<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-2700
________________________________________________________________________
EL PASO NATURAL GAS COMPANY
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State or Other Jurisdiction 74-0608280
of Incorporation or Organization) (I.R.S. Employer Identification No.)
ONE PAUL KAYSER CENTER,
100 NORTH STANTON STREET, EL PASO, TEXAS 79901
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (915) 541-2600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING
----- -----------
Common Stock, par value $3.00 per
share, as of May 6, 1996 35,408,172 shares
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<PAGE> 2
GLOSSARY
The following abbreviations, acronyms, or defined terms used in this Form 10-Q
are defined below:
<TABLE>
<CAPTION>
ABBREVIATIONS,
ACRONYMS, OR DEFINED TERMS TERMS
- -------------------------- -----
<S> <C>
ALJ . . . . . . . . . . . . . . . . . . . Administrative Law Judge
Board . . . . . . . . . . . . . . . . . Board of Directors of El Paso Natural Gas Company
CAAA . . . . . . . . . . . . . . . . . . Clean Air Act Amendments of 1990
CFE . . . . . . . . . . . . . . . . . . Comision Federal de Electricidad
Company . . . . . . . . . . . . . . . . El Paso Natural Gas Company and its subsidiaries
Cornerstone . . . . . . . . . . . . . . . Cornerstone Natural Gas, Inc.
Court of Appeals . . . . . . . . . . . . United States Court of Appeals for the District of Columbia Circuit
Eastex . . . . . . . . . . . . . . . . . Eastex Energy Inc., a wholly owned subsidiary of El Paso Natural Gas
Company
Edison . . . . . . . . . . . . . . . . . Southern California Edison Company
EPA . . . . . . . . . . . . . . . . . . United States Environmental Protection Agency
EPFS . . . . . . . . . . . . . . . . . . El Paso Field Services Company, a wholly owned subsidiary of El Paso
Natural Gas Company
EPG . . . . . . . . . . . . . . . . . . El Paso Natural Gas Company, now doing business as El Paso Energy
Corporation, unless the context otherwise requires
EPGM . . . . . . . . . . . . . . . . . . El Paso Gas Marketing, a wholly owned subsidiary of El Paso Natural Gas
Company
EPNC . . . . . . . . . . . . . . . . . . El Paso New Chaco Company, a wholly owned subsidiary of El Paso Natural Gas
Company
FERC . . . . . . . . . . . . . . . . . . Federal Energy Regulatory Commission
Mdth/d . . . . . . . . . . . . . . . . . Thousand dekatherms per day
MPC . . . . . . . . . . . . . . . . . . Mojave Pipeline Company
NGL . . . . . . . . . . . . . . . . . . . Natural gas liquids
Odd-Lot Holders . . . . . . . . . . . . . Shareholders of El Paso Natural Gas Company owning beneficially fewer than
100 shares of El Paso Natural Gas Company's common stock
PCB . . . . . . . . . . . . . . . . . . Polychlorinated biphenyl
Plan . . . . . . . . . . . . . . . . . . Dividend Reinvestment and Common Stock Purchase Plan
Premier . . . . . . . . . . . . . . . . . Premier Gas Company, a wholly owned subsidiary of Eastex Energy Inc.
Program . . . . . . . . . . . . . . . . Continuous Odd-Lot Stock Sales Program
PRP(s) . . . . . . . . . . . . . . . . . Potentially Responsible Party(ies)
RI/FS . . . . . . . . . . . . . . . . . Remedial Investigation/Feasibility Study
SEC . . . . . . . . . . . . . . . . . . Securities and Exchange Commission
SFAS . . . . . . . . . . . . . . . . . . Statement of Financial Accounting Standards
TransAmerican . . . . . . . . . . . . . . TransAmerican Natural Gas Corporation
TransColorado . . . . . . . . . . . . . . TransColorado Gas Transmission Company
</TABLE>
i
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EL PASO NATURAL GAS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER
----------------------
1996 1995
--------- ---------
<S> <C> <C>
Operating revenues ............................... $ 605,635 $ 204,131
--------- ---------
Operating charges
Natural gas and liquids ....................... 434,197 43,225
Operation and maintenance ..................... 73,328 77,366
Employee separation and asset impairment charge 99,053 --
Depreciation, depletion, and amortization ..... 21,615 16,805
Taxes, other than income taxes ................ 10,391 10,522
--------- ---------
638,584 147,918
--------- ---------
Operating income (loss) .......................... (32,949) 56,213
--------- ---------
Other (income) and income deductions
Interest and debt expense ..................... 22,706 21,066
Other - net ................................... 2,224 (1,378)
--------- ---------
24,930 19,688
--------- ---------
Income (loss) before income taxes ................ (57,879) 36,525
Income taxes (benefit) ........................... (22,631) 14,555
--------- ---------
Net income (loss) ................................ $ (35,248) $ 21,970
========= =========
Earnings (loss) per common share ................. $ (1.01) $ 0.62
========= =========
Average common shares outstanding ................ 35,052 35,156
========= =========
Dividends declared per common share .............. $ .3475 $ .3300
========= =========
</TABLE>
The accompanying Notes are an integral part of these
Consolidated Financial Statements.
1
<PAGE> 4
EL PASO NATURAL GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNT)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
(UNAUDITED)
---------- ----------
<S> <C> <C>
Current assets
Cash and temporary investments .......................................... $ 41,083 $ 39,373
Accounts and notes receivable, net ...................................... 302,410 214,796
Inventories ............................................................. 36,933 37,108
Take-or-pay buy-outs, buy-downs, and prepayments, net ................... 1,001 10,477
Other regulatory assets ................................................. 8,871 11,740
Deferred income tax benefit ............................................. 22,035 22,631
Other ................................................................... 11,765 32,467
---------- ----------
Total current assets .............................................. 424,098 368,592
---------- ----------
Property, plant, and equipment, net ...................................... 1,929,621 1,977,624
Intangible assets, net ................................................... 47,701 47,878
Other regulatory assets .................................................. 41,197 51,878
Other .................................................................... 112,135 88,653
---------- ----------
2,130,654 2,166,033
---------- ----------
Total assets ....................................................... $2,554,752 $2,534,625
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ........................................................ $ 382,108 $ 275,674
Short-term borrowings ................................................... 233,400 278,200
Accrual for regulatory issues ........................................... 29,926 --
Current maturities on long-term debt .................................... 107,950 7,590
Other ................................................................... 82,589 81,178
---------- ----------
Total current liabilities .......................................... 835,973 642,642
---------- ----------
Long-term debt, less current maturities .................................. 667,892 771,892
Deferred income taxes, less current portion .............................. 261,203 314,143
Deferred credits ......................................................... 32,990 39,514
Other .................................................................... 58,547 54,279
---------- ----------
1,020,632 1,179,828
---------- ----------
Commitments and contingent liabilities (See Note 5)
Stockholders' equity
Common stock, par value $3 per share; authorized 100,000 shares;
issued 37,351 shares .................................................. 112,054 112,054
Additional paid-in capital .............................................. 455,460 454,713
Retained earnings ....................................................... 191,475 240,101
Less: Treasury stock (at cost) 2,015 and 3,127 shares ................... 60,842 94,713
---------- ----------
Total stockholders' equity ......................................... 698,147 712,155
---------- ----------
Total liabilities and stockholders' equity ......................... $2,554,752 $2,534,625
========== ==========
</TABLE>
The accompanying Notes are an integral part of these
Consolidated Financial Statements.
2
<PAGE> 5
EL PASO NATURAL GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER
--------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) ................................................. $(35,248) $ 21,970
Adjustments to reconcile net income (loss) to net cash provided
by operating activities
Depreciation, depletion, and amortization ....................... 21,615 16,805
Deferred income taxes (benefit) ................................. (23,151) 8,708
Net take-or-pay recoveries ...................................... 9,476 9,495
Net employee separation and asset impairment charge
($99,053 less cash payments of $1,142) ..................... 97,911 --
Other working capital changes
Accounts and notes receivable .................................. (88,539) 34,418
Inventories .................................................... 175 (425)
Other current assets ........................................... 20,702 (9,733)
Accrual for regulatory issues .................................. 29,926 --
Accounts payable ............................................... 41,413 (66,769)
Other current liabilities ...................................... 939 (9,162)
Other ........................................................... (2,026) 4,768
-------- --------
Net cash provided by operating activities ..................... 73,193 10,075
-------- --------
Cash flows from investing activities
Capital expenditures .............................................. (29,446) (23,259)
Proceeds from disposal of property ................................ 1,617 1,037
Other ............................................................. 8,348 (2,214)
-------- --------
Net cash used in investing activities ......................... (19,481) (24,436)
-------- --------
Cash flows from financing activities
Net commercial paper borrowings (repayments) ...................... (59,800) 61,100
Revolving credit borrowings ....................................... 75,000 --
Revolving credit repayments ....................................... (60,000) --
Long-term debt retirements ........................................ -- (3,667)
Repayment of volumetric take-or-pay receivable .................... -- (9,800)
Acquisition of treasury stock ..................................... -- (14,564)
Dividends paid .................................................... (11,291) (10,850)
Other ............................................................. 4,089 2,140
-------- --------
Net cash provided by (used in) financing activities ........... (52,002) 24,359
-------- --------
Increase in cash and temporary investments ......................... 1,710 9,998
Cash and temporary investments
Beginning of period ........................................... 39,373 27,636
-------- --------
End of period ................................................. $ 41,083 $ 37,634
======== ========
</TABLE>
The accompanying Notes are an integral part of these
Consolidated Financial Statements.
3
<PAGE> 6
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The 1995 Annual Report on Form 10-K for the Company includes a summary of
significant accounting policies and should be read in conjunction with this
Form 10-Q. The condensed consolidated financial statements at March 31, 1996,
and the quarters ended March 31, 1996, and 1995, are unaudited. The condensed
balance sheet at December 31, 1995, is derived from audited financial
statements. These financial statements do not include all disclosures required
by generally accepted accounting principles. In the opinion of management, all
material adjustments necessary to present fairly the results of operations for
such periods have been included. All such adjustments are of a normal recurring
nature. Results of operations for any interim period are not necessarily
indicative of the results of operations for the entire year. Financial
statements for the previous periods include certain reclassifications which
were made to conform to current presentation. Such reclassifications have no
effect on reported net income or stockholders' equity.
2. ACQUISITIONS
Effective September 1, 1995, Eastex was merged with a subsidiary of EPG.
In December 1995, Eastex acquired all of the issued and outstanding capital
stock of Premier. The consolidated operating results of Eastex for the three
months ended March 31, 1996, are included in the consolidated results of
operations.
In April 1996, the Company and Cornerstone entered into a definitive
merger agreement which provides for the acquisition by the Company of all of
the outstanding shares of Cornerstone common stock and the merger of
Cornerstone with a subsidiary of EPFS. Pursuant to the agreement, a cash tender
offer of $6.00 per share for all outstanding shares of Cornerstone common stock
commenced on April 26, 1996. The tender offer is conditioned upon, among other
things, the acquisition of at least a majority of the shares of Cornerstone
common stock on a fully diluted basis and the expiration of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act. The agreement provides
that shares of Cornerstone common stock not purchased in the tender offer will
be acquired in the subsequent merger at the same price as that paid in the
tender offer. The agreement also provides for specified fees and expenses to be
paid to the Company under certain circumstances. The holders of over 50 percent
of the fully diluted outstanding shares of Cornerstone have granted to the
Company options to purchase all shares of Cornerstone common stock and
Cornerstone stock options and warrants held by them. The merger is expected to
close in the second quarter of 1996. The net value of the transaction is
approximately $115 million.
3. BUSINESS SEGMENTS
In recognition of changes in the natural gas industry and the manner in
which the Company manages its businesses, and in order to facilitate a more
detailed understanding of its various activities, the Company has segregated
its business activities into three business segments. The natural gas
transmission segment is involved in the interstate transportation of natural
gas. The field and merchant services segment is involved in the purchasing,
gathering, processing, and marketing of natural gas and NGL, as well as the
storage of natural gas. The corporate and other segment includes El Paso Energy
International Company and other corporate activities. El Paso Energy
International Company is responsible for the Company's international
activities.
Identifiable assets by segment are those assets that are used in the
Company's operations in each segment. Corporate assets are those assets which
are not specifically identifiable with a segment.
4
<PAGE> 7
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table reflects selected financial data for the Company's
segments. To the extent practicable, prior year amounts have been reclassified
to conform to the current business segment presentation, although such results
are not necessarily indicative of the results which would have been achieved
had the revised business segment structure been in effect during that period.
In general, transactions among business segments are recorded at market prices
and material affiliate transactions within business segments have been
eliminated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1996 1995
----------- -------------
(IN THOUSANDS)
<S> <C> <C>
OPERATING REVENUES
Natural gas transmission ............. $ 128,572 $ 140,534
Field and merchant services .......... 477,207 65,321
Corporate and other .................. 3 12
Eliminations ......................... (147) (1,736)
----------- -----------
Consolidated total ................. $ 605,635 $ 204,131
=========== ===========
DEPRECIATION, DEPLETION, AND AMORTIZATION
Natural gas transmission ............. $ 14,756 $ 12,388
Field and merchant services .......... 6,859 4,405
Corporate and other .................. -- 12
----------- -----------
Consolidated total ................. $ 21,615 $ 16,805
=========== ===========
OPERATING INCOME (LOSS)
Natural gas transmission ............. $ 47,510 $ 54,674
Field and merchant services .......... 17,942 2,038
Corporate and other .................. (98,401) (499)
----------- -----------
Consolidated total ................. $ (32,949) $ 56,213
=========== ===========
IDENTIFIABLE ASSETS
Natural gas transmission ............. $ 1,802,911 $ 1,873,157
Field and merchant services .......... 625,357 309,698
Corporate and other .................. 163,696 122,080
Eliminations ......................... (37,212) (1,132)
----------- -----------
Consolidated total ................. $ 2,554,752 $ 2,303,803
=========== ===========
CAPITAL EXPENDITURES
Natural gas transmission ............. $ 4,135 $ 20,243
Field and merchant services .......... 25,311 3,016
Corporate and other .................. -- --
----------- -----------
Consolidated total ................. $ 29,446 $ 23,259
=========== ===========
</TABLE>
5
<PAGE> 8
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. EMPLOYEE SEPARATION AND ASSET IMPAIRMENT CHARGE
In response to changes in the natural gas industry, increased competition,
and recent and future firm capacity contract step-downs and terminations, the
Company initiated an extensive review of its business processes. In the first
quarter of 1996, the Company adopted a program to restructure its businesses
and reduce operating costs through work force reductions and improved work
processes. Also during the first quarter of 1996, the Company adopted SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. As a result of the workforce reduction program and
the adoption of SFAS No. 121, the Company recorded a special charge of $99
million ($47 million for employee separation costs and $52 million for asset
impairments).
The employee separation charge included approximately $26 million for
expected severance related costs and $21 million for additional pension
benefits. The majority of the 903 employee reductions were in the natural gas
transmission function. As of March 31, 1996, payments of approximately $1
million had been recorded as a reduction of the provision for employee
separation. The Company anticipates that the remaining provision will be
expended by the end of 1996.
The asset impairment charge included approximately $44 million for the
impairment of certain natural gas gathering, processing, and production
facilities, and $8 million for the write-off of a regulatory asset established
upon the adoption of SFAS No. 112, Employers' Accounting for Postemployment
Benefits, but not recoverable through the Company's rate settlement filed with
FERC in March 1996.
5. COMMITMENTS AND CONTINGENCIES
Rates and Regulatory Matters
In June l995, EPG made a filing with FERC for approval of new system rates
for mainline transportation to be effective January l, 1996. In July 1995, FERC
accepted and suspended EPG's filing to be effective January 1, 1996, subject to
refund and certain other conditions. FERC also set EPG's rates for hearing.
In March 1996, EPG filed a comprehensive offer of settlement which, if
approved by FERC, would resolve issues related to the above mentioned rate case
and issues surrounding certain contract reductions and expirations scheduled to
occur from January 1, 1996, through December 31, 1997. The settlement provides
for, among other things: (i) a long term rate stability plan which establishes
base rates, for a 10-year period from January 1, 1996, through December 31,
2005, subject to annual escalation after 1997; (ii) payments within 8 years to
EPG by its customers totaling $255 million prior to interest, representing a
risk sharing mechanism that provides for approximately 35 percent of the
revenues (for the period 1996 to 2003) associated with the contract reductions
and expirations; (iii) the sharing between EPG (65 percent) and its customers
(35 percent) of revenues, in excess of a threshold, which are attributable to
unsubscribed capacity sales during the period 1996 through 2003; and (iv) a
mechanism to adjust the base rate for increases or decreases resulting from
laws or regulations to the extent that costs are impacted at a level in excess
of $10 million a year. The settlement contains a provision which permits any
party desiring not to be bound by the settlement to have its rates determined
pursuant to procedures established by FERC.
In March 1996, Edison, a firm shipper on EPG's system, filed its own offer
of settlement. While Edison's offer is similar in many respects to EPG's, it
contains provisions that EPG believes would be adverse to its interests if
Edison's offer was approved and EPG's offer was rejected. The ALJ has
established procedures to determine what discovery will be allowed in
connection with comments on the two offers of settlement to be filed by the
6
<PAGE> 9
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
parties and in the meantime has suspended the schedule for filing comments. It
is EPG's position that discovery is inappropriate because, among other things, a
provision in EPG's offer of settlement affords Edison the opportunity to have
its rates determined separately. The ALJ will determine whether to certify EPG's
settlement to FERC and will make a similar determination concerning the Edison
offer. Even though the comment schedule has been suspended, comments supporting
EPG's settlement have been filed by FERC staff, the regulatory agencies of
California, Arizona, and Nevada, the state of New Mexico, and customers
representing 95 percent of the firm throughput on EPG's mainline transmission
system. Comments opposing Edison's offer have been filed by EPG, FERC staff, and
the customer coalition supporting EPG's settlement. EPG is accruing a provision
for refunds, and the balance of this provision at March 31, 1996, was
approximately $30 million. Management believes the amount being reserved will be
sufficient to cover any anticipated refunds.
Since 1987, EPG has made buy-out and buy-down payments and recoupable
prepayments to resolve past and future take- or-pay exposure, to terminate and
reform gas purchase contracts, to amend pricing and take provisions of gas
purchase contracts, and to settle related litigation. EPG collected its buy-out
and buy-down costs under FERC cost recovery procedures. The collection period
for EPG's buy-out and buy-down costs ended March 1996.
Under FERC procedures, take-or-pay cost recovery filings may be challenged
by pipeline customers on prudence and certain other grounds. In October 1992,
FERC issued an order resolving all but one of the outstanding issues regarding
EPG's take-or-pay proceedings. The issue unresolved by FERC involved the claim
by several customers that EPG sought to recover an excessive amount for the
value of certain production properties which were transferred to a producer as
part of a 1989 take-or-pay settlement. Following a hearing on this issue, in
June 1994, FERC affirmed a decision of an ALJ which found that the valuation
proposed by EPG was excessive and required EPG to refund to its customers the
costs found to be ineligible for take-or-pay recovery. In accordance with the
FERC decision, EPG refunded $34 million, inclusive of interest, to its
customers in September 1994. In December 1994, EPG filed a petition with the
Court of Appeals for review of the FERC decision, which petition is currently
pending.
In addition, certain of EPG's customers sought review in the Court of
Appeals of FERC's determination in the October 1992 order that certain
buy-down/buy-out costs were eligible for recovery. In January 1996, the Court
of Appeals remanded the order to FERC with direction to clarify the basis for
its decision that the take-or-pay buy-down/buy-out costs were eligible for
recovery. In March 1996, FERC issued an order to the effect that categories of
costs which had been determined to be eligible for recovery might in fact be
ineligible for recovery and established a technical conference for May 1996 to
investigate the issues. EPG has filed a request for rehearing of FERC's order
and requested that the technical conference be canceled. FERC has not yet ruled
on the request.
MPC filed a service and rate design restructuring plan in November 1992
which was essentially approved by FERC in March 1993. Several of MPC's
customers have filed petitions with the Court of Appeals for review of the
March 1993 order and certain other FERC orders. These petitions are currently
pending before the Court of Appeals. The primary issues on appeal pertain to
FERC's requirement that MPC's rates for firm transportation service be based
upon straight fixed variable rate design rather than modified fixed variable
rate design.
In February 1995, MPC made a filing with FERC seeking authorization to
maintain its existing rates. In March 1995, FERC accepted the filing and
allowed the rates to become effective as of March 30, 1995, subject to refund.
In September 1995, MPC filed a settlement agreement supported by FERC and the
majority of MPC's firm shippers which would continue rates at existing levels
for a 5-year period. In December 1995, FERC approved the settlement agreement
as it relates to the supporting parties. Contested issues applicable solely to
the minority customer group not supporting the settlement were presented in a
hearing before FERC in April 1996. A final ruling is expected in late 1996.
7
<PAGE> 10
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Environmental Matters
As of March 31, 1996, the Company had a reserve of approximately $40
million for the following environmental contingencies with income statement
impact:
1- EPG has been conducting remediation of PCB contamination at certain
of its facilities. The majority of the required PCB remediation has
been completed. Future PCB remediation costs are estimated to be $3
million over the next 4 years.
2- In June 1993, EPG executed an Administrative Order on Consent with
EPA to conduct a RI/FS for a site located in Statesville, North
Carolina . EPG and the other PRPs are jointly funding the RI/FS. The
RI/FS is to be submitted to EPA in July 1996. Once the RI/FS is
complete, EPG and the other PRPs will begin negotiating the
appropriate allocation of the remediation costs. Based on available
information, the remediation costs are estimated to be between $16
million and $29 million over a 30-year period.
3- In November 1993, in accordance with an EPA order, EPG and Atlantic
Richfield Company submitted work plans for remediation of the Prewitt
Refinery site in McKinley County, New Mexico. EPG and Atlantic
Richfield Company have a cost sharing agreement to each pay one-half
of any remediation costs at this site. EPG's share of the remediation
costs is estimated to be approximately $8 million over a 29-year
period. Remediation began in May 1995, and as of March 31, 1996, EPG
has incurred approximately $2 million in remediation costs.
4- In December 1993, EPA issued EPG a Notice of Potential Liability for
the Colorado School of Mines Research Institute site in Golden,
Colorado ordering EPG and eleven other PRPs to clean up the site. EPA
has determined that the volume of hazardous substances sent to the
site by EPG represents less than 2.5 percent of the total volumes
sent by all PRPs. Based on this percentage, EPG's share of the
potential remediation costs is estimated to be less than $0.4
million. Remediation of the site is expected to be completed during
1996.
5- EPG and another PRP have been notified about potential groundwater
and soil contamination at various sites in southeastern Utah. EPG and
the other PRP have been conducting environmental assessments at
certain of these sites and are engaged in negotiations over the
appropriate allocation of the remediation costs. Based upon currently
available information, EPG estimates its costs for remediation will
be approximately $5 million over a 5-year period.
6- EPG and other PRPs entered into an agreement to conduct a RI/FS for a
site located in Fountain Inn, South Carolina. The RI/FS was completed
in October 1994, and EPA issued a Record of Decision in September
1995, under which the proposed remediation and EPA oversight costs
are estimated to be $1.6 million. The allocation of these costs
between EPG and the other PRPs has been negotiated. EPG's share of
the costs is estimated to be approximately $0.8 million over a 5-year
period.
7- EPFS is conducting remediation of 135 earthen siphon/dehydration pits
in the San Juan Basin. Based upon currently available information,
the costs for remediation are estimated to be approximately $3.1
million over a 5-year period.
Management believes the amount reserved as of March 31, 1996, is
sufficient to cover the remediation activities discussed above and other small
environmental assessments.
8
<PAGE> 11
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The State of Tennessee has asserted a claim that EPG is a liable party
under state environmental laws for cleanup costs associated with a site in
Elizabethton, Tennessee. The State of Tennessee and EPA are investigating the
nature and extent of contamination. Since the investigation is in the initial
stages, EPG is unable to estimate its potential share of any remediation costs.
The Company initially estimated the CAAA would require modification of
exhaust stacks at numerous locations. Based upon the latest analysis of CAAA
regulations and developments, the Company believes the modifications will not be
required, and the impact to the Company will be limited to the following: (i)
installation of emissions control equipment, (ii) the requirement for air
emissions permitting of existing facilities, and (iii) compliance assurance
monitoring of emissions. The Company anticipates capitalizing the equipment
costs associated with complying with CAAA and estimates that approximately $5
million will be spent from 1997 through 2005. When finalized, EPA's proposed
compliance assurance monitoring rules could potentially impose greater costs to
the Company.
It is possible that new information or future developments could require
the Company to reassess its potential exposure related to environmental
matters. As such information becomes available, or developments occur, related
accrual amounts will be adjusted accordingly.
Guarantees
In February 1995, EPNC entered into a 7.75-year lease for a NGL extraction
plant which is being constructed in the San Juan Basin. The lease is an
unconditional "triple net" lease with the trustee of a special purpose trust.
The trust obtains financing for construction of the plant from a consortium of
financial institutions. The total amount financed via the operating lease will
not exceed $80 million, and the annual lease obligation will be a function of
the amount financed, a variable interest rate, and commitment and other fees.
EPNC has an option at the end of the lease term, and has an obligation upon the
occurrence of certain events, to purchase the plant for a price sufficient to
pay the entire amount financed, interest, and certain expenses. If EPNC does
not purchase the plant at the end of the lease term, it has an obligation to
pay a residual guaranty amount equal to approximately 87 percent of the amount
financed, plus interest. EPG unconditionally guaranteed all obligations of EPNC
under the lease. Construction of the plant began in April 1995, and total costs
expended through April 1996 were approximately $74 million. The start up and
check out phase for the first 412 Mdth/d of plant capacity will be completed in
May 1996. The remaining 206 Mdth/d of capacity is expected to be available in
the second quarter of 1996.
Legal Proceedings
In November 1993, TransAmerican filed a complaint in a Texas state court
against various parties, including EPG, alleging fraud, tortious interference
with contractual relationships, economic duress, civil conspiracy, and
violation of state antitrust laws arising from a settlement agreement entered
into by EPG, TransAmerican and others in 1990 to settle litigation then pending
and other potential claims. The complaint, as amended, seeks unspecified actual
and exemplary damages. EPG is defending the matter, and the parties have
stipulated to transfer this case to the State District Court of Dallas County,
Texas. Based on information available at this time, management believes that
the claims made by TransAmerican have no factual or legal basis and that the
ultimate resolution of this matter will not have a materially adverse effect on
the Company's financial condition.
The Company is a named defendant in numerous lawsuits and a named party in
numerous governmental proceedings arising in the ordinary course of business.
While the outcome of such lawsuits or other proceedings
9
<PAGE> 12
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
against the Company cannot be predicted with certainty, management currently
does not expect these matters to have a materially adverse effect on the
Company's financial condition.
6. FINANCING TRANSACTIONS
In August 1994, EPG established with a group of banks a revolving credit
facility of $400 million that expires August 1999. This facility was
established primarily to provide a liquidity facility for the Company's
commercial paper program, and as of March 31, 1996, and December 31, 1995,
approximately $90 million and $75 million, respectively, was outstanding. In
January 1996, the Board increased short-term borrowing limits from $400 million
to $500 million. As of March 31, 1996, and December 31, 1995, approximately
$143 million and $203 million, respectively, of commercial paper was
outstanding. In October 1994, EPG established an additional $30 million line of
credit facility. As of March 31, 1996, and December 31, 1995, there were no
borrowings outstanding under this line of credit facility.
In January 1997, EPG's 6.90 percent notes for $100 million will mature.
EPG filed a shelf registration statement in August 1994, pursuant to which
EPG may offer up to $400 million of unsecured debt securities, preferred stock,
and common stock from time to time as determined by market conditions and
Company needs. On March 10, 1995, the registration statement was declared
effective by the SEC. As of March 31, 1996, EPG had not issued any securities
pursuant to the shelf registration statement.
7. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment at March 31, 1996, and December 31, 1995,
consisted of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Property, plant, and equipment, at cost ......... $3,051,026 $3,042,516
Less accumulated depreciation and depletion ..... 1,213,646 1,158,486
---------- ----------
1,837,380 1,884,030
Additional acquisition cost assigned to utility
plant, net of accumulated amortization ..... 92,241 93,594
---------- ----------
Total property, plant, and equipment, net... $1,929,621 $1,977,624
========== ==========
</TABLE>
8. INTANGIBLE ASSETS
Intangible assets at March 31, 1996, and December 31, 1995, consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Goodwill .............................................. $42,344 $42,261
Other intangibles ..................................... 15,124 14,890
------- -------
57,468 57,151
Less accumulated amortization ......................... 9,767 9,273
------- -------
Total intangible assets, net ..................... $47,701 $47,878
======= =======
</TABLE>
10
<PAGE> 13
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. INVENTORIES
Inventories at March 31, 1996, and December 31, 1995, consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Materials and supplies ................................ $29,259 $30,354
Gas in storage ........................................ 7,674 6,754
------- -------
$36,933 $37,108
======= =======
</TABLE>
Materials and supplies and gas in storage are valued at the lower of cost
or market, with cost determined using the average cost method
10. SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITIES
<TABLE>
<CAPTION>
FIRST QUARTER
--------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net cash payments (refunds)
Interest ......................................... $ 33,102 $ 33,174
Income taxes ..................................... (2,723) (2,436)
</TABLE>
11. ACCOUNTING FOR REGULATED OPERATIONS
EPG and MPC are subject to the regulations and accounting procedures of
FERC, and therefore, continue to follow the reporting and accounting
requirements of SFAS No. 71, Accounting for the Effects of Certain Types of
Regulation. Accounting methods for companies subject to cost-of-service
regulation may differ from those used by non-regulated companies. However, when
the accounting method prescribed by the regulatory authority is used for
rate-making, such accounting conforms to the generally accepted accounting
principle of matching costs against the revenues to which they apply. While
management believes that EPG and MPC remain "regulated" as the term is used in
the relevant accounting literature, changes in the regulatory and economic
environment may, at some point in the future, create circumstances in which
application of regulatory accounting principles is no longer appropriate. The
Consolidated Balance Sheets contain assets and liabilities related to
operations which have been recorded pursuant to regulatory accounting
principles. If these accounting principles should no longer be applied, an
amount would be charged to earnings as an extraordinary item. At March 31,
1996, this amount was estimated to be approximately $35 million, net of income
taxes. Any potential charge would be non-cash and would have no direct effect
on EPG's and MPC's ability to seek recovery of the underlying deferred costs in
their future rate proceedings or on their ability to collect the rates set
thereby.
11
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information contained in Item 2 updates, and should be read in
conjunction with, information set forth in Part II, Items 7 and 8, in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995, in
addition to the interim consolidated financial statements and accompanying
notes presented in Item 1 of this Form 10-Q.
OPERATING ENVIRONMENT
In recognition of changes in the natural gas industry and the manner in
which the Company manages its businesses, and in order to facilitate a more
detailed understanding of the various activities in which it engages, the
Company began doing business under the name El Paso Energy Corporation
(effective April 22, 1996) and has segregated its business activities into
three business segments: (i) natural gas transmission, (ii) field and merchant
services, and (iii) corporate and other. The natural gas transmission segment
is involved in the interstate transportation of natural gas. The field and
merchant services segment is involved in the purchasing, gathering, processing,
and marketing of natural gas and NGL, as well as the storage of natural gas.
The corporate and other segment includes the Company's miscellaneous
subsidiaries.
Natural Gas Transmission
EPG owns and operates one of the nation's largest mainline natural gas
transmission systems, connecting natural gas supply regions in New Mexico,
Texas, Oklahoma, and Colorado to markets in California, Nevada, Arizona, New
Mexico, Texas, and northern Mexico. EPG's natural gas transmission system
consists of approximately 17,000 miles of pipeline and is connected to one of
the most prolific supply basins in the nation, the San Juan Basin of northern
New Mexico and southern Colorado. MPC serves the enhanced oil recovery
operations and associated cogeneration projects in the heavy oil fields in
central California. EPG's and MPC's pipeline facilities, services, and rates
are regulated by FERC in accordance with the Natural Gas Act of 1938 and the
Natural Gas Policy Act of 1978. The Company also has a one-third interest in
TransColorado. For a further discussion, see TransColorado Pipeline Project of
this section.
Field and Merchant Services
EPFS provides field services including gathering, products extraction,
dehydration, purification, and compression. EPFS has approximately 7,241 miles
of gathering lines and 64,179 horsepower of compression in its gathering
operations located in the San Juan, Anadarko, and Permian Basins. Eastex and
its subsidiaries provide direct end user sales, storage, and hub services for a
diverse customer base. Eastex and its subsidiaries transport gas supplies for
customers on 45 pipelines serving 37 states. EPGM conducts all of EPG's new gas
marketing business, while also acting as EPG's agent in winding down its
remaining role as a natural gas merchant predominately in the southwestern
region of the United States. In April 1996, the Company entered into a
definitive merger agreement with Cornerstone. For a further discussion, see
Acquisitions of this section.
Corporate and Other
Corporate and other includes El Paso Energy International and other
corporate activities. El Paso Energy International is responsible for the
Company's international activities.
12
<PAGE> 15
Operating Income (Loss) by Business Segment (1)
<TABLE>
<CAPTION>
FIRST QUARTER
--------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Natural gas transmission ........ $ 47,510 $ 54,674
Field and merchant services ..... 17,942 2,038
Corporate and other ............. (98,401) (499)
-------- --------
Consolidated ........... $(32,949) $ 56,213
======== ========
</TABLE>
(1) To the extent practicable, prior year results of operations have been
reclassified to conform to the current business segment presentation,
although such results are not necessarily indicative of the results which
would have been achieved had the revised business segment structure been
in effect during that period. In general, transactions among business
segments are recorded at market prices and material affiliate transactions
within business segments have been eliminated.
First Quarter 1996 Compared to First Quarter 1995
Natural Gas Transmission Financial Results
<TABLE>
<CAPTION>
FIRST QUARTER
-------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Reservation revenue .................. $118,264 $125,543
Transportation revenue ............... 5,025 4,130
Other revenue ........................ 5,283 10,861
-------- --------
Total operating revenues .... 128,572 140,534
-------- --------
Operation and maintenance ............ 54,610 61,815
Depreciation and amortization ........ 14,756 12,388
Other operating expenses ............. 11,696 11,657
-------- --------
Total operating expenses .... 81,062 85,860
-------- --------
Operating income ..................... $ 47,510 $ 54,674
======== ========
</TABLE>
Operating revenues for the quarter ended March 31, 1996, were $12 million
lower than for the same period of 1995. The decrease was primarily due to an
accrual for regulatory issues, the impact of a January 1996 transportation
contract reduction, and a decrease in return on take-or-pay receivables. The
decrease in operating revenues was partially offset by new system rates that
became effective January 1, 1996.
Operating expenses for the quarter ended March 31, 1996, were $5 million
lower than for the same period of 1995 primarily due to lower operation and
maintenance expense as a result of an adjustment to the take-or-pay
undercollections accrual.
Mainline throughput for the quarter ended March 31, 1996, averaged 3,829
Mdth/d compared to 3,815 Mdth/d for the same period of 1995. This increase was
primarily due to higher off-system deliveries, partially offset by lower
deliveries to California due to an increase in the availability of
hydroelectric power and milder winter temperatures.
13
<PAGE> 16
Field and Merchant Services Financial Results
<TABLE>
<CAPTION>
FIRST QUARTER
---------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Gathering and treating revenue ........ $ 17,690 $ 16,563
Products extraction revenue ........... 4,766 2,482
Merchant services revenue ............. 451,460 38,890
Other revenue ......................... 3,291 7,386
-------- --------
Total operating revenues ..... 477,207 65,321
-------- --------
Operation and maintenance ............. 19,371 15,408
Gas purchases ......................... 423,262 40,380
Depreciation and amortization ......... 6,859 4,405
Other operating expenses .............. 9,773 3,090
-------- --------
Total operating expenses ..... 459,265 63,283
-------- --------
Operating income ...................... $ 17,942 $ 2,038
======== ========
</TABLE>
Operating revenues for the quarter ended March 31, 1996, were $412 million
higher than for the same period of 1995. The increase was due primarily to the
consolidation of Eastex, an increase in the average natural gas sales price, an
increase of 200 Mdth/d in natural gas gathered volumes, and higher products
extraction rates. The increase in operating revenues was partially offset by
the elimination of certain gathering revenues previously collected in mainline
rates prior to January 1, 1996.
Operating expenses for the quarter ended March 31, 1996, were $396 million
higher than for the same period of 1995. The increase was due to the
consolidation of Eastex and an increase in the average natural gas purchase
price.
Natural gas marketed for the quarter ended March 31, 1996, averaged 3,877
Mdth/d compared to 301 Mdth/d for the same period of 1995. This increase was
primarily due to the consolidation of Eastex. Natural gas gathered for the
quarter ended March 31, 1996, averaged 1,528 Mdth/d compared to 1,328 Mdth/d
for the same period of 1995. This increase was largely due to acquisitions of
gathering systems, pressure reduction projects, and the removal of mainline
capacity constraints.
Corporate and Other Financial Results
The operating loss for the quarter ended March 31, 1996, reflects a one
time special charge of $99 million for the employee separation and asset
impairment recorded in March 1996. For a further discussion of the special
charge, see Part I, Financial Information, Note 4.
Non-Operating Income and Expense
Interest and debt expense for the quarter ended March 31, 1996, was $2
million higher than for the same period of 1995 due primarily to higher
interest on short-term debt.
Other-net for the quarter ended March 31, 1996, reflects a charge for
losses on donations of property.
LIQUIDITY, FINANCIAL POSITION, AND CAPITAL RESOURCES
Net cash provided by operating activities was $73 million for the quarter
ended March 31, 1996, compared with $10 million for the same period of 1995.
The increase from the previous year was primarily due to the
14
<PAGE> 17
collection of revenues subject to refund, the Amoco Production Company
litigation payment made in the first quarter of 1995, and timing of insurance
premium payments. These increases were partially offset by higher net working
capital uses at Eastex and timing differences in other working capital
accounts.
Acquisitions
Effective September 1, 1995, Eastex was merged with a subsidiary of EPG.
In December 1995, Eastex acquired all of the issued and outstanding capital
stock of Premier. The consolidated operating results of Eastex for the three
months ended March 31, 1996, are included in the consolidated results of
operations.
In April 1996, the Company and Cornerstone entered into a definitive
merger agreement which provides for the acquisition by the Company of all of
the outstanding shares of Cornerstone common stock and the merger of
Cornerstone with a subsidiary of EPFS. Pursuant to the agreement, a cash tender
offer of $6.00 per share for all outstanding shares of Cornerstone common stock
commenced on April 26, 1996. The tender offer is conditioned upon, among other
things, the acquisition of at least a majority of the shares of Cornerstone
common stock on a fully diluted basis and the expiration of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act. The agreement provides
that shares of Cornerstone common stock not purchased in the tender offer will
be acquired in the subsequent merger at the same price as that paid in the
tender offer. The agreement also provides for specified fees and expenses to be
paid to the Company under certain circumstances. The holders of over 50 percent
of the fully diluted outstanding shares of Cornerstone have granted to the
Company options to purchase all shares of Cornerstone common stock and
Cornerstone stock options and warrants held by them. The merger is expected to
close in the second quarter of 1996. The net value of the transaction is
approximately $115 million.
Cornerstone is comprised of approximately 700 miles of gathering and
transportation systems and seven natural gas processing and treating facilities
principally located in East Texas and Louisiana. Additionally, Cornerstone
markets natural gas and NGL.
Employee Separation and Asset Impairment Charge
In response to changes in the natural gas industry, increased competition,
and recent and future firm capacity contract step-downs and terminations, the
Company initiated an extensive review of its business processes. In the first
quarter of 1996, the Company adopted a program to restructure its businesses and
reduce operating costs through work force reductions and improved work
processes. Also during the first quarter of 1996, the Company adopted SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. As a result of the workforce reduction program and
the adoption of SFAS No. 121, the Company recorded a special charge of
$99 million. For a further discussion, see Part I, Financial Information,
Note 4.
Rates and Regulatory Matters
In June 1995, EPG made a filing with FERC for approval of new system rates
for mainline transportation to be effective January 1, 1996. In July 1995, FERC
accepted and suspended EPG's filing to be effective January 1, 1996, subject to
refund and certain other conditions. FERC also set EPG's rates for hearing.
In March 1996, EPG filed a comprehensive offer of settlement which, if
approved by FERC, would resolve issues related to the above mentioned rate case
and issues surrounding certain contract reductions and expirations which are
scheduled to occur from January 1, 1996, through December 31, 1997. For a
further discussion of the March 1996 offer of settlement, see Part I, Financial
Information, Note 5.
Since 1987, EPG has made buy-out and buy-down payments and recoupable
prepayments to resolve past and future take-or-pay exposure, to terminate and
reform gas purchase contracts, to amend pricing and take provisions of gas
purchase contracts, and to settle related litigation. EPG collected its buy-out
and buy-down costs under
15
<PAGE> 18
FERC cost recovery procedures. For a further discussion of EPG's take-or-pay
matters, see Part I, Financial Information, Note 5.
MPC filed a service and rate design restructuring plan in November 1992
which was essentially approved by FERC in March 1993. Several of MPC's
customers have filed petitions with the Court of Appeals for review of the
March 1993 order and certain other FERC orders. These petitions are currently
pending before the Court of Appeals. The primary issues on appeal pertain to
FERC's requirement that MPC's rates for firm transportation service be based
upon straight fixed variable rate design rather than modified fixed variable
rate design.
In February 1995, MPC made a filing with FERC seeking authorization to
maintain its existing rates. In March 1995, FERC accepted the filing and
allowed the rates to become effective as of March 30, 1995, subject to refund.
In September 1995, MPC filed a settlement agreement supported by FERC and the
majority of MPC's firm shippers which would continue rates at existing levels
for a 5-year period. In December 1995, FERC approved the settlement agreement
as it relates to the supporting parties. Contested issues applicable solely to
the minority customer group not supporting the settlement were presented in a
hearing before FERC in April 1996. A final ruling is expected in late 1996.
Legal Proceedings
See Part I, Financial Information, Note 5.
Environmental Matters
The Company is subject to extensive federal, state, and local laws and
regulations governing environmental quality and pollution control. These laws
and regulations require the Company to remove or remedy the effect on the
environment of the disposal or release of specified substances at ongoing and
former operating sites. As of March 31, 1996, the Company had a reserve of
approximately $40 million for the following environmental contingencies: (i)
PCB remediation costs estimated to be $3 million over the next 4 years and (ii)
remediation of groundwater and soil contamination costs estimated to range
between $33 million and $46 million over a 30-year period. Management believes
the amount reserved as of March 31, 1996, is sufficient to cover these and
other small environmental assessments and remediation activities.
The Company initially estimated the CAAA would require modification of
exhaust stacks at numerous locations. Based upon the latest analysis of CAAA
regulations and developments, the Company believes the modifications will not
be required, and the impact to the Company will be limited to the following :
(i) installation of emissions control equipment, (ii) the requirement for air
emissions permitting of existing facilities, and (iii) compliance assurance
monitoring of emissions. The Company anticipates capitalizing the equipment
costs associated with complying with CAAA and estimates that approximately $5
million will be spent from 1997 through 2005. When finalized, EPA's proposed
compliance assurance monitoring rules could potentially impose greater costs to
the Company. For a further discussion of specific environmental matters see
Part I, Financial Information, Note 5.
Financing Facilities
In August 1994, EPG established with a group of banks a revolving credit
facility of $400 million that expires August 1999. This facility was
established primarily to provide a liquidity facility for the Company's
commercial paper program and as of March 31, 1996, and December 31, 1995,
approximately $90 million and $75 million, respectively, was outstanding. In
January 1996, the Board increased short-term borrowing limits from $400 million
to $500 million. As of March 31, 1996, and December 31, 1995, approximately
$143 million and $203 million, respectively, of commercial paper was
outstanding. In October 1994, EPG established an additional $30 million line of
credit facility. As of March 31, 1996, and December 31, 1995, there were no
borrowings outstanding under this line of credit facility.
16
<PAGE> 19
In January 1997, EPG's 6.90 percent notes for $100 million will mature.
EPG filed a shelf registration statement in August 1994, pursuant to which
EPG may offer up to $400 million of unsecured debt securities, preferred stock,
and common stock from time to time as determined by market conditions and
Company needs. On March 10, 1995, the registration statement was declared
effective by the SEC. As of March 31, 1996, EPG had not issued any securities
pursuant to the shelf registration statement.
Common Stock and Other Stockholders' Equity
The following table reflects quarterly dividends declared and paid on EPG's
common stock:
<TABLE>
<CAPTION>
AMOUNT PER
DECLARATION DATE COMMON SHARE PAYMENT DATE TOTAL AMOUNT
---------------- ------------ ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C>
October 20, 1995 $0.3300 January 2, 1996 $11,292
January 19,1996 $0.3475 April 1, 1996 $12,258
</TABLE>
On April 12, 1996, the Board declared a quarterly dividend of $0.3475 per
share on EPG's common stock, payable on July 1, 1996, to shareholders of record
on June 7, 1996.
In November 1994, the Board authorized the repurchase of up to 3.5 million
shares of EPG's outstanding common stock from time to time in the open market.
This authorization was in addition to a 2 million share authorization received
in October 1992. Shares repurchased are held in EPG's treasury and are expected
to be used in connection with EPG stock option compensation plans and for other
corporate purposes. Pursuant to the foregoing authorizations, the Company has
purchased 4.7 million shares, cumulatively, as of March 31, 1996.
Project Investments
Samalayuca II Power Plant (Mexico)
The Company is a member of a consortium that plans to build the proposed
Samalayuca II Power Plant near Ciudad Juarez, Chihuahua, Mexico. In December
1992, an award for construction was granted to the consortium by CFE. The
consortium will construct the plant, which is projected to cost approximately
$647 million, and lease it to CFE for a term of 20 years. The Company presently
has a 20 percent interest in the consortium and plant and will make an initial
equity investment of approximately $26 million. The Company is finalizing
negotiations which would increase its interest to 30 percent at financial close
and possibly 38 percent upon the completion of the project.
CFE and the consortium executed a trust agreement in May 1996 signifying
the completion of negotiations between the consortium and CFE. The consortium
has received approval for non-recourse senior debt financing of up to 80
percent of the capital requirements from the United States Export/Import Bank
and Inter-American Development Bank. The project is expected to reach financial
close and construction is expected to begin in the first half of 1996.
Aguaytia Energy Project (Peru)
In August 1995, the Company became a member of a consortium that is
developing a $250 million integrated gas and power project near Pucallpa, in
central Peru, called the Aguaytia Energy Project. The Company presently has a
24 percent interest in the project, and its equity investment is estimated to
be $40 million. The consortium will sell electricity, propane, and natural gas
to meet the growing demand for energy in Peru. Initially, the project will be
funded 60 percent with equity. Negotiations are nearing completion with two
major lenders to provide
17
<PAGE> 20
non-recourse debt financing for the project during construction and operation.
In December 1995, the project received approval from the Overseas Private
Investment Corporation for full political risk insurance coverage. Construction
is expected to begin in the first half of 1996, and operations are expected to
commence in late 1997.
TransColorado Pipeline Project
In the third quarter of 1995, the Company purchased a one-third interest
in TransColorado from Public Service Company of Colorado for approximately $4
million. The Company paid approximately $2 million in cash. The balance of
approximately $2 million is due upon commencement of the pipeline project. KN
Energy, Inc. and Questar Pipeline Company also each own a one-third interest in
TransColorado.
In November 1994, TransColorado received FERC authorization to build a 292
mile pipeline with a capacity of 309 Mdth/d, from northwest Colorado to the
Blanco Hub area in the San Juan Basin, at an estimated cost of approximately
$184 million. The pipeline is expected to provide an alternative outlet for
natural gas produced in the Rocky Mountain region. In April 1996, TransColorado
filed with FERC for authorization to phase the construction of the pipeline
system. Phase I will consist of 22.5 miles of pipeline beginning at the outlet
of the Coyote Gulch Treating and Compression Facility in La Plata County,
Colorado and extending to Blanco, New Mexico and is expected to cost
approximately $14 million. The Company's share is estimated to be approximately
$5 million. The proposed pipeline is expected to be in service during the fourth
quarter of 1996. Phase II will consist of the remainder of the project up to
northwest Colorado.
Coyote Gulch Treating and Compression Facility
EPFS and KN Gas Gathering, Inc. are negotiating an agreement to construct,
own, and operate Coyote Gulch Treating and Compression Facility, a 110,400
Mdth/d facility in La Plata County, Colorado. Construction of the facility is
expected to commence in the second quarter of 1996 and is expected to be
completed by December 31, 1996, at a total cost of $16 million. EPFS's share is
estimated to be $8 million. Upon completion, the facility will receive and
treat gas for Red Cedar Gathering Company.
Capital Expenditures
The Company's consolidated planned capital expenditures for 1996 of $175
million are primarily for maintenance of business, system expansion, and system
enhancement. Capital expenditures for the quarter ended March 31, 1996, were
$29 million compared to $23 million for the same period of 1995. Data for the
quarter ended March 31, 1995, has been restated in order to provide a
discussion of capital expenditures by business segment.
Natural Gas Transmission
The segment's planned capital expenditures for 1996 of $60 million are
primarily for maintenance of business, system expansion, and system
enhancement. Capital expenditures for the quarter ended March 31, 1996, were $4
million, compared to $20 million for the same period of 1995. Capital
expenditures were lower during the first quarter of 1996 primarily due to the
completion of the San Juan Basin expansion in December 1995.
In April 1996, EPG filed with FERC for authorization to add compression on
its Havasu Crossover Line. This project will permit an additional 185 Mdth/d to
move on the Havasu Crossover Line from the San Juan Basin in northern New
Mexico to points of delivery off EPG's southern system. EPG has executed
transportation service agreements with shippers to fully subscribe this
additional capacity. This $20 million expansion is expected to be in service by
the second quarter of 1997.
18
<PAGE> 21
In March 1993, EPG filed an application with FERC to expand its system in
order to provide natural gas service to the proposed Samalayuca II Power Plant.
The proposed expansion, as filed, would provide an additional 309 Mdth/d of
capacity at a cost of approximately $57 million. In November 1993, FERC issued
an order that approved the proposed border crossing facility south of Clint,
Texas that would connect EPG's facilities with facilities in Mexico. In
December 1993, Pacific Gas & Electric Company, Southern California Gas Company,
and the California Public Utilities Commission jointly filed a motion with FERC
seeking clarification or rehearing of the November 1993 order, which motion is
currently pending. In November 1994, FERC required EPG to provide the executed
long-term contracts or binding agreements for a substantial amount of the firm
capacity of the proposed facilities by January 1995. EPG advised FERC that
there were presently no such contracts or agreements. In March 1996, FERC
required EPG to provide a status of the negotiations for long-term contracts or
binding precedent agreements in validation of the market for the proposed new
capacity. EPG advised FERC that the project, although progressing more slowly
than expected, remains a viable natural gas project and that EPG continues to
actively pursue executed firm, long-term transportation arrangements. In
support, EPG is preparing to file an application for the Mexican portion of the
Samalayuca lateral as soon as financial close is reached for the new power
plant and the new regulatory agency, the Comision Reguladora de Energia, issues
its request for transportation services. The terms and conditions of providing
firm transportation will be determined by EPG when the Comision Reguladora de
Energia issues its final regulations.
Field and Merchant Services
The segment's planned capital expenditures for 1996 of $115 million
(excluding the Cornerstone acquisition) are primarily for system enhancement,
facility purchases, joint ventures, and maintenance of business. Capital
expenditures for the quarter ended March 31, 1996, were $25 million compared to
$3 million for the same period of 1995. The increase was primarily due to the
purchase of the Linc and Pandale gathering systems and the installation of
additional compression.
In February 1996, EPFS, through its wholly owned subsidiary El Paso
Intrastate Company, acquired the Linc gathering system and the Pandale
gathering system from Tejas Power Corporation for approximately $12 million.
The combined throughput of the two systems is expected to contribute 46 Mdth/d
on an annual basis to EPFS's total throughput. The Linc gathering system is
located in the Waha area of the Permian Basin and should increase EPFS's market
share in that area. The Pandale gathering system is located in the Texas
counties of Crockett and Val Verde, and should give EPFS a base from which to
grow in this active drilling area. (1) In addition, in the first quarter of
1996, EPFS installed new compression at five locations at a total cost of $8
million.
Financing Requirements
Future funding for capital expenditures, acquisitions, long-term debt
retirements, dividends, and other expenditures is expected to be provided by a
combination of internally generated funds, available credit facilities, and
debt/equity issuances.
OTHER
Accounting for Regulated Operations
EPG and MPC are subject to the regulations and accounting procedures of
FERC, and therefore, continue to follow the reporting and accounting
requirements of SFAS No. 71, Accounting for the Effects of Certain Types of
Regulation. For a further discussion of SFAS No. 71, see Part I, Financial
Information, Note 11.
__________________________________
(1) The previous statement(s) may be considered forward-looking. See page 20
for a description of the important factors that may affect actual results.
19
<PAGE> 22
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995
EPG is including the following cautionary statement in this Form 10-Q to
make applicable and take advantage of the new "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 for any forward-looking
statement made by, or on behalf of, the Company. The factors identified in this
cautionary statement are important factors (but not necessarily all important
factors) that could cause actual results to differ materially from those
expressed in any forward-looking statement made by, or on behalf of, the
Company. Forward-looking statements are identified with a footnote on the page
in which they appear.
Where any such forward-looking statement includes a statement of the
assumptions or basis underlying such forward-looking statement, the Company
cautions that, while it believes such assumptions or basis to be reasonable and
makes them in good faith, assumed facts or basis almost always vary from actual
results, and the differences between assumed facts or basis and actual results
can be material, depending upon the circumstances. Where, in any forward-
looking statement, the Company, or its management, expresses an expectation or
belief as to future results, such expectation or belief is expressed in good
faith and believed to have a reasonable basis, but there can be no assurance
that the statement of expectation or belief will result or be achieved or
accomplished.
Taking into account the foregoing, the following are identified as
important factors that could cause actual results to differ materially from
those expressed in any forward-looking statement made by, or on behalf of, the
Company:
1-- The ability to increase transmission, gathering, processing, and
sales volumes can be subject to the impact of future weather
conditions, including those that favor hydroelectric generation;
price; drilling activity; and service competition, especially due to
excess pipeline capacity into California.
2-- Growth strategies through acquisitions and investments in joint
ventures may face legal and regulatory delays and other unforeseeable
obstacles beyond the Company's control.
3-- Future profitability will be affected by the Company's ability to
compete with the services offered by other energy enterprises which
may be larger, offer more services, and possess greater resources.
4-- Cost control efforts may be effected by the timing of related work
force reductions and might be further offset by unusual and
unexpected items resulting from such events as, but not limited to,
litigation settlements, adverse rulings or judgments, and unexpected
environmental remediation costs in excess of reserves.
5-- Rates for certain services are related to natural gas prices such
that variations in natural gas prices may result in corresponding
variances in operating revenues.
6-- Future operating results and success of business ventures in the
United States, Mexico, and Latin America may be subject to the
effects of, and changes in, United States and foreign trade and
monetary policies, laws and regulations, political and governmental
changes, inflation and exchange rates, taxes, and operating
conditions.
20
<PAGE> 23
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Part I, Financial Information, Note 5.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
ITEM 5. OTHER INFORMATION
Continuous Odd-Lot Stock Sales Program
EPG has made available a Program, in which Odd-Lot Holders are
offered a convenient method of disposing of all their shares without
incurring the customary brokerage costs associated with the sale of an
odd-lot. Only Odd-Lot Holders are eligible to participate in the Program.
The Program is strictly voluntary, and no Odd-Lot Holder is obligated to
sell pursuant to the Program. A brochure and related materials describing
the Program were sent to Odd-Lot Holders in February 1994. The Program
currently does not have a termination date, but EPG may suspend the
Program at any time. Inquiries regarding the Program should be directed to
The First National Bank of Boston.
Dividend Reinvestment and Common Stock Purchase Plan
EPG has made available a Plan, which provides all shareholders of
record a convenient and economical means of increasing their holdings in
EPG's common stock. A shareholder who owns shares of common stock in
street name or broker name and who wishes to participate in the Plan will
need to have his or her broker or nominee transfer the shares into the
shareholder's name. The Plan is strictly voluntary, and no shareholder of
record is obligated to participate in the Plan. A brochure and related
materials describing the Plan were sent to shareholders of record in
November 1994. The Plan currently does not have a termination date, but
EPG may suspend the Plan at any time. Inquiries regarding the Plan should
be directed to The First National Bank of Boston.
21
<PAGE> 24
ITEM. 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
<TABLE>
<S> <C> <C>
3(ii) - By-Laws of EPG, as amended April 1, 1996.
10.D.1 - Letter Agreement and revised Exhibits A and B to the Transportation Service Agreement, effective
January 1, 1996.
10.V.1 - First Amendment to Amended and Restated Limited Liability Company Agreement of Aguaytia Energy,
LLC, dated January 19, 1996, and Second Amendment to Amended and Restated Limited Liability Company
Agreement of Aguaytia Energy, LLC, dated March 12, 1996.
10.AA - Omnibus Compensation Plan for Management Employees, Amended and Restated, effective as of April 12,
1996.
11 - Computation of Earnings Per Common Share
27 - Financial Data Schedule
</TABLE>
B. Reports on Form 8-K
None.
22
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EL PASO NATURAL GAS COMPANY
(Registrant)
Date: May , 1996 /s/ H. BRENT AUSTIN
--------------------------------
H. Brent Austin
Executive Vice President and
Chief Financial Officer
Date: May , 1996 /s/ JEFFREY I. BEASON
--------------------------------
Jeffrey I. Beason
Vice President, Controller,
and Treasurer
23
<PAGE> 26
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
-------- -------------
3(ii) - By-Laws of EPG, as amended April 1, 1996.
10.D.1 - Letter Agreement and revised Exhibits A and B to the
Transportation Service Agreement, effective January 1, 1996.
10.V.1 - First Amendment to Amended and Restated Limited Liability
Company Agreement of Aguaytia Energy, LLC, dated January 19,
1996, and Second Amendment to Amended and Restated
Limited Liability Company Agreement of Aguaytia Energy, LLC,
dated March 12, 1996.
10.AA - Omnibus Compensation Plan for Management Employees, Amended
and Restated, effective as of April 12, 1996.
11 - Computation of Earnings Per Common Share
27 - Financial Data Schedule
<PAGE> 1
EXHIBIT 3(ii)
BY-LAWS
OF
EL PASO NATURAL GAS COMPANY
As amended April 1, 1996
<PAGE> 2
BY-LAWS
OF
EL PASO NATURAL GAS COMPANY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1 - Registered Office and Agent . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2 - Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1 - Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2 - Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3 - Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 4 - Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 5 - Fixing of Record Date for Determining Stockholders . . . . . . . . . . . . . . 2
Section 6 - Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 7 - Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 8 - Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 9 - Inspectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 10 - List of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 11 - Stockholder Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III. BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1 - Number, Qualification and Term of Office . . . . . . . . . . . . . . . . . . . 6
Section 2 - Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3 - Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4 - Removals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5 - Place of Meetings; Books and Records . . . . . . . . . . . . . . . . . . . . . 6
Section 6 - Annual Meeting of the Board . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 7 - Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 8 - Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 9 - Quorum and Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 10 - Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 11 - Consent of Directors in Lieu of Meeting . . . . . . . . . . . . . . . . . . . 8
Section 12 - Telephonic Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 13 - Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 14 - Interested Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV. COMMITTEES OF THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1 - Executive Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2 - Finance Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3 - Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4 - Compensation Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5 - Committee Chairman, Books and Records . . . . . . . . . . . . . . . . . . . . 10
Section 6 - Alternates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 7 - Other Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 8 - Quorum and Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE V. OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1 - Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2 - Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3 - Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4 - Removals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5 - Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6 - Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7 - Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8 - President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9 - Vice Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 10 - Chief Operating Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 11 - Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 12 - Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 13 - General Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 14 - Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 15 - Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 16 - Controller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 17 - Absence or Disability of Officers . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VI. STOCK CERTIFICATES AND TRANSFER THEREOF . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 1 - Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2 - Transfer of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3 - Transfer Agents and Registrars . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4 - Additional Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5 - Lost, Stolen or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VII. DIVIDENDS, SURPLUS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VIII. SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IX. FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE X. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 1 - Right to Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2 - Right of Indemnitee to Bring Suit . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Section 3 - Nonexclusivity of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4 - Insurance, Contracts and Funding . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5 - Wholly Owned Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6 - Indemnification of Agents of the Corporation . . . . . . . . . . . . . . . . . 20
ARTICLE XI. CHECKS, DRAFTS, BANK ACCOUNTS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 1 - Checks, Drafts, Etc.; Loans . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2 - Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE XII. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE XIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
iii
<PAGE> 5
BY-LAWS
OF
EL PASO NATURAL GAS COMPANY
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE AND AGENT
The registered office of the corporation is located at Corporation Trust
Center, 1209 Orange Street in the City of Wilmington, County of New Castle,
State of Delaware, and the name of its registered agent at such address is The
Corporation Trust Company.
SECTION 2. OTHER OFFICES
The corporation may have offices at such other places both within and
without the State of Delaware as the Board of Directors (the "Board") may from
time to time determine or the business of the corporation may require.
ARTICLE II
STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS
A meeting of the stockholders for the purpose of electing Directors and
for the transaction of such other business as may properly be brought before
the meeting shall be held annually at 9:00 o'clock A.M. on the third Thursday
of March, or at such other time on such other date as shall be fixed by
resolution of the Board. If the day fixed for the annual meeting shall be a
legal holiday such meeting shall be held on the next succeeding business day.
SECTION 2. SPECIAL MEETINGS
Special meetings of the stockholders for any purpose or purposes may be
called only by a majority of the Board, the Chairman of the Board, the Chief
Executive Officer, the President or the Vice Chairman of the Board.
<PAGE> 6
SECTION 3. PLACE OF MEETINGS
The annual meeting of the stockholders of the corporation shall be held at
the general offices of the corporation in the City of El Paso, State of Texas,
or at such other place in the United States as may be stated in the notice of
the meeting. All other meetings of the stockholders shall be held at such
places within or without the State of Delaware as shall be stated in the notice
of the meeting.
SECTION 4. NOTICE OF MEETINGS
4.1 GIVING OF NOTICE. Except as otherwise provided by statute, written
notice of each meeting of the stockholders, whether annual or special, shall be
given not less than ten nor more than sixty days before the date of the meeting
to each stockholder entitled to vote at such meeting. If mailed, notice shall
be given when deposited in the United States mails, postage prepaid, directed
to such stockholder at his address as it appears in the stock ledger of the
corporation. Each such notice shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called.
4.2 NOTICE OF ADJOURNED MEETINGS. When a meeting is adjourned to another
time and place, notice of the adjourned meeting need not be given if the time
and place thereof are announced at the meeting at which the adjournment is
given. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
4.3 WAIVER OF NOTICE
4.3.1 Whenever any notice is required to be given to any stockholder
under the provisions of these By-laws, the Restated Certificate of
Incorporation or the general Corporation Law of the State of Delaware, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
4.3.2 The attendance of a stockholder at a meeting shall constitute a
waiver of notice of such meeting, except when a stockholder attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 5. FIXING OF RECORD DATE FOR DETERMINING STOCKHOLDERS
5.1 MEETINGS. For the purpose of determining stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
the Board may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board, and
which record date shall not be more than sixty nor less than ten days before
the date of such meeting. If no record date is fixed by the Board, the record
date for determining stockholders shall be at the close of business on the day
next preceding the day on
2
<PAGE> 7
which notice is given, or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at the meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.
5.2 DIVIDENDS, DISTRIBUTIONS AND OTHER RIGHTS. For the purpose of
determining stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board may fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted, and which record date shall be not more than sixty
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board adopts the resolution relating thereto.
SECTION 6. QUORUM
A majority of the outstanding shares of stock of the corporation entitled
to vote, present in person or represented by proxy, shall constitute a quorum
at a meeting of the stockholders; provided that where a separate vote by a
class or classes or by a series of a class is required, a majority of the
outstanding shares of such class or classes or of such series of a class,
present in person or represented by proxy at the meeting, shall constitute a
quorum entitled to take action with respect to the vote on that matter. Shares
of stock will be counted toward a quorum if they are either (i) present in
person at the meeting or (ii) represented at the meeting by a valid proxy,
whether the instrument granting such proxy is marked as casting a vote or
abstaining, is left blank or does not empower such proxy to vote with respect
to some or all matters to be voted upon at the meeting. If less than a
majority of the outstanding shares entitled to vote are represented at a
meeting, a majority of the shares so represented may adjourn the meeting from
time to time without further notice. If a quorum is present or represented at
a reconvened meeting following such an adjournment, any business may be
transacted that might have been transacted at the meeting as originally called.
The stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
SECTION 7. ORGANIZATION
At each meeting of the stockholders, the Chairman of the Board, or in his
absence the Chief Executive Officer, the President or the Vice Chairman of the
Board, or if all of the said officers are absent, a person designated by the
Board, the Chairman of the Board, the Chief Executive Officer, the President or
the Vice Chairman of the Board, or in the absence of such designated person, a
person elected by the holders of a majority in number of shares of stock
present in person or represented by proxy and entitled to vote, shall act as
chairman of the meeting.
The Secretary, or in his absence or in the event he shall be presiding
over the meeting in accordance with the provisions of this Section, an
Assistant Secretary or, in the absence of the
3
<PAGE> 8
Secretary and all of the Assistant Secretaries, any person appointed by the
chairman of the meeting, shall act as secretary of the meeting.
SECTION 8. VOTING
8.1 GENERAL PROVISIONS. Unless otherwise provided in the Restated
Certificate of Incorporation or a resolution of the Board creating a series of
stock, at each meeting of the stockholders, each holder of any share of any
series or class of stock entitled to vote at such meeting shall be entitled to
one vote for each share of stock having voting power in respect of each matter
upon which a vote is to be taken, standing in his name on the stock ledger of
the corporation on the record date fixed as provided in these By-laws for
determining the stockholders entitled to vote at such meeting. In all matters
other than the election of Directors, if a quorum is present, the affirmative
vote of the majority of the shares present in person or represented by proxy at
the meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the vote of a greater number is required by these By-laws,
the Restated Certificate of Incorporation or the General Corporation Law of the
State of Delaware. In determining the number of votes cast for or against a
proposal, shares abstaining from voting on a matter (including elections) will
not be treated as a vote for or against the proposal. A non-vote by a broker
will be treated as if the broker never voted, but a non-vote by a stockholder
will be counted as a vote "for" the management's position. Where a separate
vote by a class or classes or by a series of a class is required, if a quorum
is present, the affirmative vote of the majority of shares of such class or
classes or series of a class present in person or represented by proxy at the
meeting shall be the act of such class or classes or series of a class. The
provisions of this Section will govern with respect to all votes of
stockholders except as otherwise provided for in these By-laws, the Restated
Certificate of Incorporation or the General Corporation Law of the State of
Delaware.
8.2 VOTING FOR DIRECTORS. At each election of Directors the voting shall
be by written ballot. Directors shall be elected by a plurality of the votes
of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of Directors.
8.3 SHARES HELD OR CONTROLLED BY THE CORPORATION. Shares of its own
capital stock belonging to the corporation, or to another corporation if a
majority of the shares entitled to vote in the election of Directors of such
other corporation is held by the corporation, shall neither be entitled to vote
nor counted for quorum purposes.
8.4 PROXIES. A stockholder may vote by proxy executed in writing by the
stockholder or by his attorney-in-fact. Such proxy shall be filed with the
Secretary of the corporation before or at the time of the meeting. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date with the Secretary of
the corporation. A proxy shall become invalid three years after the date of
its execution, unless otherwise provided in the proxy. A proxy with respect to
a specified meeting shall entitle the holder thereof to vote at any reconvened
meeting following adjournment of such meeting but shall not be valid after the
final adjournment thereof.
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SECTION 9. INSPECTORS
Prior to each meeting of stockholders, the Board shall appoint two
Inspectors who are not Directors, candidates for Directors or officers of the
corporation, who shall receive and determine the validity of proxies and the
qualifications of voters, and receive, inspect, count and report to the meeting
in writing the votes cast on all matters submitted to a vote at such meeting.
In case of failure of the Board to make such appointments or in case of failure
of any Inspector so appointed to act, the Chairman of the Board shall make such
appointment or fill such vacancies. Each Inspector, immediately before
entering upon his duties, shall subscribe to an oath or affirmation faithfully
to execute the duties of Inspector at such meeting with strict impartiality and
according to the best of his ability.
SECTION 10. LIST OF STOCKHOLDERS
The Secretary or other officer or agent having charge of the stock ledger
of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at said meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares of each class and series registered in the
name of each such stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall
be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. Such list shall also be produced and
kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present. The stock ledger shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by this section, or the books of the corporation, or
to vote in person or by proxy at any such meeting.
SECTION 11. STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in any proxy statement to be issued in
connection with the annual meeting of stockholders must be mailed to the
Corporate Secretary, El Paso Natural Gas Company, P. O. Box 1492, El Paso,
Texas 79978, and must be received by the Corporate Secretary at least by the
150th day preceding the annual meeting of stockholders unless the specific
deadline for stockholder proposals is set forth in the corporation's proxy
statement.
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ARTICLE III
BOARD OF DIRECTORS
SECTION 1. NUMBER, QUALIFICATION AND TERM OF OFFICE
The business, property and affairs of the corporation shall be managed by
a Board consisting of not less than one Director. The Board shall from time to
time by a vote of a majority of the Directors then in office fix the specific
number of Directors to constitute the Board. At each annual meeting of
stockholders a Board shall be elected by the stockholders for a term of one
year. Each Director shall serve until his successor is duly elected and shall
qualify.
SECTION 2. VACANCIES
Vacancies in the Board and newly created directorships resulting from any
increase in the authorized number of Directors may be filled by a vote of the
majority of the Directors then in office, although less than a quorum, or by a
sole remaining Director, at any regular or special meeting of the Board.
SECTION 3. RESIGNATIONS
Any Director may resign at any time upon written notice to the Board, the
Chairman of the Board, the Chief Executive Officer, the President, the Vice
Chairman of the Board or the Secretary of the corporation. Such resignation
shall take effect on the date of receipt of such notice or at any later time
specified therein; and the acceptance of such resignation, unless otherwise
required by the terms thereof, shall not be necessary to make it effective.
When one or more Directors shall resign effective at a future date, a majority
of the Directors then in office, including those who have resigned, shall have
power to fill such vacancy or vacancies to take effect when such resignation or
resignations shall become effective.
SECTION 4. REMOVALS
Any Director may be removed, with or without cause, at any special meeting
of the stockholders called for that purpose, by the affirmative vote of the
holders of a majority in number of shares of the corporation entitled to vote
for the election of such Director, and the vacancy in the Board caused by any
such removal may be filled by the stockholders at such a meeting.
SECTION 5. PLACE OF MEETINGS; BOOKS AND RECORDS
The Board may hold its meetings, and have an office or offices, at such
place or places within or without the State of Delaware as the Board from time
to time may determine.
The Board, subject to the provisions of applicable statutes, may authorize
the books and records of the corporation, and offices or agencies for the
issue, transfer and registration of the
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capital stock of the corporation, to be kept at such place or places outside of
the State of Delaware as, from time to time, may be designated by the Board.
SECTION 6. ANNUAL MEETING OF THE BOARD
The first meeting of each newly elected Board, to be known as the Annual
Meeting of the Board, for the purpose of electing officers, designating
committees and the transaction of such other business as may come before the
Board, shall be held as soon as practicable after the adjournment of the annual
meeting of stockholders, and no notice of such meeting shall be necessary to
the newly elected Directors, provided a quorum shall be present. In the event
such meeting is not held due to the absence of a quorum, the meeting may be
held at such time and place as shall be specified in a notice given as
hereinafter provided for special meetings of the Board, or as shall be
specified in a written waiver signed by all of the newly elected Directors.
SECTION 7. REGULAR MEETINGS
The Board shall provide for regular meetings of the Board at such times
and at such places as it deems desirable. Notice of regular meetings need not
be given.
SECTION 8. SPECIAL MEETINGS
Special meetings of the Board may be called by the Chairman of the Board,
the Chief Executive Officer, the President or the Vice Chairman of the Board
and shall be called by the Secretary on the written request of three Directors
on such notice as the person or persons calling the meeting shall deem
appropriate in the circumstances. Notice of each such special meeting shall be
mailed to each Director or delivered to him by telephone, telegraph or any
other means of electronic communication, in each case addressed to his
residence or usual place of business, or delivered to him in person or given to
him orally. The notice of meeting shall state the time and place of the
meeting but need not state the purpose thereof. Whenever any notice is
required to be given to any Director under the provisions of these By-laws, the
Restated Certificate of Incorporation or the General Corporation Law of the
State of Delaware, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
or any committee appointed by the Board need be specified in the waiver of
notice of such meeting. Attendance of a Director at any meeting shall
constitute a waiver of notice of such meeting except when a Director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting was not lawfully called or convened.
SECTION 9. QUORUM AND MANNER OF ACTING
Except as otherwise provided by statute, the Restated Certificate of
Incorporation, or these By-laws, the presence of a majority of the total number
of Directors shall constitute a quorum for the transaction of business at any
regular or special meeting of the Board, and the act of a majority of the
Directors present at any such meeting at which a quorum is present shall be the
act
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of the Board. In the absence of a quorum, a majority of the Directors present
may adjourn the meeting, from time to time, until a quorum is present. Notice
of any such adjourned meeting need not be given.
SECTION 10. ORGANIZATION
At every meeting of the Board, the Chairman of the Board or in his absence
the Chief Executive Officer, the President or the Vice Chairman of the Board,
or if all of the said officers are absent, a chairman chosen by a majority of
the Directors present shall act as chairman of the meeting. The Secretary, or
in his absence, an Assistant Secretary, or in the absence of the Secretary and
all the Assistant Secretaries, any person appointed by the chairman of the
meeting, shall act as secretary of the meeting.
SECTION 11. CONSENT OF DIRECTORS IN LIEU OF MEETING
Unless otherwise restricted by the Restated Certificate of Incorporation
or by these By-laws, any action required or permitted to be taken at any
meeting of the Board, or any committee designated by the Board, may be taken
without a meeting if all members of the Board or committee consent thereto in
writing, and such written consent is filed with the minutes of the proceedings
of the Board or committee.
SECTION 12. TELEPHONIC MEETINGS
Members of the Board, or any committee designated by the Board, may
participate in any meeting of the Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in such a
meeting shall constitute presence in person at such meeting.
SECTION 13. COMPENSATION
Each Director, who is not a full-time salaried officer of the corporation
or any of its wholly owned subsidiaries, when authorized by resolution of the
Board, may receive as a Director a stated salary or an annual retainer, and any
other benefits as the Board may determine, and in addition may be allowed a
fixed fee or reimbursement of his reasonable expenses for attendance at each
regular or special meeting of the Board or any committee thereof.
SECTION 14. INTERESTED DIRECTORS
No contract or transaction between the corporation and one or more of its
Directors or officers, or between the corporation and any other corporation,
partnership, association or other organization in which one or more of its
Directors or officers are Directors or officers of this corporation, or have a
financial interest in such contract or transaction, shall be void or voidable
solely for this reason, or solely because the Director or officer is present at
or participates in the meeting of the Board or committee thereof which
authorizes the contract or transaction, or solely because his or their votes
are counted for such purpose, if: (1) the material facts as to his
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relationship or interest and as to the contract or transaction are disclosed or
are known to the Board or the committee, and the Board or committee in good
faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested Directors, even though the disinterested
Directors be less than a quorum; or (2) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (3) the contract or transaction is fair as to the corporation as of the time
it is authorized, approved or ratified by the Board, a committee thereof or the
stockholders. Common or interested Directors may be counted in determining the
presence of a quorum at a meeting of the Board or of a committee which
authorizes the contract or transaction.
ARTICLE IV
COMMITTEES OF THE BOARD OF DIRECTORS
SECTION 1. EXECUTIVE COMMITTEE
The Board may, in its discretion, designate an Executive Committee,
consisting of such number of Directors as the Board may from time to time
determine. The committee shall have and may exercise all the powers and
authority of the Board in the management of the business and affairs of the
corporation and may authorize the seal of the corporation to be affixed to all
papers which may require it, but the committee shall have no power or authority
to amend the Restated Certificate of Incorporation (except that the committee
may, to the extent authorized in the resolution or resolutions providing for
the issuance of shares of stock adopted by the Board, fix the designations and
any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the corporation or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the corporation or fix the number of shares of any series of stock or
authorize the increase or decrease of the shares of any series). The committee
shall have such other powers as the Board may from time to time prescribe.
SECTION 2. FINANCE COMMITTEE
The Board may, in its discretion, designate a Finance Committee,
consisting of such number of Directors as the Board may from time to time
determine. The committee shall monitor, review, appraise and recommend to the
Board appropriate action with respect to the corporation's capital structure,
its source of funds and its financial position; review and recommend
appropriate delegations of authority to management on expenditures and other
financial commitments; review terms and conditions of financing plans; develop
and recommend dividend policies and recommend to the Board specific dividend
payments; and review the performance of the trustee of the corporation's
pension trust fund, and any proposed change in the investment policy of the
trustee with respect to such fund. The committee shall have such other duties,
functions and powers as the Board may from time to time prescribe.
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SECTION 3. AUDIT COMMITTEE
The Board shall designate annually an Audit Committee consisting of not
less than two Directors as it may from time to time determine, none of whom
shall be officers or employees of the corporation. The committee shall review
with the independent accountants the corporation's financial statements, basic
accounting and financial policies and practices, adequacy of controls, standard
and special tests used in verifying the corporation's statements of account and
in determining the soundness of the corporation's financial condition, and the
committee shall report to the Board the results of such reviews; review the
policies and practices pertaining to publication of quarterly and annual
statements to assure consistency with audited results and the implementation of
policies and practices recommended by the independent accountants; ensure that
suitable independent audits are made of the operations and results of
subsidiary corporations and affiliates; and monitor compliance with the
corporation's code of business conduct. The committee shall have such other
duties, functions and powers as the Board may from time to time prescribe.
SECTION 4. COMPENSATION COMMITTEE
The Board shall designate annually a Compensation Committee consisting of
not less than two Directors as it may from time to time determine, none of whom
shall be officers or employees of the corporation. The committee shall
administer the corporation's executive compensation plans and programs. In
addition, the committee shall consider proposals with respect to the creation
of and changes to executive compensation plans and will review appropriate
criteria for establishing certain performance measures and determining annual
corporate and executive performance ratings under applicable corporation plans
and programs. The committee shall have such other duties, functions and powers
as the Board may from time to time prescribe.
SECTION 5. COMMITTEE CHAIRMAN, BOOKS AND RECORDS
Each committee shall elect a chairman to serve for such term as it may
determine, shall fix its own rules of procedure and shall meet at such times
and places and upon such call or notice as shall be provided by such rules. It
shall keep a record of its acts and proceedings, and all action of the
committee shall be reported to the Board at the next meeting of the Board.
SECTION 6. ALTERNATES
Alternate members of the committees prescribed by this Article IV may be
designated by the Board from among the Directors to serve as occasion may
require. Whenever a quorum cannot be secured for any meeting of any such
committee from among the regular members thereof and designated alternates, the
member or members of such committee present at such meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board to act at the meeting in the
place of such absent or disqualified member.
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Alternative members of such committees shall receive a reimbursement for
expenses and compensation at the same rate as regular members of such
committees.
SECTION 7. OTHER COMMITTEES
The Board may designate such other committees, consisting of such number
of Directors as the Board may from time to time determine, and each such
committee shall serve for such term and shall have and may exercise, during
intervals between meetings of the Board, such duties, functions and powers as
the Board may from time to time prescribe.
SECTION 8. QUORUM AND MANNER OF ACTING
At each meeting of any committee the presence of a majority of the members
of such committee, whether regular or alternate, shall be necessary to
constitute a quorum for the transaction of business, and if a quorum is present
the concurrence of a majority of those present shall be necessary for the
taking of any action; provided, however, that no action may be taken by the
Executive Committee or the Finance Committee when one or more officers of the
corporation are present as members at a meeting of either such committee unless
such action shall be concurred in by the vote of at least one member of such
committee who is not an officer of the corporation.
ARTICLE V
OFFICERS
SECTION 1. NUMBER
The officers of the corporation shall consist of such of the following as
the Board may from time to time elect or appoint, or as the Chairman of the
Board may from time to time appoint pursuant to Section 6 of this Article V: a
Chairman of the Board, a Chief Executive Officer, a President, a Vice Chairman
of the Board, a Chief Operating Officer, a Chief Financial Officer, a General
Counsel, a Secretary, a Treasurer, a Controller and one or more of the
following: Executive Vice President, Senior Vice President, Vice President,
Assistant Vice President, Associate or Assistant General Counsel, Assistant
Secretary, Assistant Treasurer, Assistant Controller and such other officers
with such titles and powers and/or duties as the Board or the Chairman of the
Board, as the case may be, shall from time to time determine. Officers of the
corporation may simultaneously serve as officers of subsidiaries or divisions
thereof. Any number of offices may be held by the same person.
SECTION 2. ELECTION
The officers of the corporation, except those who may be appointed by the
Chairman of the Board as provided in Section 6 of this Article V, shall be
elected or appointed as soon as practicable after the annual meeting of
stockholders in each year to hold office until the first
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meeting of the Board after the annual meeting of stockholders next succeeding
his election, or until his successor is elected and qualified or until his
earlier death, resignation or removal..
SECTION 3. RESIGNATIONS
Any elected or appointed officer may resign at any time upon written
notice to the Chairman of the Board or the Secretary of the corporation. Such
resignation shall take effect upon the date of its receipt or at such later
time as may be specified therein, and unless otherwise required by the terms
thereof, no acceptance of such resignation shall be necessary to make it
effective.
SECTION 4. REMOVALS
Any elected or appointed officer may be removed, with or without cause, by
the Board at any regular or special meeting of the Board, and in the case of an
officer appointed pursuant to Section 6 of this Article V, may be so removed by
the Chairman of the Board. Any such removal shall be without prejudice to the
contractual rights of such officer, if any, with the corporation, but the
election or appointment of any officer shall not of itself create contractual
rights.
SECTION 5. VACANCIES
Any vacancy occurring in any office by death, resignation, removal or
otherwise may be filled for the unexpired portion of the term by the Board at
any regular or special meeting or as otherwise provided in these By-laws.
SECTION 6. CHAIRMAN OF THE BOARD
The Chairman of the Board shall, when present, preside at all meetings of
the stockholders and the Board; have authority to call special meetings of the
stockholders and of the Board; have authority to sign and acknowledge in the
name and on behalf of the corporation all stock certificates, contracts or
other documents and instruments except where the signing thereof shall be
expressly delegated to some other officer or agent by the Board or required by
law to be otherwise signed or executed and, unless otherwise provided by law or
by the Board may authorize any officer, employee or agent of the corporation to
sign, execute and acknowledge in his place and stead all such documents and
instruments; he shall fix the compensation of officers of the corporation,
other than his own compensation, and the compensation of officers of its
principal operating subsidiaries reporting directly to him unless such
authority is otherwise reserved to the Board or a committee thereof; and he
shall approve proposed employee compensation and benefit plans of subsidiary
companies not involving the issuance or purchase of capital stock of the
corporation. He shall have the power to appoint and remove any Vice President,
Controller, General Counsel, Secretary or Treasurer of the corporation. He
shall also have the power to appoint and remove such associate or assistant
officers of the corporation with such titles and duties as he may from time to
time deem necessary or appropriate. He shall have such other powers and
perform such other duties as from time to time may be assigned to him by the
Board or the Executive Committee.
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The Chairman of the Board is hereby authorized, without further approval
of the Finance Committee or the Board:
(a) To approve individual expenditures by the corporation of up to $10
million each for those expenditure categories presented to the Board
in the annual budget or plan and up to $5 million each for
individual expenditures in categories not presented to the Board,
including but not limited to individual expenditures pertaining to
operating expenses, purchases, leases, options to purchase or lease
assets, investments, business acquisitions, land purchases, products
or services acquisitions, litigation settlements, charitable
donations and political contributions.
(b) To approve individual cost overruns of up to 10% of any amounts
approved by or presented to the Board.
(c) To enter into leases or extensions thereof and other agreements with
respect to the assets of the corporation, including interests in
minerals and real estate, for a term of not more than 10 years or
for an unlimited term if the aggregate initial rentals, over the
term of the lease, including renewal options, do not exceed $3
million.
(d) To approve capital contributions to the corporation's wholly owned
subsidiaries.
(e) To approve disposition of assets and interests in securities of
subsidiaries or related commitments, provided that the aggregate
market value of the assets being disposed of in any one such
transaction does not exceed $10 million.
(f) To approve increases in the capital budgets of the corporation's
operating subsidiaries provided such increases in the aggregate do
not exceed 10% of the corporation's capital budget for the fiscal
year.
(g) To approve in emergency situations commitments in excess of the
above-described limits provided they are in the interests of the
corporation.
The above delegation of authority does not authorize the corporation or its
subsidiaries to make a significant change in its business or to issue the
corporation's capital stock without the specific approval of the Board.
Notwithstanding these limitations, the Chairman of the Board shall have such
power and authority as is usual, customary and desirable to perform all the
duties of the office.
SECTION 7. CHIEF EXECUTIVE OFFICER
The Chief Executive Officer shall assist the Chairman of the Board in the
performance of his duties and shall perform those duties assigned to him in
other provisions of the By-laws and such other duties as may from time to time
be assigned to him by the Board or the Chairman of the Board. In the absence
or disability of the Chairman of the Board, or at his request, the Chief
Executive Officer may preside at any meeting of the stockholders or of the
Board and, in such
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circumstances, may exercise any of the other powers or perform any of the other
duties of the Chairman of the Board. Subject to delegations by the Chairman of
the Board pursuant to Section 6 of this Article V, the Chief Executive Officer
may sign or execute, in the name of the corporation, all stock certificates,
deeds, mortgages, bonds, contracts or other documents and instruments, except
in cases where the signing or execution thereof shall be required by law or
shall have been expressly delegated by the Board or these By-laws to some other
officer or agent of the corporation.
SECTION 8. PRESIDENT
The President shall have general authority over the property, business and
affairs of the corporation, and over all subordinate officers, agents and
employees of the corporation, subject to the control and direction of the
Board, the Executive Committee, the Chairman of the Board and the Chief
Executive Officer, including the power to sign and acknowledge in the name and
on behalf of the corporation all stock certificates, deeds, mortgages, bonds,
contracts or other documents and instruments except when the signing thereof
shall be expressly delegated to some other officer or agent by the Board or
required by law to be otherwise signed or executed and, unless otherwise
provided by law or by the Board, may delegate to any officer, employee or agent
of the corporation authority to sign, execute and acknowledge in his place and
stead all such documents and instruments.
SECTION 9. VICE CHAIRMAN OF THE BOARD
The Vice Chairman of the Board shall assist the Chairman of the Board, the
Chief Executive Officer and the President, in the performance of their duties
and shall perform those duties assigned to him in other provisions of the
By-laws and such other duties as may from time to time be assigned to him by
the Board, the Chairman of the Board, the Chief Executive Officer or the
President. In the absence or disability of the Chairman of the Board, the
Chief Executive Officer or the President, or at the request of any of them, the
Vice Chairman of the Board may preside at any meeting of the stockholders or of
the Board and, in such circumstances, may exercise any of the other powers or
perform any of the other duties of the Chairman of the Board, the Chief
Executive Officer or the President. Subject to delegations by the Chairman of
the Board pursuant to Section 6 of this Article V, the Vice Chairman of the
Board may sign or execute, in the name of the corporation, all stock
certificates, deeds, mortgages, bonds, contracts or other documents and
instruments, except in cases where the signing or execution thereof shall be
required by law or shall have been expressly delegated by the Board or these
By-laws to some other officer or agent of the corporation.
SECTION 10. CHIEF OPERATING OFFICER
The Chief Operating Officer shall have direct management responsibility
for the general business operations of the corporation, and he shall have such
powers and perform such duties as may be incident to the office of chief
operating officer of a corporation, those duties assigned to him by other
provisions of the By-laws, and such other duties as may from time to time be
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assigned to him either directly or indirectly by the Board, the Chairman of the
Board, the Chief Executive Officer, the President or the Vice Chairman of the
Board. Subject to delegations by the Chairman of the Board pursuant to Section
6 of this Article V, the Chief Operating Officer may sign or execute, in the
name of the corporation, all stock certificates, deeds, mortgages, bonds,
contracts or other documents and instruments, except in cases where the signing
or execution thereof shall be required by law or shall have been expressly
delegated by the Board or these By-laws to some other officer or agent of the
corporation.
SECTION 11. CHIEF FINANCIAL OFFICER
The Chief Financial Officer shall have responsibility for development and
administration of the corporation's financial plans and all financial
arrangements, its cash deposits and short term investments, its accounting
policies and its federal and state tax returns. The Chief Financial Officer
shall also be responsible for the corporation's internal control procedures and
for its relationship with the financial community. The Chief Financial Officer
shall perform all the duties incident to the office of chief financial officer
of a corporation, those duties assigned to him by other provisions of these
By-laws and such other duties as may be assigned to him either directly or
indirectly by the Board, the Chairman of the Board, the Chief Executive
Officer, the President, the Vice Chairman of the Board or the Chief Operating
Officer, or as may be provided by law.
SECTION 12. VICE PRESIDENTS
Each Executive Vice President, Senior Vice President and Vice President
shall have such powers and perform such duties as may from time to time be
assigned to him, directly or indirectly, either generally or in specific
instances, by the Board, the Chairman of the Board, the Chief Executive
Officer, the President, the Vice Chairman of the Board or the Chief Operating
Officer.
Subject to delegations by the Chairman of the Board pursuant to Section 6
of this Article V, each Executive Vice President, Senior Vice President and
Vice President shall perform all duties incident to the office of vice
president of a corporation and shall have authority to sign or execute, in the
name of the corporation, all stock certificates, deeds, mortgages, bonds,
contracts or other documents or instruments, except in cases where the signing
or execution thereof shall have been expressly delegated by the Board or these
By-laws to some other officer or agent of the corporation.
SECTION 13. GENERAL COUNSEL
The General Counsel shall be the chief legal advisor of the corporation
and shall have responsibility for the management of the legal affairs and
litigation of the corporation and, in general, he shall perform the duties
incident to the office of general counsel of a corporation and such other
duties as may be assigned to him either directly or indirectly by the Board,
the Chairman of the Board, the Chief Executive Officer, the President or the
Vice Chairman of the Board, or as may be provided by law.
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SECTION 14. SECRETARY
The Secretary shall keep the minutes of meetings of the stockholders and
of the Board in books provided for the purpose; he shall see that all notices
are duly given in accordance with the provisions of these By-laws or as
required by law; he shall be custodian of the records and of the corporate seal
or seals of the corporation; he shall see that the corporate seal is affixed to
all documents requiring same, the execution of which, on behalf of the
corporation, under its seal, is duly authorized, and when said seal is so
affixed he may attest same; and, in general, he shall perform all duties
incident to the office of the secretary of a corporation, and such other duties
as from time to time may be assigned to him directly or indirectly by the
Board, the Chairman of the Board, the Chief Executive Officer, the President,
the Vice Chairman of the Board or the General Counsel, or as may be provided by
law. Any Assistant Secretary may perform any of the duties or exercise any of
the powers of the Secretary at the request of, or in the absence or disability
of, the Secretary or otherwise as occasion may require in the administration of
the business and affairs of the corporation.
SECTION 15. TREASURER
The Treasurer shall have charge of and be responsible for all funds,
securities, receipts and disbursements of the corporation, and shall deposit,
or cause to be deposited, in the name of the corporation, all moneys or other
valuable effects in such banks, trust companies or other depositaries as shall,
from time to time, be selected by or under authority of the Board; if required
by the Board, he shall give a bond for the faithful discharge of his duties,
with such surety or sureties as the Board may determine; he shall keep or cause
to be kept full and accurate records of all receipts and disbursements in books
of the corporation; and, in general, he shall perform the duties incident to
the office of treasurer of a corporation and such other duties as may be
assigned to him directly or indirectly by the Board, the Chairman of the Board,
the Chief Executive Officer, the President, the Vice Chairman of the Board, the
Chief Operating Officer or the Chief Financial Officer, or as may be provided
by law. Any Assistant Treasurer may perform any of the duties or exercise any
of the powers of the Treasurer at the request of, or in the absence or
disability of, the Treasurer or otherwise as occasion may require in the
administration of the business and affairs of the corporation.
SECTION 16. CONTROLLER
The Controller shall be the chief accounting officer of the corporation.
He shall keep full and accurate accounts of the assets, liabilities,
commitments, receipts, disbursements and other financial transactions of the
corporation; shall cause regular audits of the books and records of account of
the corporation and shall supervise the preparation of the corporation's
financial statements; and, in general, he shall perform the duties incident to
the office of controller of a corporation and such other duties as may be
assigned to him directly or indirectly by the Board, the Audit Committee, the
Chairman of the Board, the Chief Executive Officer, the President, the Vice
Chairman of the Board, the Chief Operating Officer or the Chief Financial
Officer, or as may be provided by law.
16
<PAGE> 21
SECTION 17. ABSENCE OR DISABILITY OF OFFICERS
In the absence or disability of the Chairman of the Board, the Chief
Executive Officer, the President or the Vice Chairman of the Board, the Board
or a committee thereof may designate individuals to perform the duties of those
absent or disabled.
ARTICLE VI
STOCK CERTIFICATES AND TRANSFER THEREOF
SECTION 1. STOCK CERTIFICATES
Except as otherwise permitted by statute, the Restated Certificate of
Incorporation or resolution or resolutions of the Board, every holder of stock
in the corporation shall be entitled to have a certificate, signed by or in the
name of the corporation by the Chairman of the Board, the Chief Executive
Officer, the President, the Vice Chairman of the Board, the Chief Operating
Officer, the Chief Financial Officer or any Vice President and by the Treasurer
or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation, certifying the number of shares, and the class and series thereof,
owned by him in the corporation. Any and all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
SECTION 2. TRANSFER OF STOCK
Transfer of shares of the capital stock of the corporation shall be made
only on the books of the corporation by the holder thereof, or by his attorney
duly authorized, and on surrender of the certificate or certificates for such
shares. A person in whose name shares of stock stand on the books of the
corporation shall be deemed the owner thereof as regards the corporation, and
the corporation shall not, except as expressly required by statute, be bound to
recognize any equitable or other claim to, or interest in, such shares on the
part of any other person whether or not it shall have express or other notice
thereof.
SECTION 3. TRANSFER AGENTS AND REGISTRARS
The Board may in its discretion appoint responsible banks or trust
companies from time to time to act as transfer agents and registrars of the
stock of the corporation, as may be required by and in accordance with
applicable laws, rules and regulations. Except as otherwise provided by
resolution of the Board in respect of temporary certificates, no certificates
for shares of capital stock of the corporation shall be valid unless
countersigned by a transfer agent and registered by one of such registrars.
17
<PAGE> 22
SECTION 4. ADDITIONAL REGULATIONS
The Board may make such additional rules and regulations as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of the capital stock of the corporation.
SECTION 5. LOST, STOLEN OR DESTROYED CERTIFICATES
The Board may provide for the issuance of new certificates of stock to
replace certificates of stock lost, stolen or destroyed, or alleged to be lost,
stolen or destroyed, upon such terms and in accordance with such procedures as
the Board shall deem proper and prescribe.
ARTICLE VII
DIVIDENDS, SURPLUS, ETC.
Except as otherwise provided by statute or the Restated Certificate of
Incorporation, the Board may declare dividends upon the shares of its capital
stock either (1) out of its surplus, or (2) in case there shall be no surplus,
out of its net profits for the fiscal year, whenever, and in such amounts as,
in its opinion, the condition of the affairs of the corporation shall render it
advisable. Dividends may be paid in cash, in property, or in shares of the
capital stock of the corporation.
ARTICLE VIII
SEAL
The corporation may have a corporate seal which shall have inscribed
thereon the name of the corporation, the year of its organization and the words
"Corporate Seal, Delaware." The corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner reproduced.
ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of January
of each year, or on such other day as may be fixed from time to time by the
Board.
18
<PAGE> 23
ARTICLE X
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION
Each person who was or is made a party or is threatened to be made a party
to or is involved (including, without limitation, as a witness) in any actual
or threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he is or was a Director, officer or employee of the corporation or is
or was serving at the request of the corporation as a Director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to an employee
benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a Director, officer,
employee or agent or in any other capacity while serving as such a Director,
officer, employee or agent, shall be indemnified and held harmless by the
corporation to the full extent authorized by the General Corporation Law of the
State of Delaware, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law permitted
the corporation to provide prior to such amendment), or by other applicable law
as then in effect, against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
to be paid in settlement) actually and reasonably incurred or suffered by such
indemnitee in connection therewith and such indemnification shall continue as
to an indemnitee who has ceased to be a Director, officer, employee or agent
and shall inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that except as provided in Section 2 of this
Article with respect to proceedings seeking to enforce rights to
indemnification, the corporation shall indemnify any such indemnitee seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such indemnitee only if such proceeding (or part thereof) was authorized by the
Board of the corporation. The right to indemnification conferred in this
Section shall be a contract right and shall include the right to be paid by the
corporation the expenses incurred in defending any such proceeding in advance
of its final disposition (hereinafter an "advancement of expenses"); further
provided, however, that, if the General Corporation Law of the State of
Delaware requires, an advancement of expenses incurred by an indemnitee in his
capacity as a Director, officer or employee (and not in any other capacity in
which service was or is rendered by such indemnitee while a Director, officer
or employee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the corporation of an undertaking, by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined that such indemnitee is not entitled to be indemnified
under this Section 1, or otherwise.
SECTION 2. RIGHT OF INDEMNITEE TO BRING SUIT
If a claim under Section 1 of this Article is not paid in full by the
corporation within sixty days after a written claim has been received by the
corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be twenty days, the
19
<PAGE> 24
indemnitee may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim and, to the extent successful in whole
or in part, the indemnitee shall be entitled to be paid also the expense of
prosecuting such suit. The indemnitee shall be presumed to be entitled to
indemnification under this Article upon submission of a written claim (and, in
an action brought to enforce a claim for an advancement of expenses, where the
required undertaking, if any is required, has been tendered to the
corporation), and thereafter the corporation shall have the burden of proof to
overcome the presumption that the indemnitee is not so entitled. Neither the
failure of the corporation (including its Board, independent legal counsel, or
its stockholders), to have made a determination prior to the commencement of
such suit that indemnification of the indemnitee is proper in the
circumstances, nor an actual determination by the corporation (including its
Board, independent legal counsel or its stockholders) that the indemnitee is
not entitled to indemnification, shall be a defense to the suit or create a
presumption that the indemnitee is not so entitled.
SECTION 3. NONEXCLUSIVITY OF RIGHTS
The rights to indemnification and to the advancement of expenses conferred
in this Article shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Restated
Certificate of Incorporation, By-law, agreement, vote of stockholders or
disinterested Directors or otherwise.
SECTION 4. INSURANCE, CONTRACTS AND FUNDING
The corporation may maintain insurance, at its expense, to protect itself
and any Director, officer, employee or agent of the corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the corporation would have the power
to indemnify such person against such expense, liability or loss under the
General Corporation Law of the State of Delaware. The corporation may enter
into contracts with any indemnitee in furtherance of the provisions of this
Article and may create a trust fund, grant a security interest or use other
means (including, without limitation, a letter of credit) to ensure the payment
of such amounts as may be necessary to effect indemnification as provided in
this Article.
SECTION 5. WHOLLY OWNED SUBSIDIARIES
Any person who is or was serving as a Director of a wholly owned
subsidiary of the corporation shall be deemed, for purposes of this Article
only, to be a Director, officer or employee of the corporation entitled to
indemnification under this Article.
SECTION 6. INDEMNIFICATION OF AGENTS OF THE CORPORATION
The corporation may, by action of the Board from time to time, grant
rights to indemnification and advancement of expenses to agents of the
corporation with the same scope and effect as the provisions of this Article
with respect to the indemnification and advancement of expenses of Directors,
officers and employees of the corporation.
20
<PAGE> 25
ARTICLE XI
CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 1. CHECKS, DRAFTS, ETC.; LOANS
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the corporation shall be
signed by such officer or officers, agent or agents of the corporation and in
such manner as shall, from time to time, be determined by resolution of the
Board. No loans shall be contracted on behalf of the corporation unless
authorized by the Board. Such authority may be general or confined to specific
circumstances.
SECTION 2. DEPOSITS
All funds of the corporation shall be deposited, from time to time, to the
credit of the corporation in such banks, trust companies or other depositories
as the Board may select, or as may be selected by any officer or officers,
agent or agents of the corporation to whom such power may, from time to time,
be delegated by the Board; and for the purpose of such deposit, the Chairman of
the Board, the Chief Executive Officer, the President, the Vice Chairman of the
Board, any Executive Vice President, any Senior Vice President, any Vice
President, the Treasurer or any Assistant Treasurer, or any other officer or
agent to whom such power may be delegated by the Board, may endorse, assign and
deliver checks, drafts and other order for the payment of money which are
payable to the order of the corporation.
ARTICLE XII
AMENDMENTS
These By-laws may be altered or repealed and new By-laws may be made by
the affirmative vote, at any meeting of the Board, of a majority of the entire
Board, subject to the rights of the stockholders of the corporation to amend or
repeal By-laws made or amended by the Board by the affirmative vote of the
holders of record of a majority in number of shares of the outstanding stock of
the corporation present or represented at any meeting of the stockholders and
entitled to vote thereon, provided that notice of the proposed action be
included in the notice of such meeting.
ARTICLE XIII
MISCELLANEOUS
All references and uses herein of the masculine pronouns "he" or "his"
shall have equal applicability to and shall also mean their feminine
counterpart pronouns, such as "she" or "her."
21
<PAGE> 1
EXHIBIT 10.D.1
[EL PASO NATURAL GAS LETTERHEAD]
June 1, 1995
Southern California Gas Company
Box 3249
Los Angeles, CA 90051-1249
Attention: Mr. Lee M. Stewart
Senior Vice President
Re: Transportation Contract Demand
Reduction for Contract 97VT
Gentlemen:
Pursuant to your letter dated June 1, 1994, wherein Southern California
Gas Company ("SoCalGas") exercised its option to reduce its Transportation
Contract Demand under that certain Transportation Service Agreement dated
October 16, 1990 between El Paso and SoCalGas, attached hereto for execution by
SoCalGas are two (2) original counterparts of revised Exhibits A and B to said
Transportation Service Agreement. These exhibits provide for the requested
reduction in Transportation Contract Demand effective January 1, 1996.
El Paso is preparing the appropriate application to be filed with the
Federal Energy Regulatory Commission evidencing the reduction of certificated
firm transportation quantities from 1,450,000 Mcf to 1,150,000 Mcf per day. By
execution of the revised Exhibits A and B attached hereto and of this letter in
the space provided below, SoCalGas evidences its written concurrence of the
abandonment by El Paso of 300,000 Mcf per day of certificated firm
transportation contract demand.
If the foregoing correctly sets forth the agreement between our two
companies on this matter, please execute the two (2) original counterparts of
revised Exhibits A and B and indicate your acceptance and agreement on the two
(2) original counterparts of this letter in the space provided below. Please
retain one original counterpart of the revised Exhibits A and B and one
original counterpart of
<PAGE> 2
Southern California Gas
Company 2 June 1, 1995
this letter for your files and return one fully executed copy of each to El
Paso for its files.
Very truly yours,
EL PASO NATURAL GAS COMPANY
By /s/ A. W. CLARK
-------------------------
A. W. Clark
Vice President
ACCEPTED AND AGREED TO
as of the date hereof:
SOUTHERN CALIFORNIA GAS COMPANY
By: /s/ L. M. STEWART
-------------------------
Title: Senior Vice President
----------------------
Attachments
<PAGE> 3
EXHIBIT A
To The
Transportation Service Agreement
Dated October 16, 1990
As Amended and Restated
Between El Paso Natural Gas Company
and Southern California Gas Company
<TABLE>
<CAPTION>
Maximum
Delivery Daily Type of Field
Pressure(s) Quantity Field Shrinkage
Receipt Point(s) (psig) 1/ (Mcf) Services(s) Factor(s)
- ---------------- ----------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
El Paso Anadarko
Mainline System
- ---------------
(EPNG Code STML ANA)
Any point of
interconnection
existing from time
to time on
El Paso's mainline
facilities in
the Anadarko Basin,
except ILEEDE and
those requiring Actual
production area operating
services or pressure,
transportation by not to exceed
others to provide MAOP
service under this of that
agreement facility 2/ N/A N/A
El Paso Permian
Mainline System
- ---------------
(EPNG Code STML PER)
Any point of
interconnection
existing from time
to time on
El Paso's mainline
facilities in
the Permian Basin,
except those Actual
requiring production operating
area services or pressure,
transportation by not to exceed
others to provide MAOP
service under this of that
agreement facility 2/ N/A N/A
</TABLE>
Ex. A-1
<PAGE> 4
EXHIBIT A
(Continued)
<TABLE>
<CAPTION>
Maximum
Delivery Daily Type of Field
Pressure(s) Quantity Field Shrinkage
Receipt Point(s) (psig) 1/ (Mcf) Service(s) Factor(s)
- ---------------- ----------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
El Paso San Juan
Mainline System
- ---------------
(EPNG Code STML, SJN)
Any point of Actual
interconnection operating
existing from time pressure,
to time on not to exceed
El Paso's mainline MAOP
facilities in of that
the San Juan Basin facility 2/ N/A N/A
Shipper's Transportation
Contract Demand 1,150,000 Mcf
</TABLE>
1/ Necessary pressure to enter the El Paso System and, except as
otherwise noted, not in excess of the MAOP of the facility.
2/ El Paso shall be obligated to receive hereunder, in accordance with
paragraph 1.1 of the Agreement and Section 4.2 of the General Terms
and Conditions contained in El Paso's Volume No. 1-A Tariff, or
superseding tariff, up to 1,150,000 Mcf per day of natural gas in the
aggregate from all Receipt Point(s), plus applicable fuel, shrinkage
and lost and unaccounted for volumes as provided in paragraph 1.2 of
the Agreement.
A. Effective Date of this Exhibit A: January 1, 1996.
------------------------------------
B. Supersedes Exhibit A Effective: July 16, 1993.
--------------------------------------
SOUTHERN CALIFORNIA GAS COMPANY EL PASO NATURAL GAS COMPANY
By /s/ L M STEWART By /s/ A W CLARK
------------------------- -------------------------
Vice President Vice President
Date June 20, 1995 Date June 5, 1995
------------------------- ------------------------
Ex. A-2
<PAGE> 5
EXHIBIT B
To The
Transportation Service Agreement
Dated October 16, 1990
As Amended and Restated
Between El Paso Natural Gas Company
and Southern California Gas Company
<TABLE>
<CAPTION>
Maximum
Daily
Delivery Quantity
Delivery Point(s) Pressure (s) (Mcf)
- ------------------ ------------ --------
<S> <C> <C>
Blythe Delivery pressure 610,000
------ not less than
(EPNG Code 32002 22) 600 psig
Interconnection between
the facilities of El Paso
and Southern California
Gas Company located
at the borderline between
the States of Arizona and
California near Blythe, California
Topock Delivery pressure *1/
- ------ not less than
(EPNG Code 32003 22) 600 psig
Interconnection between
the facilities of El Paso
and Southern California
Gas Company located
at the borderline between
the States of Arizona and
California near Topock,
Arizona
Topock Delivery pressure *1/
- ------ not less than
(EPNG Code 32001 82) 600 psig
Interconnection between
the facilities of El Paso
and Pacific Gas and
Electric Company located
at the borderline between
the States of Arizona and
California near Topock,
Arizona
</TABLE>
Ex. B-1
<PAGE> 6
EXHIBIT B
(Continued)
<TABLE>
<CAPTION>
Maximum
Daily
Delivery Quantity
Delivery Point(s) Pressure(s) (Mcf)
- ----------------- ----------- ---------
<S> <C> <C>
Mojave Pipeline Company ** *1/
- -----------------------
(EPNG Code IMOJAVE)
Interconnection between
the facilities of El Paso
and Mojave Pipeline
Company located at the
borderline between the
States of Arizona and
California near Topock,
Arizona
Shipper's Transportation
Contract Demand 1,150,00 Mcf
</TABLE>
* El Paso shall be obligated to deliver hereunder, in accordance
with paragraph 1.3 of the Agreement and Section 4.2 of the General
Terms and Conditions contained in El Paso's Volume No. 1-A Tariff, or
superseding tariff, up to the Mdq of 1,150,000 MCF per day of natural
gas in the aggregate at all Delivery Points, not to exceed any stated
MDQ at a Delivery Point; provided, that El Paso shall be obligated to
deliver hereunder only Shipper's quantities of natural gas received
pursuant to this Agreement in the aggregate at all Delivery Point(s).
** Unless otherwise specified on this exhibit, the Delivery Pressure(s)
for the Point(s) listed above shall be the pressure existing from time
to time at the metering facility; however, El Paso reserves the right
to deliver quantities at pressures up to the MAOP of that facility.
1/ The MDQ for deliveries at the Topock Delivery Points shall not exceed
540,000 Mcf per day in the aggregate.
A. Effective Date of this Exhibit B: January 1, 1996
-------------------------------------------
B. Supersedes Exhibit B Effective: July 16, 1993.
-------------------------------------------
SOUTHERN CALIFORNIA GAS COMPANY EL PASO NATURAL GAS COMPANY
By /s/ L M STEWART By /s/ A W CLARK
------------------------- -------------------------
Vice President Vice President
Date June 20, 1995 Date June 5, 1995
------------------------- ------------------------
Ex. B-2
<PAGE> 1
EXHIBIT 10.V.1
FIRST AMENDMENT TO
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
AGUAYTIA ENERGY, LLC
This FIRST AMENDMENT TO AMENDED AND RESTATED LIMITED LIABILITY COMPANY
AGREEMENT OF AGUAYTIA ENERGY, LLC (this "Amendment") is made and entered into as
of January 19, 1996, by and among The Maple Gas Development Corporation, a
Cayman Islands limited liability company ("Maple"), P.I.D.C Aguaytia, L.L.C., a
Delaware limited liability company ("PanEnergy"), EPED Aguaytia Company, a
Cayman Islands company ("El Paso"), IGC Aguaytia Partners, L.L.C., a Cayman
Islands limited liability company ("Illinova"), Scudder Latin American Power
I-P, L.D.C., a Cayman Islands limited duration company ("Scudder"), and PMDC
Aguaytia, Ltd., a Cayman Islands limited life company ("PMDC").
RECITALS
Effective as of November 30, 1995, The Maple Gas Corporation del Peru
Ltd., a British Virgin Islands corporation (the "Original Maple Member"), The
Maple Gas Corporation, a Delaware corporation, PanEnergy, El Paso,
Illinova,Scudder and PMDC entered into that certain Amended and Restated
Limited Liability Company Agreement of Aquaytia Energy, LLC (such agreement
being herein referred to as the "LLC Agreement"), pursuant to which such
parties formed a Delaware limited liability company known as "Aguaytia Energy,
LLC" (such limited liability company being herein referred to as the
"Company").
Maple, as the successor to the interest of the Original Maple Member
in and to the Company, PanEnergy, El Paso, Illinova, Scudder and PMDC desire to
amend the LLC Agreement as herein provided.
AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual covenants,
rights and obligations set forth herein, the benefits to be derived therefrom,
and other good and valuable consideration, the receipt and the sufficiency of
which each party hereto acknowledges and confesses, the parties hereto agree as
follows:
1. DEFINITIONS. Any capitalized term used herein but not defined
shall have the meaning given such term in the LLC Agreement.
2. ALLOCATION OF MAPLE COMMITMENT AMONG SCUDDER, ILLINOVA AND
PMDC. The Members acknowledge and agree that, pursuant to the terms of clause
(B) of the proviso contained in the last sentence of Section 4.1(a) of the LLC
Agreement, Maple's right to receive the Units designated on Exhibit A to the
LLC Agreement as being issued to Maple in respect of its Commitment terminated
and
<PAGE> 2
Maple has no further rights or obligations with respect thereto. The Members
hereby agree that the Commitment that Maple would have been obligated to
contribute to the Company, and the Units that Maple would have been entitled to
in exchange for such Commitment, had Maple satisfied the requirements of clause
(A) of the proviso contained in the last sentence of Section 4.1(a) of the LLC
Agreement (the "Requirements"), shall be allocated among Scudder, Illinova and
PMDC as follows:
<TABLE>
<CAPTION>
PORTION OF
COMMITMENT ADDITIONAL UNITS
ASSUMED TO BE RECEIVED
<S> <C> <C>
Scudder $3,001,000 3,001
Illinova 1,166,000 1,166
PMDC 1,166,000 1,166
--------- -----
Total $5,333,000 5,333
</TABLE>
In order to give full effect to such agreement, the Members further agree as
follows:
(a) the Initial Advanced Amount required to be
contributed by each of Scudder, Illinova and PMDC to the Company shall
be increased by a portion of the Initial Advanced Amount that Maple
would have been obligated to contribute, had it satisfied the
Requirements, that bears the same ratio that the number of additional
Units to be received by such Cash Member bears to the number 5,333,
it being agreed that such Capital Contribution shall be made
contemporaneously with the next Capital Contribution required to be
made by the Cash Members pursuant to Section 4.1(b) of the LLC
Agreement;
(b) contemporaneously with the execution of this
Amendment by Scudder, Illinova and PMDC, the number of Units that the
Company shall be deemed to have issued to each of Scudder, Illinova and
PMDC pursuant to the third sentence of Section 4.1(a) of the LLC
Agreement shall be increased by the number of additional Units to
be received by such Cash Member as specified in the table set forth
above;
(c) the Commitments of Scudder, Illinova and PMDC for
purposes of the LLC Agreement shall be increased by the portion of the
Maple Commitment specified as being assumed by such Cash Member in the
table set forth above; and
(d) Exhibit A to the LLC Agreement is hereby deleted and
replaced in its entirety with the form of Exhibit A attached to this
Amendment, which exhibit has been modified to reflect (i) the fact that
Maple has succeeded to the interest of the Original Maple Member in and
to the Company and (ii) the effect of the agreements described in
subparagraphs (a)-(c) immediately above.
3. REPRESENTATIONS AND WARRANTIES. Each of Scudder,
Illinova and PMDC hereby represents and warrants to the Company and each other
Member that:
-2-
<PAGE> 3
(a) It is a duly organized, validly existing entity of
the type described in the introduction to this Amendment and is in good
standing under the laws of the jurisdiction of its formation. It has
all requisite power and authority to enter into and to perform its
obligations under this Amendment.
(b) Its execution, delivery, and performance of this
Amendment have been duly authorized, and do not and will not (A)
violate any law, rule, regulation, order, or decree applicable to it,
(B) violate its organizational documents or (C) contravene or
constitute a default or breach under any instrument, indenture,
agreement or other obligation to which it or one of its Affiliates is a
party or by which it or such Affiliate is bound.
(c) This Amendment is a legal and binding obligation of
that Member, enforceable against that Member in accordance with its
terms, except to the extent enforceability is modified by
bankruptcy, reorganization and other similar laws affecting the rights
of creditors generally and by general principles of equity.
4. MISCELLANEOUS
(a) Except to the extent amended by the terms of this
Amendment, the LLC Agreement is hereby ratified and confirmed and, as
hereby amended, shall remain in full force and effect in accordance
with its terms, conditions and provisions.
(b) This amendment may be executed in any number of
counterparts with the same effect as if all signing parties had signed
the same document. All counterparts shall be construed together and
constitute the same instrument.
(c) In connection with this Amendment and the
transactions contemplated hereby, each Member shall execute and deliver
any additional documents and instruments and perform any additional
acts that may be necessary or appropriate to effectuate and perform the
provisions of this Amendment.
(d) This Amendment has been drafted and executed in
English, and the English version shall prevail over any translations.
(e) The Representative of each Member joins herein for
the purpose of evidencing its adoption, execution and agreement to the
terms of this Amendment as required by Section 14.5 of the LLC
Agreement.
(f) All references herein to dollars ($) shall mean
dollars of the United States of America.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the Members and their respective
Representatives have executed this Amendment as of the date first set
forth above.
MEMBERS:
THE MAPLE GAS DEVELOPMENT CORPORATION
By: /s/ REX W. CANON
---------------------------------------
Name: Rex W. Canon
-------------------------------------
Title: Authorized Representative
------------------------------------
/s/ REX W. CANON
------------------------------------------
REX W. CANON
Management Committee Representative for
The Maple Gas Development Corporation
P.I.D.C. AGUAYTIA, L.L.C.
By: /s/ JOHN T. SICKMAN
---------------------------------------
Name: John T. Sickman
-------------------------------------
Title: Vice President
------------------------------------
/s/ JOHN T. SICKMAN
------------------------------------------
JOHN T. SICKMAN
Management Committee Representative for
P.I.D.C. Aguaytia, L.L.C.
EPED AGUAYTIA COMPANY
By: /s/ JOHN R. CUNNINGHAM
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
/s/ JOHN R. CUNNINGHAM
------------------------------------------
John R. Cunningham
Management Committee Representative for
EPED Aguaytia Company
-4-
<PAGE> 5
IGC AGUAYTIA PARTNERS, L.L.C.
By: /s/ JON C. BANCKS
-------------------------------------
Name: Jon C. Bancks
-----------------------------------
Title: Business Development Manager
----------------------------------
/s/ JON C. BANCKS
----------------------------------------
JON C. BANCKS
Management Committee Representative for
IGC Aguaytia Partners, L.L.C.
SCUDDER LATIN AMERICAN POWER I-P, L.D.C.
By: /s/ J. SCOTT SWENSEN
-------------------------------------
Name: J. Scott Swenson
-----------------------------------
Title: Head Portfolio Manager
----------------------------------
/s/ J. SCOTT SWENSON
----------------------------------------
J. SCOTT SWENSEN
Management Committee Representative for
Scudder Latin American Power I-P, L.D.C.
PMDC AGUAYTIA, LTD.
By: /s/ PAUL T. CHAMPAGNE
-------------------------------------
Name: Paul T. Champagne
-----------------------------------
Title: Vice President
----------------------------------
/s/ PAUL T. CHAMPAGNE
----------------------------------------
PAUL T. CHAMPAGNE
Management Committee Representative for
PMDC Aguaytia Ltd.
-5-
<PAGE> 6
SECOND AMENDMENT TO
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
AGUAYTIA ENERGY, LLC
This SECOND AMENDMENT TO AMENDED AND RESTATED LIMITED LIABILITY
COMPANY AGREEMENT OF AGUAYTIA ENERGY, LLC (this "Amendment") is made and entered
into as of March 12, 1996, by and among the Maple Gas Development Corporation,
a Cayman Islands limited liability company ("Maple"), P.I.D.C. Aguaytia
L.L.C., a Delaware limited liability company ("PanEnergy") EPED Aguaytia
Company, a Cayman Islands company ("El Paso") IGC Aguaytia Partners, L.L.C., a
Cayman Islands limited liability company ("Illinova"), Scudder Latin American
Power I-P, L.D.C., a Cayman Islands limited duration company ("Scudder"), and
PMDC Aguaytia, LTD., a Cayman Islands limited life company "(PMDC").
RECITALS
Effective as of November 30, 1995, The Maple Gas Corporation del Peru
Ltd., a British Virgin Islands corporation (the "Original Maple Member"), The
Maple gas Corporation, Delaware corporation, PanEnergy, El Paso, Illinova,
Scudder and PMDC entered into that certain Amended and Restated Limited
Liability Company Agreement of Aguaytia Energy, LLC (such agreement being
herein referred to as the "LLC Agreement"), pursuant to which such parties
formed a Delaware limited liability company known as "Aguaytia Energy, LLC"
(such limited liability company being herein referred to as the "Company").
Maple, as the successor to the interest of the Original Maple Member
in and to the Company, PanEnergy, El Paso, Illinova, Scudder and PMDC desire to
amend the LLC Agreement as herein provided.
AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual covenants,
rights and obligations set forth herein, the benefits to be derived therefrom,
and other good and valuable consideration, the receipt and the sufficiency of
which each party hereto acknowledges, and confesses, the parties hereto agree
as follows:
1. Definitions. Any Capitalized term used herein but not defined
shall have the meaning given such term in the LLC agreement.
2. Amendments. The LLC Agreement is hereby amended as follows:
(a) Delete subparagraph(i) of Section 2.4(a) of the
Agreement and substitute the following subparagraph:
"(i) through one or more Entities, invest in, own and dispose
of interest in the Project
<PAGE> 7
and manage assets and supervise the operation of facilities in connection
therewith, provided that the natural gas produced in connection with the Gas
Project shall, unless the Management Committee otherwise directs, at all times
be use predominantly in connection with the Power Project,"
(b) Delete exhibit 4.1 (b) of the Agreement and
substitute the attached new Exhibit 4.1(b).
3. Miscellaneous.
(a) Except to the extent amended by the terms of
this Amendment, the LLC Agreement is hereby ratified and confirmed and, as
hereby amended, shall remain in full force and effect in accordance with its
terms, conditions and provisions.
(b) This Amendment may be executed in any number
of counterparts with the same effect as if all signing parties had signed the
same document. All counterparts shall be construed together and constitute the
same instrument.
(c) In connection with this Amendment and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may
be necessary or appropriate to effectuate and perform the provisions of this
Amendment.
(d) This Amendment has been drafted and executed
in English, and the English version shall prevail over any translations.
(e) The Representative of each Member joins
herein for the purpose of evidencing its adoption, execution and agreement to
the terms of this Amendment as required by Section 14.5 of the LLC Agreement.
(f) All references herein to dollars ($) shall
mean dollars of the United States of America.
IN WITNESS WHEREOF, the Members and their respective Representatives
have executed this Amendment as of the date first set forth above.
<PAGE> 8
IN WITNESS WHEREOF, the Members and their respective Representatives
have axecuted this Amendment as of th date first set forth above.
MEMBERS:
THE MAPLE GAS DEVELOPMENT CORPORATION
BY:/s/ REX W. CANON
---------------------------------------
Name: Rex W. Canon
-------------------------------------
Title: Authorized Representative
------------------------------------
/s/ REX W. CANON
------------------------------------------
REX W. CANON
Management Committee Representative for
The Maple Gas Developement Corporation
P.I.D.C. AGUAYTIA, L.L.C.
By: /s/ JOHN T. SICKMAN
---------------------------------------
Name: John T. Sickman
-------------------------------------
Title: Vice President
------------------------------------
JOHN T. SICKMAN
Management Committee Representative for
P.I.D.C. Aguaytia L.L.C.
EPED AGUAYTIA COMPANY
BY:/s/ JOHN R. CUNNINGHAM
---------------------------------------
Name: John R. Cunningham
-------------------------------------
Title: Authorized Representative
------------------------------------
/s/ JOHN R. CUNNINGHAM
------------------------------------------
John R. Cunningham
Management Committee representattive for
EPED Aguaytia Company
<PAGE> 9
IGC AGUAYTIA PARTNERS, L.L.C.
By: /s/ JON BANCKS
-------------------------------------
Name: Jon Bancks
-----------------------------------
Title: AUTHORIZED REPRESENTATIVE
----------------------------------
/s/ JON BANCKS
----------------------------------------
JOHN C. BANCKS
Management Committee Representative for
IGC Aquaytia Partners, L.L.C.
SCUDDER LATIN AMERICAN POWER I-P, L.D.C.
BY:/s/ JOHN H. NORTHRUP
-------------------------------------
Name: JOHN H. NORTHRUP
-----------------------------------
Title: AUTHORIZED REPRESENTATIVE
----------------------------------
/s/ JOHN H. NORTHRUP
----------------------------------------
JOHN H. NORHTRUP
Alternate Management Committee
Representative for Scudder Latin
American Power I-P, L.D.C.
PMDC AGUAYTIA, LTD.
By: /s/ ROGERT D. FAGAN
-------------------------------------
Name: Robert D. Fagan
-----------------------------------
Title: President and Director
----------------------------------
/s/ ROBERT D. FAGAN
----------------------------------------
for PAUL T. CHAMPAGNE
Management Committee Representative for
PMDC Aguaytia Ltd.
<PAGE> 1
EXHIBIT 10.AA.
EL PASO NATURAL GAS COMPANY
OMNIBUS PLAN FOR
MANAGEMENT EMPLOYEES
AMENDED AND RESTATED EFFECTIVE AS OF APRIL 12, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1 PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4 Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 Good Reason . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 Management Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.11 Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.13 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.14 Permanent Disability or Permanently Disabled . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3 ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4 ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 5 SHARES AVAILABLE FOR THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 6 STOCK OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 7 STOCK APPRECIATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 8 LIMITED STOCK APPRECIATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 9 RESTRICTED STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 10 REGULATORY APPROVALS AND LISTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 11 EFFECTIVE DATE AND TERM OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 12 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 13 AMENDMENT, TERMINATION OR DISCONTINUANCE
OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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El Paso Natural Gas Company -i- Table of Contents
Omnibus Plan for Management Employees
<PAGE> 3
EL PASO NATURAL GAS COMPANY
OMNIBUS PLAN FOR MANAGEMENT EMPLOYEES
AMENDED AND RESTATED EFFECTIVE AS OF APRIL 12, 1996
SECTION 1 PURPOSE
The purpose of the El Paso Natural Gas Company Omnibus Plan for
Management Employees, formerly known as the El Paso Natural Gas Company Stock
Option Plan for Management Employees, (the "Plan") is to promote the interests
of El Paso Natural Gas Company (the "Company") and its stockholders by
strengthening its ability to attract and retain key employees in the employ of
the Company and its Subsidiaries (as defined below) by furnishing suitable
recognition of their ability and industry which materially contributes to the
success of the Company. The Plan provides for the grant of stock options,
limited stock appreciation rights, stock appreciation rights and restricted
stock 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 BENEFICIARY
The person or persons designated by the Participant pursuant to
Section 6.2(f) to whom payments are to be paid pursuant to the terms of the
Plan in the event of the Participant's death.
2.2 BOARD OF DIRECTORS
The Board of Directors of the Company.
2.3 CAUSE
A termination for Cause is a termination evidenced by a statement
adopted in good faith by the Management Committee 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
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El Paso Natural Gas Company Page 1
Omnibus Plan for Management Employees
<PAGE> 4
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 Management Committee (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 to the Participant shall constitute Cause.
2.4 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 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.
2.5 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.
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El Paso Natural Gas Company Page 2
Omnibus Plan for Management Employees
<PAGE> 5
2.6 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.
2.7 EXCHANGE ACT
The Securities Exchange Act of 1934, as amended.
2.8 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 was 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 an 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 an Option less than six
(6) months prior to a Change in Control,
On or after a Change in Control, Fair Market Value on the date of
exercise shall be deemed to be the greater of (i) the highest price
per share of Common Stock as reported in the NYSE-Composite
Transactions by The Wall Street Journal during the sixty (60) day
period ending on the day preceding the date of exercise of the stock
appreciation right or limited stock appreciation right, as the case
may be, and (ii) if the Change in Control is one described in clause
(ii) or (iii) of Section 2.4, the highest price per share paid for
Common Stock in connection with such Change in Control.
2.9 GOOD REASON
Good Reason shall mean the occurrence of any of the following events
or conditions, after a Change in Control:
(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
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El Paso Natural Gas Company Page 3
Omnibus Plan for Management Employees
<PAGE> 6
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, 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 requires 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 due to
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 and
the El Paso Natural Gas Company Retirement Savings Plan; 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.
2.10 MANAGEMENT COMMITTEE
A committee consisting of the Chief Executive Officer of the Company
and such other officers as the Chief Executive Officer shall designate.
2.11 OPTION
A stock option which is not intended to meet the requirements of an
Incentive Stock Option, as defined in Section 422 of the Code.
2.12 OPTION PRICE
The price per share of Common Stock at which each Option is
exercisable.
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El Paso Natural Gas Company Page 4
Omnibus Plan for Management Employees
<PAGE> 7
2.13 PARTICIPANT
An eligible employee to whom an Option, limited stock appreciation
right, stock appreciation right or Restricted Stock is granted under the Plan
as set forth in Section 4.
2.14 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 with the
Company or any of its Subsidiaries, and that such disability will be permanent
and continuous during the remainder of the Participant's life.
2.15 PLAN ADMINISTRATOR
The Management Committee shall, pursuant to Section 3, administer the
Plan.
2.16 RESTRICTED STOCK
Common Stock granted under the Plan that is subject to the
requirements of Section 9 and such other restrictions as the Plan Administrator
deems appropriate.
2.17 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.
SECTION 3 ADMINISTRATION
3.1 The Plan shall be administered by the Management Committee,
unless the Board of Directors shall otherwise determine the administrator of
the Plan. The administrator of the Plan is referred to herein as the "Plan
Administrator."
3.2 The members of the Management Committee serving as Plan
Administrator shall be appointed by the Chief Executive Officer for such term
as the Chief Executive Officer may determine. The Chief Executive Officer may
from time to time remove members from, or add members to, the Management
Committee.
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El Paso Natural Gas Company Page 5
Omnibus Plan for Management Employees
<PAGE> 8
3.3 Except for the terms and conditions explicitly set forth in
the Plan, the Plan Administrator shall have full 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 and
Restricted Stock thereunder, to administer the Plan, to make recommendations to
the Board of Directors, 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 and Restricted Stock granted thereunder as it may
deem necessary or advisable, which determination shall be final and binding
upon all Participants. The Plan Administrator shall cause the Company at its
expense to take any action related to the Plan which may be required or
necessary to comply with the provisions of any federal or state law or any
regulations issued thereunder.
3.4 Each member of the Management Committee acting as Plan
Administrator, while serving as such, shall be considered to be acting in his
or her capacity as an officer of the Company. Members of the Management
Committee acting under the Plan shall be fully protected in relying in good
faith upon the advice of counsel and shall incur no liability except for gross
negligence or willful misconduct in the performance of their duties.
SECTION 4 ELIGIBILITY
To be eligible for selection by the Plan Administrator to participate
in the Plan, an individual must be a key 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 or Restricted Stock and 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.
SECTION 5 SHARES AVAILABLE FOR THE PLAN
5.1 Subject to Section 5.2, the maximum number of shares for which
Options, limited stock appreciation rights, stock appreciation rights and
Restricted Stock may at any time be granted under the Plan is two million five
hundred thousand (2,500,000) 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 Plan Administrator. Upon
(i) the expiration or termination in whole or in part of unexercised Options,
(ii) the surrender of an Option, or portion thereof, upon exercise of a related
limited stock appreciation right or stock appreciation right for cash, or (iii)
the forfeiture of shares of Restricted Stock, shares of Common Stock which were
subject thereto shall again be available for grants of Options, limited stock
appreciation rights, stock appreciation rights and Restricted Stock under the
Plan, as the Plan Administrator may determine.
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El Paso Natural Gas Company Page 6
Omnibus Plan for Management Employees
<PAGE> 9
5.2 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 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. When determining a grant, the Plan Administrator may take 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 purpose of the Plan.
The granting of an Option shall take place when the Plan Administrator
determines to grant such an Option to a particular Participant at the Option
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 All Options under the Plan shall be granted subject to the
following terms and conditions:
(A) OPTION PRICE
The Option Price shall be the Fair Market Value of the Common
Stock on the date the Option is granted, unless otherwise specified by
the Plan Administrator.
(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
Option be exercisable later than the tenth anniversary of the date of
its grant.
(C) EXERCISE OF OPTIONS
Subject to Section 6.2(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 immediately
following the date on which the Option is granted, or such other
shorter or 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
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El Paso Natural Gas Company Page 7
Omnibus Plan for Management Employees
<PAGE> 10
employment is completed and may be waived or modified in the agreement
evidencing the Option or by written notice to the Participant from 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 at one time or in such installments at any time prior to the
final expiration of the Option as may be provided in the Option grant.
To the extent that the right to purchase shares has accrued
thereunder, Options may be exercised from time to time by providing
written notice to the Company setting forth the number of shares to
which the Option is being exercised.
(D) PAYMENT
The product of the Option Price and the number of shares
purchased (the "Purchase Price") shall be paid in full to the Company
upon the exercise of an Option. The Purchase Price may be paid either
(i) in cash or (ii) at the discretion of the Plan Administrator, in
Common Stock already owned by the Participant for at least six (6)
months, or any combination of cash and Common Stock. The Fair Market
Value of such Common Stock as delivered shall be valued as of the day
prior to delivery. To the extent permitted by the Plan Administrator
and applicable laws and regulations (including, but not limited to,
federal tax and securities laws and regulations and state corporate
law), an Option may also be exercised by delivering 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.
(E) RESTRICTIONS
The Plan Administrator shall determine, 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 an
Option 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
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El Paso Natural Gas Company Page 8
Omnibus Plan for Management Employees
<PAGE> 11
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, except
that to the extent permitted by applicable law, the Plan Administrator
may permit a recipient of an Option to designate in writing during the
Participant's lifetime a Beneficiary to receive and exercise Options
in the event of such Participant's death (as provided in Section
6.2(i)). Any attempt 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 the sale or levy or any attachment or similar process upon the
rights and privileges conferred hereby, shall be null and void.
(G) PURCHASE FOR INVESTMENT
The Plan Administrator shall have the right to require that
each Participant or other person who shall exercise an Option under
the Plan, and each person into whose name shares of Common Stock shall
be issued pursuant to the exercise of an Option, represent and agree
that any and all shares of Common Stock purchased pursuant to such
Option are being purchased for investment only and not with a view to
the distribution or resale thereof and that such shares will not be
sold except in accordance with such restrictions or limitations as may
be set forth in the Option. This Section 6.2(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.
(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 Option expires sooner, such
Option 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.
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El Paso Natural Gas Company Page 9
Omnibus Plan for Management Employees
<PAGE> 12
(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 Plan
Administrator shall have determined in a specific case that
the Option should expire sooner or should terminate when the
Participant's employment status ceases.
(IV) TERMINATION FOLLOWING A CHANGE IN CONTROL
The Option shall expire, unless exercised, within
thirty-six (36) months of 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
Except as provided in subparagraphs (iii) and (iv)
above, the Option shall expire upon termination of employment.
(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 6.2(h)(i), (ii) and (iii), the Option
shall expire, unless the term of the Option expires sooner, twelve
(12) months after the date of the Participant's death, unless the
Option is exercised within such twelve (12) month period by the
Participant's Beneficiary, legal representatives, estate or the person
or persons to whom the deceased's Option rights shall have passed by
will or the laws of descent and distribution; provided, that the Plan
Administrator may determine in a particular case that specific
limitations and restrictions under the Plan shall not apply.
(J) CHANGE IN CONTROL
Notwithstanding other Plan provisions pertaining to the times
at which Options may be exercised, all outstanding Options, to the
extent not then currently exercisable, shall become exercisable in
full upon the occurrence of a Change in Control. No Option shall be
exercisable at a time that would violate the maximum duration of
Section 6.2(b).
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El Paso Natural Gas Company Page 10
Omnibus Plan for Management Employees
<PAGE> 13
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 the related unexercised Option, or
any portion thereof, and to receive from the Company in exchange therefor an
amount equal to the excess of the Fair Market Value of one share of Common
Stock on the date the right is exercised over the Option Price per share times
the number of shares covered by the Option, or portion thereof, which is
surrendered. Payment shall be made in shares of Common Stock valued at Fair
Market Value as of the date the right is exercised, or in cash, or partly in
shares and partly in cash, at the discretion of the Plan Administrator;
provided, however, that payment shall be made solely in cash with respect to a
stock appreciation right which is exercised within seven (7) months following a
Change in Control. Stock appreciation rights may be exercised from time to
time upon actual receipt by the Company of written notice stating the number of
shares of Common Stock with respect to which the stock appreciation rights are
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 that the Option to which they relate shall be
exercisable or at such other times as the Plan Administrator may
determine; provided, however, that such rights shall not be
exercisable until the Participant shall have completed six (6) months
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 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.
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El Paso Natural Gas Company Page 11
Omnibus Plan for Management Employees
<PAGE> 14
(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.
(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 6.2.
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, provided, however, that limited stock
appreciation rights may not be exercised under any circumstances until
the expiration of the six (6) month period following the date of
grant. Limited stock appreciation rights shall be exercisable only to
the same
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El Paso Natural Gas Company Page 12
Omnibus Plan for Management Employees
<PAGE> 15
extent and subject to the same conditions as the Options related
thereto are exercisable, as provided in Section 6.2(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 RESTRICTED STOCK
9.1 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.
9.2 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 9.3)
expires or until restrictions thereon otherwise lapse, and may require, as a
condition of any issuance of Restricted Stock that the Participant shall have
delivered a stock power endorsed in blank relating to the shares of Restricted
Stock.
9.3 During a period of years following the date of grant, which
shall in no event be less than one (1) year and until required performance
targets are achieved, if applicable, as determined by the Plan Administrator
(the "Restriction Period"), the Restricted Stock may not be sold, assigned,
transferred, pledged, hypothecated or
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El Paso Natural Gas Company Page 13
Omnibus Plan for Management Employees
<PAGE> 16
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.
9.4 Except as provided in Section 9.5 or 9.6, 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.
9.5 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, Permanent Disability, retirement or any termination of
employment determined by the Plan Administrator to end the Restriction Period.
9.6 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.
9.7 When the restrictions imposed by Section 9.3 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
9.1, as it relates to such shares, shall be terminated.
9.8 Subject to Section 9.2, 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.
SECTION 10 REGULATORY APPROVALS AND LISTING
10.1 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, or with respect to a grant of Restricted Stock
prior to:
(a) the obtaining of 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;
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El Paso Natural Gas Company Page 14
Omnibus Plan for Management Employees
<PAGE> 17
(b) the listing of such shares on any stock exchange on
which the Common Stock may then be listed; or
(c) the completion of 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.
SECTION 11 EFFECTIVE DATE AND TERM OF THE PLAN
The Plan was originally adopted by the Board of Directors as of
December 14, 1993, and was amended and restated by the Board of Directors
effective April 12, 1996. Options, limited stock appreciation rights, stock
appreciation rights and Restricted Stock may be granted pursuant to the Plan
from time to time as the Plan Administrator shall determine. The Plan shall
terminate on December 14, 2003. However, Options, limited stock appreciation
rights, stock appreciation rights and Restricted Stock granted prior to the
expiration of the Plan 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 hereunder.
SECTION 12 GENERAL PROVISIONS
12.1 Nothing contained in the Plan, or in any Option, limited stock
appreciation right, stock appreciation right or Restricted Stock 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.
12.2 Grants, vesting or payment of Options, limited stock
appreciation rights, stock appreciation rights or Restricted Stock 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.
12.3 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.
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El Paso Natural Gas Company Page 15
Omnibus Plan for Management Employees
<PAGE> 18
12.4 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.
12.5 In the event a Participant is transferred from the Company to
a Subsidiary, or vice versa, or is promoted or given different
responsibilities, the Options, limited stock appreciation rights, stock
appreciation rights and Restricted Stock granted to the Participant prior to
such date shall not be affected. Notwithstanding the foregoing or any other
provision in this Plan, in the event a Participant becomes an officer or
director of the Company subject to Section 16(b) of the Exchange Act, the Plan
Administrator may take any and all action necessary to prevent any violation of
Section 16(b), including, but not limited to, accelerating the vesting of
Options, rights or Restricted Stock, canceling any unvested Options, rights or
Restricted Stock and/or requiring the Participant to exercise any and all
vested Options or rights at such times as the Plan Administrator may determine.
12.6 Each grant to a Participant of an Option, limited stock
appreciation right, stock appreciation right and Restricted Stock hereunder
shall make reference to this Plan by title and date to confirm the
applicability of the Plan and the source of shares and rights covered by the
grant.
12.7 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.
12.8 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 and Restricted Stock 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 for payment of withholding taxes on the exercise
of an option, stock appreciation right, or limited stock appreciation right or
upon the grant or 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 exercise of an
option or stock appreciation right or 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 12.8 shall be valued as of the day prior
to delivery, and shall be calculated in accordance with Section 2.8.
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El Paso Natural Gas Company Page 16
Omnibus Plan for Management Employees
<PAGE> 19
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 13 AMENDMENT, TERMINATION OR DISCONTINUANCE OF THE PLAN
13.1 Subject to Section 13.2, 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 Board of Directors,
including, but not limited to, any amendment necessary to ensure that the
Company may obtain any regulatory approval referred to in Section 10; provided,
however, that no change in any Option, limited stock appreciation right, stock
appreciation right or Restricted Stock 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.
13.2 The Plan Administrator may not amend the Plan without the
approval of the Board of Directors to:
(a) increase the number of shares or rights that may be
issued under the Plan; or
(b) otherwise materially increase the benefits accruing
to the Participants under the Plan.
13.3 The Plan Administrator may at any time suspend the operation
of or terminate the Plan with respect to any shares of Common Stock not subject
to Option, limited stock appreciation right, stock appreciation right or
Restricted Stock at the time.
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El Paso Natural Gas Company Page 17
Omnibus Plan for Management Employees
<PAGE> 1
EL PASO NATURAL GAS COMPANY
EARNINGS PER COMMON SHARE
Form 10-Q, Exhibit 11
<TABLE>
<CAPTION>
First Quarter
--------------------------
1996 1995
--------------------------
<S> <C> <C>
Income available for common stock dividends $(35,248,000) $21,970,000
Fully diluted average common shares
outstanding 35,689,417 35,416,268
Fully diluted earnings per common share $ (0.9876) 0.6203
</TABLE>
Outstanding stock options of EPG are common stock equivalents but are excluded
from primary earnings per common share due to immateriality. See following
calculation:
<TABLE>
<CAPTION>
First Quarter
--------------------------
1996 1995
--------------------------
<S> <C> <C>
Total primary earnings per common share $ (1.0056) $ 0.6249
Fully diluted earnings per common share
(includes stock options) $ (0.9876) 0.6203
Percent dilution 1.7899% 0.7361%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 41,083
<SECURITIES> 0
<RECEIVABLES> 302,410
<ALLOWANCES> 0<F1>
<INVENTORY> 36,933
<CURRENT-ASSETS> 424,098
<PP&E> 1,929,621
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 2,554,752
<CURRENT-LIABILITIES> 835,973
<BONDS> 667,892
<COMMON> 112,054
0
0
<OTHER-SE> 586,093
<TOTAL-LIABILITY-AND-EQUITY> 2,554,752
<SALES> 0
<TOTAL-REVENUES> 605,635
<CGS> 0
<TOTAL-COSTS> 638,584
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,706
<INCOME-PRETAX> (57,879)
<INCOME-TAX> (22,631)
<INCOME-CONTINUING> (35,248)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (35,248)
<EPS-PRIMARY> (1.01)
<EPS-DILUTED> 0
<FN>
<F1>Not separately identified in the Consolidated Financial Statements or
accompanying notes thereto.
</FN>
</TABLE>
