<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the Com-
mission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EL PASO NATURAL GAS COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Not Applicable
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
Not Applicable
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rules 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
Not Applicable
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
Not Applicable
- --------------------------------------------------------------------------------
(5) Total fee paid:
Not Applicable
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
Not Applicable
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
Not Applicable
- --------------------------------------------------------------------------------
(3) Filing Party:
Not Applicable
- --------------------------------------------------------------------------------
(4) Date Filed:
Not Applicable
- --------------------------------------------------------------------------------
<PAGE> 2
[EL PASO LOGO]
Dear Stockholder:
You are cordially invited to attend the 1995 Annual Meeting of Stockholders
of El Paso Natural Gas Company (the "Company"), which will be held on Thursday,
March 16, 1995, at 9:00 a.m. (mountain standard time), in the Crescent III
meeting room, The Sheraton Crescent Hotel, 2620 West Dunlap Avenue, Phoenix,
Arizona. The accompanying Notice of Annual Meeting of Stockholders and Proxy
Statement describe the business to be transacted at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, please complete,
date, sign and return the enclosed proxy card in the accompanying envelope as
promptly as possible to ensure that your shares are represented and voted in
accordance with your wishes. You can help the Company avoid the necessity and
expense of sending follow-up letters to ensure a quorum is represented by
promptly returning the enclosed proxy card in the accompanying envelope.
Sincerely,
/s/ WILLIAM A. WISE
WILLIAM A. WISE
Chairman of the Board, President
and Chief Executive Officer
El Paso, Texas
February 13, 1995
<PAGE> 3
EL PASO NATURAL GAS COMPANY
100 NORTH STANTON STREET
EL PASO, TEXAS 79901
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MARCH 16, 1995
The Annual Meeting of Stockholders of El Paso Natural Gas Company (the
"Company") will be held on Thursday, March 16, 1995, at 9:00 a.m. (mountain
standard time), in the Crescent III meeting room, The Sheraton Crescent Hotel,
2620 West Dunlap Avenue, Phoenix, Arizona, for the following purposes:
1. To elect eight Directors, each to hold office for a term of one year;
2. To ratify the appointment of Coopers & Lybrand as independent certified
public accountants to audit the Company's financial statements for the
fiscal year ending December 31, 1995;
3. To consider and act upon a proposal to approve the El Paso Natural Gas
Company 1995 Omnibus Compensation Plan;
4. To consider and act upon a proposal to approve the El Paso Natural Gas
Company 1995 Incentive Compensation Plan;
5. To consider and act upon a proposal to approve the El Paso Natural Gas
Company 1995 Compensation Plan for Non-Employee Directors; and
6. To transact any other business which may be properly brought before the
Annual Meeting.
Only stockholders of record at the close of business on January 25, 1995,
are entitled to notice of, and to vote at, the Annual Meeting and any
adjournment or postponement thereof. Whether or not you plan to attend the
Annual Meeting, please complete, date, sign and return the enclosed proxy card
in the accompanying envelope as promptly as possible to ensure that your shares
are represented and voted in accordance with your wishes.
By Order of the Board of Directors
/s/ STACY J. JAMES
STACY J. JAMES
Corporate Secretary
El Paso, Texas
February 13, 1995
<PAGE> 4
EL PASO NATURAL GAS COMPANY
100 NORTH STANTON STREET
EL PASO, TEXAS 79901
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS -- MARCH 16, 1995
This Proxy Statement with the accompanying Notice of Annual Meeting of
Stockholders and proxy card are being mailed to stockholders beginning on or
about February 13, 1995. The proxy is solicited by the Board of Directors of El
Paso Natural Gas Company (the "Company") for use at the Annual Meeting of
Stockholders (the "Annual Meeting") on Thursday, March 16, 1995. Shares of the
Company's common stock, par value $3.00 per share (the "Common Stock"),
represented by a properly executed proxy in the accompanying form, will be voted
at the Annual Meeting. The proxy may be revoked at any time before its exercise
by sending written notice of revocation to Ms. Stacy J. James, Corporate
Secretary, El Paso Natural Gas Company, 100 North Stanton Street, El Paso, Texas
79901, by signing and delivering a subsequently dated proxy or by attending the
Annual Meeting in person and giving notice of revocation to the Inspectors of
Election.
January 25, 1995, was the record date for the determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting. On that date there
were outstanding and entitled to vote 35,756,539 shares of Common Stock, which
is the Company's only class of voting securities. For a period of at least ten
days prior to the Annual Meeting, a complete list of stockholders entitled to
vote at the Annual Meeting will be available for examination by any stockholder
during the Company's ordinary business hours at The Sheraton Crescent Hotel,
2620 West Dunlap Avenue, Phoenix, Arizona.
Each stockholder is entitled to one vote on each proposal for each share of
Common Stock held as of the record date. Two Inspectors of Election, both from
The First National Bank of Boston and appointed by the Board of Directors, shall
have authority to receive, inspect, electronically tally and determine the
validity of the proxies which are received. In accordance with the Company's
By-laws, an abstention by a stockholder will be a vote of abstention with
respect to the proposal voted upon and will not be a vote "for" or "against" the
proposal; however, an abstention and a broker non-vote will be included when
determining whether a quorum is present. The Company's By-laws also provide that
a non-vote by a broker will be treated as if the broker never voted. A non-vote
by a stockholder will be tallied as a vote "for" management.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company held eight meetings during the fiscal
year ended December 31, 1994. The standing committees of the Board of Directors
are the Audit Committee and the Compensation Committee. The Board of Directors
does not have a nominating committee or any committee performing similar
functions, and all matters which would be considered by such committee are acted
upon by the full Board of Directors. Each Director has attended at least 75% of
the meetings of the Board of Directors and the committees on which he served
during the fiscal year 1994, except for Mr. Eugenio Garza Laguera.
THE AUDIT COMMITTEE
During fiscal year 1994, the Audit Committee held four meetings. The Audit
Committee currently consists of Kenneth L. Smalley (Chairman), Byron Allumbaugh,
Eugenio Garza Laguera, James F. Gibbons and Ben F. Love, each a non-employee
Director. The Audit Committee makes a recommendation to the Board of Directors
for a firm of independent certified public accountants to audit the Company's
annual financial statements. In addition, the Audit Committee reviews with
management and the Company's
<PAGE> 5
independent certified public accountants the Company's financial statements, the
adequacy of the Company's internal accounting controls, and the Company's basic
accounting and financial policies and practices.
THE COMPENSATION COMMITTEE
During fiscal year 1994, the Compensation Committee held two meetings. The
Compensation Committee currently consists of Ben F. Love (Chairman), Byron
Allumbaugh, Eugenio Garza Laguera, James F. Gibbons and Kenneth L. Smalley, each
a non-employee Director. The Compensation Committee currently administers the
Company's executive stock option plan, long-term incentive compensation plan,
annual incentive compensation plan and other executive compensation plans. In
addition, the Compensation Committee considers proposals with respect to the
creation of and changes to executive compensation plans and reviews appropriate
criteria for establishing performance targets and determining annual corporate
and executive performance ratings. The policies and mission of the Compensation
Committee are set forth in the "Compensation Committee Report on Executive
Compensation," which begins on page 11 of this Proxy Statement.
DIRECTOR COMPENSATION
Each member of the Company's Board of Directors is reimbursed for the usual
and ordinary expenses of meeting attendance. Employee Directors receive no
additional compensation for serving on the Board of Directors or committees
thereof. Pursuant to the Company's Compensation Plan for Non-Employee Directors,
non-employee Directors receive an annual retainer of $50,000, which may be paid
in cash, deferred cash or a combination thereof. If the Company's stockholders
approve the adoption of the 1995 Compensation Plan for Non-Employee Directors
(as hereinafter defined) at the Annual Meeting, non-employee Directors of the
Company will also be entitled to elect to receive their compensation in the form
of deferred Common Stock. See Proposal No. 5, which begins on page 25 of this
Proxy Statement. No additional fees are currently paid to non-employee Directors
for serving on the Board of Directors or committees thereof.
Each non-employee Director receives a stock option grant of 3,000 options
under the Company's Stock Option Plan for Non-Employee Directors upon his
initial election to the Board of Directors and an annual stock option grant of
1,000 options upon each re-election to the Board of Directors. Non-employee
Directors are also eligible to participate in the Company's Retirement Income
Plan for Non-Employee Directors (which provides for retirement benefits based
upon the number of years of service as a Director).
As part of its overall program to support charitable organizations, the
Company has a Director Charitable Award Plan. The plan provides for the
designation of up to four charitable organizations to receive a maximum of
$1,000,000 in the aggregate upon the death of each Director participant.
Pursuant to the plan, each Director of the Company is entitled to participate
upon the completion of two consecutive years of service on the Board of
Directors. Currently, Messrs. Allumbaugh, Love, Smalley and Wise are eligible to
participate in the plan.
PROPOSALS
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
In accordance with the By-laws of the Company, the Board of Directors has
fixed at eight the number of Directors constituting the full Board. The Company
proposes to elect eight Directors, each to hold office for a term of one year
and until his successor has been duly elected and shall qualify. With the
exception of broker non-votes and unless otherwise instructed by stockholders,
the persons named on the enclosed proxy card will vote the shares of Common
Stock represented by such proxy for the election of the eight nominees named in
this Proxy Statement. However, if any of the named nominees should be
unavailable for election, the Board of Directors may substitute nominees, in
which event the shares of Common Stock represented by proxy will be voted for
substitute nominees unless an instruction to the contrary is contained on the
proxy card. No circumstances are presently known which would render any nominee
named herein unavailable to serve as a member of the Board of Directors, except
for Mr. Dell'Osso, who has indicated a desire to retire before the end of 1995.
PURSUANT TO THE COMPANY'S BY-LAWS, THE ELECTION OF EACH DIRECTOR REQUIRES AN
AFFIRMATIVE VOTE OF A PLURALITY OF THE SHARES OF THE COMPANY'S COMMON STOCK
REPRESENTED AT THE ANNUAL MEETING IN PERSON OR
2
<PAGE> 6
BY PROXY AND ENTITLED TO VOTE ON THE PROPOSAL. HOLDERS OF COMMON STOCK MAY NOT
CUMULATE THEIR VOTES FOR THE ELECTION OF DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE ELECTION
OF EACH OF THE NOMINEES NAMED BELOW.
Each of the following nominees is currently a Director of the Company:
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION SERVED AS
AND SELECTED OTHER INFORMATION DIRECTOR
CONCERNING NOMINEES FOR DIRECTOR SINCE
--------------------------------------------- ----------
<S> <C>
BYRON ALLUMBAUGH 1992
Chairman of the Board and Chief Executive Officer,
Ralphs Grocery Company,
Los Angeles, California -- Supermarket Chain.
Age -- 63
Member -- Audit and Compensation Committees
Since February 1976, Mr. Allumbaugh's principal occupation has been as shown
above. Mr. Allumbaugh is a member of the Board of Directors of H. F.
Ahmanson & Company and Ultramar Inc.
LUINO DELL'OSSO, JR. 1993
Vice Chairman of the Board
and Chief Operating Officer,
El Paso Natural Gas Company,
El Paso, Texas -- Natural Gas Transmission.
Age -- 55
Mr. Dell'Osso has been Vice Chairman of the Board of the Company since
September 1994 and Chief Operating Officer (the "COO") of the Company since
November 1990. From November 1990 until September 1994, he was an Executive
Vice President of the Company. Mr. Dell'Osso was Senior Vice President and
Chief Financial Officer of Burlington Resources Inc. ("BR") from April 1989
until October 1990 and Senior Vice President, Finance and Planning of BR from
May 1988 until March 1989. From April 1984 until December 1988, he was Senior
Vice President, Finance and Planning of Burlington Northern Inc.
EUGENIO GARZA LAGUERA 1993
Chairman of the Board of Directors,
Valores Industriales, S.A. ("VISA"),
Monterrey, Mexico -- Mexican Holding Company
principally involved in beer and
soft drink bottling and distribution;
Chairman of the Board of Directors,
Fomento Economico Mexicano,
S.A. de C.V. ("FEMSA"),
Monterrey, Mexico -- Beer and soft
drink bottling and distribution;
Chairman of the Board of Directors,
Grupo Financiero Bancomer, S.A. de C.V.,
Mexico City, Mexico -- Mexican Holding Company
principally involved in commercial banking;
Chairman of the Board of Directors,
BANCOMER,
Mexico City, Mexico --
Commercial Banking Institution;
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION SERVED AS
AND SELECTED OTHER INFORMATION DIRECTOR
CONCERNING NOMINEES FOR DIRECTOR SINCE
-------------------------------------------- ---------
<S> <C>
Chairman of the Board of Regents,
Instituto Tecnologico Y de
Estudios Superiores de Monterrey, A.C.,
Monterrey, Mexico -- Higher Education.
Age -- 71
Member -- Audit and Compensation Committees
Mr. Garza Laguera has served as the Chairman of the Board of Directors of
VISA and FEMSA and Chairman of the Board of Regents of Instituto
Tecnologico Y de Estudios Superiores de Monterrey for more than five years.
He has been the Chairman of the Board of Directors of Grupo Financiero
Bancomer and BANCOMER since 1991.
JAMES F. GIBBONS, PH.D. 1994
Dean of the School of Engineering,
Stanford University,
Stanford, California -- Higher Education.
Age -- 63
Member -- Audit and Compensation Committees
Dr. Gibbons has been on the faculty of Stanford University since 1957 and has
been the Dean of the School of Engineering since September 1984. He is a
member of the Board of Directors of Centigram Communications Corp., Cisco
Systems, Inc., Lockheed Corporation and Raychem Inc.
BEN F. LOVE 1992
Investor.
Age -- 70
Chairman -- Compensation Committee
Member -- Audit Committee
Since December 1989, Mr. Love's principal occupation has been as shown above.
For more than five years prior to that date, Mr. Love was Chairman of the
Board and Chief Executive Officer of Texas Commerce Bancshares, Inc. He is a
member of the Board of Directors of Burlington Northern Inc., Eli Lilly and
Company and Mitchell Energy & Development Corp.
KENNETH L. SMALLEY 1992
Retired.
Age -- 64
Chairman -- Audit Committee
Member -- Compensation Committee
Mr. Smalley has been retired since February 1992. For more than five years
prior to that date, Mr. Smalley was a Senior Vice President of Phillips
Petroleum Company and President of Phillips 66 Natural Gas Company, a
Phillips Petroleum Company subsidiary.
MALCOLM WALLOP 1995
President,
Frontiers of Freedom Foundation,
Arlington, Virginia -- Political Foundation.
Age -- 61
Since January 1995, Mr. Wallop's principal occupation has been as shown
above. For eighteen years prior to that date, Mr. Wallop was a member of
the United States Senate. He is a member of the Board of Directors of Hubbell
Inc.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION SERVED AS
AND SELECTED OTHER INFORMATION DIRECTOR
CONCERNING NOMINEES FOR DIRECTOR SINCE
------------------------------------------- ---------
<S> <C>
WILLIAM A. WISE 1984
Chairman of the Board, President
and Chief Executive Officer,
El Paso Natural Gas Company,
El Paso, Texas -- Natural Gas Transmission.
Age -- 49
Mr. Wise has been Chairman of the Board since January 1994. Mr. Wise has been
the President and Chief Executive Officer (the "CEO") of the Company since
January 1990. He was President and COO of the Company from April 1989 to
December 1989. From March 1987 until April 1989, Mr. Wise was an Executive
Vice President of the Company. From January 1984 to February 1987, he was a
Senior Vice President of the Company. He is a member of the Board of
Directors of Battle Mountain Gold Company.
</TABLE>
SECURITY OWNERSHIP OF A CERTAIN BENEFICIAL OWNER AND MANAGEMENT
The following table sets forth certain information as of December 31, 1994,
regarding the beneficial ownership of the Company's Common Stock by (i) each
Director of the Company, (ii) each of the Company's named executives (as
hereinafter defined), (iii) all Directors and executive officers of the Company
as a group, and (iv) each person or entity known by the Company to own
beneficially more than 5% of its outstanding shares of Common Stock. No family
relationship exists between any of the Directors and executive officers of the
Company.
<TABLE>
<CAPTION>
TITLE OF BENEFICIAL OWNERSHIP STOCK PERCENT
CLASS NAME (EXCLUDING OPTIONS)(1) OPTIONS(3) TOTAL OF CLASS
- ------------- ---- ---------------------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Common Stock INVESCO Funds Group 2,072,000 -- 2,072,000 5.77%
7800 East Union Avenue
Denver, CO 80237
Common Stock Byron Allumbaugh 2,000 5,000 7,000 *
Common Stock Luino Dell'Osso, Jr. 22,940 152,879 175,819 *
Common Stock Eugenio Garza Laguera 0 4,000 4,000 *
Common Stock James F. Gibbons 1,000 4,000 5,000 *
Common Stock Ben F. Love 11,000 2,000 13,000 *
Common Stock Kenneth L. Smalley 4,000 3,000 7,000 *
Common Stock Malcolm Wallop 0 0 0 *
Common Stock William A. Wise 78,023(2) 366,592 444,615 1.24%
Common Stock Richard Owen Baish 11,679 74,841 86,520 *
Common Stock H. Brent Austin 5,572 91,822 97,394 *
Common Stock Britton White, Jr. 16,000 54,067 70,067 *
Common Stock Directors and executive officers 182,944 959,934 1,142,878 3.18%
as a group (15 persons in total,
including those individuals
listed
above)
</TABLE>
- ---------------
* Less than 1%.
(1) Directors and executive officers have sole voting and investment power of
the shares of Common Stock reflected in the table above, except that each
of Messrs. Allumbaugh, Dell'Osso, Gibbons, Wise, Austin and White shares
with one or more other individuals voting and investment power with respect
to 2,000, 2,940, 1,000, 2,000, 159 and 1,000 shares of Common Stock,
respectively. Some shares of Common Stock reflected in this column for
certain individuals are subject to restrictions.
5
<PAGE> 9
(2) Mr. Wise's beneficial ownership excludes 200 shares of Common Stock owned
by his children under the Uniform Gifts to Minors Act, of which Mr. Wise
disclaims beneficial ownership.
(3) The Directors and executive officers have the right to acquire the shares
of Common Stock reflected in this column within 60 days through the
exercise of stock options and/or tandem stock appreciation rights ("SARs").
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the compensation
awarded to, earned by or paid to any person serving as the Company's President
and CEO or acting in a similar capacity during the last completed fiscal year,
and the Company's four other most highly compensated executive officers
(collectively the "named executives") for services rendered to the Company and
its subsidiaries in all capacities during each of the last three fiscal years.
The table also identifies the principal capacity in which each of the named
executives served the Company at the end of fiscal year 1994.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- -------------------------------------
AWARDS PAYOUTS
------------------------- ---------
LONG-TERM
OTHER SECURITIES INCENTIVE
ANNUAL RESTRICTED UNDERLYING PLAN ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) (3) ($) (4) (#) (5) ($) (6) ($) (7)
- ----------------------- ---- -------- -------- ------------ ------------ ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William A. Wise 1994 $525,096 $550,000 $126,025 -- 83,000 $1,348,390 $ 42,008
Chairman of the 1993 $400,000 $400,000 $ 24,187 -- 80,000 -- $752,681(8)
Board, President 1992 $357,500 $400,000 $ 70,176 $961,875 150,000 $1,423,977 $ 78,702
and CEO
Luino Dell'Osso, Jr. 1994 $316,667 $350,000 $ 12,528 -- 43,000 $ 736,148 $ 25,333
Vice Chairman 1993 $300,000 $300,000 $ 14,194 -- 40,000 -- $ 48,113
of the Board 1992 $277,750 $300,000 $ 2,891 $427,500 50,000 $1,209,750 $ 62,248
and COO
Richard Owen Baish 1994 $201,667 $180,000 $ 1,883 -- 16,400 $ 264,819 $ 16,133
Executive Vice 1993 $190,000 $152,000 $ 724 -- 15,000 -- $ 27,387
President 1992 $169,000 $135,200 -- $213,750 34,000 $ 403,250 $ 33,026
H. Brent Austin 1994 $193,333 $168,000 $ 8,542 -- 16,400 $ 264,819 $ 11,595
Senior Vice President 1993 $185,000 $148,000 $ 1,409 -- 15,000 -- $ 19,993
and Chief Financial 1992(2) $134,583 $136,000 $ 108 -- -- -- $ 16,236
Officer
Britton White, Jr. 1994 $183,333 $160,000 $ 7,608 -- 16,400 $ 264,819 $ 11,000
Senior Vice President 1993 $175,000 $140,000 $ 2,009 -- 15,000 -- $ 18,911
and General Counsel 1992 $161,250 $129,000 $ 453 $213,750 34,000 -- $ 22,815
</TABLE>
- ---------------
(1) The Company did not have any executive officer terminate employment during
fiscal year 1994 who would otherwise have been included as a named executive
in this table.
(2) Mr. Austin began his employment with the Company in March 1992.
(3) The aggregate value of the perquisites and other personal benefits received
by each named executive, other than those received by the CEO in fiscal
years 1994 and 1992, has not been reflected for any fiscal year because the
amount was below the Securities and Exchange Commission's (the "SEC")
required reporting threshold. The amounts reflected for Mr. Wise include
$46,102 and $35,274 in value attributed to the use of the Company's aircraft
for fiscal years 1994 and 1992, respectively. Aircraft use for fiscal year
1994 was based on the thirteen-month period of December 1993 through
December 1994 due to a change in the period the Company uses to report
aircraft usage. Aircraft use for fiscal year 1992 was based on the
twelve-month period of December 1991 through November 1992. All other
compensation for all fiscal years reflected is based upon fiscal year
amounts.
6
<PAGE> 10
(4) The restricted stock awards made in fiscal year 1992 were the result of a
special one-time incentive grant made in connection with the initial public
offering of the Company's Common Stock. On December 9, 1992, January 15,
1994 and January 15, 1995, 20% of each named executive's restricted stock
vested. The remaining 40% of restricted stock originally granted will vest
on January 15, 1996. Dividends are paid directly to the holder of the
restricted stock. The total number of shares of restricted stock held on
December 31, 1994, by Messrs. Wise, Dell'Osso, Baish, Austin and White was
27,000, 12,000, 6,000, 0 and 6,000, respectively. The aggregate dollar value
on December 31, 1994, of all shares of restricted stock held by Messrs.
Wise, Dell'Osso, Baish, Austin and White was $823,500, $366,000, $183,000,
$0 and $183,000, respectively. No named executive received a grant of
restricted stock from the Company during the fiscal years 1994 and 1993.
(5) The stock options granted in fiscal year 1992 were the result of a special
one-time incentive grant made in connection with the initial public offering
of the Company's Common Stock. See the "Aggregated Option/SAR Exercises in
1994 and Fiscal Year-end Option/SAR Values" Table for the year-end holdings
and value of Company stock options held by the named executives.
(6) The amounts reflected in this column for fiscal year 1992 are payouts made
under BR's performance share unit plan and represent compensation earned as
a result of the achievement of performance targets established by BR while
the Company was a subsidiary of BR and not for services rendered to the
Company after the Company's separation from BR. The amounts reflected in
this column for fiscal year 1994 are payouts made with respect to
Performance Share Units (the "PSUs") granted under the Company's Omnibus
Compensation Plan as a result of the early termination of the applicable
performance cycle during fiscal year 1994. The reasons for the early
termination of the performance cycle are discussed in the "Compensation
Committee Report on Executive Compensation" found on page 11 of this Proxy
Statement. No named executive received a long-term incentive plan award or
payout from the Company during the fiscal year 1993.
(7) The compensation reflected in this column for fiscal year 1994 is comprised
of Company contributions to the Company's Retirement Savings Plan and
supplemental Company contributions under the Supplemental Benefits Plan.
Specifically, these amounts for fiscal year 1994 were $12,000 and $30,008
for Mr. Wise; $12,000 and $13,333 for Mr. Dell'Osso; $12,000 and $4,133 for
Mr. Baish; $9,000 and $2,595 for Mr. Austin; and $9,000 and $2,000 for Mr.
White, respectively.
(8) The fiscal year 1993 compensation reflected in this column for Mr. Wise
includes (a) $64,369 which is comprised of Company contributions to the
Company's Retirement Savings Plan, supplemental Company contributions under
the Supplemental Benefits Plan and the above-market interest earned on
deferred compensation, and (b) $688,312 attributable to the exercise of BR
rights which were granted by BR to Mr. Wise in fiscal year 1992 for services
rendered to the Company prior to the Company's separation from BR. The
amount discussed in (b) above was paid by BR.
The following table sets forth the number of stock options granted at fair
market value to each of the named executives during the fiscal year 1994. In
satisfaction of applicable SEC regulations, the table further sets forth the
potential realizable value of such stock options in the year 2004 (the
expiration date of the stock options) at arbitrarily assumed annualized rates of
stock price appreciation of five and ten percent over the full ten-year term of
the stock options. As the table indicates, the annualized stock price
appreciation of five and ten percent will result in stock prices in the year
2004 of approximately $60.07 and $95.64, respectively. The amounts shown in the
table as potential realizable values for all shareholders' stock (approximately
$833 million and $2.1 billion) represent the corresponding increases in the
market value of 35,937,789 outstanding shares of the Company's Common Stock held
by all shareholders (other than the Company) as of December 31, 1994. No gain to
the named executives is possible without an increase in stock price which will
benefit all shareholders proportionately. Actual gains, if any, on stock option
exercises and Common Stock
7
<PAGE> 11
holdings are dependent on the future performance of the Company's Common Stock
and overall stock market conditions. There can be no assurance that the
potential realizable values shown in this table will be achieved.
OPTION GRANTS IN 1994
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS(1) TERM
----------------------------------------------------- ------------------------------
NUMBER OF % OF TOTAL IF STOCK IF STOCK
SECURITIES OPTIONS PRICE PRICE
UNDERLYING GRANTED TO AT $60.07 AT $95.64
OPTIONS EMPLOYEES EXERCISE EXPIRATION IN 2004 IN 2004
NAME GRANTED(#) IN 1994 PRICE ($/SH) DATE 5% ($) 10% ($)
---- ---------- ---------- ------------ --------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
ALL SHAREHOLDERS' STOCK
APPRECIATION......... N/A N/A N/A N/A $833,414,914 $2,112,037,022
William A. Wise........ 83,000 12.67% $36.8750 01/14/04 $ 1,924,811 $ 4,877,848
Luino Dell'Osso, Jr.... 43,000 6.56% $36.8750 01/14/04 $ 997,191 $ 2,527,078
Richard Owen Baish..... 16,400 2.50% $36.8750 01/14/04 $ 380,324 $ 963,816
H. Brent Austin........ 16,400 2.50% $36.8750 01/14/04 $ 380,324 $ 963,816
Britton White, Jr...... 16,400 2.50% $36.8750 01/14/04 $ 380,324 $ 963,816
</TABLE>
- ---------------
(1) The stock options were granted on January 14, 1994 at the fair market value
on that date, and became exercisable on January 14, 1995. There were no
SARs granted in 1994. Any unvested stock options become fully exercisable
in the event of a "change in control" (see page 14 of this Proxy Statement
for a description of the Company's Omnibus Compensation Plan and the term
"change in control"). Under the terms of the Omnibus Compensation Plan, the
Compensation Committee may, in its sole discretion and at any time, change
the vesting of the stock options. Further, stock options are subject to
forfeiture and/or time limitations in the event of a termination of
employment. If the Company's stockholders approve the adoption of the 1995
Omnibus Compensation Plan (as hereinafter defined) at the Annual Meeting,
the current Omnibus Compensation Plan will be terminated, except with
respect to any outstanding grants.
N/A -- Not Applicable
The following table sets forth information concerning each stock option (or
tandem SAR) which was exercised during the fiscal year 1994 by each of the named
executives and the fiscal year-end value of the unexercised stock options (and
tandem SARs), provided on an aggregate basis.
AGGREGATED OPTION/SAR EXERCISES IN 1994
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($) (2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William A. Wise........ 0 $ 0 233,592 133,000 $1,781,083 $ 571,875
Luino Dell'Osso, Jr.... 22,000 $ 432,682 93,212 59,667 $ 608,612 $ 190,629
Richard Owen Baish..... 0 $ 0 47,108 27,733 $ 375,360 $ 129,621
H. Brent Austin........ 0 $ 0 75,422 16,400 $ 704,077 $ 0
Britton White, Jr...... 0 $ 0 26,334 27,733 $ 129,633 $ 129,621
</TABLE>
- ---------------
(1) The figures presented in this column have been calculated based upon the
difference between the fair market value of each stock option/SAR on the
date of exercise and its exercise price.
(2) The figures presented in this column have been calculated based upon the
difference between the fair market value on December 31, 1994 of $30.4375
for each in-the-money stock option/SAR and its exercise price. Messrs. Wise
and Dell'Osso have tandem SARs attached to some of their stock options. If
their stock options are exercised, the tandem SARs expire and vice versa.
The exercise of a tandem SAR would have the equivalent market value as the
exercise of a stock option.
8
<PAGE> 12
PENSION PLAN
Set forth below is a table describing the Company's Pension Plan in which
the named executives, as well as other Company employees, may be entitled to
participate. The following table lists current annual retirement benefits under
the Pension Plan for the average annual earnings and years of credited service
shown for a participant retiring at the normal retirement age of 65. Under the
Pension Plan and applicable Internal Revenue Code (the "IRC") provisions,
compensation in excess of $150,000 cannot be taken into account under the
Pension Plan. Any excess benefits otherwise accruing under the Pension Plan are
payable under the Company's Supplemental Benefits Plan.
Estimated annual benefit levels under the Pension Plan, based on earnings
and years of credited service at the normal retirement age, are as follows:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE AT NORMAL RETIREMENT
AGE
FINAL AVERAGE -----------------------------------------------
PENSION EARNINGS 15 20 25 30
- ---------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 100,000........................................... $ 22,485 $ 29,980 $ 37,475 $ 44,970
$ 300,000........................................... $ 70,485 $ 93,980 $117,475 $140,970
$ 500,000........................................... $118,485 $157,980 $197,475 $236,970
$ 700,000........................................... $166,485 $221,980 $277,475 $332,970
$ 900,000........................................... $214,485 $285,980 $357,475 $428,970
$1,100,000........................................... $262,485 $349,980 $437,475 $524,970
$1,300,000........................................... $310,485 $413,980 $517,475 $620,970
</TABLE>
Benefits which accrue under the Pension Plan are based upon the gross
salary amount, including incentive bonuses, but excluding all commissions and
other compensation or benefits of any kind. For the named executives, the
amounts reflected in the Salary and Bonus columns of the "Summary Compensation
Table" are, subject to the IRC limitation described above, considered to
calculate Pension Plan benefits and supplemental pension payable under the
Supplemental Benefits Plan, if any. The Pension Plan formula for retirement at
age 65 is 1.1% of the highest five-year average earnings, plus .5% of the
highest five-year average earnings in excess of one-third of the FICA taxable
wage base in effect during the year of termination, times the number of years of
credited service up to a maximum of 30 years. There is no deduction for Social
Security amounts paid; however, an early retirement supplement equal to 1% of
the highest five-year average earnings up to one-third of the FICA taxable wage
base in effect in the year of termination, times the number of years of credited
service up to a maximum of 30 years, is payable from retirement until age 62.
Both the basic benefit and the early retirement supplement are reduced by 2% for
each year the participant's actual retirement date precedes the date the
participant would have attained age 65, or the date the participant could have
retired after attaining age 60 with 30 years of credited service, if earlier.
Years of credited service under the Pension Plan at age 65 for Messrs. Wise,
Dell'Osso, Baish, Austin and White are 30, 30, 30, 30 and 25 (including 7 years
of credited service pursuant to Mr. White's employment agreement, which is
described on page 13 of this Proxy Statement), respectively.
CUMULATIVE TOTAL SHAREHOLDER VALUE
The following graph shows the changes in the value of $100 invested since
March 12, 1992 (the date on which the Company's Common Stock was initially
offered to the public) for the Company's Common Stock and since February 29,
1992 (the month-end date closest to the March 12, 1992 initial public offering
date of the Company's Common Stock) for the Standard & Poor's Natural Gas Index
and the Standard & Poor's 500 Stock Index.
9
<PAGE> 13
COMPARISON OF QUARTERLY CUMULATIVE TOTAL VALUES IN 1992, 1993
AND 1994 FOR THE COMPANY, THE S&P NATURAL GAS INDEX AND
THE S&P 500 STOCK INDEX
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
QUARTERLY CUMULATIVE TOTAL VALUES ($)
-------------------------------------------------------------
QUARTER-END THE COMPANY S&P NATURAL GAS INDEX S&P 500 STOCK INDEX
----------- ----------- --------------------- -------------------
<S> <C> <C> <C>
1992:
March $ 119.1 $ 101.4 $ 98.1
June 129.0 112.9 99.9
September 153.6 128.2 103.1
December 167.6 122.6* 108.3
1993:
March $ 202.2 $ 147.5* $ 113.0
June 214.0 158.4* 113.5
September 217.5 165.7* 116.5
December 200.4 145.6* 119.2
1994:
March $ 204.9 $ 141.3 $ 114.7
June 182.7 144.5 115.1
September 189.4 147.3 120.8
December 176.1 138.9 120.7
</TABLE>
- ---------------
* These numbers differ from those reported for such quarters in the Company's
1994 Proxy Statement due to a restatement of these numbers by Standard &
Poor's Corporation. The restated numbers differ from the previously reported
numbers by no more than $1.50.
The quarter-end values of each investment are based on the share price
appreciation and assumes cash dividend reinvestment. The calculations exclude
any applicable brokerage commissions and taxes. Total shareholder return from
each investment can be calculated from the quarter-end values given above.
10
<PAGE> 14
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive officer compensation program is administered and
reviewed by the Compensation Committee. For 1994, the Committee consisted of
five independent, non-employee Directors of the Company. The Compensation
Committee has neither interlocks nor insider participation.
POLICIES AND MISSION
The Compensation Committee has determined that the compensation program of
executive officers should not only be adequate to attract, motivate and retain
competent executive personnel, but should also be directly and materially
related to the short-term and long-term operating performance and objectives of
the Company. To achieve these ends, executive compensation (including base
salary, year-end bonus, restricted stock awards, stock option grants and other
long-term incentive awards) is, to a significant extent, dependent upon the
Company's financial performance and the return on its Common Stock. However, to
ensure that the Company is strategically and competitively positioned for the
future, the Compensation Committee also attributes significant weight to other
factors in determining executive compensation, such as maintaining
competitiveness, implementing capital improvements, expanding markets and
achieving other long-range business and operating objectives.
In order to determine appropriate levels of executive compensation, the
Compensation Committee periodically conducts a thorough competitive evaluation,
reviews proprietary and proxy information, and consults with and receives advice
from an independent compensation consulting firm. The Compensation Committee
also considers relevant industry and market changes when evaluating the
Company's performance and each individual executive's performance. The
independent consulting firm provides data and information that compares the
Company with a peer group of companies. Such peer group consists of most of
those companies included in the S&P Natural Gas Index (reflected in the
Performance Graph found on page 10 of this Proxy Statement) and certain
additional companies which the consulting firm and the Compensation Committee
believe represent the Company's most direct competition for executive talent.
A primary mission of the Compensation Committee is to ensure that each
executive officer's compensation is directly related to the performance of the
Company and its Common Stock and the performance of the individual executive
officer. Toward that end, the Compensation Committee has established an
executive compensation program with a strong performance-based orientation. In
particular, the Compensation Committee has determined, in consultation with the
independent consulting firm, that the long-term incentive awards for executive
officers, including the CEO, should be targeted in the top one-half of the peer
group, tied directly to the performance of the Company's Common Stock and should
consist of approximately 50% in stock options and 50% in PSUs. With respect to
cash compensation, the base salary of executive officers is targeted at or near
the 50th percentile of the peer group (described above). Total cash compensation
under the Company's current plans can reach approximately the 90th percentile of
such peer group with year-end incentive bonuses ranging from 0% to 100% of base
salary for the CEO and COO, and from 0% to 80% of base salary for the other
executive officers. The Compensation Committee determines what percentage bonus
will be awarded based upon both the Company's and the individual executive's
performance vis-a-vis objectives established each year. Mr. Wise's employment
agreement, as described on page 13 of this Proxy Statement, does not affect the
amount of his compensation. Mr. Wise's compensation and benefits are determined
under Company plans and programs in effect from time to time in accordance with
the policies described above. None of the other named executives received
compensation governed or affected by employment agreements.
Section 162(m) of the IRC ("Section 162(m)") was enacted in 1993 and
generally affects the Company's federal income tax deduction for compensation
paid to the Company's CEO and four other highest paid executives. To the extent
compensation is "performance-based" within the meaning of Section 162(m), the
Section's limitations will not apply. Accordingly, the Board of Directors has
adopted the Company's 1995 Omnibus Compensation Plan and the Company's 1995
Incentive Compensation Plan (as hereinafter defined). In addition to requiring
and encouraging stock ownership by Company executives, these plans are designed
to allow the Compensation Committee to provide appropriate compensation when
certain performance goals
11
<PAGE> 15
have been achieved. The plans have been structured to qualify as
performance-based compensation under Section 162(m). A summary of these plans
can be found starting on page 15 of this Proxy Statement.
COMPANY PERFORMANCE AND CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee reviewed the Company's 1994 financial
performance targets (consisting of income, earnings, return and cash flow
objectives) and the Company's 1994 non-financial goals consisting of regulatory
matters (primarily Federal Energy Regulatory Commission and other regulatory
filings, approvals and settlements); marketing of natural gas, and gathering and
transportation services; and operating matters (primarily initiation and
completion of system expansion and maintenance projects, operating efficiencies
and safety) and has determined that the Company's 1994 performance has met or
exceeded each material objective. Accordingly, the Company was awarded the
highest rating available. The Compensation Committee does not assign relative
weights to each of the factors and criteria used in determining executive
compensation. Moreover, publication of sensitive and proprietary quantifiable
targets and other specific goals for the Company and CEO established and applied
each year could adversely affect the Company.
The Compensation Committee, in consultation with the independent consulting
firm, applied the information and performance factors for 1994 to determine the
appropriate compensation for the CEO. The Committee also recognized the
significant leadership, planning and business execution role performed by the
CEO in his new position of Chairman of the Board during the fiscal year 1994,
and the CEO's role in building strong markets for the Company's natural gas
transportation, gathering and other services and in maintaining efficient
operations to remain competitive in the future. In addition, the CEO displayed
exceptional foresight by directing certain of the Company's businesses into
areas of potential financial growth and opportunity. Having reviewed the
contribution that the CEO made to the Company's performance in 1994, the
Compensation Committee believed that he continues to demonstrate the
motivational, planning and leadership qualities that the executive compensation
program was designed to foster and reward.
In recognition of the CEO's overall performance and his responsibility for
the Company's success during 1994, the Compensation Committee determined that he
should receive the highest rating available, and awarded him the maximum
incentive bonus available (100% of base salary). Based upon the Company's total
shareholder return in comparison to the total shareholder return of other
companies in the peer group and in anticipation of implementing the proposed
1995 Omnibus Compensation Plan (as described elsewhere in this Proxy Statement),
the Compensation Committee terminated the current PSU cycle, vested 45% of the
PSUs granted to the CEO in 1992, paid out all vested PSUs and canceled the
remaining unvested PSUs. The Compensation Committee also determined that it was
in the best interests of the Company to pay out the vested PSUs in 1994 in order
to preserve the deduction on a higher portion of such compensation. The CEO's
base salary was increased during 1994 to $550,000 in recognition of the new
responsibilities he assumed when he was promoted to Chairman of the Board and is
based upon a recommendation by the Company's independent executive consulting
firm. In support of the Compensation Committee's long-term compensation mission
to provide competitive compensation incentives to retain and motivate executive
officers, the CEO was granted 83,000 stock options in January 1994. The number
of options granted to the CEO and other executives was determined in accordance
with the targets and formulas recommended by the Company's independent
consulting firm, as described in more detail above.
COMPENSATION OF OTHER EXECUTIVE OFFICERS
The Compensation Committee, in consultation with the independent consulting
firm, applied the information and performance factors outlined above in
reviewing and approving the compensation of the Company's other executive
officers. This process resulted in a determination that, based upon individual
performance and their contributions to overall Company performance during the
fiscal year 1994, each executive officer should be awarded the maximum incentive
bonus available (100% of base salary for the COO and 80% of base salary for the
other executive officers). In addition, for the reasons explained above 45% of
PSUs granted to executive officers in 1992 were vested and all vested PSUs were
paid out. The remaining unvested PSUs were canceled. Stock options were granted
in 1994 to certain executive officers to provide continuing incentives for
future performance. The number of options granted to such executives was
12
<PAGE> 16
determined in accordance with the targets and formulas recommended by the
Company's independent consulting firm, as described in more detail above.
THE 1994 COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
<TABLE>
<S> <C> <C> <C> <C>
Byron Allumbaugh Eugenio Garza Laguera James F. Gibbons Ben F. Love Kenneth L. Smalley
(Member) (Member) (Member) (Chairman) (Member)
</TABLE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE IN CONTROL ARRANGEMENTS
The Company entered into an employment agreement with Mr. Wise. The term of
the agreement is three years from its initial effective date (July 31, 1992) and
is automatically renewed at the end of every month (re-establishing a three-year
term on the first of each month), unless either party notifies the other that it
elects not to extend the term of the agreement. Mr. Wise's compensation and
benefits are determined under Company plans and programs in effect from time to
time. If Mr. Wise's employment is terminated involuntarily, without cause, or is
voluntarily terminated by Mr. Wise for "good reason" (as defined in the
Severance Plan, which is discussed below), Mr. Wise will receive his salary,
bonus (equal to fifty percent of the maximum bonus opportunity in effect at the
time of termination, but not less than fifty percent of annual salary) and
benefits through the end of the term of the employment agreement. Unless
termination follows a "change in control" (as defined in the Severance Plan),
any continued salary, bonus or benefits (not including defined benefit pension
plan payments) will be reduced by comparable compensation from subsequent
employment. If Mr. Wise's employment is terminated because of death, involuntary
termination for cause or is voluntarily terminated by Mr. Wise other than for
"good reason," Mr. Wise's right to receive his salary shall terminate on the
date of termination of his employment and his right to receive benefits will be
determined according to the terms of the Company's applicable plans. Mr. Wise
will also be entitled to pension benefits under the terms of the Company's
Supplemental Benefits Plan, but based on one additional year of "age" and
"service" credit for each year of the term. Upon termination of his employment,
this benefit will be funded through a trust. If Mr. Wise's employment is
terminated prior to the end of the term, other than as a result of either a
"change in control" of the Company or his voluntary termination of the agreement
for "good reason" pursuant to six months prior written notice to the Company of
such termination, Mr. Wise will be subject to a noncompetition provision through
the end of the term. Any compensation and benefits received by Mr. Wise under
the Severance Plan will offset obligations of a similar nature under Mr. Wise's
employment agreement. The Company entered into a letter agreement with Mr. Wise
dated January 13, 1995, which provides that in the event of termination of Mr.
Wise's employment due to death, retirement, permanent disability, any other
involuntary termination without cause or any other voluntary termination for
good reason, the restriction period for restricted stock held by Mr. Wise shall
lapse and all restrictions thereon shall end, and unvested stock options shall
become immediately exercisable, subject to applicable law, for a period of
thirty-six months, unless such stock options expire sooner in accordance with
their terms.
The Company entered into a letter agreement with Mr. Dell'Osso dated
October 22, 1990, which provides for the purchase of Mr. Dell'Osso's residence
if his employment is terminated with the Company for any reason other than for
cause. Pursuant to his letter agreement, Mr. Dell'Osso is also entitled to
additional years of credited service with respect to pension benefits which are
payable under the Company's Supplemental Benefits Plan if he remains employed
with the Company until the specified age set forth in his letter agreement, or
if his employment is terminated before he reaches the specified age for any
reason other than for cause.
The Company entered into a letter agreement with Mr. White dated February
22, 1991, which provides that Mr. White is entitled to additional years of
credited service with respect to pension benefits which are payable under the
Company's Supplemental Benefits Plan if he remains employed with the Company
until the specified age set forth in his letter agreement.
The Company has a Key Executive Severance Protection Plan (the "Severance
Plan") which provides severance benefits following a Change in Control (as
hereinafter defined) of the Company for all officers of
13
<PAGE> 17
the Company and its subsidiaries in an amount equal to three times annual
salary, including maximum bonus amounts as specified in the plan. The Severance
Plan also provides for the continuation of life and health insurance for a
period of 18 months subsequent to a participant's termination of employment
following a Change in Control of the Company, as well as a supplemental pension
payable under the Company's Supplemental Benefits Plan calculated by adding
three years of additional credited pension service and certain other benefits.
Benefits are payable under the Severance Plan for any termination of employment
within two years of the date of a Change in Control of the Company, except where
termination is by reason of death, disability, for cause or instituted by the
employee for other than "good reason." The Severance Plan provides that certain
additional payments will be made to terminated participants following a Change
in Control of the Company if the participant's payments are subjected to a
specified adverse excise tax. The Severance Plan also provides that the Company
will pay legal fees and expenses incurred by a participant to enforce rights or
benefits under the plan.
The Company currently has an Omnibus Compensation Plan which provides that
stock options, SARs, limited stock appreciation rights ("LSARs"), PSUs and
restricted stock may be granted to officers and key employees of the Company and
its subsidiaries. The Plan Administrator (as defined in the plan) determines
which employees are eligible to participate, the amount of any grant and the
terms and conditions (not otherwise specified in the plan) of such grant.
Pursuant to the terms of the plan, if a "change in control" of the Company
occurs, all outstanding stock options become fully exercisable, SARs and LSARs
become immediately exercisable, designated amounts of PSUs become fully vested
and all restrictions placed on awards of restricted stock automatically lapse.
Under the current Omnibus Compensation Plan, a "change in control" of the
Company is deemed to occur if (a) any person or entity becomes the beneficial
owner of 20% or more of the Company's outstanding voting securities, (b) any
person or entity purchases the Company's Common Stock pursuant to a tender offer
or exchange offer, other than a tender offer or exchange offer made by the
Company, (c) the stockholders of the Company approve a merger or consolidation,
a sale or disposition of all or substantially all of the Company's assets or a
plan of liquidation or dissolution of the Company, or (d) there occurs an
unapproved change in the constitution of the majority of the Board of Directors
of the Company within a two-year period. If the Company's stockholders approve
the adoption of the 1995 Omnibus Compensation Plan at the Annual Meeting, the
current Omnibus Compensation Plan will be terminated, except with respect to any
outstanding grants. For a discussion of the terms of the new plan, including the
Change in Control provisions contained therein, see Proposal No. 3, which begins
on page 15 of this Proxy Statement.
Under the Company's current Incentive Compensation Plan, awards of cash or
Common Stock may be granted to eligible officers of the Company and its
subsidiaries. The amount of awards available and the performance goals upon
which the awards are contingent are determined by the Compensation Committee for
the CEO and certain other officers, and by the Management Committee (as defined
in the plan) for all other officers. Pursuant to the terms of the plan, if a
"change in control" of the Company occurs, the current year's maximum incentive
award for each officer becomes fully payable within 30 days following such
"change in control." For purposes of the plan, the term "change in control" has
the same meaning given such term in the current Omnibus Compensation Plan. If
the Company's stockholders approve the adoption of the 1995 Incentive
Compensation Plan at the Annual Meeting, the current Incentive Compensation Plan
will be terminated. For a discussion of the terms of the new plan, including the
Change in Control provisions contained therein, see Proposal No. 4, which begins
on page 22 of this Proxy Statement.
The Company's Supplemental Benefits Plan provides benefits to officers and
key employees of the Company and its subsidiaries. The benefits equal the amount
that a participant failed to receive under the Company's Pension Plan because
the Pension Plan does not consider deferred compensation for purposes of
calculating benefits and is subject to IRS limitations on the amount of
compensation to be considered when calculating benefits and on the amount of
benefits that can be paid to a participant. The plan also provides an additional
benefit equal to the amount of the Company's matching contribution to the
Company's Retirement Savings Plan that cannot be made because of deferred
compensation and IRS limitations. The plan may not be terminated so long as the
Pension Plan and/or Retirement Savings Plan remain in effect. The Management
Committee (as defined in the plan) designates who may participate and
administers the plan. Benefits under
14
<PAGE> 18
the Company's Supplemental Benefits Plan are paid upon termination of employment
in a lump-sum payment, in annuity or in periodic installments. In the event of a
Change in Control, the supplemental pension benefits become fully vested and
nonforfeitable.
The Company's Deferred Compensation Plan allows eligible executives and key
management employees of the Company and its subsidiaries to defer all or a
portion of their base salaries and any other deferrals made in accordance with
certain of the Company's compensation plans. The Management Committee (as
defined in the plan) designates the executives and key management employees who
may participate. Amounts deferred are payable upon termination of employment in
a lump-sum payment or in periodic installments, except that the Management
Committee may, in its discretion, accelerate payments. Any amounts deferred bear
interest at a rate based on an index specified by the Management Committee.
The Company has a Senior Executive Survivor Benefits Plan which provides
certain senior executives of the Company and its subsidiaries, who are
designated by the Management Committee (as defined in the plan), with survivor
benefit coverage in lieu of the coverage provided generally for employees under
the Company's group life insurance plan. The amount of benefits provided, on an
after-tax basis, is two and one-half times the executive's annual salary.
Benefits are payable in installments over 30 months beginning within 31 days
after the executive's death, except that the Management Committee may, in its
discretion, accelerate payments.
PROPOSAL NO. 2 -- RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND AS
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors desires to obtain stockholder ratification of the
resolution appointing Coopers & Lybrand L.L.P., State National Plaza, Suite
1600, El Paso, Texas 79901, as independent certified public accountants for the
Company for the fiscal year 1995. Coopers & Lybrand has served continuously in
such capacity for the Company since 1983.
If the appointment is not ratified, the adverse vote will be considered as
an indication to the Board of Directors that it should select other independent
certified public accountants for the following fiscal year. Given the difficulty
and expense of making any substitution of accountants after the beginning of the
current fiscal year, it is contemplated that the appointment for the fiscal year
1995 will be permitted to stand unless the Board of Directors finds other good
reason for making a change.
A representative from Coopers & Lybrand will attend the Annual Meeting to
respond to appropriate questions raised during the Annual Meeting or submitted
to Coopers & Lybrand in writing prior to the Annual Meeting, and to make a
statement if he or she desires to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND AS INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS FOR THE COMPANY FOR THE FISCAL YEAR 1995.
PROPOSAL NO. 3 -- APPROVAL OF THE EL PASO NATURAL GAS COMPANY 1995 OMNIBUS
COMPENSATION PLAN
Since January 15, 1992, the Company has had an Omnibus Compensation Plan
pursuant to which the Company granted stock options, SARs, LSARs, shares of
restricted stock and PSUs to eligible participants. Certain of the awards under
the Omnibus Compensation Plan were granted to participants based on the
attainment of individual and Company performance objectives. The performance
criteria used included both objective and subjective measures. In 1993, the IRC
was amended by the addition of Section 162(m), and regulations related thereto,
to limit the tax deduction available to a company with respect to compensation
paid to certain executive officers, unless the compensation qualifies as
"performance-based" (as defined in Section 162(m)). Among the requirements for
"performance-based" compensation are that the compensation be paid based solely
on the attainment of objective performance measures established by a committee
of outside directors, and that the plan providing for such compensation be
approved by stockholders.
15
<PAGE> 19
The Board of Directors believes that in light of Section 162(m) it is
desirable to restructure certain awards under the Company's Omnibus Compensation
Plan so that the value of certain awards will be established based on objective
criteria, and to submit the new plan for stockholder approval. It is intended
that those awards shall qualify as "performance-based" compensation for purposes
of Section 162(m), and thereby continue to be deductible by the Company without
regard to the deduction limit otherwise imposed by Section 162(m). Accordingly,
on January 13, 1995, the Board of Directors adopted the El Paso Natural Gas
Company 1995 Omnibus Compensation Plan (the "1995 Omnibus Compensation Plan")
and is herein seeking approval of such plan by the stockholders of the Company
at the Annual Meeting.
The 1995 Omnibus Compensation Plan will succeed the current Omnibus
Compensation Plan. AN AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES OF COMMON
STOCK REPRESENTED AT THE ANNUAL MEETING IN PERSON OR BY PROXY AND ENTITLED TO
VOTE ON THE PROPOSAL WILL CONSTITUTE APPROVAL.
The following is a general summary of the 1995 Omnibus Compensation Plan
and is qualified in its entirety by the full text thereof which is attached to
this Proxy Statement as Exhibit A.
PURPOSES. The purposes of the 1995 Omnibus Compensation Plan are to promote
the interests of the Company and its stockholders by strengthening the Company's
ability to attract and retain officers and key management employees (defined for
purposes of the plan as those employees who hold the position of department
director) in the employ of the Company and its subsidiaries by furnishing
suitable recognition of their ability and industry which contributed materially
to the success of the Company and to align the interests and efforts of the
Company's officers and key management employees to the long-term interests of
the Company's stockholders.
ADMINISTRATION. The plan will be administered by the Compensation Committee
(the "Plan Administrator"). With respect to certain officers and Directors of
the Company who are subject to the requirements of Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (the "Section 16
Insiders"), the Plan Administrator will, at all times, be constituted to meet
the "disinterested administration" requirements of Rule 16b-3 of the Exchange
Act ("Rule 16b-3") and to meet the "outside directors" requirements of Section
162(m). Except as otherwise explicitly set forth in the plan, the Plan
Administrator will be authorized to construe and interpret the plan, establish,
amend and rescind rules and regulations relating to the plan, to select
individuals eligible to participate in the plan, to grant awards and to take all
other actions necessary or advisable for the administration of the plan.
PARTICIPANTS. The Plan Administrator will designate the officers, including
salaried officers who are members of the Board of Directors, and key management
employees of the Company or any subsidiary of the Company who will be eligible
to participate in the plan. Members of the Board of Directors who are not full-
time salaried officers will not be eligible to participate in the plan. As of
January 13, 1995, approximately 82 employees were eligible to participate in the
plan.
SHARES AND UNITS AVAILABLE FOR THE PLAN. Subject to adjustment as provided
in the plan (e.g., in the event of a recapitalization, stock split, stock
dividend, merger, reorganization or similar event), the maximum number of shares
of Common Stock which may be allocated pursuant to awards under the plan is
three million (3,000,000), which may be shares of original issuance, treasury
shares or a combination thereof. The maximum number of shares of
non-performance-based restricted stock which may be granted under the plan is
limited to five hundred thousand (500,000). The maximum number of performance
units ("Performance Units") which may be granted under the plan is limited to
three hundred thousand (300,000) units. The maximum number of shares of Common
Stock which may be granted to any eligible participant in any one year may not
exceed: (a) five hundred thousand (500,000) in the case of options (and related
SARs and LSARs) or in satisfaction 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-based restricted stock). With respect to
Performance Units, the maximum number of units which may be granted to any
eligible participant may not exceed seventy five thousand (75,000) Performance
Units in any Performance Cycle (as hereinafter defined). The Plan Administrator
shall determine the method of share counting under the plan.
16
<PAGE> 20
AWARDS. The plan authorizes the granting of stock options (both incentive
stock options and non-qualified stock options), SARs, LSARs, Performance Units
and restricted stock. The terms and features of these various forms of awards
are set forth below and described more fully in the plan itself, the text of
which is attached as Exhibit A hereto.
Stock Options. Stock options may be granted to participants in such number,
at such times and subject to such terms and conditions as the Plan Administrator
may determine, except that (i) the option exercise price may not be less than
100% of the fair market value of the Common Stock on the date of grant, (ii) an
option may not be exercised until the participant has completed at least one
year of continuous employment with the Company or its subsidiaries after the
date of grant (subject to the Plan Administrator's sole discretion to waive or
modify such period at any time), and (iii) no option may be exercised more than
ten years after the date of grant. Options granted under the plan may be either
"incentive stock options" within the meaning of Section 422 of the IRC or
options that are not intended to so qualify. With respect to each option granted
under the plan, the Plan Administrator may determine and reflect in the option
grant, the nature and extent of any restrictions to be imposed on the shares of
Common Stock which may be purchased thereunder, including, but not limited to,
restrictions on the transferability of shares acquired upon exercise.
The Plan Administrator will determine the payment form for the option
exercise price, which may include cash, Common Stock previously acquired by the
participant and held for at least six months, or any combination of cash or
Common Stock, having a fair market value on the exercise date equal to the
relevant exercise price. At the time of grant, the Plan Administrator may also
designate additional forms of payment that will be permitted, including the
payment of all or a portion of the exercise price from the shares of Common
Stock issuable to a participant upon such exercise. A participant will have no
rights as a stockholder of the Company until the shares of Common Stock are
issued to the participant. Options granted under the plan will be exercisable
only by the participant and will not be transferable or assignable except by
will or by applicable laws of descent and distribution. Any attempt to transfer
or assign an option, or any right or privilege conferred thereby, will result in
such affected option being immediately forfeited.
A participant may exercise options only while he or she is an employee of
the Company or its subsidiaries and before the expiration date of the option, or
thirty-six months after the participant retires, becomes permanently disabled,
resigns or is terminated under certain circumstances. If a participant is
terminated for cause (as defined in the plan), any options held by such
participant will expire upon such termination. Options will vest in accordance
with the schedule established by the Plan Administrator at the time of grant and
will not be exercisable until vested. All outstanding unvested options may
become exercisable in full upon the occurrence of a Change in Control (as
hereinafter defined) of the Company.
SARs and LSARs. SARs and LSARs may be granted under the plan in tandem with
stock options, either at the time the stock options are granted or any time
thereafter during the term of the stock options. SARs and LSARs will cover the
same number of shares of Common Stock covered by the related stock option (or
such lesser number of shares of Common Stock as the Plan Administrator may
determine), and will be subject to the same terms and conditions as the related
stock options and such further terms and conditions as determined by the Plan
Administrator. Each SAR and LSAR will entitle the holder of the related stock
option to surrender the unexercised portion of the related stock option (and, in
the case of a SAR, any portion thereof), and to receive from the Company in
exchange therefor an amount equal to the difference between the exercise price
per share specified for the stock option and the fair market value of one share
of Common Stock on the date of exercise times the number of shares of Common
Stock covered by the stock option (or, in the case of a SAR, any portion
thereof) surrendered. At the discretion of the Plan Administrator, payments with
respect to SARs may be made in Common Stock or in cash. Payments with respect to
LSARs, however, may be made only in cash.
No SAR can be exercised until the participant has completed six months of
continuous employment with the Company or its subsidiaries following the date
the SAR is granted. In the event of a Change in Control, however, such six-month
requirement will be waived with respect to each participant who is employed by
the Company at the time of the Change in Control but who, within the six-month
period, voluntarily terminates employment for good reason (as defined in the
plan) or is terminated by the Company at the time of the
17
<PAGE> 21
Change in Control other than for cause. No participant who receives a grant of
SARs will have any rights as a stockholder of the Company until shares of Common
Stock, if any, are issued to the participant upon exercise of such SARs.
LSARs are only exercisable in the event of a Change in Control. A
participant's right to exercise an LSAR will be canceled if and to the extent
the related stock option is exercised.
Performance Units. The Plan Administrator may grant Performance Units
representing the right to receive specified compensation upon the Company's
attainment of performance objectives established by the Plan Administrator for a
performance cycle (the "Performance Cycle"). Generally, Performance Units will
be granted only at the beginning of a Performance Cycle, except in cases where
prorated grants may be made in mid-cycle to a newly eligible participant or a
participant whose job responsibilities have significantly changed during the
Performance Cycle. Each grant of Performance Units will specify the number of
Performance Units, the vesting schedule, the Company's targeted total
shareholder return requirements for such cycle, and such other terms and
conditions as the Plan Administrator may determine.
The initial value of each Performance Unit will be $100. The adjusted value
of the Performance Unit at the end of the Performance Cycle (or at the end of
the second year of the Performance Cycle in the event of an interim payment)
will be determined based upon the Company's relative total shareholder return
for the applicable Performance Cycle compared to the total shareholder return
for each other company in the performance peer group selected by the Plan
Administrator for such cycle. The value of the Performance Unit at the end of
the Performance Cycle will be based on the following schedule:
<TABLE>
<CAPTION>
COMPANY'S PERFORMANCE
RANKING POSITION
AGAINST PEER ADJUSTED VALUE
GROUP COMPANIES OF A PERFORMANCE UNIT
- --------------------- ---------------------
<S> <C>
1st Quartile.................................. $ 150
2nd Quartile.................................. $ 100
3rd Quartile.................................. $ 50
4th Quartile.................................. $ 0
</TABLE>
For example, if the Company's total shareholder return is equal to or
greater than 75% of the total shareholder return for the peer group companies,
the Company will be in the 1st quartile and the adjusted value would be $150.
Upon the expiration of each Performance Cycle, all uncanceled Performance
Units granted with respect to such Performance Cycle will vest and the benefits,
if any, with respect to such Performance Cycle will become payable. If the Plan
Administrator determines at the time of grant that an interim payment will be
permitted, an interim payment of up to 50% of the adjusted value of vested
Performance Units may be made to participants then employed at the end of the
second year of the Performance Cycle; provided, however, that the Company's
performance ranking position is in the 1st or 2nd quartile.
The benefit which a participant will be entitled to receive from the
Company at the end of a Performance Cycle will equal the product of the adjusted
value of such Performance Units at the end of the applicable Performance Cycle
times the number of vested Performance Units which a participant holds less the
amount of any interim payment made with respect to such Performance Units. In no
event will such amount be less than zero. No benefits will be paid under the
plan unless the Plan Administrator has certified the Company's performance
ranking position for such Performance Cycle in writing prior to the payment of
the benefit. No benefits will be paid to participants if the Company's
performance ranking is in the 4th quartile.
In the absence of a Change in Control or an election by a participant to
defer payment of cash benefits, benefit payments with respect to Performance
Units will be paid as follows: (i) 50% in cash and 50% in Common Stock to
participants employed by the Company holding the positions of Chairman of the
Board, President or CEO (or equivalent positions in the case of Company
subsidiary executives), and (ii) 75% in cash and 25% in Common Stock to
participants employed by the Company holding the position of Vice Chairman of
the Board, COO, Executive Vice President or Senior Vice President (or equivalent
positions in
18
<PAGE> 22
the case of Company subsidiary executives). Participants (or their beneficiaries
in the case of their deaths) who have retired, died, became permanently disabled
or who have terminated their employment prior to the end of the Performance
Cycle shall not be entitled to receive payment for any Performance Units which
were not vested as of the time such participants ceased active employment with
the Company or its subsidiaries. Vested units held by such participants (or
their beneficiaries in the case of their deaths) will be paid in accordance with
the plan. Cash benefits may, at the election of the participant, be deferred
according to the terms of the Company's Deferred Compensation Plan. Any amounts
(deferred or otherwise) to be paid to participants pursuant to the plan are
unfunded obligations of the Company. The Company will not be required to
segregate any monies from its general account, to create any trusts or to make
any special deposits with respect to such obligations.
In the event of a Change in Control, the then current Performance Cycle
will immediately end and all vested Performance Units will be paid to
participants within ten days following the Change in Control. Such payment will
be made in the form of a lump-sum cash payment based on a value of $150 per
Performance Unit. Any amount due as a result of a Change in Control of the
Company will be reduced by the amount of any interim benefit payment made by the
Company to the participant. In addition, in the event of a Change in Control,
all unvested Performance Units shall become fully vested on a pro rata basis
measured in the nearest whole year between the date of grant and the date of the
Change in Control. If a participant's employment is terminated within two years
following a Change in Control, but subsequent thereto, for any reason other than
for certain reasons specified in the plan, all unvested Performance Units shall
become fully vested on a pro rata basis measured in the nearest whole year
between the date of the Change in Control and the participant's termination.
Restricted Stock. Restricted stock, including performance-based restricted
stock, may be granted under the plan in such number and at such times during the
term of the plan as the Plan Administrator may determine. Each participant who
receives a grant of restricted stock under the plan will have all the rights of
a stockholder with respect to such shares (subject to certain restrictions on
transferability), including the right to vote such shares and receive dividends
and other distributions following issuance of a certificate or certificates for
such shares.
Restricted stock issued under the plan may not be sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered or disposed of by the
participant, except in the event of death or permanent disability, during a
period of years determined by the Plan Administrator. Such restriction may never
be for a period of less than one year. Except as provided below, if a
participant terminates employment with the Company for any reason before the
expiration of the applicable restrictive period, or attempts to sell, exchange,
transfer, pledge or otherwise dispose of the restricted stock in violation of
the terms of the plan, such shares of restricted stock will be forfeited by the
participant to the Company.
Performance-based restricted stock may not be granted or vested, as
applicable, unless the Plan Administrator has determined the performance goals
applicable to the particular performance period relating to such shares, and the
Plan Administrator has certified in writing that the Performance Goals for such
Performance Period have been attained.
The restrictive period for any participant's restricted stock will be
deemed to end and all restrictions on such shares will lapse upon the
participant's death, permanent disability or any termination of employment
determined by the Plan Administrator to end the restrictive period. In addition,
in the event of a Change in Control the restrictive period for any participant
shall be deemed to end and all restrictions on shares of restricted stock will
terminate immediately.
CHANGE IN CONTROL. Under the plan, a Change in Control will be deemed to
have occurred (i) if any person (as defined in Rule 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner (as defined in Section 13d-3 of
the Exchange Act) directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities, (ii) upon the first purchase of Common Stock pursuant to
a tender offer or exchange offer (other than a tender offer or exchange offer
made by the Company), (iii) upon the approval by the Company's stockholders of a
merger or consolidation, sale or disposition of all or substantially all of the
Company's assets, or a plan of
19
<PAGE> 23
dissolution of the Company, or (iv) if during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board
cease for any reason to constitute at least a majority thereof, unless the
election or nomination for election by the Company's stockholders of each new
director was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the period.
Notwithstanding the foregoing, the plan provides that a Change in Control
will not be deemed to have occurred if the Company either merges or consolidates
with or into another company or sells or disposes of all or substantially all of
its assets to another company, if such merger, consolidation, sale or
disposition is in connection with a corporate restructuring wherein the
stockholders of the Company immediately before such merger, consolidation, sale
or disposition own, directly or indirectly, immediately following such merger,
consolidation, sale or disposition, at least 80% of the combined voting power of
all outstanding classes of securities of the company resulting from such merger
or consolidation, or to which the Company sells or disposes of its assets, in
substantially the same proportion as their ownership in the Company immediately
before such merger, consolidation, sale or disposition.
TERMINATION AND AMENDMENT. Subject to certain plan provisions, the Plan
Administrator may from time to time amend the plan as it may deem proper and in
the best interest of the Company without any further approval of the
stockholders of the Company, provided, however, that no change in any option,
SAR, LSAR, restricted stock or Performance Unit previously granted, which would
impair the right of the participant to acquire or retain Common Stock or cash
that the participant may have acquired as a result of the plan, may be made
without the consent of the participant. Notwithstanding the foregoing, the Plan
Administrator and the Board of Directors may not, to the extent required for
compliance with applicable law and regulation including Rule 16b-3 and Section
162(m), amend the plan without the approval of the stockholders of the Company
to: (i) materially increase the number of shares, rights or units that may be
issued under the plan to Section 16 Insiders, (ii) with respect to incentive
stock options and any related SARs and LSARs, change the description of the
participants or class of participants eligible for participation in the plan,
or, with respect to all other grants under the plan, materially modify the
requirements as to eligibility for participation in the plan to add a class of
Section 16 Insiders, and (iii) otherwise materially increase the benefits
accruing to the participants under the plan. The plan will terminate ten years
after the date of stockholder approval.
FEDERAL INCOME TAX CONSEQUENCES. The following discussion briefly
summarizes the material federal income tax consequences of participation in the
plan. This discussion is general in nature and does not address issues related
to the tax circumstances of any particular participant. The discussion is based
on federal income tax laws currently in effect and is, therefore, subject to
possible future changes in the law. This discussion does not address state,
local or foreign tax consequences.
The grant of a stock option, SAR or LSAR will have no tax consequences for
the participant or the Company. The participant will have no taxable income upon
exercising an incentive stock option (except that an alternative minimum tax may
apply), and the Company will not receive a deduction when an incentive stock
option is exercised. If the participant does not dispose of the shares of Common
Stock acquired on exercise of an incentive stock option within the two-year
period beginning on the day after the grant of the incentive stock option or
within one year after the exercise, the gain or loss on a subsequent sale will
be a capital gain or loss to the participant. The Company would not be entitled
to any deduction in such event. If the participant disposes of the shares within
the two-year or one-year periods described above, the participant generally will
realize ordinary income and the Company will be entitled to a corresponding
deduction. Upon exercising a SAR, LSAR or stock option (other than an incentive
stock option), the participant must recognize ordinary income in an amount equal
to the difference between the exercise price and the fair market value of the
Common Stock on the exercise date. The Company is entitled to a deduction for
the same amount.
Because an LSAR is exercisable only upon the occurrence of a Change in
Control of the Company, exercise by a participant could result in the imposition
of an additional 20% excise tax on, and denial of a deduction to the Company
for, all or a portion of the total payments made to the participant upon the
Change in Control. Similarly, accelerated vesting resulting from a Change in
Control in the case of any other awards
20
<PAGE> 24
under the plan could trigger the 20% excise tax and the loss of the deduction.
The amount of the excise tax will depend on the amount of the payments subject
to the Change in Control provisions and the other circumstances of the
participant.
Awards granted under the plan that are settled in cash or shares of Common
Stock are taxable as ordinary income when received. Awards of restricted stock
granted under the plan are taxable as ordinary income, as of the earlier of the
date that the shares become transferable or are not subject to a substantial
risk of forfeiture, in an amount equal to the fair market value of the shares on
such date, unless the participant makes an election under Section 83(b) of the
IRC. If a Section 83(b) election is made, the participant must include in income
the value of the shares as of the date of grant. The Company will receive a
deduction for the amount recognized as income by the participant, subject to the
provisions of Section 162(m).
BENEFITS UNDER THE PLAN. In January 1995, the Plan Administrator granted
awards of options and Performance Units to certain participants in the plan. The
following table sets forth the awards made to (i) each of the named executives,
(ii) all current executives as a group, (iii) all current Directors who are not
executive officers, as a group, and (iv) all employees, including all current
officers who are not executive officers, as a group. Such grants are subject to
stockholder approval of the plan at the Annual Meeting. The Compensation
Committee has determined that the overall compensation structure submitted to
stockholders is important as a whole. If stockholders do not approve one or more
pieces of the structure, the Compensation Committee intends to design other
compensation programs to achieve an appropriate aggregate compensation
structure.
1995 OMNIBUS COMPENSATION PLAN
<TABLE>
<CAPTION>
STOCK OPTION AWARDS(1)
NUMBER OF SECURITIES NUMBER OF
NAME AND POSITION UNDERLYING OPTIONS PERFORMANCE UNITS
- ------------------------------------------------------ ---------------------- -----------------
<S> <C> <C>
William A. Wise....................................... 62,000 29,600
Chairman of the Board, President and CEO
Luino Dell'Osso, Jr.(2)............................... 0 0
Vice Chairman of the Board and COO
Richard Owen Baish.................................... 15,000 7,100
Executive Vice President
H. Brent Austin....................................... 15,000 7,100
Senior Vice President and Chief Financial Officer
Britton White, Jr..................................... 15,000 7,100
Senior Vice President and General Counsel
Executive Officer Group............................... 167,000 79,300
Non-Executive Officer Director Group.................. 0 0
Non-Executive Officer Employee Group.................. 255,000 0
</TABLE>
- ---------------
(1) The number of stock options reflected in this column include 3,000 incentive
stock options ("ISOs") for each of the named executives, other than for Mr.
Dell'Osso, 24,000 ISOs for the Executive Officer Group, and 19,500 ISOs for
the Non-Executive Officer Employee Group.
(2) No grant was made to Mr. Dell'Osso because of his expressed desire to retire
before the end of 1995.
RECOMMENDATION. The Board of Directors believes that approval of the 1995
Omnibus Compensation Plan is in the best interests of the Company and its
stockholders because the plan will enable the Company to attract and retain
officers and key management employees and provide these employees with
competitive incentives, which also align their interests with those of the
Company stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE 1995 OMNIBUS COMPENSATION PLAN.
21
<PAGE> 25
PROPOSAL NO. 4 -- APPROVAL OF THE EL PASO NATURAL GAS COMPANY 1995 INCENTIVE
COMPENSATION PLAN
Since January 15, 1992, the Company has had an incentive compensation plan
pursuant to which annual bonuses were paid to executive officers based on the
performance of the individual and the Company and its subsidiaries. The
performance criteria used have included both objective and subjective measures.
In 1993, the IRC was amended by the addition of Section 162(m), which limits the
tax deduction available to a company with respect to compensation paid to
certain executive officers, unless the compensation qualifies as "performance
based."
The Board of Directors believes that in light of Section 162(m), it is
desirable to restructure the Company's incentive compensation program to provide
for objective performance goals, and to submit the plan for stockholder
approval. This would enable the executive's annual incentive award to qualify as
"performance-based" compensation for purposes of Section 162(m), and thereby
continue to be deductible by the Company without regard to the deduction limit
otherwise imposed by such Section. The plan also requires that the executive
receive at least a part of any award in Company restricted stock. Accordingly,
on January 13, 1995, the Board of Directors adopted the El Paso Natural Gas
Company 1995 Incentive Compensation Plan (the "1995 Incentive Compensation
Plan") and is herein seeking approval of such plan by the stockholders of the
Company at the Annual Meeting.
The 1995 Incentive Compensation Plan will succeed the current Incentive
Compensation Plan. AN AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES OF COMMON
STOCK REPRESENTED AT THE ANNUAL MEETING IN PERSON OR BY PROXY AND ENTITLED TO
VOTE ON THE PROPOSAL WILL CONSTITUTE APPROVAL.
The following is a general summary of the 1995 Incentive Compensation Plan
and is qualified in its entirety by the full text thereof which is attached to
this Proxy Statement as Exhibit B.
PURPOSES. The purposes of the 1995 Incentive Compensation Plan are to
encourage outstanding performance by the executives of the Company and its
subsidiaries, to attract and retain exceptional executives and to provide a
direct incentive to the executives to achieve the Company's strategic and
financial goals.
ADMINISTRATION. With respect to participants who are Section 16 Insiders,
the plan will be administered by the Compensation Committee (the "Plan
Administrator") which Committee will, at all times, be constituted to meet the
"disinterested administration" requirements of Rule 16b-3 and the "outside
directors" requirements of Section 162(m). With respect to all other
participants, the plan will be administered by a management committee (the
"Management Committee") consisting of the CEO and such other senior officers of
the Company as the CEO may designate.
SHARES AVAILABLE FOR THE PLAN. Subject to adjustment as provided in the
plan (e.g., in the event of a recapitalization, stock split, stock dividend,
merger, reorganization or similar event), the maximum number of shares of Common
Stock which may be awarded under the plan is one million two hundred fifty
thousand (1,250,000), which may be shares of original issuance, treasury shares
or a combination thereof. Shares of Common Stock subject to the restrictions of
the plan and such other restrictions as the Plan Administrator may deem
appropriate are referred to herein as restricted stock.
PARTICIPANTS. The Plan Administrator will designate Section 16 Insiders,
and the Management Committee will designate all other executives who are
eligible to receive awards under the plan. Participants, in general, will be
limited to those executives employed by the Company holding the positions of
Chairman of the Board, President, CEO, Vice Chairman of the Board, if any, COO,
any Executive Vice President, any Senior Vice President and any Vice President
(or equivalent positions in the case of Company subsidiary executives). As of
January 13, 1995, approximately 22 employees were eligible to participate in the
plan.
TERMS AND CONDITIONS OF AWARDS. The Plan Administrator will determine prior
to the beginning of a particular performance period (the "Performance Period")
or at such other time allowed by the IRC, the participants who will be eligible
to receive an award for such Performance Period, the performance goals
applicable to the Performance Period (the "Performance Goals") and the maximum
amount payable to each
22
<PAGE> 26
participant if the Performance Goals for such Performance Period are attained.
The Plan Administrator will set the target level of performance required for
each Performance Goal selected for a particular Performance Period and may
specify that a percentage less than 100% of an award may be payable if a
designated level of performance of a Performance Goal is attained that is less
than the established target level for such Performance Goal. The maximum award
which will be payable under the plan to any participant for any Performance
Period is two million dollars ($2,000,000) whether in cash, restricted stock or
a combination thereof. Performance Goals may be based on one or more of the
following criteria: operating income, pre-tax profit, earnings per share, cash
flow, return on capital, return on equity, return on net assets, net income,
debt reduction, safety, return on investment, total stockholder return or
revenues. The foregoing terms shall have the same meaning as used in the
Company's financial statements, in the generally accepted accounting principles
or in the industry, as applicable.
Within 30 days after the Company's financial information is available for a
particular Performance Period, the Plan Administrator or the Management
Committee, in the case of participants other than Section 16 Insiders, will
calculate the extent to which the Performance Goals have been attained and the
amount of the award for each participant. No awards under the plan may be made
by the Plan Administrator or the Management Committee, in the case of
participants other than Section 16 Insiders, unless the Plan Administrator has
certified in writing prior to payment of the award that the Performance Goals
for such Performance Period have been attained. No awards will be payable under
the plan if the threshold level of performance set for the Performance Goals for
the applicable Performance Period have not been attained. The Plan Administrator
or the Management Committee, as the case may be, will have the sole and absolute
discretion to reduce the amount of any award otherwise payable to a participant
upon attainment of any Performance Goal established for a Performance Period. No
participant will be entitled to receive an award under the plan unless his or
her performance is satisfactory.
Generally, awards under the plan will be paid not later than the end of the
month following the month in which the Plan Administrator determines the amount
of the award and will be paid as follows: (i) 50% in cash and 50% in restricted
stock to any participant employed by the Company holding the position of
Chairman of the Board, President, CEO, Vice Chairman of the Board, COO,
Executive Vice President or Senior Vice President (or equivalent positions in
the case of Company subsidiary executives), and (ii) 75% in cash and 25% in
restricted stock to participants employed by the Company holding the position of
Vice President (or equivalent position in the case of Company subsidiary
executives). Because participants will bear the forfeiture, price fluctuation
and other attendant risks during the period in which the restricted stock
remains restricted, the participants will also be awarded an additional amount
of restricted stock equal to the amount of restricted stock which they receive
pursuant to the award.
In lieu of receiving all or any portion of any cash award under the plan,
participants will be entitled to elect to receive additional shares of
restricted stock with a value equal to the portion of the cash award foregone.
Any participant who makes such an election will, on account of the attendant
risks, as described above, receive further shares of restricted stock in an
amount equal to the shares a participant elected to receive, as described above.
Cash awards under the plan may, at the election of the participant, be deferred
according to the terms of the Company's Deferred Compensation Plan. Any amounts
(deferred or otherwise) to be paid to participants pursuant to the plan are
unfunded obligations of the Company. The Company will not be required to
segregate any monies from its general account, to create any trusts or to make
any special deposits with respect to such obligations.
CHANGE IN CONTROL. In the event of a Change in Control of the Company, all
awards attributable to the Performance Period in which a Change in Control
occurs will become fully vested and distributable in cash within 30 days after
the date of the Change in Control in an amount equal to 100% of Annual Salary
(as hereinafter defined) for participants who are employees of the Company
holding the positions of Chairman of the Board, President, CEO, Vice Chairman of
the Board or COO (or equivalent positions in the case of Company subsidiary
executives); 80% of Annual Salary for any participant employed by the Company
holding the positions of Executive Vice President or Senior Vice President (or
equivalent positions in the case of Company subsidiary executives); and 60% of
Annual Salary for any participant employed by the Company holding the position
of Vice President (or equivalent position in the case of Company subsidiary
executives).
23
<PAGE> 27
For the purposes of the plan, the term "Annual Salary" means a participant's
annual base salary in effect on the date of a Change in Control.
In the event that the Change in Control is deemed to occur after the end of
a Performance Period but before the Plan Administrator has calculated whether
the applicable Performance Goals have been achieved and has set each
participant's award amount for such Performance Period, then the participant
will be entitled to receive in cash, within 30 days after the date of the Change
in Control, the amounts set forth in the preceding paragraph. Any such amounts
payable under the plan are in addition to any amounts which participants may be
entitled to for the Performance Period in which the Change in Control is deemed
to occur.
For purposes of the plan, Change in Control has the same meaning given such
term in the 1995 Omnibus Compensation Plan. For a description of the events
which constitute a Change in Control under this plan, see the discussion of
"Change in Control" on page 19 of this Proxy Statement.
RESTRICTED STOCK. Each share of restricted stock issued under the plan will
be subject to the restrictions summarized below and to any additional
restrictions which may be imposed on such shares by the Plan Administrator. Each
participant who receives a grant of restricted stock will have all the rights of
a stockholder with respect to such shares (subject to certain restrictions on
transferability), including the right to vote the shares and receive dividends
and other distributions.
Restricted stock issued under the plan may not be sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered or disposed of by the
participant, except as provided below, during a period of years determined by
the Plan Administrator (but not less than one year). Except as provided below,
if a participant terminates employment with the Company for any reason before
the expiration of the applicable restrictive period or attempts to sell,
exchange, transfer, pledge or otherwise dispose of restricted stock in violation
of terms of the plan, all such shares will be forfeited by a participant to the
Company.
The restriction period for any participant will be deemed to end and all
restrictions on shares of restricted stock awarded under the plan (except for
restricted stock granted as additional restricted stock in connection with
either an original award or in connection with an election by a participant to
forgo all or a portion of the cash portion of an award for restricted stock)
shall lapse upon a participant's death, retirement, permanent disability or
other involuntary termination without cause. The restrictive period for
restricted stock awarded as additional restricted stock under the circumstances
mentioned above will lapse on a pro rata basis measured in years between the
amount of time which has elapsed between the date of the award and the
participant's death, retirement, permanent disability or any other involuntary
termination without cause and the restriction period for such shares. All
restricted stock for which the restrictive period has not lapsed will be
forfeited to the Company. Notwithstanding the foregoing, the plan provides that
the Plan Administrator or the Management Committee, in the case of participants
who are Section 16 Insiders, may determine that any restrictive period should
not lapse or that the restrictive period on additional shares of restricted
stock should lapse. In the event of a Change in Control, the restrictive period
for all outstanding shares of restricted stock for any participant will be
deemed to end and all restrictions on such shares of restricted stock will
immediately lapse.
TERMINATION AND AMENDMENT. The Board of Directors and the Plan
Administrator 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 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. Notwithstanding the foregoing, the
Board of Directors, the Plan Administrator 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 Stock that may be issued
under the plan, (ii) materially modify the requirements as to eligibility for
participation in the plan, (iii) change the Performance Goals, or (iv) otherwise
materially increase the benefits accruing to the participants under the plan.
The plan will terminate ten years after the date of stockholder approval.
24
<PAGE> 28
BENEFITS UNDER THE PLAN. In January 1995, the Plan Administrator granted
awards under the plan with respect to the 1995 Performance Period to certain
participants in the plan. The following table sets forth the ranges of bonus
awards awarded under the plan for (i) each of the named executives, (ii) all
current executives as a group, (iii) all current Directors who are not executive
officers, as a group, and (iv) all employees, including all current officers who
are not executive officers, as a group. Such awards are subject to stockholder
approval of the plan at the Annual Meeting. The Compensation Committee has
determined that the overall compensation structure submitted to stockholders is
important as a whole. If stockholders do not approve one or more pieces of the
structure, the Compensation Committee intends to design other compensation
programs to achieve an appropriate aggregate compensation structure.
1995 INCENTIVE COMPENSATION PLAN
<TABLE>
<CAPTION>
RANGES OF
$ VALUE
------------
<S> <C>
William A. Wise................................................................ 0 - 550,000
Chairman of the Board, President and CEO
Luino Dell'Osso, Jr.(1)........................................................ 0
Vice Chairman of the Board and COO
Richard Owen Baish............................................................. 0 - 180,000
Executive Vice President
H. Brent Austin................................................................ 0 - 168,000
Senior Vice President and
Chief Financial Officer
Britton White, Jr.............................................................. 0 - 160,000
Senior Vice President and
General Counsel
Executive Officer Group........................................................ 0 - 1,638,000
Non-Executive Officer Director Group........................................... 0
Non-Executive Officer Employee Group........................................... 0 - 1,100,700
</TABLE>
- ---------------
(1) No grant was made to Mr. Dell'Osso because of his expressed desire to retire
before the end of 1995.
RECOMMENDATION. The Board of Directors believes that approval of the 1995
Incentive Compensation Plan is in the best interests of the Company and its
stockholders because the plan will enable the Company to attract and retain
exceptional executives and provide these executives with competitive incentives,
which also align their interests with those of the Company stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE 1995 INCENTIVE COMPENSATION PLAN.
PROPOSAL NO. 5 -- APPROVAL OF THE EL PASO NATURAL GAS COMPANY 1995 COMPENSATION
PLAN FOR NON-EMPLOYEE DIRECTORS
Since January 15, 1992, the Company has had a Compensation Plan for
Non-Employee Directors pursuant to which non-employee Directors of the Company
were paid their annual retainer and meeting fees, if any, in the form of cash,
either current or deferred. The Board of Directors believes that it is desirable
to expand the current plan to permit non-employee Directors to also defer
receipt of annual retainer and meeting fees in the form of deferred shares of
Common Stock. Accordingly, on January 13, 1995, the Board of Directors adopted
the El Paso Natural Gas Company 1995 Compensation Plan for Non-Employee
Directors (the "1995 Compensation Plan for Non-Employee Directors").
The 1995 Compensation Plan for Non-Employee Directors will succeed the
current plan if it is adopted by the Company's stockholders at the Annual
Meeting. AN AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES OF COMMON STOCK
REPRESENTED AT THE ANNUAL MEETING IN PERSON OR BY PROXY AND ENTITLED TO VOTE ON
THAT PROPOSAL IS REQUIRED FOR ITS ADOPTION.
25
<PAGE> 29
The following is a general summary of the 1995 Compensation Plan for
Non-Employee Directors and is qualified in its entirety by the full text thereof
which is attached to this Proxy Statement as Exhibit C.
PURPOSE. The purpose of the 1995 Compensation Plan for Non-Employee
Directors is to provide a compensation program for the non-employee Directors of
the Company that will attract and retain highly qualified individuals to serve
as members of the Company's Board of Directors.
ADMINISTRATION. Subject to terms of the plan, the plan will be administered
by the Management Committee. The Management Committee will interpret the plan,
will prescribe, amend and rescind rules relating to the plan as it deems proper
and in the best interests of the Company, and will take any other action
necessary for the administration of the plan.
PARTICIPANTS. Each non-employee Director of the Company will be eligible to
participate in the plan immediately upon his or her election to the Board of
Directors. As of January 13, 1995, the effective date of the plan, there were 5
Directors eligible to participate.
SHARES AVAILABLE FOR THE PLAN. Subject to adjustment as provided in the
plan (e.g., in the event of a recapitalization, stock split, stock dividend,
merger, reorganization or similar event), the maximum number of shares of Common
Stock which may be awarded under the plan is one hundred fifty thousand
(150,000), which may be shares of original issuance, treasury shares or a
combination thereof.
COMPENSATION. The Board of Directors will establish, by resolution or
otherwise, from time to time, the amount of each participant's compensation.
Such compensation will be paid, unless deferred by the participant in accordance
with the terms of the plan, in four equal quarterly installments with each
installment being made on or about the last day of the applicable Plan Quarter
(as defined in the plan), unless otherwise determined by the Management
Committee.
Upon election to the Board of Directors and at the time of or prior to each
annual stockholders' meeting thereafter, or at such other time as may be
required by Section 16 of the Exchange Act, a participant will be entitled to
elect to receive his or her compensation in the form of cash, deferred cash,
deferred Common Stock or a combination thereof. If no election is received by
the Company with respect to any Plan Year (as defined in the plan), the
participant will be deemed to have made an election to receive such compensation
in the form of undeferred cash.
If a participant elects to have all or a specified percentage of his or her
compensation for a given year deferred in cash or Common Stock, such cash or
Common Stock, as the case may be, will be credited to a deferred account until
the participant ceases to be a Director of the Company. If a participant elects
to defer in cash, the participant's deferred account will be credited with an
amount equal to the amount deferred. If a participant elects to defer
compensation in the form of deferred Common Stock, the participant's account
will be credited with an amount equal to the amount deferred plus a 10%
conversion premium (increasing automatically to a maximum of 50% if and when
such amount is permitted under the rules and regulations promulgated under
Section 16(b) of the Exchange Act) for the purpose of determining the number of
shares of Common Stock which will be credited to his or her account (the "Common
Stock Deferral"). The actual number of shares of Common Stock which will be
credited to the participant's deferred account will equal the Common Stock
Deferral divided by the fair market value of the Company's Common Stock on the
applicable Payment Date (as defined in the plan), or such later date as may be
required by Section 16(b) of the Exchange Act.
With respect to shares of Common Stock credited to a participant's deferred
account, the participant will have the right to vote the shares and receive
dividends and other distributions thereon. Any such dividends and distributions
will be promptly reinvested in additional shares of Common Stock.
Payment of compensation deferred by a participant will be generally made by
the Company in the month following the date on which the participant ceased to
be a Director. In the case of compensation deferred in Common Stock, however,
such payment may be delayed until such later date as may be necessary to comply
with Section 16(b) of the Exchange Act and the rules and regulations promulgated
thereunder. The amount which will be paid and/or distributed to a participant
(or the participant's beneficiary in the case of the
26
<PAGE> 30
participant's death) will equal the amount credited to the participant's
deferred account in the form of cash, plus interest thereon to the date of
payment, plus a number of shares of Common Stock equal to the number of whole
shares held in such account. No fractional shares of Common Stock will be
distributed. The value of any fractional shares of Common Stock will be paid in
a lump-sum cash payment. Deferred cash will be payable to the participant,
subject to the approval of the Management Committee, in either a lump-sum cash
payment or in periodic installments over a period of years to be determined at
the time the deferral election is made.
The plan provides that the Management Committee, in its discretion, may
accelerate the payment of any unpaid balance of a participant's 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 the
participant's death) has incurred a severe financial hardship. In making its
determination, the Management Committee will be entitled to consider such
factors and require such information as it deems appropriate.
CHANGE IN CONTROL. In the event of a Change in Control of the Company, all
cash and Common Stock Deferrals will be paid and/or distributed, as the case may
be, to a participant (or to his or her beneficiary in the case of the
participant's death) within 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 the plan, Change in Control has the same meaning given such
term in the 1995 Omnibus Compensation Plan. For a description of the events
which will constitute a Change in Control under this plan, see the discussion of
"Change in Control" on page 19 of this Proxy Statement.
UNFUNDED OBLIGATION; DISCRETIONARY INVESTMENT BY THE COMPANY. Amounts
deferred by participants under the plan are unfunded obligations of the Company.
The Company will not be required to segregate any monies from its general funds,
to create any trusts or to make any special deposits with respect to such
obligations. All amounts deferred by participants may be invested by the Company
at the direction of the Management Committee. The Management Committee may also,
in its sole discretion, determine that all or a portion of deferred amounts will
be paid into one or more grantor trusts to be established by the Company, and
may designate an investment advisor to direct investments and reinvestments of
such deferrals.
TERMINATION AND AMENDMENT. The Board of Directors 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 of Directors 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, 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 of Directors and the Management Committee may not amend
the plan without stockholder approval to: (i) materially increase the number of
shares of Common Stock that may be issued under the plan, (ii) materially modify
the conditions of eligibility to participate in the plan, or (iii) otherwise
materially increase the benefits accruing to participants under the plan. The
plan will terminate ten years after the date of stockholder approval.
BENEFITS UNDER THE PLAN. Although the current annual retainer for each
participant is $50,000, it is not possible to specify the amount of benefits
that will be paid to each participant under the plan since each participant's
ultimate benefit depends upon his or her election to receive cash, deferred
cash, deferred Common Stock or a combination thereof.
RECOMMENDATION. The Board of Directors believes that approval of the 1995
Compensation Plan for Non-Employee Directors is in the best interests of the
Company and its stockholders because the plan will enable to the Company to
attract and retain qualified individuals to serve as Directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE 1995 COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS.
27
<PAGE> 31
COST OF SOLICITATION
The cost of preparing, printing and mailing this Proxy Statement and the
accompanying proxy card, and the cost of solicitation of proxies on behalf of
the Company's Board of Directors will be borne by the Company. The Company has
retained Georgeson & Company Inc. to assist in the solicitation of proxies from
stockholders at an estimated fee of $10,000, plus reimbursement of out-of-pocket
expenses. In addition to the use of the mail, proxies may be solicited
personally or by telephone by regular employees of the Company without
additional compensation, as well as by Georgeson & Company Inc. Brokerage houses
and other custodians and nominees will be asked whether other persons are
beneficial owners of the shares of Common Stock which they hold of record and,
if so, they will be supplied with additional copies of the proxy materials for
distribution to such beneficial owners. The Company will reimburse banks,
nominees, fiduciaries, brokers and other custodians for their costs of sending
the proxy materials to the beneficial owners of the Company's Common Stock.
OTHER MATTERS
The Board of Directors knows of no other matters which will be brought
before the Annual Meeting. If, however, any other matters should come before the
Annual Meeting all proxies (with the exception of broker non-votes) which have
been signed and returned without further instruction will give the persons
designated thereon discretionary authority to vote according to their best
judgment.
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(A)
Section 16(a) of the Exchange Act requires the Company's Directors, certain
officers and persons holding more than 10% of a registered class of the
Company's equity securities to file reports of ownership and reports of changes
in ownership with the SEC and the New York Stock Exchange. Directors, certain
officers and greater than 10% stockholders are also required by SEC regulations
to furnish the Company with copies of all such reports that they file. Based on
the Company's review of copies of such forms filed, the Company believes that
all filing requirements were complied with during the fiscal year ended December
31, 1994.
SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholder proposals submitted for inclusion in the Proxy Statement to be
issued in connection with the Company's 1996 Annual Meeting of Stockholders must
be mailed to the Corporate Secretary, El Paso Natural Gas Company, 100 North
Stanton Street, El Paso, Texas 79901, and must be received by the Corporate
Secretary on or before October 16, 1995. The Company will consider only
proposals meeting the requirements of applicable SEC rules.
28
<PAGE> 32
ANNUAL REPORT
A copy of the Company's 1994 Annual Report to Stockholders is being mailed
with this Proxy Statement to each stockholder entitled to vote at the Annual
Meeting. Stockholders not receiving a copy of such Annual Report may obtain one
by writing or calling Ms. Stacy J. James, Corporate Secretary, El Paso Natural
Gas Company, 100 North Stanton Street, El Paso, Texas 79901,
telephone (915) 541-2600.
By Order of the Board of Directors
/s/ STACY J. JAMES
STACY J. JAMES
Corporate Secretary
El Paso, Texas
February 13, 1995
29
<PAGE> 33
EXHIBIT A
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
A-1
<PAGE> 34
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,
A-2
<PAGE> 35
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.
A-3
<PAGE> 36
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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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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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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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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(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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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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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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(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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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> 49
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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EXHIBIT B
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> 54
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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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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(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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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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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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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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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> 62
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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EXHIBIT C
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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PROXY
SOLICITED BY THE BOARD OF DIRECTORS
EL PASO NATURAL GAS COMPANY
ANNUAL MEETING OF STOCKHOLDERS
MARCH 16, 1995
The undersigned hereby appoints William A. Wise and Britton White, Jr., and
each or any of them, with power of substitution, proxies for the undersigned
and authorizes them to represent and vote, as designated, all of the shares of
stock of El Paso Natural Gas Company held of record by the undersigned on
January 25, 1995, at the Annual Meeting of Stockholders to be held at the
Crescent III meeting room, The Sheraton Crescent Hotel, 2620 West Dunlap
Avenue, Phoenix, Arizona on March 16, 1995, and at any adjournment or
postponement of such meeting for the purposes identified on the reverse side of
this proxy and with discretionary authority as to any other matters that may
properly come before the Annual Meeting, including substitute nominees if any
of the named nominees for Director should be unavailable to serve for election,
in accordance with and as described in the Notice of Annual Meeting of
Stockholders and Proxy Statement. This proxy when properly executed will be
voted in the manner directed herein by the undersigned stockholder. If this
proxy is returned without direction being given, this proxy will be voted FOR
proposals 1, 2, 3, 4 and 5.
(IMPORTANT - TO BE SIGNED AND DATED ON REVERSE SIDE) /SEE REVERSE SIDE/
<PAGE> 72
/x/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3, 4 AND 5.
1. Election of Directors.
NOMINEES: Byron Allumbaugh, Luino Dell'Osso, Jr.,
Eugenio Garza Laguera, James F. Gibbons,
Ben F. Love, Kenneth L. Smalley, Malcolm Wallop,
William A. Wise.
FOR WITHHOLD
ALL NOMINEES / / / / AUTHORITY TO VOTE
LISTED ABOVE FOR ALL NOMINEES
LISTED ABOVE
/ /
______________________________________
For all nominees except as noted above
For Against Abstain
2. Ratification of the appointment of / / / / / /
Coopers & Lybrand LLP as
Independent Certified Public
Accountants of the Company for
fisical year 1995.
3. Approval of the El Paso Natural / / / / / /
Gas Company 1995 Omnibus
Compensation Plan.
4. Approval of the El Paso Natural / / / / / /
Gas Company 1995 Incentive
Compensation Plan.
5. Approval of the El Paso Natural / / / / / /
Gas Company 1995 Compensation
Plan for Non-Employee Directors.
MARK HERE MARK
FOR ADDRESS / / HERE FOR / /
CHANGE AND COMMENTS
NOTE AT LEFT
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Please sign exactly as your name appears. If acting as attorney, executor,
trustee or in other representative capacity, sign name and title. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person. If held jointly, both parties must sign and date.
Signature:_____________________________________ Date_____________
Signature:_____________________________________ Date_____________
<PAGE> 73
CONFIDENTIAL VOTING INSTRUCTIONS
EL PASO NATURAL GAS COMPANY
ANNUAL MEETING OF STOCKHOLDERS - MARCH 16, 1995
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
TO: BANKERS TRUST COMPANY, TRUSTEE UNDER EL PASO NATURAL GAS
COMPANY RETIREMENT SAVINGS PLAN
The undersigned hereby directs the Trustee to vote, in person or by proxy, the
full and fractional shares of Common Stock of El Paso Natural Gas Company
credited to my account under the referenced Plan at the close of business on
January 25, 1995, the record date, at the Annual Meeting of Stockholders to be
held at the Crescent III meeting room, The Sheraton Crescent Hotel, 2620 West
Dunlap Avenue, Phoenix, Arizona on March 16, 1995, and at any adjournment or
postponement of such meeting for the purposes identified on the reverse side of
this proxy and with discretionary authority as to any other matters that may
properly come before the meeting, including substitute nominees if any of the
named nominees for Director should be unavailable to serve, in accordance with
and as described in the Notice of Annual Meeting of Stockholders and Proxy
Statement.
If this proxy is completed, dated, signed and returned in the accompanying
envelope to the trustee by March 9, 1995, the shares of stock represented by
this proxy will be voted in the manner directed herein by the undersigned. If
this proxy is returned to the trustee without direction being given, this proxy
will be voted FOR Proposals 1, 2, 3, 4 and 5.
<PAGE> 74
PLEASE MARK YOUR CHOICE LIKE THIS /X/ IN
DARK INK AND SIGN AND DATE BELOW
1. Election of Directors
/ / VOTE FOR ALL / / WITHHOLD FROM
(except as marked /X/ to the VOTING FOR ALL
contrary below)
/ / Byron Allumbaugh / / James F. Gibbons / / Kenneth L. Smalley
/ / Luino Dell'Osso, Jr. / / Ben F. Love / / Malcolm Wallop
/ / Eugenio Garza Laguera / / William A. Wise
2. Ratification of the For Against Abstain
appointment of Coopers &
Lybrand L.L.P. as Independent / / / / / /
Certified Public Accountants
of the Company for fiscal
year 1995.
3. Approval of the El Paso For Against Abstain
Natural Gas Company 1995
Omnibus Compensation Plan. / / / / / /
4. Approval of the El Paso For Against Abstain
Natural Gas Company 1995
Incentive Compensation Plan. / / / / / /
5. Approval of the El Paso For Against Abstain
Natural Gas Company 1995
Compensation Plan for / / / / / /
Non-Employee Directors.
If acting as attorney, executor, trustee or in other represenative capacity,
sign name and title. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
IMPORTANT: Please mark, sign, date, and return this proxy card promptly using
the enclosed envelope.
Shares held as of December 31, 1994
- ---------------------- ----------
Signature Date
