<PAGE> 1
As filed with the Securities and Exchange Commission on February 2, 1995
Registration No. 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________________________
EL PASO NATURAL GAS COMPANY
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C>
Delaware 74-0608280
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
</TABLE>
One Paul Kayser Center
100 North Stanton Street
El Paso, Texas 79901
(Address of Principal Executive Offices, Including Zip Code)
1995 OMNIBUS COMPENSATION PLAN
1995 INCENTIVE COMPENSATION PLAN
1995 COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
(Full Title of the Plans)
BRITTON WHITE, JR.
Senior Vice President and General Counsel
EL PASO NATURAL GAS COMPANY
One Paul Kayser Center
100 North Stanton Street
El Paso, Texas 79901
(915) 541-2600
(Name, Address and Telephone Number, Including Area Code, of Agent For Service)
__________________________________
Copy to:
JAMES P. PRENETTA, JR.
KELLEY DRYE & WARREN
Two Stamford Plaza
281 Tresser Boulevard
Stamford, CT 06901
___________________________________
CALCULATION OF REGISTRATION FEE
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====================================================================================================================================
Title of Securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered Offering Price Per Aggregate Offering Registration Fee
Share(1) Price(1)
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<S> <C> <C> <C> <C>
Common Stock,
par value $3 per 4.4 million shares $30.00 $132,000,000 $45,517.56
share
====================================================================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457(c) solely for the purpose of
calculating the amount of the registration fee. The price per share
is estimated based on the average of the high and low trading prices
for El Paso Natural Gas Company's Common Stock on January 27, 1995 as
reported by the New York Stock Exchange.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed with the Securities and Exchange
Commission (the "Commission") by El Paso Natural Gas Company (the "Registrant")
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), are hereby incorporated by reference in this Registration Statement:
(a) The Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994, which contains audited financial statements for the most
recent year for which such statements have been filed;
(b) All other reports filed by the Registrant pursuant to Section
13(a) or 15(d) of the Exchange Act, since the end of the fiscal year covered by
the Annual Report referred to in (a) above; and
(c) The description of the Registrant's common stock, $3 par value
(the "Common Stock"), contained in the Registration Statement on Form 8-A
(Registration No. 1-2700) filed with the Commission on February 13, 1992 under
Section 12 of the Exchange Act, including any amendments or reports filed for
the purpose of updating such descriptions.
All documents and reports filed by the Registrant pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date hereof and prior
to the filing of a post-effective amendment to the Registration Statement which
indicates that the securities offered hereby have been sold, or which
deregisters all such securities remaining unsold, shall also be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof commencing on the respective dates on which such documents are filed.
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation--a "derivative action"),
if they acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful. A similar standard is applicable in the case of
derivative actions, except that indemnification only extends to expenses
(including attorneys' fees) incurred in connection with the defense or
settlement of such action, and the statute requires court approval before there
can be any indemnification where the person seeking indemnification has been
found liable to the corporation. The statute provides that it is not exclusive
of other indemnification that may be granted by a corporation's charter,
by-laws, disinterested director vote, stockholder vote, agreement or otherwise.
Article X of the Registrant's By-laws requires indemnification to the
full extent permitted under Delaware law as from time to time in effect.
Subject to any restrictions imposed by Delaware law, the By-laws provide an
unconditional right to indemnification for all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes, or penalties
and amounts paid in settlement) actually and reasonably incurred or suffered by
any person in connection with any actual or threatened proceeding (including,
to the extent permitted by law, any derivative action) by reason of the fact
that such person is or was serving as a director, officer or employee of the
Registrant or that, being or having been such a director or officer or an
employee of the Registrant, such person is or was serving at the request of the
Registrant as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including an employee
benefit plan. The By-laws also provide that the Registrant may, by action of
its Board of Directors, provide indemnification to its agents with the same
scope and effect as the foregoing indemnification of directors and officers.
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Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability for (i) any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
payment of unlawful dividends or unlawful stock purchases or redemptions, or
(iv) any transaction from which the director derived an improper personal
benefit.
Article 10 of the Registrant's Restated Certificate of Incorporation,
as amended, provides that to the full extent that the Delaware General
Corporation Law, as it now exists or may hereafter be amended, permits the
limitation or elimination of the liability of directors, a director of the
Registrant shall not be liable to the Registrant or its stockholders for
monetary damages for breach of fiduciary duty as a director. Any amendment to
or repeal of such Article 10 shall not adversely affect any right or protection
of a director of the Registrant for or with respect to any acts or omissions of
such director occurring prior to such amendment or repeal.
The Registrant maintains Directors' and Officers' liability insurance
which provides for payment on behalf of the directors and officers of the
Registrant and its subsidiaries, of certain losses of such persons (other than
matters uninsurable under the law) arising from claims, including claims
arising under the Securities Act of 1933, as amended (the "Securities Act"),
for acts or omissions by such persons while acting as directors or officers of
the Registrant and/or its subsidiaries, as the case may be.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
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Exhibit
Number Description
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<S> <C>
4.1 Restated Certificate of Incorporation of the Registrant dated January 22, 1992 (incorporated by
reference to Exhibit 3.A to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991, file no. 1-2700, filed January 29, 1992); Certificate of Designation, Preferences
and Rights of Series A Junior Participating Preferred Stock of the Registrant dated July 7, 1992
(incorporated by reference to Exhibit 3.A.1 of the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, file no. 1-2700, filed February 3, 1993).
4.2 El Paso Natural Gas Company 1995 Omnibus Compensation Plan
4.3 El Paso Natural Gas Company 1995 Incentive Compensation Plan
4.4 El Paso Natural Gas Company 1995 Compensation Plan for Non-Employee Directors
5.1 Opinion of Kelley Drye & Warren regarding legality of the Common Stock being registered
5.2 Opinion of Kelley Drye & Warren regarding ERISA compliance.
23.1 Consent of Kelley Drye & Warren (included in their opinions filed as Exhibits 5.1 and 5.2)
23.2 Consent of Coopers & Lybrand L.L.P.
24 Powers of Attorney (appears on page 5)
</TABLE>
ITEM 9. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
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<PAGE> 4
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions of Item 6, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-8 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of El Paso, State of Texas,
on February 2, 1995.
EL PASO NATURAL GAS COMPANY
By: /S/ WILLIAM A. WISE
William A. Wise
Chairman of the Board,
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes
H. Brent Austin and Britton White, Jr. and each of them as attorneys-in-fact,
with full power of substitution, to execute in the name and on behalf of such
person, individually and in each capacity stated below, and to file, any and
all amendments to this Registration Statement, including any and all
post-effective amendments.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities indicated on February 2, 1995.
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Signature Title
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<S> <C> <C>
/S/ WILLIAM A. WISE Chairman of the Board, President, Chief Executive
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William A. Wise Officer and Director
/S/ LUINO DELL'OSSO, JR. Vice Chairman of the Board, Chief Operating Officer and
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Luino Dell'Osso, Jr. Director
/S/ H. BRENT AUSTIN Senior Vice President and Chief Financial Officer
-------------------------------------------------
H. Brent Austin (Principal Financial Officer)
/S/ THOMAS E. RICKS Vice President, Chief Accounting Officer and Controller
-------------------------------------------------
Thomas E. Ricks (Principal Accounting Officer)
/S/ BYRON ALLUMBAUGH Director
-------------------------------------------------
Byron Allumbaugh
Director
-------------------------------------------------
Eugenio Garza Laguera
/S/ JAMES F. GIBBONS Director
-------------------------------------------------
James F. Gibbons
/S/ BEN F. LOVE Director
-------------------------------------------------
Ben F. Love
/S/ KENNETH L. SMALLEY Director
-------------------------------------------------
Kenneth L. Smalley
</TABLE>
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INDEX TO EXHIBITS
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Sequentially
Exhibit Numbered
Number Description Page
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<S> <C> <C>
4.1 Restated Certificate of Incorporation of the Registrant dated January 22, 1992 (incorporated by
reference to Exhibit 3.A to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991, file no. 1-2700, filed January 29, 1992); Certificate of Designation, Preferences
and Rights of Series A Junior Participating Preferred Stock of the Registrant dated July 7, 1992
(incorporated by reference to Exhibit 3.A.1 of the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, file no. 1-2700, filed February 3, 1993).
4.2 El Paso Natural Gas Company 1995 Omnibus Compensation Plan
4.3 El Paso Natural Gas Company 1995 Incentive Compensation Plan
4.4 El Paso Natural Gas Company 1995 Compensation Plan for Non-Employee Directors
5.1 Opinion of Kelley Drye & Warren regarding legality of the Common Stock being registered
5.2 Opinion of Kelley Drye & Warren regarding ERISA compliance.
23.1 Consent of Kelley Drye & Warren (included in their opinions filed as Exhibits 5.1 and 5.2)
23.2 Consent of Coopers & Lybrand L.L.P.
24 Powers of Attorney (appears on page 5)
</TABLE>
<PAGE> 1
EXHIBIT 4.2
EL PASO NATURAL GAS COMPANY
1995 OMNIBUS COMPENSATION PLAN
SECTION 1
PURPOSES
The purposes of the El Paso Natural Gas Company 1995 Omnibus Compensation
Plan (the "Plan") are to promote the interests of El Paso Natural Gas Company
(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 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. The Plan provides for the grant of stock options,
limited stock appreciation rights, stock appreciation rights, restricted stock
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 amount 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 9.9 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
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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
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 on 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,
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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
Good Reason 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 Natural Gas Company Pension Plan, the El Paso Natural Gas
Company Supplemental Benefits Plan, the El Paso Natural Gas Company 1995
Incentive Compensation Plan, the El Paso Natural Gas Company Deferred
Compensation Plan and the El Paso Natural Gas Company Retirement Savings
Plan, with any amendments and restatements of such plans made prior to such
Change in Control; or (ii) provide the Participant with compensation and
benefits at least equal (in terms of benefit levels and/or reward
opportunities) to those provided for under each 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 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.
2.12 MANAGEMENT COMMITTEE
A committee consisting of the Chief Executive Officer and such other senior
officers as the Chief Executive Officer shall designate.
2.13 MAXIMUM ANNUAL EMPLOYEE GRANT
The Maximum Annual Employee Grant set forth in Section 5.4.
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<PAGE> 4
2.14 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.
2.15 OPTION PRICE
The price per share of Common Stock at which each option is exercisable.
2.16 PARTICIPANT
An eligible employee to whom an option, limited stock appreciation right,
stock appreciation right, Restricted Stock or Performance Unit is granted under
the Plan as set forth in Section 4.
2.17 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.
2.18 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.
Each Performance Goal selected for a particular Performance Period shall be
a relative or absolute measure of any one or more of the following: 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 or revenues. 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.
2.19 PERFORMANCE PEER GROUP
Those publicly held companies selected by the Plan Administrator prior to
the commencement of a Performance Period, or such later date provided by the
Code, to form a comparative performance group in applying Section 9.4.
2.20 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 or Performance Units, as the Plan
Administrator may determine.
2.21 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.
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<PAGE> 5
2.22 PERFORMANCE UNIT OR UNITS
Units of long-term incentive compensation granted to a Participant with
respect to a particular Performance Cycle.
2.23 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.
2.24 PLAN ADMINISTRATOR
The Board of Directors or the committee appointed and/or authorized
pursuant to Section 3 to administer the Plan.
2.25 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.
2.26 RULE 16B-3
Rule 16b-3 of the General Rules and Regulations under the Exchange Act.
2.27 SECTION 16 INSIDER
Any person who is selected by the Plan Administrator to receive options,
limited stock appreciation rights, stock appreciation rights, Restricted Stock
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.
2.28 SECTION 162(M)
Section 162(m) of the Code, and regulations promulgated thereunder.
2.29 SUBSIDIARY
An entity that is designated by the Plan Administrator as a subsidiary for
purposes of the Plan and that is a corporation (or other form of business
association that is treated as a corporation for tax purposes) 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 as a "subsidiary corporation" (within the meaning of Section
424(f) of the Code).
2.30 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.
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2.31 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 The Plan shall be administered by the Board of Directors or, in the
event the Board of Directors shall appoint and/or authorize a committee to
administer the Plan, by such committee.
No member of the Board of Directors or the committee shall vote with
respect directly to the granting of options, limited stock appreciation rights,
stock appreciation rights, Restricted Stock 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 and Performance Units to directors, then
any option, limited stock appreciation right, stock appreciation right,
Restricted Stock 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.
The members of any committee serving as Plan Administrator shall be
appointed by the Board of Directors for such term as the Board of Directors may
determine. The Board of Directors may from time to time remove members from, or
add members to, the committee. Vacancies on the committee, however caused, may
be filled by the Board of Directors.
With respect to grants made under the Plan to Section 16 Insiders, the Plan
Administrator shall be constituted at all times so as to meet the disinterested
administration requirements 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.
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
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 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.
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.
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<PAGE> 7
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 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 Performance Units and for which options, limited stock
appreciation rights, stock appreciation rights and Restricted Stock may at any
time be granted under the Plan is three million (3,000,000) shares of Common
Stock, from shares held in the Company's treasury or out of the authorized but
unissued shares of the Company, or partly out of each, as shall be determined by
the Board of Directors.
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 five hundred thousand (500,000) shares of Common Stock,
unless the granting or vesting of such Restricted Stock is in compliance with
the performance-based requirements of Section 162(m) ("Performance Restricted
Stock"). The grant of Performance Restricted Stock is not limited by this
Section 5.2.
5.3 Subject to Section 5.5, the number of Performance Units which may be
granted under the Plan is set at three hundred thousand (300,000) 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 with respect to which awards under this
Plan may be granted to any eligible employee in any one year shall not exceed:
(a) five hundred thousand (500,000) in the case of options (and related limited
stock appreciation rights or stock appreciation rights) or issued upon
settlement of Performance Units and (b) five hundred thousand (500,000) in the
case of shares of Restricted Stock (whether or not such Restricted Stock is
Performance Restricted Stock). With respect to Performance Units, the maximum
Units granted to any eligible employee shall not exceed seventy-five thousand
(75,000) Performance Units in any Performance Cycle. Each of the foregoing
maximums shall be referred to collectively 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.
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
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<PAGE> 8
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.
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, 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 or Permanent Disability of a Participant
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
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<PAGE> 9
(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 at the time the option is granted 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 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. 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. In the event an option grant to a Section 16 Insider provides that
the Purchase Price may be paid in whole or in part by having shares with a
Fair Market Value equal to all or a portion of the Purchase Price withheld
from the shares issuable to the Participant upon the exercise of the
option, the following restrictions shall apply. To the extent required for
compliance with Rule 16b-3, the withholding of shares issuable upon the
exercise of an option to pay the Purchase Price by a Section 16 Insider
must be approved by the Plan Administrator and must be made (x) pursuant to
an irrevocable election made six (6) months in advance of the transaction,
(y) during the period beginning on the third business day following the
date of release for publication of the quarterly or annual summary
statements of sales and earnings of the Company and ending on the twelfth
business day following such date, or (z) otherwise in accordance with Rule
16b-3 and interpretations thereunder.
(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.
(f) Nontransferability of Options. During a Participant's lifetime, an
option may be exercisable only by the Participant. 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, 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 (the
"Predecessor Plan") shall remain in effect under the Plan for any options
unless such designation is revoked or changed under the Plan. 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 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
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<PAGE> 10
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. 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 11.
(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 Permanent Disability.
(iii) Termination. Subject to subparagraph (iv) below, the option
shall expire, unless exercised, thirty-six (36) months 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, 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, or following a
Change in Control.
(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 shall
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. In no
event, however, shall any intended Incentive Stock Option, without notice
to and consent of the Participant, first become exercisable, pursuant to
Section 6.4(c) or this Section 6.4(j), if the result would be to cause such
option, when granted, not to be treated as an Incentive Stock Option
(whether by reason of the possible future
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<PAGE> 11
violation of the annual limitation of Section 6.3(b) or otherwise). In
addition, 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).
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 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. Notwithstanding
the foregoing and to the extent required by Rule 16b-3, a payment, in whole or
in part, of cash upon exercise of a stock appreciation right by a Section 16
Insider may be made only if the Plan Administrator approves such election to
receive cash and the right is exercised during the period beginning on the third
business day following the date of release for publication of the quarterly or
annual summary statements of sales and earnings of the Company and ending on the
twelfth business day following such date. 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; provided, however,
that such right shall not be exercisable until the Participant shall have
completed a six (6) month period of continuous employment with the Company
or any of its Subsidiaries immediately following the date on which the
stock appreciation right is granted. 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. Notwithstanding the
foregoing, a stock appreciation right may not be exercised for cash by a
Section 16 Insider under any circumstances until the expiration of the six
(6) month period required under Rule 16b-3.
(b) Except in the event of a Change in Control, the Plan Administrator
in its sole discretion may approve or deny in whole or in part a request to
exercise a stock appreciation right. Denial or approval of such request
shall not require a subsequent request to be similarly treated by the Plan
Administrator.
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(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 acquisition 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
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; provided, however, that
limited stock appreciation rights may not be exercised under any
circumstances until the expiration of the six (6) month period required
under Rule 16b-3. 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.
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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 such other terms and
conditions applicable to such Units.
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,
all unvested Units shall become fully vested on a pro rata basis measured in the
nearest whole year between (i) the date of grant and (ii) the date of a Change
of Control. In the event of termination of the Participant's employment within
two (2) years following a Change in Control but subsequent to the Change in
Control, for any reason other than (i) the Participant's death, (ii) the
Participant's Permanent Disability, (iii) Cause, or (iv) by the Participant
without Good Reason, all unvested Units shall become fully vested on a pro rata
basis measured in the nearest whole year between (i) the date of a Change in
Control and (ii) the Participant's termination.
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:
<TABLE>
<CAPTION>
COMPANY'S PERFORMANCE ADJUSTED
RANKING POSITION VALUE
------------------------- --------
<S> <C>
1st Quartile..................................... $150
2nd Quartile..................................... 100
3rd Quartile..................................... 50
4th Quartile..................................... 0
</TABLE>
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.
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(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 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. 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 shall 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, benefit payments 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.
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<PAGE> 15
(ii) Participants employed by the Company holding the position of Vice
Chairman of the Board, Chief Operating Officer, Executive Vice President or
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).
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 Sections 9.5(c)(i)(A) or 9.5(c)(ii)(A), as applicable, 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 under the Plan and (ii) within ten (10) days after the Change in
Control.
9.8 UNFUNDED OBLIGATION
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. 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.
9.9 DESIGNATION OF BENEFICIARY
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 Plan shall remain in effect
under the Plan for any Performance Units unless such designation is
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<PAGE> 16
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
9.9.
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. 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 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 applicable to the particular
Performance Period; and
(b) Certify in writing that 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, upon payment to the
Company of the par value of the Common Stock 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 Permanent Disability, the transfer to
the Company as provided under the Plan or 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 Section 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
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<PAGE> 17
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,
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 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. At that time, the agreement referred to in Section 10.1, as it relates to
such shares, shall be terminated.
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 for such shares. Such certificate 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.
SECTION 11
REGULATORY APPROVALS AND LISTING
11.1 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, 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; or
(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 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 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 as no longer required or desirable. In making
such determination, the Plan Administrator may rely upon an opinion of counsel
for the Company.
SECTION 12
EFFECTIVE DATE AND TERM OF PLAN
The Plan shall be effective as of January 13, 1995 provided that the Plan
is adopted by the Board and is approved 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
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Stock 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 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 for compliance with Rule 16b-3, 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, to Section 16 Insiders may not be sold until a
date at least six (6) months after the date such stockholder approval is
obtained, and stock appreciation rights that are granted subject to stockholder
approval of the Plan to Section 16 Insiders may not be exercised for cash until
a date at least six (6) months after the date such stockholder approval is
obtained.
SECTION 13
GENERAL PROVISIONS
13.1 Nothing contained in the Plan, or in any option, limited stock
appreciation right, stock appreciation right, Restricted Stock 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.
13.2 Grants, vesting or payment of stock options, limited stock
appreciation rights, stock appreciation rights, Restricted Stock 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.
13.3 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.
13.4 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.
13.5 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 and Performance Units granted to the Participant prior to such
date shall not be affected.
13.6 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.
13.7 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 and Performance Units under the applicable laws or
regulations of any governmental authority, whether federal, state or local and
whether domestic or foreign. 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
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or vesting of Restricted Stock or upon the payout of 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 13.7 shall be valued as of the day prior to delivery,
and shall be calculated in accordance with Section 2.9. The withholding of
shares of Common Stock to pay tax obligations in connection with the exercise of
an option or stock appreciation right, the vesting of Restricted Stock or the
payout of Performance Units by a Section 16 Insider must be approved by the Plan
Administrator and must occur (i) pursuant to an irrevocable election made six
(6) months in advance of the transaction, (ii) during the period beginning on
the third business day following the date of release for publication of the
quarterly or annual summary statements of sales and earnings of the Company and
ending on the twelfth business day following such date, or (iii) otherwise in
accordance with the provisions of Rule 16b-3 and interpretations thereunder. In
the event Rule 16b-3 is amended or interpreted to permit shares of Common Stock
to be withheld to pay tax obligations outside the periods described in clause
(i) or (ii) of the preceding sentence, or without Plan Administrator approval,
the Plan Administrator may determine that such provisions shall no longer apply
to Section 16 Insiders.
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.
SECTION 14
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 that may not be in compliance with Section 162(m).
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 15
AMENDMENT, TERMINATION OR DISCONTINUANCE OF THE PLAN
15.1 Subject to the Board of Directors and Section 15.2, 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 11; provided, however, that no change in any option, limited stock
appreciation right, stock appreciation right, Restricted Stock 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.
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15.2 To the extent required for compliance with applicable law or
regulation, including Rule 16b-3 and Section 162(m), 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 or Units that may
be issued under the Plan to Section 16 Insiders;
(b) with respect to Incentive Stock Options and any related stock
appreciation rights (whether limited or not), 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; or
(c) otherwise materially increase the benefits accruing to the
Participants under the Plan.
15.3 Grants of Performance Restricted Stock and Performance Units shall not
be made under this Plan unless the material terms, as defined by Section 162(m),
of the Performance Goal(s) under which an award is to be paid have been
disclosed and subsequently approved by the Company's stockholders in accordance
with Section 162(m).
15.4 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, or
with respect to any Performance Units not yet granted under Section 9.
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<PAGE> 1
EXHIBIT 4.3
EL PASO NATURAL GAS COMPANY
1995 INCENTIVE COMPENSATION PLAN
SECTION 1
PURPOSES
1.1 PURPOSES
The purposes of the El Paso Natural Gas Company 1995 Incentive Compensation
Plan (the "Plan") are to encourage outstanding performances by the executives of
El Paso Natural Gas Company (the "Company") and its subsidiaries, to attract and
retain exceptional executives, and to provide a direct incentive to the
Participants (as defined in Section 4.1) to achieve the Company's strategic and
financial goals.
SECTION 2
ADMINISTRATION
2.1 ADMINISTRATION
With respect to awards made under the Plan to certain officers and
directors of the Company and its subsidiaries ("Section 16 Insiders") who are
subject to Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Plan shall be administered by the Compensation Committee
(the "Plan Administrator") of the Company's Board of Directors (the "Board"),
which shall be constituted at all times so as to meet the disinterested
administration requirements of Rule 16b-3 promulgated under Section 16(b) of the
Exchange Act and the outside director requirements of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), so long as any of the
Company's equity securities are registered pursuant to Section 12(b) or 12(g) of
the Exchange Act. The Plan Administrator shall prescribe, amend, and rescind
rules and procedures for establishing Performance Goals (as defined in Section
5.2) pursuant to Section 162(m) of the Code. Subject to the Plan Administrator,
and as may be required by Rule 16b-3 and Section 162(m) of the Code, the Plan
shall be administered by a management committee (the "Management Committee")
consisting of the Chief Executive Officer and such other senior officers as the
Chief Executive Officer shall designate. The Management Committee shall
interpret the Plan, prescribe, amend, and rescind rules relating to it, select
eligible Participants, grant incentive awards, and take all other actions
necessary for its administration, which actions shall be final and binding upon
all Participants.
2.2 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 promulgated under Section 16(b) of
the Exchange Act. The Plan shall also be administered so as to comply with
Section 162(m) of the Code and regulations promulgated thereunder. If any Plan
provision is later found not to be in compliance with Rule 16b-3 of the Exchange
Act or Section 162(m) of the Code, that provision shall be deemed modified as
necessary to meet the requirements of Rule 16b-3 and Section 162(m) of the Code.
Notwithstanding anything in the Plan to the contrary, the Board, in its absolute
discretion, may bifurcate the Plan so as to restrict, limit, or condition the
applicability 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.
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<PAGE> 2
SECTION 3
SHARES AVAILABLE FOR THE PLAN
3.1 MAXIMUM NUMBER OF SHARES
Subject to Section 3.2, the maximum number of shares of common stock of the
Company, $3 par value per share ("Common Stock"), which may at any time be
awarded under the Plan is one million two hundred-fifty thousand (1,250,000)
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 Management Committee. "Restricted Stock" is any share of
Common Stock which is subject to the requirements of Section 8 and such other
restrictions as the Plan Administrator may deem appropriate.
3.2 ADJUSTMENT TO NUMBER OF SHARES
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, upon recommendation of the Plan
Administrator, may make appropriate adjustments to the number of shares
authorized for the Plan and, with respect to outstanding Restricted Stock, the
Plan Administrator may make appropriate adjustments to the number of shares.
SECTION 4
PARTICIPANTS
4.1 PARTICIPANTS
The Plan Administrator shall determine and designate the Section 16
Insiders and the Management Committee shall designate all other executives of
the Company and its subsidiaries who are eligible to receive awards under the
Plan (the "Participants"). Participants, in general, will be limited to those
executives who hold any of the following positions within the Company and, in
the case of Participants employed by Company subsidiaries, those executives with
positions equivalent thereto, but not necessarily with the same titles: Chairman
of the Board, President, Chief Executive Officer, Vice Chairman of the Board (if
any), Chief Operating Officer, any Executive Vice President, any Senior Vice
President, and any Vice President. Members of the Board of Directors of the
Company who are full-time executives of the Company shall be eligible to
participate in the Plan. Any Participant in the El Paso Natural Gas Company
Incentive Compensation Plan dated as of January 1, 1992 (the "Predecessor Plan")
on the day immediately preceding the effective date of this Plan, who is an
employee of the Company or its subsidiaries, shall become a Participant in this
Plan on the effective date.
SECTION 5
PERFORMANCE GOALS
5.1 PERFORMANCE PERIOD
The term "Performance Period" as used in this Plan shall mean the period of
twelve consecutive months beginning on January 1 and ending on December 31, or
such other period as the Plan Administrator may determine.
5.2 PERFORMANCE GOALS
The Plan Administrator shall establish the performance goal or goals
("Performance Goal or Goals") for each Performance Period in writing prior to
the commencement of the applicable Performance Period, or at such other time as
permitted by applicable provisions of the Code and regulations thereunder, and
shall state
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the amount of award to be paid to each Participant, subject to Section 6.3
below, upon attainment of the stated Performance Goals.
Each Performance Goal selected for a particular Performance Period shall be
a relative or absolute measure of any one or more of the following:
<TABLE>
<S> <C>
Operating Income Net Income
Pre-tax Profit Debt Reduction
Earnings Per Share Safety
Cash Flow Return on Investment
Return on Capital Revenues
Return on Equity Total Stockholder Return
Return on Net Assets
</TABLE>
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 shall set the target level of performance required for each
Performance Goal selected for a particular Performance Period in order to
determine whether a Performance Goal has been attained. The Plan Administrator
may specify that a percentage (less than 100%) of awards may be payable if a
designated level of performance of a Performance Goal is attained that is less
than the target level of performance for such Performance Goal.
The Plan Administrator may select one or more Performance Goals for a
particular Performance Period. If the Plan Administrator selects more than one
Performance Goal for a particular Performance Period, the Plan Administrator may
determine to make awards upon attainment of any one or more of such Performance
Goals, provided that such Performance Goals are established in accordance with
this Section 5.2 and are stated as alternatives to one another.
5.3 PROCEDURES
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 award for a
Performance Period,
(b) the Performance Goals for such Performance Period, and
(c) the maximum award amount payable to each Participant if the
Performance Goals are met.
Any Participant chosen to participate in the Plan for a given Performance
Period shall receive the maximum 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 6.3.
SECTION 6
INDIVIDUAL AWARDS
6.1 PERFORMANCE GOAL CERTIFICATION
An award shall become payable to the extent provided herein in the event
that the Plan Administrator, or the Management Committee in the case of
Participants other than Section 16 Insiders, 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.
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<PAGE> 4
6.2 MAXIMUM AWARD PAYABLE
The maximum award payable under this Plan to any Participant for any
Performance Period shall be two million dollars ($2,000,000) in cash, Restricted
Stock, or a combination of cash and Restricted Stock.
6.3 DISCRETION TO REDUCE AWARDS; PARTICIPANT'S PERFORMANCE
The Plan Administrator, or the Management Committee in the case of
Participants other than Section 16 Insiders, in its sole and absolute
discretion, may reduce the amount of any 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 and the Management Committee,
as applicable, shall consider the Performance Goals of the Company and the
Participant's responsibilities and accomplishments, and such other factors as it
deems appropriate.
6.4 STOCKHOLDER APPROVAL OF PERFORMANCE GOALS
Awards shall not be payable under this Plan unless the Plan Administrator
determines that the material terms of the Performance Goal(s) under which an
award is to be paid have been disclosed and subsequently approved by the
Company's stockholders in accordance with Section 162(m) of the Code and
applicable regulations thereunder.
6.5 NEW EMPLOYEE, RETIREMENT, DEATH, DISABILITY, OR TERMINATION OF EMPLOYMENT
To the extent consistent with the deductibility of awards under Section
162(m) of the Code or regulations promulgated thereunder, the Plan Administrator
or the Management Committee, as applicable, may grant all or such portion of an
incentive award for the Performance Period as it deems advisable to a
Participant (or the Participant's Beneficiary (as defined in Section 9.8) in the
case of the Participant's death) who is first employed or who is promoted to a
position eligible to become a Participant under this Plan during the Performance
Period, or whose employment is terminated during the Performance Period because
of the Participant's retirement, death, permanent disability, resignation, or
discharge, provided that any of the Performance Goals are attained for the
applicable Performance Period.
SECTION 7
PAYMENT OF INCENTIVE AWARDS
7.1 REQUIRED PAYMENT
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 7.2 or 7.3, the award shall be paid not later than the end of the month
following the month in which the Plan Administrator or Management Committee
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.
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<PAGE> 5
(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
8.3) 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 7.1(a)(ii) or 7.1(b)(ii), as applicable.
For purposes of this Plan, the value of awards payable in Restricted Stock
and the calculation of fair market value of Common Stock shall be the mean
between the highest and lowest quoted selling prices at which the Common Stock
is sold on the Award Date (or such other date in the case of calculating fair
market value for other purposes) 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 date on which the Common Stock was so traded.
The value of any fractional share shall be paid in cash.
7.2 RESTRICTED STOCK ELECTION
In lieu of receiving all or any portion of the cash in accordance with
Sections 7.1(a)(i) or 7.1(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 7.1(c)
with respect to the amount of the Participant's Restricted Stock Election.
Except as provided in Section 8, 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 7.1(a)(ii) or
7.1(b)(ii), as applicable.
7.3 DEFERRED PAYMENT
Each Participant may elect to have the payment of all or a portion of any
incentive award made pursuant to Sections 7.1(a)(i) or 7.1(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 7.1 or 7.2, as applicable.
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<PAGE> 6
7.4 PAYMENT UPON CHANGE IN CONTROL
Notwithstanding any other provision of this Plan, in the event of a Change
in Control of the Company, the 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, as follows:
<TABLE>
<CAPTION>
PARTICIPANTS EMPLOYED BY THE COMPANY HOLDING ANY OF THE
FOLLOWING POSITIONS AND PARTICIPANTS EMPLOYED BY
COMPANY SUBSIDIARIES WITH POSITIONS EQUIVALENT THERETO,
PERCENTAGE OF ANNUAL SALARY BUT NOT NECESSARILY WITH THE SAME TITLES:
---------------------------- -------------------------------------------------------
<S> <C>
100% of Annual Salary Chairman of the Board, President, Chief Executive
Officer, Vice Chairman of the Board, or Chief Operating
Officer
80% of Annual Salary Executive Vice President or Senior Vice President
60% of Annual Salary Vice President
</TABLE>
The term "Annual Salary" as used in this Plan shall mean a Participant's
annual base salary in effect on the date of a Change in Control.
In the event a Change in Control occurs 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 7.4 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.
For purposes of this 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 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.
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<PAGE> 7
SECTION 8
RESTRICTED STOCK
8.1 Any share of Restricted Stock awarded pursuant to this Plan shall be
subject to the provisions of this Section 8, and to any additional restrictions
imposed by the Plan Administrator. Restricted Stock may be awarded to
Participants under this Plan in lieu of cash as provided in Section 7. Each
award of Restricted Stock shall be evidenced by a written instrument delivered
by or on behalf of the Company containing provisions not inconsistent with the
Plan. The award of Restricted Stock shall entitle a Participant to receive, on
the date or dates designated by the Plan Administrator, the number of shares of
Common Stock awarded by the Plan Administrator. 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. However, no Participant awarded Restricted Stock shall
have any right as a stockholder with respect to such shares prior to the date of
issuance to the Participant of a certificate or certificates for such shares.
8.2 Notwithstanding Section 8.1, the Plan Administrator may require, under
such terms and conditions as it deems appropriate or desirable, that the
certificates for Restricted Stock delivered under the Plan may be held in
custody by a bank or other institution, or that the Company may itself hold such
shares in custody until the Restriction Period expires or until restrictions
thereon otherwise lapse, and may require, as a condition of any issuance of
Restricted Stock that the Participant shall have delivered a stock power
endorsed in blank relating to the shares of Restricted Stock.
8.3 During a period of years following the award of Restricted Stock, 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 Participant, except as otherwise provided for in this Plan,
upon 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.
8.4 Except as provided in Section 8.5 or 8.6, 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, such shares shall be forfeited to the Company.
8.5 The Restriction Period for any Participant shall be deemed to end and
all restrictions on shares of Restricted Stock awarded pursuant to Sections
7.1(a)(ii), 7.1(b)(ii), and 7.2 (except for Restricted Stock awarded pursuant to
Section 7.1(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 7.1(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.
For the purposes of this Plan, a termination with "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,
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<PAGE> 8
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.
8.6 The Restriction Period for any Participant shall be deemed to end and
all restrictions on shares of Restricted Stock shall lapse immediately upon a
Change in Control.
8.7 Subject to Section 8.2, a Participant entitled to receive Restricted
Stock under the Plan shall be issued a certificate for such shares. Such
certificate 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. When the restrictions imposed by Section 8.3 expire or otherwise lapse
with respect to one (1) 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 unrestricted Common Stock for each share
of Restricted Stock. At that time, the agreement referred to in Section 8.1, as
it relates to such shares, shall be terminated.
SECTION 9
GENERAL PROVISIONS
9.1 ISSUANCE OF COMMON STOCK
The Company shall not be required to issue any certificate for shares of
Common Stock 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, deems necessary or advisable;
(b) listing the shares on any stock exchange on which the Common Stock
may then be listed; or
(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, determines to
be necessary or advisable.
All certificates 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 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 is no longer required or
desirable. In making such determination, the Plan Administrator may rely upon an
opinion of counsel for the Company.
9.2 NO RIGHT TO CONTINUED EMPLOYMENT
Nothing in the Plan, or any awards of cash or Restricted Stock pursuant to
the Plan, shall be construed to confer upon any Participant any right to
continued employment with the Company or a subsidiary, nor
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<PAGE> 9
interfere in any way with the right of the Company or a subsidiary to terminate
the employment of such Participant at any time without assigning any reason
therefor.
9.3 OTHER BENEFITS
Incentive awards 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 7.1(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.
9.4 NONASSIGNMENT
The right of a Participant or Beneficiary to the payment of any incentive
awards 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.
9.5 LEAVES OF ABSENCE
Leaves of absence for such periods and purposes conforming to the personnel
policy of the Company, or of its subsidiaries, as applicable, shall not be
deemed terminations or interruptions of employment, unless a Participant
commences a leave of absence from which he or she is not expected to return to
active employment with the Company or its subsidiaries.
9.6 TRANSFERS AND PROMOTIONS
In the event a Participant is transferred from the Company to a subsidiary,
or vice versa, or is promoted or given different responsibilities, the
Restricted Stock awarded to the Participant prior to such date shall not be
affected.
9.7 UNFUNDED OBLIGATION
The incentive awards to be paid to Participants pursuant to this Plan are
an unfunded obligation of the Company. 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. The Company is not required to segregate any monies from its general
funds, to create any trusts, or to make any special deposits with respect to
this obligation. Beneficial ownership of any 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 Participant account under the
Company's Deferral Compensation Plan shall not create or constitute a trust or a
fiduciary relationship between the Plan Administrator, the Management Committee
or the Company and a Participant, or otherwise create any vested interest in any
Participant or his or her Beneficiary or his or her creditors in any assets of
the Company 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 this Plan.
9.8 BENEFICIARY
The term "Beneficiary" shall mean the person or persons to whom payments
are to be paid pursuant to the terms of the Plan in the event of the
Participant's death. The designation shall be on a form provided by the
Management Committee, executed by the Participant 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
Plan shall remain in effect under this Plan unless it is revoked or changed
under this Plan. If no Beneficiary is designated, the designation is
ineffective, or in the event 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
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<PAGE> 10
surviving spouse, to his or her lineal descendants, pro rata, or, if there is no
surviving spouse or any lineal descendant, to the Participant's estate.
9.9 PERMANENT DISABILITY
A Participant shall be deemed to have become "permanently disabled" for
purposes of this Plan if the Management Committee finds, upon the basis of
medical evidence satisfactory to it, 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 his or her
life.
9.10 INCAPACITY OF PARTICIPANT OR BENEFICIARY
If the Management Committee finds that any Participant or Beneficiary to
whom a payment is payable under the Plan is unable to care for his or her
affairs because of illness or accident or is under a legal disability, any
payment due (unless a prior claim therefore shall have been made by a duly
appointed legal representative), at the discretion of the Management Committee,
may be paid to the spouse, child, parent, brother, or sister of such Participant
or Beneficiary or to any person whom the Management Committee has determined has
incurred expense for such Participant or Beneficiary. Any such payment shall be
a complete discharge of the obligations of the Company under the provisions of
the Plan.
9.11 WITHHOLDING TAXES
Appropriate provision shall be made for all taxes required to be withheld
in connection with the award or other taxable event with respect to cash awards
or Restricted Stock awards under the applicable laws or regulations of any
governmental authority, whether federal, state, or local and whether domestic or
foreign. Unless otherwise provided in the instrument awarding the cash and
Restricted Stock award, a Participant is permitted to deliver shares of
unrestricted Common Stock, to the extent permitted by applicable regulations,
for payment of withholding taxes on the payment of a cash award or the vesting
of Restricted Stock. 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 vesting of the Restricted Stock to satisfy tax
withholding obligations. The fair market value of Common Stock as delivered
pursuant to this Section 9.11 shall be valued as of the day prior to delivery,
and shall be calculated in accordance with Section 7.1. The withholding of
shares of Common Stock to pay tax obligations in connection with the vesting of
Restricted Stock by a Section 16 Insider must be approved by the Plan
Administrator and must occur (i) pursuant to an irrevocable election made six
(6) months in advance of the transaction, (ii) during the period beginning on
the third business day following the date of release for publication of the
quarterly or annual summary statements of sales and earnings of the Company and
ending on the twelfth business day following such date, or (iii) otherwise in
accordance with the provisions of Rule 16b-3 and interpretations thereunder. In
the event Rule 16b-3 is amended or interpreted to permit shares of Common Stock
to be withheld to pay tax obligations outside the periods described in clause
(i) or (ii) of the preceding sentence, or without Plan Administrator approval,
the Plan Administrator may determine that such provisions shall no longer apply
to Section 16 Insiders. Notwithstanding the foregoing, the Management Committee
shall determine, for Participants other than Section 16 Insiders, the
appropriate means of providing for the withholding of taxes.
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 a transaction under or with respect to the Plan, (ii)
designating or choosing the time of distributions under the Plan, or (iii)
disposing of any shares of Common Stock issued under the Plan.
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9.12 TERMINATION AND AMENDMENT
The Board and the Plan Administrator may from time to time amend, suspend,
or terminate the Plan, in whole or in part, including, but not limited to, any
amendment necessary to insure that the Company may obtain any required
regulatory approvals, and if the Plan is suspended or terminated, the Plan
Administrator may reinstate any or all of its provisions. The Management
Committee may amend the Plan provided that it may not suspend or terminate the
Plan, substantially increase the administrative cost of the Plan or increase the
obligations of the Company, or expand the classification of employees who are
eligible to participate in the Plan. No amendment, suspension, or termination
may impair the right of a Participant or his or her designated Beneficiary to
receive the deferred compensation benefit accrued prior to the effective date of
such amendment, suspension, or termination.
9.13 STOCKHOLDER APPROVAL
Notwithstanding any other provision in this Plan, the Board, the Plan
Administrator, and the Management Committee may not amend the Plan without the
approval of the stockholders of the Company to: (a) materially increase the
number of shares that may be issued under the Plan; (b) materially modify the
requirements as to eligibility for participation in the Plan; (c) change the
Performance Goals; or (d) otherwise materially increase the benefits accruing to
the Participants under the Plan.
9.14 APPLICABLE LAW
The Plan shall be construed and governed in accordance with the laws of the
State of Texas.
9.15 EFFECTIVE DATE AND TERM OF THE PLAN
The Plan shall be effective as of January 13, 1995, provided that the Plan
is adopted by the Board and is approved 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. Subject to
the foregoing condition, incentive awards of cash, Restricted Stock, or both may
be granted pursuant to the Plan from time to time with the period commencing
upon adoption of the Plan by the Board and ending ten (10) years after approval
of the Plan by the stockholders. Awards of Restricted Stock granted under the
Plan shall continue to be subject to the terms and conditions of the Plan after
the expiration date. To the extent required for compliance with Rule 16b-3,
shares of Common Stock underlying shares of Restricted Stock granted subject to
subsequent stockholder approval of the Plan to Section 16 Insiders may not be
sold until a date at least six (6) months after the date such stockholder
approval is obtained.
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<PAGE> 1
EXHIBIT 4.4
EL PASO NATURAL GAS COMPANY
1995 COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
SECTION 1
PURPOSE
1.1 PURPOSE
The name of the Plan shall be the El Paso Natural Gas Company 1995
Compensation Plan for Non-Employee Directors (the "Plan"). The purpose of the
Plan is to provide a compensation program for non-employee Directors of El Paso
Natural Gas Company (the "Company") that will attract and retain highly
qualified individuals to serve as members of the Company's Board of Directors
(the "Board"). The Plan permits non-employee Directors of the Company to receive
their Compensation in the form of cash, deferred cash, deferred shares of
Company common stock, par value $3 per share ("Common Stock"), or any
combination of the foregoing. For purposes of the Plan, the term "Compensation"
shall mean the Participant's annual retainer and meeting fees, if any, for each
regular or special meeting and for any committee meetings attended.
SECTION 2
ADMINISTRATION
2.1 MANAGEMENT COMMITTEE
Subject to Section 7.7, the Plan shall be administered by a management
committee (the "Management Committee") consisting of the Chief Executive Officer
of the Company and such other senior officers as the Chief Executive Officer
shall designate. The Management Committee shall interpret the Plan, shall
prescribe, amend and rescind rules relating to it from time to time as it deems
proper and in the best interests of the Company, and shall take any other action
necessary for the administration of the Plan. Any decision or interpretation
adopted by the Management Committee shall be final and conclusive and shall be
binding upon all Participants.
SECTION 3
PARTICIPATION
3.1 PARTICIPANTS
Each non-employee Director of the Company shall become a participant in the
Plan ("Participant") immediately upon election to the Board. Each person who is
a non-employee Director of the Company on the Effective Date (as defined below)
of the Plan shall become a Participant on the Effective Date.
SECTION 4
DEFERRED COMPENSATION
4.1 MAXIMUM NUMBER OF SHARES
Subject to Section 4.2, the maximum number of shares of Common Stock which
may at any time be awarded under the Plan is one hundred fifty thousand
(150,000) shares of Common Stock. Awards may be made 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 Management Committee.
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4.2 ADJUSTMENT TO NUMBER OF SHARES
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, upon recommendation of the Management
Committee, may make appropriate adjustments to the number of shares (i)
authorized for the Plan, and (ii) allocated under the Common Stock Deferral (as
defined in Section 6.2).
SECTION 5
COMPENSATION
5.1 AMOUNT OF COMPENSATION
Each Director's Compensation shall be determined in accordance with the
Company's By-laws and shall be paid, unless deferred pursuant to Section 6, in
the Plan Year (as defined below) in which it is earned in four equal quarterly
installments with each installment being made on or about the last day of the
applicable Plan Quarter (as defined below) (the "Payment Date"), unless
otherwise determined by the Management Committee.
5.2 COMPENSATION ELECTION
Upon election to the Board and at the time of or prior to each annual
stockholders' meeting thereafter, or at such other time that may be required by
Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules promulgated thereunder, each Participant may elect to
receive his or her Compensation for the following Plan Year in the form of cash,
deferred cash, deferred Common Stock or any combination of the foregoing, by
submitting a written notice to the Company in the manner prescribed by the
Management Committee. Any combination of the alternatives may be elected,
provided the aggregate of the alternatives elected may not exceed one hundred
percent of the Participant's Compensation, except as provided in Section 6.2(a).
If no election is received by the Company, the Participant shall be deemed to
have made an election to receive his or her Compensation in undeferred cash. An
election under this Section 5.2 shall be irrevocable and shall apply to the
Compensation earned during the Plan Year (as defined below) for which the
election is effective.
5.3 PLAN YEAR
The term "Plan Year" shall mean the period which begins on the day of the
Company's annual stockholders' meeting and terminates the day before the
succeeding annual stockholders' meeting except that the first Plan Year shall be
a "short" year beginning on the Effective Date of the Plan and terminating on
the day before the next succeeding annual stockholders' meeting.
5.4 PLAN QUARTER
The term "Plan Quarter" shall mean each calendar quarter except for the
first Plan Quarter of any Plan Year which shall be a "long" quarter beginning on
the day of the annual stockholders' meeting and ending on June 30, and the
fourth Plan Quarter of any Plan Year (including the first Plan Quarter after the
Effective Date) shall be a "short" quarter beginning on January 1 and ending on
the day before the annual stockholders' meeting.
SECTION 6
DEFERRED COMPENSATION
6.1 DEFERRED CASH
If a Participant elects pursuant to Section 5.2 to have all or a specified
percentage of his or her Compensation deferred in cash, such amount shall be
reflected in a Memorandum Deferred Account (as
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defined below) until the Participant ceases to be a Director. Compensation
deferred under the Company's Compensation Plan for Non-Employee Directors dated
as of January 1, 1992 shall be paid in accordance with the terms of that plan.
6.2 DEFERRED COMMON STOCK
(a) If a Participant elects pursuant to Section 5.2 to have all or a
specified percentage of his or her cash Compensation deferred in Common Stock,
such amount shall be set aside in a Memorandum Deferred Account until the
Participant ceases to be a Director. The amount credited to the Participant's
Memorandum Deferred Account in such case (the "Common Stock Deferral") shall be
equal to the amount actually deferred plus a premium (the "Conversion Premium").
The Conversion Premium shall be ten percent (10%) or, if greater, any amount
which, pursuant to published positions of the Securities and Exchange
Commission, is consistent with the requirements of Rule 16b-3(c)(2)(i)(C) of the
Exchange Act (or any successor provision), but in no case more than fifty
percent (50%).
(b) The number of shares of Common Stock credited to a Participant's
account shall equal the Common Stock Deferral divided by the fair market value
of the Common Stock on the applicable Payment Date or, if later, on the Deferred
Conversion Date (as defined below). For purposes of this Plan, fair market value
shall be the mean between the highest and lowest quoted selling prices at which
the Common Stock is sold on the date of the applicable Payment Date as reported
in the NYSE Composite Transactions by The Wall Street Journal on such date or,
if no Common Stock was traded on such Payment Date, on the next preceding date
on which Common Stock was so traded.
(c) With respect to the first Plan Year and for members of the Board who
first become Participants elected after the Effective Date of the Plan, the
following additional terms shall apply:
(i) No shares of Common Stock shall be credited to a Participant's
Memorandum Deferred Account (as defined in Section 6.3) until at least six
(6) months has lapsed since making the election for deferred Common Stock;
and
(ii) Compensation deferred in Common Stock shall be deferred in cash
(including the additional amount provided for under Section 6.2(a)) and
shall earn interest in accordance with Section 6.3 until six (6) months
after such election and shall be converted to Common Stock on the last day
of the sixth (6th) month following the date of the applicable election (the
"Deferred Conversion Date"), with the number of shares of Common Stock
being credited to the Participant's Memorandum Deferred Account being
calculated in accordance with Section 6.2(b).
(d) Subject to Section 7.1, each Participant who elects deferred Common
Stock shall, once the shares of Common Stock have been credited to his or her
Memorandum Deferred Account, have the right to vote the shares and receive
dividends and other distributions on such shares. Any such dividends and other
distributions shall be reinvested promptly in Common Stock and shall be held in
the Memorandum Deferred Account until the underlying shares are distributed.
6.3 MEMORANDUM DEFERRED ACCOUNT
The Company shall establish a ledger account (the "Memorandum Deferred
Account") for each Participant who has elected to defer a portion of his or her
Compensation for the purpose of reflecting the Company's obligation to pay the
Compensation as provided in Sections 6.5 and 6.6.
(a) Interest shall accrue on the deferred cash to the date of distribution
and shall be credited to the Memorandum Deferred Account at the end of each
calendar quarter or such other periods as may be determined by the Management
Committee, and shall be at the same interest rate as the Company pays on amounts
under the Company's Deferred Compensation Plan.
(b) The Company shall credit each Participant's Memorandum Deferred Account
with the number of shares of Common Stock (x) calculated in accordance with
Section 6.2(b) and (y) acquired through dividend reinvestments or other
distributions.
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6.4 DISCRETIONARY INVESTMENT BY COMPANY
The deferred amounts to be paid to the Participants are unfunded
obligations of the Company. The Management Committee may direct that an amount
equal to the deferred amount shall be invested by the Company as the Management
Committee, in its sole discretion, shall determine. The Management Committee may
in its sole discretion determine that all or some portion of an amount equal to
the deferred cash shall be paid into one or more grantor trusts to be
established by the Company of which it shall be the beneficiary, and to the
assets of which it shall become entitled as and to the extent that Participants
receive benefits under the Plan. The Management Committee may designate an
investment advisor to direct investments and reinvestments of the funds,
including investment of any grantor trusts hereunder.
6.5 PAYMENT OF DEFERRED CASH
When a Participant ceases to be a Director, the Company shall pay to the
Participant (or the Participant's beneficiary in the case of the Participant's
death) an amount equal to the deferred cash balance of his or her Memorandum
Deferred Account, plus interest (at a rate determined pursuant to Section 6.3)
on the outstanding deferred cash account balance to the date of distribution and
subject to approval of the Management Committee, as follows:
(a) a lump sum cash payment or
(b) in periodic installments over a period of years as determined at
the time the deferral election is made.
Payment of deferred cash shall commence or be made in the month following the
date on which a Participant ceases to be a Director.
6.6 PAYMENT OF DEFERRED COMMON STOCK
When a Participant ceases to be a Director, the Company shall distribute
Common Stock to the Participant (or the Participant's beneficiary in the case of
the Participant's death) in an amount equal to the number of whole shares of
Common Stock held in a Participant's Memorandum Deferred Account. Any fractional
shares of Common Stock held in the Participant's account shall be paid to the
Participant (or the Participant's beneficiary in the case of the Participant's
death) in a lump sum cash payment based on the Common Stock's fair market value
on the day preceding such date.
Payment of deferred Common Stock shall be made in the month following the
date on which a Participant ceases to be a Director, or such later date as may
be necessary to comply with Section 16(b) of the Exchange Act and rules
promulgated thereunder.
6.7 ACCELERATION OF PAYMENT OF DEFERRED CASH AND DEFERRED COMMON STOCK
(a) The Management Committee, in its discretion, may accelerate the payment
of the unpaid balance of a Participant's Memorandum Deferred Account in the
event of the Participant's death or Permanent Disability, or upon its
determination that the Participant (or his or her Beneficiary in the case of his
or her death) has incurred a severe financial hardship. The Management Committee
in making its determination may consider such factors and require such
information as it deems appropriate.
(b) Amounts deferred shall be paid to a Participant or a Participant's
Beneficiary in the event of a Change in Control within thirty (30) days after
the date of the Change in Control, or at such other time as may be required to
comply with Rule 16b-3 of the Exchange Act. For purposes of this 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 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
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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.
SECTION 7
GENERAL PROVISIONS
7.1 ISSUANCE OF COMMON STOCK
The Company shall not be required to issue any certificate for shares of
Common Stock 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, deems necessary or advisable;
(b) listing the shares on any stock exchange on which the Common Stock
may then be listed; or
(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, determines to be necessary
or advisable.
All certificates for shares of Common Stock delivered under the Plan also
shall be subject to such stop transfer orders and other restrictions as the
Management Committee 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 Management Committee may cause a legend or legends to be placed on
any such certificates 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 Management Committee determines that
application of such provisions is no longer required or desirable. In making
such determination, the Management Committee may rely upon an opinion of counsel
for the Company.
7.2 UNFUNDED OBLIGATION
Any deferred amount to be paid to Participants pursuant to the Plan is an
unfunded obligation of the Company. The Company is not required to segregate any
monies from its general funds, to create any trusts, or to make any special
deposits with respect to this obligation. Beneficial ownership of any
investments, including trust investments that 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 memorandum accounts shall not create
or constitute a trust or a fiduciary relationship between the Management
Committee or the Company 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 whatsoever. The
Participants shall have
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no claim against the Company for any changes in the value of any assets that may
be invested or reinvested by the Company with respect to the Plan.
7.3 BENEFICIARY
The term "Beneficiary" shall mean the person or persons to whom payments
are to be paid pursuant to the terms of the Plan in the event of the
Participant's death. The designation shall be on a form provided by the
Management Committee, executed by the Participant, 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 El Paso
Natural Gas Company Compensation Plan for Non-Employee Directors dated January
1, 1992 shall remain in effect under this Plan unless it is revoked or changed
under this Plan. If no Beneficiary is designated, the designation is
ineffective, or in the event the Beneficiary dies before the balance of the
Memorandum Deferred Account is paid, the balance shall be paid to the
Participant'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 lineal descendants,
to the Participant's legal representatives, the Participant's estate or the
person or persons to whom the deceased's rights under the Plan shall have passed
by will or the laws of descent and distribution (unless the Management Committee
for a given year has designated investment in an annuity, in which case the
payment options selected by the Participant with respect thereto shall govern).
7.4 PERMANENT DISABILITY
A Participant shall be deemed to have become disabled for purposes of the
Plan if the Management Committee finds, upon the basis of medical evidence
satisfactory to it, that the Participant is totally disabled, whether due to
physical or mental condition, so as to be prevented from engaging in further
service to the Company or any of its subsidiaries and that such disability will
be permanent and continuous during the remainder of the Participant's life.
7.5 INCAPACITY OF PARTICIPANT OR BENEFICIARY
If the Management Committee finds that any Participant or Beneficiary to
whom a payment is payable under the Plan is unable to care for his or her
affairs because of illness or accident or is under a legal disability, any
payment due (unless a prior claim therefor shall have been made by a duly
appointed legal representative), at the discretion of the Management Committee,
may be paid to the spouse, child, parent, brother or sister of such Participant
or Beneficiary or to any person whom the Management Committee has determined has
incurred expense for such Participant or Beneficiary. Any such payment shall be
a complete discharge of the obligations of the Company under the provisions of
the Plan.
7.6 NONASSIGNMENT
The right of a Participant or Beneficiary to the payment of any amounts
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.
7.7 TERMINATION AND AMENDMENT
The Board may from time to time amend, suspend or terminate the Plan, in
whole or in part, and if the Plan is suspended or terminated, the Board may
reinstate any or all of its provisions. No amendment, suspension or termination
may impair the right of a Participant or the Participant's designated
Beneficiary to receive benefits accrued prior to the effective date of such
amendment, suspension or termination. The Management Committee may amend the
Plan, without Board approval, to ensure that the Company may obtain any
regulatory approval or to accomplish any other reasonable purpose, provided that
the Management Committee may not effect a change that would materially increase
the cost of the Plan to the Company. Notwithstanding the foregoing, the Board
and the Management Committee may not amend the Plan without the approval of the
stockholders of the Company to: (i) materially increase the number of shares of
Common
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Stock that may be issued under the Plan, (ii) materially modify the eligibility
for participation in the Plan, or (iii) otherwise materially increase the
benefits accruing to the Participants under the Plan.
7.8 APPLICABLE LAW
The Plan shall be construed and governed in accordance with the laws of the
State of Texas.
7.9 EFFECTIVE DATE AND TERM OF THE PLAN
The Plan shall be effective as of January 13, 1995 (the "Effective Date"),
provided that the Plan is approved 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. To the
extent required for compliance with Section 16(b) of the Exchange Act and rules
promulgated thereunder, shares of Common Stock distributed to Participants may
not be sold until a date at least six (6) months after the date such stockholder
approval is obtained, or if earlier, such other date allowed by Section 16(b) of
the Exchange Act or rules promulgated thereunder. The Plan shall terminate ten
(10) years after the approval of the Plan by the stockholders of the Company.
7.10 COMPLIANCE WITH RULE 16B-3 OF THE EXCHANGE ACT
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 of Common Stock, the Plan shall comply in all
respects with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act. If
any Plan provision is later found not to be in compliance with Rule 16b-3 of the
Exchange Act, that provision shall be deemed modified as necessary to meet the
requirements of Rule 16b-3.
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Exhibit 5.1
KELLEY DRYE & WARREN
A Partnership Including Professional Associations
TWO STAMFORD PLAZA
281 TRESSER BOULEVARD
STAMFORD, CT. 06901-3229
February 2, 1995
El Paso Natural Gas Company
One Paul Kayser Center
100 North Stanton Street
El Paso, Texas 79901
Re: El Paso Natural Gas Company's 1995 Omnibus Compensation Plan,
1995 Incentive Compensation Plan and 1995 Compensation Plan
for Non-Employee Directors
Dear Sirs:
We are acting as special counsel to El Paso Natural Gas
Company, a Delaware corporation (the "Company"), in connection with the
preparation and filing with the Securities and Exchange Commission of a
Registration Statement on Form S-8 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act"). The Registration Statement
relates to an aggregate of 4,400,000 shares of the Company's Common Stock, $3
par value (the "Shares"), of which 3,000,000 Shares are to be issued pursuant
to the Company's 1995 Omnibus Compensation Plan, 1,250,000 Shares are to be
issued pursuant to the Company's 1995 Incentive Compensation Plan, and 150,000
Shares are to be issued pursuant to the Company's 1995 Compensation Plan for
Non-Employee Directors (collectively, the "Plans").
As special counsel to the Company, we have examined the
Registration Statement and such corporate records and other documents and
instruments and have made such investigations of law, as we have considered
necessary or appropriate for the purpose of rendering this opinion.
Based upon and subject to the foregoing, we are of the opinion
that the Shares issuable pursuant to the Plans have been duly authorized and
reserved for issuance and, when certificates for the Shares have been duly
executed by the Company, countersigned by a transfer agent, duly registered by
a registrar for the Shares and issued in accordance with the terms of the
applicable Plan, the Shares will be validly issued, fully paid and
nonassessable.
<PAGE> 2
El Paso Natural Gas Company
February 2, 1995
Page -2-
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement. By giving the foregoing consent, we do not
admit that we are within the category of persons whose consent is required
under Section 7 of the Act.
Very truly yours,
/S/ KELLEY DRYE & WARREN
<PAGE> 1
Exhibit 5.2
KELLEY DRYE & WARREN
A Partnership Including Professional Associations
TWO STAMFORD PLAZA
281 TRESSER BOULEVARD
STAMFORD, CT. 06901-3229
February 2, 1995
El Paso Natural Gas Company
One Paul Kayser Center
100 North Stanton Street
El Paso, Texas 79901
Re: El Paso Natural Gas Company's 1995 Omnibus Compensation Plan,
1995 Incentive Compensation Plan and 1995 Compensation Plan
for Non-Employee Directors
Dear Sirs:
We are acting as special counsel to El Paso Natural Gas
Company, a Delaware corporation (the "Company"), in connection with the
preparation and filing with the Securities and Exchange Commission of a
Registration Statement on Form S-8 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act"). The Registration Statement
relates to an aggregate of 4,400,000 shares of the Company's Common Stock, $3
par value (the "Shares"), of which 3,000,000 Shares are to be issued pursuant
to the Company's 1995 Omnibus Compensation Plan, 1,250,000 Shares are to be
issued pursuant to the Company's 1995 Incentive Compensation Plan, and 150,000
Shares are to be issued pursuant to the Company's 1995 Compensation Plan for
Non-Employee Directors (collectively, the "Plans"). You have requested that we
provide you with our opinion regarding the compliance of the Plans with the
requirements of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
In rendering this opinion, we have reviewed the Plans as
adopted effective January 13, 1995, which you have represented to us to be the
full and complete Plans in effect on the date hereof. We have also reviewed
such other records and documents and obtained such verifications and
confirmations of fact as we have deemed necessary for the purposes of this
opinion. We have relied upon the representations and warranties contained in
such documents and upon such verifications and confirmations, and, as to all
matters of fact covered by such documents, we have relied, without independent
investigation or verification, on such documents. In such examination we have
assumed the genuineness of all signatures and the authenticity, accuracy and
completeness of all documents submitted to us as originals and the conformity
with the originals and accuracy and completeness of all documents submitted to
us as copies. We have assumed the due authorization, execution,
acknowledgement and delivery of the Plan and of all documents which are a
prerequisite to the effectiveness of the Plan.
We have also assumed that the Plans are and will be operated in
accordance with the terms thereof and in accordance with the requirements of
ERISA and published regulations and interpretations thereof as they apply to
the interpretation and operation of the Plans. We have assumed that all
reporting and disclosure requirements applicable to the Plans have been met and
will continue to be met in a timely manner. We are not, and have not been,
responsible for the day-to-day administration and operation of the Plans nor
have we reviewed for the purpose of this opinion any trust or trusts which may
have been established with respect to the Plans.
Based on the foregoing, we are of the opinion that, as of the
date hereof, the provisions of the written documents constituting the Plans
meet all material applicable requirements of ERISA. This opinion is limited to
matters governed by ERISA as they exist on the date hereof, and we express no
opinion as to the effect of any other federal laws or as to the effect of the
laws of any state.
This opinion is being offered solely for your benefit and is
not to be quoted in whole or in part or otherwise referred to, nor is it to be
filed with any governmental agency or other person, without our prior written
consent. We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. By giving the foregoing consent, we do not admit that
we are within the category of persons whose consent is required under Section 7
of the Act.
Very truly yours,
/s/ KELLEY DRYE & WARREN
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-8, relating to the El Paso Natural Gas Company 1995 Omnibus Compensation
Plan, 1995 Incentive Compensation Plan and 1995 Compensation Plan for
Non-Employee Directors, of our report dated January 18, 1995, on our audits of
the consolidated financial statements and financial statement schedules of El
Paso Natural Gas Company as of December 31, 1994 and 1993, and for each of the
three years in the period ended December 31, 1994, which report is included in
its Annual Report on Form 10-K for the year ended December 31, 1994, filed with
the Securities and Exchange Commission.
/S/ COOPERS & LYBRAND L.L.P
El Paso, Texas
January 31, 1995
