPANY, TRUSTEE UNDER EL PASO
ENERGY CORPORATION BENEFITS PROTECTION TRUST
The undersigned hereby directs the Trustee to vote, in person or
by proxy, the full and fractional shares of common stock of
El Paso Energy Corporation, credited to my account under the
referenced Plan at the close of business on February 24, 1999, the
record date, at the Annual Meeting of Stockholders to be held at
The Windsor Court Hotel, 300 Gravier Street, New Orleans,
Louisiana 70130, on April 22, 1999, and at any adjournment(s) or
postponement(s) 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 meeting,
including substitute nominees if any of the named nominees for
Director should be unavailable to serve, in accordance with and as
described in the Notice of Annual Meeting of Stockholders and
Proxy Statement.
If this proxy is completed, dated, signed and returned in the
accompanying envelope to the Trustee by April 12, 1999, the shares
of stock represented by this proxy will be voted in the manner
directed herein by the undersigned. If this proxy is returned to
the Trustee without direction being given, this proxy will be
voted FOR proposals 1, 2, 3, 4 and 5 and AGAINST proposal 6.
<PAGE>
PLEASE MARK YOUR CHOICE LIKE THIS [X]
IN DARK INK AND SIGN AND DATE BELOW
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3, 4 AND 5.
1. Election of Directors - Nominees:
Byron Allumbaugh, Juan Carlos Braniff, For All Nominees Withhold Authority
Peter T. Flawn, James F. Gibbons [ ] to Vote for all
Ben F. Love, Kenneth L. Smalley, nominees [ ]
Malcolm Wallop, William A. Wise
[ ]____________________________
For all nominees except as noted above
For Against Abstain
2. Approval of El Paso Energy Corporation
1999 Omnibus Incentive Compensation Plan. [ ] [ ] [ ]
3. Approval of El Paso Energy Corporation For Against Abstain
Employee Stock Purchase Plan [ ] [ ] [ ]
4. Approval of Amendment to Restated
Certificate of Incorporation of
El Paso Natural Gas Company to
to eliminate the provision relating
to Section 251(g) of the Delaware For Against Abstain
General Corporation Law. [ ] [ ] [ ]
5. Ratification of the appointment of
PricewaterhouseCoopers LLP as
Independent Certified Public Accountants For Against Abstain
of the Company for fiscal year 1999. [ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 6.
6. Approval of Stockholder Proposal relating For Against Abstain
to Corporate Democracy [ ] [ ] [ ]
If acting as attorney, executor, trustee or
in other representative capacity, sign name
and title. If a corporation, please sign in
full corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
IMPORTANT: Please mark, sign, date, and
return this proxy card promptly using the
enclosed envelope.
Shares held as of
December 31, 1998:
SIGNATURE
DATE
<PAGE>
CONFIDENTIAL VOTING INSTRUCTIONS
EL PASO ENERGY CORPORATION
ANNUAL MEETING OF STOCKHOLDERS - April 22, 1999
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
TO: BANKERS TRUST COMPANY, TRUSTEE UNDER EL PASO
ENERGY CORPORATION RETIREMENT SAVINGS PLAN
The undersigned hereby directs the Trustee to vote, in person or
by proxy, the full and fractional shares of common stock of
El Paso Energy Corporation credited to my account under
the referenced Plan at the close of business on February 24, 1999,
the record date, at the Annual Meeting of Stockholders to be held
at The Windsor Court Hotel, 300 Gravier Street, New Orleans,
Louisiana 70130 on April 22, 1999, and at any adjournment(s) or
postponement(s) of such meeting for the purpose 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, in accordance with and as described in the Notice of
Annual Meeting of Stockholders and Proxy Statement.
If this proxy is completed, dated, signed and returned in the
accompanying envelope to the Trustee by April 12, 1999, the shares
of stock represented by this proxy will be voted in the manner
directed herein by the undersigned. If this proxy is returned to
the Trustee without direction being given, this proxy will be
voted FOR proposals 1, 2, 3, 4 and 5 and AGAINST proposal 6.
<PAGE>
PLEASE MARK YOUR CHOICE LIKE THIS [X]
IN DARK INK AND SIGN AND DATE BELOW
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3, 4 AND 5.
1. Election of Directors - Nominees:
Byron Allumbaugh, Juan Carlos Braniff, For All Nominees Withhold Authority
Peter T. Flawn, James F. Gibbons, [ ] to Vote for all
Ben F. Love, Kenneth L. Smalley nominees [ ]
Malcolm Wallop, William A. Wise
[ ]____________________________
For all nominees except as noted above
For Against Abstain
2. Approval of El Paso Energy Corporation
1999 Omnibus Incentive Compensation Plan. [ ] [ ] [ ]
3. Approval of El Paso Energy Corporation For Against Abstain
Employee Stock Purchase Plan [ ] [ ] [ ]
4. Approval of Amendment to Restated
Certificate of Incorporation of
El Paso Natural Gas Company to
to eliminate the provision relating
to Section 251(g) of the Delaware For Against Abstain
General Corporation Law. [ ] [ ] [ ]
5. Ratification of the appointment of
PricewaterhouseCoopers LLP as
Independent Certified Public Accountants For Against Abstain
of the Company for fiscal year 1999. [ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 6.
6. Approval of Stockholder Proposal relating For Against Abstain
to Corporate Democracy [ ] [ ] [ ]
If acting as attorney, executor, trustee or
in other representative capacity, sign name
and title. If a corporation, please sign in
full corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
IMPORTANT: Please mark, sign, date, and
return this proxy card promptly using the
enclosed envelope.
Shares held as of
December 31, 1998:
SIGNATURE
DATE
