EXHIBIT 10.F
EL PASO ENERGY CORPORATION
2001 OMNIBUS INCENTIVE
COMPENSATION PLAN
Effective as of January 29, 2001

 

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TABLE OF CONTENTS

         
SECTION 1 PURPOSES
    1  
 
       
SECTION 2 DEFINITIONS
    1  
2.1 Adjusted Value
    1  
2.2 Beneficiary
    1  
2.3 Board of Directors
    1  
2.4 Cause
    1  
2.5 Change in Control
    2  
2.6 Code
    3  
2.7 Common Stock
    3  
2.8 Exchange Act
    3  
2.9 Fair Market Value
    3  
2.10 Good Reason
    3  
2.11 Incentive Award
    4  
2.12 Incentive Stock Option
    5  
2.13 Management Committee
    5  
2.14 Maximum Annual Employee Grant
    5  
2.15 Nonqualified Option
    5  
2.16 Option Price
    5  
2.17 Participant
    5  
2.18 Performance Cycle
    5  
2.19 Performance Goals
    5  
2.20 Performance Peer Group
    6  
2.21 Performance Period
    6  
2.22 Performance Ranking Position
    7  
2.23 Performance Unit or Units
    7  
2.24 Permanent Disability or Permanently Disabled
    7  
2.25 Plan Administrator
    7  
2.26 Restricted Stock
    7  
2.27 Rule 16b-3
    7  
2.28 Section 16 Insider
    7  
2.29 Section 162(m)
    8  
2.30 Subsidiary
    8  
2.31 Total Shareholder Return
    8  
2.32 Valuation Date
    8  
 
       
SECTION 3 ADMINISTRATION
    9  
 
       
SECTION 4 ELIGIBILITY
    10  
 
       
SECTION 5 SHARES AND UNITS AVAILABLE FOR THE PLAN
    10  

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SECTION 6 STOCK OPTIONS
    11  
 
       
SECTION 7 STOCK APPRECIATION RIGHTS
    18  
 
       
SECTION 8 LIMITED STOCK APPRECIATION RIGHTS
    20  
 
       
SECTION 9 PERFORMANCE UNITS
    20  
9.1 Grants of Units
    20  
9.2 Notice to Participants
    21  
9.3 Vesting
    21  
9.4 Valuation of Performance Units
    22  
9.5 Entitlement to Payment
    23  
9.6 Deferred Payment
    25  
9.7 Acceleration of Payment Due to Change in Control
    26  
 
       
SECTION 10 RESTRICTED STOCK
    26  
 
       
SECTION 11 INCENTIVE AWARDS
    29  
11.1 Procedures for Incentive Awards
    29  
11.2 Performance Goal Certification
    29  
11.3 Maximum Incentive Award Payable
    29  
11.4 Discretion to Reduce Awards; Participant’s Performance
    29  
11.5 Required Payment of Incentive Awards
    30  
11.6 Restricted Stock Election
    31  
11.7 Deferred Payment
    31  
11.8 Payment Upon Change in Control
    31  
 
       
SECTION 12 REGULATORY APPROVALS AND LISTING
    32  
 
       
SECTION 13 EFFECTIVE DATE AND TERM OF PLAN
    33  
 
       
SECTION 14 GENERAL PROVISIONS
    34  
 
       
SECTION 15 COMPLIANCE WITH RULE 16b-3 AND SECTION 162(m)
    37  
 
       
SECTION 16 AMENDMENT, TERMINATION OR DISCONTINUANCE OF THE PLAN
    37  

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EL PASO ENERGY CORPORATION
2001 OMNIBUS INCENTIVE COMPENSATION PLAN
SECTION 1 PURPOSES
     The purposes of the El Paso Energy Corporation 2001 Omnibus Incentive
Compensation Plan (the “Plan”) are to promote the interests of El Paso Energy
Corporation (the “Company”) and its stockholders by strengthening its ability to
attract and retain officers and key management employees (“key management
employees” means those employees who hold the position of department director)
in the employ of the Company and its Subsidiaries (as defined below) by
furnishing suitable recognition of their ability and industry which contribute
materially to the success of the Company and to align the interests and efforts
of the Company’s officers and key management employees to the long-term
interests of the Company’s stockholders, and to provide a direct incentive to
the Participants (as defined below) to achieve the Company’s strategic and
financial goals. The Plan provides for the grant of stock options, limited stock
appreciation rights, stock appreciation rights, restricted stock, incentive
awards and performance units in accordance with the terms and conditions set
forth below.
SECTION 2 DEFINITIONS
     Unless otherwise required by the context, the following terms when used in
the Plan shall have the meanings set forth in this Section 2:
2.1 Adjusted Value
     The dollar value of Performance Units determined as of a Valuation Date.
2.2 Beneficiary
     The person or persons designated by the Participant pursuant to
Section 6.4(f) or Section 14.7 of this Plan to whom payments are to be paid
pursuant to the terms of the Plan in the event of the Participant’s death.
2.3 Board of Directors
     The Board of Directors of the Company.
2.4 Cause
     The Company may terminate the Participant’s employment for Cause. A
termination for Cause is a termination evidenced by a resolution adopted in good
faith by two-thirds (2/3) of the Board of Directors that the Participant
(i) willfully and continually failed to substantially perform the Participant’s
duties with the Company (other than a

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failure resulting from the Participant’s incapacity due to physical or mental
illness) which failure continued for a period of at least thirty (30) days after
a written notice of demand for substantial performance has been delivered to the
Participant specifying the manner in which the Participant has failed to
substantially perform or (ii) willfully engaged in conduct which is demonstrably
and materially injurious to the Company, monetarily or otherwise; provided,
however, that no termination of the Participant’s employment shall be for Cause
as set forth in clause (ii) above until (A) there shall have been delivered to
the Participant a copy of a written notice setting forth that the Participant
was guilty of the conduct set forth in clause (ii) above and specifying the
particulars thereof in detail and (B) the Participant shall have been provided
an opportunity to be heard by the Board of Directors (with the assistance of the
Participant’s counsel if the Participant so desires). No act, nor failure to
act, on the Participant’s part shall be considered “willful” unless the
Participant has acted, or failed to act, with an absence of good faith and
without a reasonable belief that the Participant’s action or failure to act was
in the best interest of the Company. Notwithstanding anything contained in the
Plan to the contrary, no failure to perform by the Participant after notice of
termination is given by the Participant shall constitute Cause.
2.5 Change in Control
     As used in the Plan, a Change in Control shall be deemed to occur (i) if
any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of securities of the Company representing
twenty percent (20%) or more of the combined voting power of the Company’s then
outstanding securities, other than persons who exceed such percentage solely as
a result of being executive officers, directors and/or other affiliates of the
Company who are deemed to constitute a “group” as a result of acting to oppose a
Change in Control proposed by another person (ii) upon the first purchase of the
Common Stock pursuant to a tender or exchange offer (other than a tender or
exchange offer made by the Company), (iii) upon the approval by the Company’s
stockholders of a merger or consolidation, a sale or disposition of all or
substantially all of the Company’s assets or a plan of liquidation or
dissolution of the Company, or (iv) if, during any period of two (2) consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors cease for any reason to constitute at least a majority thereof, unless
the election or nomination for the election by the Company’s stockholders of
each new director was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who were directors at the beginning of the period
and such new director’s initial assumption of office does not occur in
connection with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of directors of the
Company. 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,

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directly or indirectly, immediately following such merger, consolidation, sale
or disposition at least eighty percent (80%) of the combined voting power of all
outstanding classes of securities of the company resulting from such merger or
consolidation, or to which the Company sells or disposes of its assets, in
substantially the same proportion as their ownership in the Company immediately
before such merger, consolidation, sale or disposition.
2.6 Code
     The Internal Revenue Code of 1986, as amended and in effect from time to
time, and the temporary or final regulations of the Secretary of the U.S.
Treasury adopted pursuant to the Code.
2.7 Common Stock
     The Common Stock of the Company, $3 par value per share, or such other
class of shares or other securities as may be applicable pursuant to the
provisions of Section 5.
2.8 Exchange Act
     The Securities Exchange Act of 1934, as amended.
2.9 Fair Market Value
     Unless otherwise provided by the Plan Administrator prior to the date of a
Change in Control as applied to a specific date, Fair Market Value shall be
deemed to be the mean between the highest and lowest quoted selling prices at
which Common Stock is sold on such date as reported in the NYSE-Composite
Transactions by The Wall Street Journal for such date, or if no Common Stock was
traded on such date, on the next preceding day on which Common Stock was so
traded. Notwithstanding the foregoing, upon the exercise, of a limited stock
appreciation right or stock appreciation right granted in connection with a
Nonqualified Option on or after a Change in Control, Fair Market Value on the
date of exercise shall be deemed to be the greater of (i) the highest price per
share of Common Stock as reported in the NYSE-Composite Transactions by The Wall
Street Journal during the sixty (60) day period ending on the day preceding the
date of exercise of the stock appreciation right or limited stock appreciation
right, as the case may be, and (ii) if the Change in Control is one described in
clause (ii) or (iii) of Section 2.5, the highest price per share paid for Common
Stock in connection with such Change in Control.
2.10 Good Reason
     For purposes of the Plan, a Participant’s termination of employment for
Good Reason, following a Change in Control, shall mean the occurrence of any of
the following events or conditions:

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     (a) a change in the Participant’s status, title, position or
responsibilities (including reporting responsibilities) which represents a
substantial reduction of the status, title, position or responsibilities as in
effect immediately prior thereto; the assignment to the Participant of any
duties or responsibilities which are inconsistent with such status, title,
position or responsibilities; or any removal of the Participant from or failure
to reappoint or reelect the Participant to any of such positions, except in
connection with the termination of the Participant’s employment for Cause, for
Permanent Disability or as a result of his or her death, or by the Participant
other than for Good Reason;
     (b) a reduction in the Participant’s annual base salary;
     (c) the Company’s requiring the Participant (without the consent of the
Participant) to be based at any place outside a thirty-five (35) mile radius of
his or her place of employment prior to a Change in Control, except for
reasonably required travel on the Company’s business which is not materially
greater than such travel requirements prior to the Change in Control;
     (d) the failure by the Company to (i) continue in effect any material
compensation or benefit plan in which the Participant was participating at the
time of the Change in Control, including, but not limited to, the Plan, the El
Paso Energy Corporation Pension Plan, the El Paso Energy Corporation
Supplemental Benefits Plan, the El Paso Energy Corporation Deferred Compensation
Plan and the El Paso Energy Corporation Retirement Savings Plan, with any
amendments and restatements of such plans (or substantially similar successor
plans) made prior to such Change in Control; or (ii) provide the Participant
with compensation and benefits at least equal (in terms of benefit levels and/or
reward opportunities) to those provided for under each employee benefit plan,
program and practice as in effect immediately prior to the Change in Control (or
as in effect following the Change in Control, if greater);
     (e) any material breach by the Company of any provision of the Plan or of
any provision of a Participant’s employment agreement, if any, with the Company
or a Subsidiary; 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 or the
Participant’s employment agreement, if any, with the Company or a Subsidiary.
2.11 Incentive Award
     A percentage of base salary, fixed dollar amount or other measure of
compensation which Participants are eligible to receive, in cash and/or shares
of

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Restricted Stock, at the end of a Performance Period if certain Performance
Goals are achieved.
2.12 Incentive Stock Option
     An option intended to meet the requirements of an Incentive Stock Option as
defined in Section 422 of the Code, as in effect at the time of grant of such
option, or any statutory provision that may hereafter replace such Section.
2.13 Management Committee
     A committee consisting of the Chief Executive Officer and such other senior
officers as the Chief Executive Officer shall designate.
2.14 Maximum Annual Employee Grant
     The Maximum Annual Employee Grant set forth in Section 5.4.
2.15 Nonqualified Option
     An option which is not intended to meet the requirements of an Incentive
Stock Option as defined in Section 422 of the Code.
2.16 Option Price
     The price per share of Common Stock at which an option is exercisable.
2.17 Participant
     An eligible employee to whom an option, limited stock appreciation right,
stock appreciation right, Restricted Stock, Incentive Award or Performance Unit
is granted under the Plan as set forth in Section 4.
2.18 Performance Cycle
     That period commencing with January 1 of each year in which the grant of a
Performance Unit is made and ending on December 31 of the third succeeding year,
or such other time period as the Plan Administrator may determine. The Plan
Administrator, it its discretion, may initiate an overlapping Performance Cycle
that begins before an existing Performance Cycle has ended.
2.19 Performance Goals
     The Plan Administrator shall establish one or more performance goals
(“Performance Goals”) for each Performance Period in writing. Such Performance
Goals

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shall be set no later than the commencement of the applicable Performance
Period, or such later date as may be permitted with respect to
“performance-based” compensation under Section 162(m) of the Code, and shall
establish the amount of any Incentive Award to be granted to each Participant,
subject to Section 5.4 below.
     Each Performance Goal selected for a particular Performance Period shall be
any one or more of the following, either individually, alternatively or in any
combination, applied to either the Company as a whole or to a Subsidiary or
business unit, either individually, alternatively or in any combination, and
measured either annually or cumulatively over a period of years, on an absolute
basis or relative to the pre-established target, to previous years’ results or
to a designated comparison group, in each case as specified by the Plan
Administrator: Total Shareholder Return, operating income, pre-tax profit,
earnings per share, cash flow, return on capital, return on equity, return on
net assets, net income, debt reduction, safety, return on investment, revenues,
or Common Stock price. The foregoing terms shall have the same meaning as used
in the Company’s financial statements, or if the terms are not used in the
Company’s financial statements, they shall have the meaning generally applied
pursuant to general accepted accounting principles, or as used in the industry,
as applicable. The Plan Administrator may appropriately adjust any evaluation of
performance under a Performance Goal to exclude any of the following events that
occurs during a Performance Period: (i) asset write-downs, (ii) litigation or
claim judgments or settlements, (iii) the effect of changes in tax law,
accounting principles or other such laws or provisions affecting reported
results, (iv) accruals for reorganization and restructuring programs, and
(v) extraordinary non-recurring items as described in Accounting Principles
Board Opinion No. 30 and/or in management’s discussion and analysis of financial
condition and results of operations appearing in the Company’s annual report to
stockholders for the applicable year.
2.20 Performance Peer Group
     Those publicly held companies selected by the Plan Administrator prior to
the commencement of a Performance Period, or such later date as may be permitted
under Section 162(m) of the Code, consistent with maintaining the status of
Performance Units as “performance-based compensation,” to form a comparative
performance group in applying Section 9.4.
2.21 Performance Period
     That period of time during which Performance Goals are measured to
determine the vesting or granting of options, limited stock appreciation rights,
stock appreciation rights, Restricted Stock, Performance Units or Incentive
Awards, as the Plan Administrator may determine.

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2.22 Performance Ranking Position
     The relative placement of the Company’s Total Shareholder Return measured
against the Total Shareholder Return of the other companies in the Performance
Peer Group for which purposes rank shall be determined by quartile, with a
ranking in the first (1st) quartile (e.g., the Company’s Total Shareholder
Return is equal to or greater than the Total Shareholder Return of at least
seventy-five percent (75%) of the Performance Peer Group) corresponding to the
highest quartile of Total Shareholder Return.
2.23 Performance Unit or Units
     Units of long-term incentive compensation granted to a Participant with
respect to a particular Performance Cycle.
2.24 Permanent Disability or Permanently Disabled
     A Participant shall be deemed to have become Permanently Disabled for
purposes of the Plan if the Chief Executive Officer of the Company shall find
upon the basis of medical evidence satisfactory to the Chief Executive Officer
that the Participant is totally disabled, whether due to physical or mental
condition, so as to be prevented from engaging in further employment by the
Company or any of its Subsidiaries, and that such disability will be permanent
and continuous during the remainder of the Participant’s life; provided, that
with respect to Section 16 Insiders such determination shall be made by the Plan
Administrator.
2.25 Plan Administrator
     The Board of Directors or the committee appointed and/or authorized
pursuant to Section 3 to administer the Plan.
2.26 Restricted Stock
     Common Stock granted under the Plan that is subject to the requirements of
Section 10 and such other restrictions as the Plan Administrator deems
appropriate. References to Restricted Stock in this Plan shall include
Performance Restricted Stock (as defined in Section 5.2) unless the context
otherwise requires.
2.27 Rule 16b-3
     Rule 16b-3 of the General Rules and Regulations under the Exchange Act.
2.28 Section 16 Insider
     Any person who is selected by the Plan Administrator to receive options,
limited stock appreciation rights, stock appreciation rights, Restricted Stock,
Incentive Awards

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and/or Performance Units pursuant to the Plan and who is subject to the
requirements of Section 16 of the Exchange Act, and the rules and regulations
promulgated thereunder.
2.29 Section 162(m)
     Section 162(m) of the Code, and regulations promulgated thereunder.
2.30 Subsidiary
     An entity that is designated by the Plan Administrator as a subsidiary for
purposes of the Plan and that is a corporation, partnership, joint venture,
limited liability company, limited liability partnership, or other entity in
which the Company owns directly or indirectly, fifty percent (50%) or more of
the voting power or profit interests, or as to which the Company or one of its
affiliates serves as general or managing partner or in a similar capacity.
Notwithstanding the foregoing, for purposes of options intended to qualify as
Incentive Stock Options, the term “Subsidiary” shall mean a corporation (or
other entity treated as a corporation for tax purposes) in which the Company
directly or indirectly holds more than fifty percent (50%) of the voting power.
2.31 Total Shareholder Return
     The sum of (i) the appreciation or depreciation in the price of a share of
a company’s common stock, and (ii) the dividends and other distributions paid
during the applicable Performance Cycle, expressed as a percentage basis of the
Fair Market Value of such share on the first day of the applicable Performance
Cycle, as calculated in a manner determined by the Plan Administrator.
2.32 Valuation Date
     The date for determining the Adjusted Value of vested Units that will be
paid or credited to the Participant or Beneficiary in accordance with
Section 9.5 or 9.6. The Valuation Date shall occur on the last day of the
applicable Performance Cycle, or such other time as provided in this Plan, or as
the Plan Administrator may select. The Valuation Date for each Performance Cycle
shall be set forth in the grant of Performance Units and shall be established no
later than the date on which the Performance Goals for a particular Performance
Cycle are selected, except as otherwise specifically provided herein.

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SECTION 3 ADMINISTRATION
     3.1 With respect to awards made under the Plan to Section 16 Insiders or
employees subject to Section 162(m), the Plan shall be administered by the Board
of Directors or Compensation Committee of the Board of Directors, which shall be
constituted at all times so as to meet the non-employee director standards of
Rule 16b-3 and the outside director requirements of Section 162(m), so long as
any of the Company’s equity securities are registered pursuant to Section 12(b)
or 12(g) of the Exchange Act. Subject to the Board of Directors, and as may be
required by the foregoing sentence, the Plan shall be administered by the
Management Committee.
     No member of the Board of Directors or the Plan Administrator shall vote
with respect directly to the granting of options, limited stock appreciation
rights, stock appreciation rights, Restricted Stock, Incentive Awards and/or
Performance Units hereunder to himself or herself, as the case may be, and, if
state corporate law does not permit a committee to grant options, limited stock
appreciation rights, stock appreciation rights, Restricted Stock, Incentive
Awards and Performance Units to directors, then any option, limited stock
appreciation right, stock appreciation right, Restricted Stock, Incentive Award
or Performance Unit granted under the Plan to a director for his or her services
as such shall be approved by the full Board of Directors.
     3.2 Except for the terms and conditions explicitly set forth in the Plan,
the Plan Administrator shall have sole authority to construe and interpret the
Plan, to establish, amend and rescind rules and regulations relating to the
Plan, to select persons eligible to participate in the Plan, to grant options,
limited stock appreciation rights, stock appreciation rights, Restricted Stock,
Incentive Awards and Performance Units hereunder, to administer the Plan, to
make recommendations to the Board of Directors, to determine whether, and the
extent to which, adjustments are made pursuant to Section 5.5 hereof, and to
take all such steps and make all such determinations in connection with the Plan
and the options, limited stock appreciation rights, stock appreciation rights,
Restricted Stock, Incentive Awards and Performance Units granted thereunder as
it may deem necessary or advisable, which determination shall be final and
binding upon all Participants, so long as such interpretation and construction
with respect to Incentive Stock Options corresponds to any applicable
requirements of Section 422 of the Code. The Plan Administrator shall cause the
Company at its expense to take any action related to the Plan which may be
necessary to comply with the provisions of any federal or state law or any
regulations issued thereunder, which the Plan Administrator determines are
intended to be complied with.
     3.3 Each member of any committee acting as Plan Administrator, while
serving as such, shall be considered to be acting in his or her capacity as a
director of the Company. Members of the Board of Directors and members of any
committee acting under the Plan shall be fully protected in relying in good
faith upon the advice of counsel and shall incur no liability except for gross
negligence or willful misconduct in the performance of their duties.

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SECTION 4 ELIGIBILITY
     To be eligible for selection by the Plan Administrator to participate in
the Plan, an individual must be an officer or key management employee (other
than an employee who is a member of a unit covered by a collective bargaining
agreement) of the Company, or of any Subsidiary, as of the date on which the
Plan Administrator grants to such individual an option, limited stock
appreciation right, stock appreciation right, Restricted Stock, Incentive Award
or Performance Unit or a person who, in the judgment of the Plan Administrator,
holds a position of responsibility and is able to contribute substantially to
the Company’s continued success. Members of the Board of Directors of the
Company who are full-time salaried officers shall be eligible to participate.
Members of the Board of Directors who are not employees are not eligible to
participate in this Plan.
SECTION 5 SHARES AND UNITS AVAILABLE FOR THE PLAN
     5.1 Subject to Section 5.5, the maximum number of shares that may be issued
upon settlement of Incentive Awards or Performance Units and exercise of
options, limited stock appreciation rights, stock appreciation rights and
Restricted Stock granted under the Plan is six million (6,000,000) shares of
Common Stock, from shares held in the Company’s treasury or out of authorized
but unissued shares of the Company, or partly out of each, as shall be
determined by the Plan Administrator. For purposes of Section 5.1, the aggregate
number of shares of Common Stock issued under this Plan at any time shall equal
only the number of shares actually issued upon exercise or settlement of
options, limited stock appreciation rights, stock appreciation rights,
Restricted Stock, Incentive Awards and Performance Units and not returned to the
Company upon cancellation, expiration or forfeiture of any such award or
delivered (either actually or by attestation) in payment or satisfaction of the
purchase price, exercise price or tax obligation of the award.
     5.2 Notwithstanding the foregoing, and subject to Section 5.5, the number
of shares for which Restricted Stock may be granted pursuant to Section 10 of
the Plan may not exceed two million (2,000,000) shares of Common Stock,
including the granting or vesting of Restricted Stock that is in compliance with
the performance-based requirements of Section 162(m) (the “Performance
Restricted Stock”).
     5.3 Subject to Section 5.5, the number of Performance Units which may be
granted under the Plan may not exceed five hundred thousand (500,000) Units.
Units that have been granted and are fully vested or that still may become fully
vested under the terms of the Plan shall reduce the number of outstanding Units
that are available for use in making future grants under the Plan.
     5.4 For purposes of qualifying as “performance-based compensation” under
Section 162(m), the maximum number of shares, as calculated in accordance with
the provisions of Section 5.1, and maximum amount with respect to which awards
under this

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Plan may be granted to any eligible employee in any one year shall not exceed:
(a) one million (1,000,000) shares, in the case of options (and related limited
stock appreciation rights or stock appreciation rights); (b) one million
(1,000,000) shares in the case of shares of Restricted Stock (whether or not
such Restricted Stock is Performance Restricted Stock) or shares issuable upon
settlement of Performance Units; and (c) ten million dollars ($10,000,000) in
cash, Restricted Stock or a combination thereof, in the case of Incentive
Awards. With respect to Performance Units, the maximum number of Units granted
to any eligible employee for any Performance Cycle shall not exceed one hundred
thousand (100,000) Performance Units, each with a value of not more than $150.
Collectively, the foregoing maximums referred to in this Section 5.4 shall be
referred to as the “Maximum Annual Employee Grant.”
     5.5 In the event of a recapitalization, stock split, stock dividend,
exchange of shares, merger, reorganization, change in corporate structure or
shares of the Company or similar event, the Board of Directors or the Plan
Administrator, may make, and following a Change in Control may make, appropriate
adjustments in the number of shares authorized for issuance under the Plan, the
Maximum Annual Employee Grant and, with respect to outstanding options, limited
stock appreciation rights, stock appreciation rights, and Restricted Stock, the
Plan Administrator may make appropriate adjustments in the number of shares and
the Option Price, except that any such adjustments for purposes of Sections 5.4
and 6.3 shall be consistent with the requirements under Code Sections 162(m) and
422, respectively.
SECTION 6 STOCK OPTIONS
     6.1 Options may be granted to eligible employees in such number, and at
such times during the term of the Plan as the Plan Administrator shall
determine, the Plan Administrator taking into account the duties of the
respective employees, their present and potential contributions to the success
of the Company, and such other factors as the Plan Administrator shall deem
relevant in accomplishing the purposes of the Plan. The Plan Administrator may
grant an option or provide for the grant of an option, either from time to time
in the discretion of the Plan Administrator or automatically upon the occurrence
of specified events, including, without limitation, the achievement of
performance goals, the satisfaction of an event or condition within the control
of the recipient of the option or within the control of others. The granting of
an option shall take place when the Plan Administrator by resolution, written
consent or other appropriate action determines to grant such an option to a
particular Participant at a particular price. Each option shall be evidenced by
a written instrument delivered by or on behalf of the Company containing
provisions not inconsistent with the Plan, which may (but need not) require the
Participant’s signature.
     6.2 An option granted under the Plan may be either an Incentive Stock
Option or a Nonqualified Option.

      El Paso Energy Corporation
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     6.3 Each provision of the Plan and each Incentive Stock Option granted
thereunder shall be construed so that each such option shall qualify as an
Incentive Stock Option, and any provision thereof that cannot be so construed
shall be disregarded, unless the Participant agrees otherwise. The total number
of shares which may be purchased upon the exercise of Incentive Stock Options
granted under the Plan shall not exceed the total specified in Section 5.1, as
adjusted pursuant to Section 5.5. Incentive Stock Options, in addition to
complying with the other provisions of the Plan relating to options generally,
shall be subject to the following conditions:
     (a) Ten Percent (10%) Stockholders
     A Participant must not, immediately before an Incentive Stock Option is
granted to him or her, own stock representing more than ten percent (10%) of the
voting power or value of all classes of stock of the Company or of a Subsidiary.
This requirement is waived if (i) the Option Price of the Incentive Stock Option
to be granted is at least one hundred ten percent (110%) of the Fair Market
Value of the stock subject to the option, determined at the time the option is
granted, and (ii) the option is not exercisable more than five (5) years from
the date the option is granted.
     (b) Annual Limitation
     To the extent that the aggregate Fair Market Value (determined at the time
of the grant of the option) of the stock with respect to which Incentive Stock
Options are exercisable for the first time by the Participant during any
calendar year exceeds One Hundred Thousand Dollars ($100,000), such options
shall be treated as Nonqualified Options.
     (c) Additional Terms
     Any other terms and conditions which the Plan Administrator determines,
upon advice of counsel, must be imposed for the option to be an Incentive Stock
Option.
     6.4 Except as otherwise provided in Section 6.3, all Incentive Stock
Options and Nonqualified Options under the Plan shall be granted subject to the
following terms and conditions:
     (a) Option Price
     The Option Price shall be determined by the Plan Administrator, but shall
not be less than one hundred percent (100%) of the Fair Market Value of the
Common Stock on the date the option is granted.

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     (b) Duration of Options
     Options shall be exercisable at such time and under such conditions as set
forth in the option grant, but in no event shall any Incentive Stock Option be
exercisable subsequent to the day before the tenth anniversary of the date this
Plan was adopted, nor shall any option (including an Incentive Stock Option) be
exercisable later than the tenth anniversary of the date of its grant.
     (c) Exercise of Options
     Subject to Section 6.4(j), a Participant may not exercise an option until
the Participant has completed one (1) year of continuous employment with the
Company or any of its Subsidiaries from and including the date on which the
option is granted, or such other period as the Plan Administrator may determine
in a particular case. This requirement is waived in the event of death,
Permanent Disability of a Participant or a Change in Control before such period
of continuous employment is completed. Thereafter, shares of Common Stock
covered by an option may be purchased at one time or in such installments over
the balance of the option period as may be provided in the option grant. Any
shares not purchased on the applicable installment date may be purchased
thereafter at any time prior to the final expiration of the option. To the
extent that the right to purchase shares has accrued thereunder, options may be
exercised from time to time by written notice to the Company setting forth the
number of shares with respect to which the option is being exercised.
     (d) Payment
The purchase price of shares purchased under options shall be paid in full to
the Company upon the exercise of the option by delivery of consideration equal
to the product of the Option Price and the number of shares purchased (the
“Purchase Price”). Such consideration may be either (i) in cash or (ii) at the
discretion of the Plan Administrator, in Common Stock already owned by the
Participant for at least six (6) months, or any combination of cash and Common
Stock. The Fair Market Value of such Common Stock as delivered shall be valued
as of the day prior to delivery. The Plan Administrator can determine that
additional forms of payment will be permitted. To the extent permitted by the
Plan Administrator and applicable laws and regulations (including, but not
limited to, federal tax and securities laws, regulations and state corporate
law), an option may also be exercised in a “cashless” exercise by delivery of a
properly executed exercise notice together with irrevocable instructions to a
broker selected by the Company 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.

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     If specifically authorized in the option grant, a Participant may elect to
pay all or a portion of the Purchase Price by having shares of Common Stock with
a Fair Market Value equal to all or a portion of the Purchase Price be withheld
from the shares issuable to the Participant upon the exercise of the option;
provided that such shall be permitted of a Participant who is a Section 16
Insider only if approved in advance by the Board of Directors or the
Compensation Committee, if required by Section 16, and rules promulgated
thereunder, of the Exchange Act. The Fair Market Value of such Common Stock as
is withheld shall be determined as of the same day as the exercise of the
option.
     Notwithstanding any other provision in this Plan to the contrary and unless
the Plan Administrator shall otherwise determine, in the event of a “cashless”
exercise, and for that purpose only under this Plan, a Participant’s
compensation shall be equal to the difference between the actual sales price
received for the underlying Common Stock and the Option Price. For all other
purposes under this Plan, the Fair Market Value shall be the value against which
compensation is determined.
     (e) Restrictions
     The Plan Administrator shall determine and reflect in the option grant,
with respect to each option, the nature and extent of the restrictions, if any,
to be imposed on the shares of Common Stock which may be purchased thereunder,
including, but not limited to, restrictions on the transferability of such
shares acquired through the exercise of such options for such periods as the
Plan Administrator may determine and, further, that in the event a Participant’s
employment by the Company, or a Subsidiary, terminates during the period in
which such shares are nontransferable, the Participant shall be required to sell
such shares back to the Company at such prices as the Plan Administrator may
specify in the option. In addition, the Plan Administrator may require that a
Participant who wants to effectuate a “cashless” exercise of options be required
to sell the shares of Common Stock acquired in the associated exercise to the
Company, or in the open market through the use of a broker selected by the
Company, at such price and on such terms as the Plan Administrator may determine
at the time of grant, or otherwise. Without limiting the foregoing, the Plan
Administrator may impose such restrictions, conditions or limitations as it
determines appropriate as to the timing and manner of any resales by the
Participant or other subsequent transfers by the Participant of any shares
issued as a result of the exercise of an option, including without limitation
(i) restrictions under an insider trading policy, (ii) restrictions designed to
delay and/or coordinate the timing and manner of sales by the Participant and
other participants and (iii) restrictions as to the use of a specified brokerage
firm for such resales or other transfers.

      El Paso Energy Corporation
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     (f ) Nontransferability of Options
     Options granted under the Plan and the rights and privileges conferred
thereby shall not be subject to execution, attachment or similar process and may
not be transferred, assigned, pledged or hypothecated in any manner (whether by
operation of law or otherwise) other than by will or by the applicable laws of
descent and distribution. Notwithstanding the foregoing and only as provided by
the Plan Administrator or the Company, as applicable, Nonqualified Options may
be transferred to a Participant’s immediate family members, directly or
indirectly or by means of a trust, corporate entity or partnership (a person who
thus acquires this option by such transfer, a “Permitted Transferee”). A
transfer of an option may only be effected by the Company at the request of the
Participant and shall become effective upon the Permitted Transferee agreeing to
such terms as the Plan Administrator may require and only when recorded in the
Company’s record of outstanding options. In the event an option is transferred
as contemplated hereby, the option may not be subsequently transferred by the
Permitted Transferee except a transfer back to the Participant or by will or the
laws of descent and distribution. A transferred option may be exercised by a
Permitted Transferee to the same extent as, and subject to the same terms and
conditions as, the Participant (except as otherwise provided herein), as if no
transfer had taken place. As used herein, “immediate family” shall mean, with
respect to any person, such person’s child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, sister-in-law, and shall include
adoptive relationships. In the event of exercise of a transferred option by a
Permitted Transferee, any amounts due to (or to be withheld by) the Company upon
exercise of the option shall be delivered by (or withheld from amounts due to)
the Participant, the Participant’s estate or the Permitted Transferee, in the
reasonable discretion of the Company.
     In addition, to the extent permitted by applicable law and Rule 16b-3, the
Plan Administrator may permit a recipient of a Nonqualified Option to designate
in writing during the Participant’s lifetime a Beneficiary to receive and
exercise the Participant’s Nonqualified Options in the event of such
Participant’s death (as provided in Section 6.4(i)). A designation by a
Participant under the Company’s Omnibus Compensation Plan dated as of January 1,
1992, as amended, the Company’s 1995 Omnibus Compensation Plan effective as of
January 13, 1995, as amended and restated, or the 1999 Omnibus Incentive
Compensation Plan effective as of January 20, 1999 (the “Predecessor Plans”),
shall remain in effect under the Plan for any options unless such designation is
revoked or changed under the Plan. Except as otherwise provided for herein, if
any Participant attempts to transfer, assign, pledge, hypothecate or otherwise
dispose of any option under the Plan or of any right or privilege conferred
thereby, contrary to the provisions of the Plan or such option, or suffers the
sale or levy or any attachment or similar process upon the rights and privileges
conferred hereby, all affected options held by such Participant shall be
immediately forfeited.

      El Paso Energy Corporation
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     (g) Purchase for Investment
     The Plan Administrator shall have the right to require that each
Participant or other person who shall exercise an option under the Plan, and
each person into whose name shares of Common Stock shall be issued pursuant to
the exercise of an option, represent and agree that any and all shares of Common
Stock purchased pursuant to such option are being purchased for investment only
and not with a view to the distribution or resale thereof and that such shares
will not be sold except in accordance with such restrictions or limitations as
may be set forth in the option or by the Plan Administrator. This Section 6.4(g)
shall be inoperative during any period of time when the Company has obtained all
necessary or advisable approvals from governmental agencies and has completed
all necessary or advisable registrations or other qualifications of shares of
Common Stock as to which options may from time to time be granted as
contemplated in Section 12.
     (h) Termination of Employment
     Upon the termination of a Participant’s employment for any reason other
than death or Permanent Disability, the Participant’s option shall be
exercisable only to the extent that it was then exercisable and, unless provided
otherwise in this Plan or in the grant letter, shall immediately be forfeited to
the extent not exercisable. Unless the term of the options expires sooner, the
exercisable portion of such options shall expire according to the following
schedule; provided, that the Plan Administrator may at any time determine in a
particular case that specific limitations and restrictions under the Plan shall
not apply:
     (i) Retirement
     The option shall expire, unless exercised, thirty-six (36) months after the
Participant’s retirement from the Company or any Subsidiary.
     (ii) Disability
     The option shall expire, unless exercised, thirty-six (36) months after the
Participant’s termination on account of Permanent Disability.
     (iii) Termination
     Subject to subparagraphs (iv) and (v) below, the option shall expire,
unless exercised, not more than thirty-six (36) months, as specified in the
grant letter, after a Participant resigns or is terminated as an employee of the
Company or any of its Subsidiaries other than as a result of retirement,
disability or death, unless the Chief Executive Officer of the Company shall
have determined in a specific case that the option should expire sooner or
should terminate when the Participant’s employment

      El Paso Energy Corporation
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status ceases; provided, however, that for Section 16 Insiders, such
determination shall be made by the Plan Administrator.
     (iv) Termination Following a Change in Control
     The option shall expire, unless exercised or expiring earlier in accordance
with its original terms, thirty-six (36) months after a Participant’s
termination of employment (other than a termination by the Company for Cause or
a voluntary termination by the Participant other than for Good Reason) following
a Change in Control, provided that said termination of employment occurs within
two (2) years following a Change in Control.
     (v) All Other Terminations
     Notwithstanding subparagraphs (iii) and (iv) above, the option shall expire
upon termination of employment for Cause and any option intended to qualify as
an Incentive Stock Option shall state that it will not qualify for tax treatment
as an Incentive Stock Option if it is exercised more than one year after the
Participant’s termination of employment on account of disability (as defined in
Section 22(e)(3) of the Code) and shall expire three (3) months after the
Participant’s termination of employment other than on account of death,
Permanent Disability or termination for Cause.
     (i) Death of Participant
     Upon the death of a Participant, whether during the Participant’s period of
employment or during the period prior to the option’s expiration as provided in
Section 6.4(h), the option shall expire, unless the original term of the option
expires sooner, twelve (12) months after the date of the Participant’s death,
unless the option is exercised within such twelve (12) month period by the
Participant’s Beneficiary, legal representatives, estate or the person or
persons to whom the deceased’s option rights shall have passed by will or the
laws of descent and distribution; provided, that the Plan Administrator may
determine in a particular case that specific limitations and restrictions under
the Plan shall not apply. Notwithstanding any other Plan provisions pertaining
to the times at which options may be exercised, no option shall continue to be
exercisable, pursuant to Section 6.4(h) or this Section 6.4(i), at a time that
would violate the maximum duration of Section 6.4(b).
     (j) Change in Control
     Notwithstanding other Plan provisions pertaining to the times at which
options may be exercised, all outstanding options, to the extent not then
currently

      El Paso Energy Corporation
2001 Omnibus Incentive Compensation Plan   Page 17

 

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exercisable, shall become exercisable in full upon the occurrence of a Change in
Control. No option (whether or not intended to be an Incentive Stock Option)
shall continue to be exercisable, pursuant to Sections 6.4(h) and 6.4(i), at a
time that would violate the maximum duration of Section 6.4(b).
     (k) Deferral Election
     A Participant may elect irrevocably (at a time and in a manner determined
by the Plan Administrator or the Company, as appropriate) prior to exercising an
option granted under the Plan that issuance of shares of Common Stock upon
exercise of such option and/or associated stock appreciation right shall be
deferred until a pre-specified date in the future or until the Participant
ceases to be employed by the Company or any of its Subsidiaries, as elected by
the Participant. After the exercise of any such option and prior to the issuance
of any deferred shares, the number of shares of Common Stock issuable to the
Participant shall be credited to the deferred stock account (or such other
account(s) as the Management Committee shall deem necessary and appropriate)
under a memorandum deferred account established pursuant the Company’s
then-existing Deferred Compensation Plan (as it may be further amended) (the
“Deferred Compensation Plan”), and any dividends or other distributions paid on
the Common Stock (or its equivalent) shall be deemed reinvested in additional
shares of Common Stock (or its equivalent) until all credited deferred shares
shall become issuable pursuant to the Participant’s election, unless the
management committee of the Deferred Compensation Plan shall otherwise
determine.
     (l) Repricing
     The Company shall not reprice any options, except for adjustments pursuant
to Section 5.5, as determined by the Plan Administrator, unless such action is
subject to approval of the Company’s stockholders or unless the number of shares
available for issuance under the Plan is reduced by the number of shares that
were subject to options affected by such action. For purposes of the Plan, the
term “reprice” shall mean lowering the exercise price of previously awarded
Nonqualified Options within the meaning of Item 402(i) under Securities and
Exchange Commission Regulation S-K.
SECTION 7 STOCK APPRECIATION RIGHTS
     7.1 The Plan Administrator may grant stock appreciation rights to
Participants in connection with any option granted under the Plan, either at the
time of the grant of such option or at any time thereafter during the term of
the option. Such stock appreciation rights shall cover the same number of shares
covered by the options (or such lesser number of shares of Common Stock as the
Plan Administrator may determine) and shall, except as provided in Section 7.3,
be subject to the same terms and conditions as

      El Paso Energy Corporation
2001 Omnibus Incentive Compensation Plan   Page 18

 

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the related options and such further terms and conditions not inconsistent with
the Plan as shall from time to time be determined by the Plan Administrator.
     7.2 Each stock appreciation right shall entitle the holder of the related
option to surrender to the Company unexercised the related option, or any
portion thereof, and to receive from the Company in exchange therefor an amount
equal to the excess of the Fair Market Value of one share of Common Stock on the
date the right is exercised over the Option Price per share times the number of
shares covered by the option, or portion thereof, which is surrendered. Payment
shall be made in shares of Common Stock valued at Fair Market Value as of the
date the right is exercised, or in cash, or partly in shares and partly in cash,
at the discretion of the Plan Administrator. Stock appreciation rights may be
exercised from time to time upon actual receipt by the Company of written notice
stating the number of shares of Common Stock with respect to which the stock
appreciation right is being exercised. The value of any fractional shares shall
be paid in cash.
     7.3 Stock appreciation rights are subject to the following restrictions:
     (a) Each stock appreciation right shall be exercisable at such time or
times as the option to which it relates shall be exercisable, or at such other
times as the Plan Administrator may determine. In the event of death or
Permanent Disability of a Participant during employment but before the
Participant has completed such period of continuous employment, such stock
appreciation right shall be exercisable, but only within the period specified in
the related option. In the event of a Change in Control, the requirement that a
Participant shall have completed a one (1) year 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 one (1) year period,
voluntarily terminates employment for Good Reason or is terminated by the
Company other than for Cause.
     (b) Except following a Change in Control, each request to exercise a stock
appreciation right shall be subject to approval or denial in whole or in part by
the Plan Administrator in its sole discretion. Denial or approval of such
request shall not require a subsequent request to be similarly treated by the
Plan Administrator.
     (c) The right of a Participant to exercise a stock appreciation right shall
be canceled if and to the extent the related option is exercised or canceled. 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.

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     (e) The acquisition of Common Stock pursuant to the exercise of a stock
appreciation right shall be subject to the same restrictions as would apply to
the acquisition of Common Stock acquired upon exercise of the related option, as
set forth in Section 6.4.
SECTION 8 LIMITED STOCK APPRECIATION RIGHTS
     8.1 The Plan Administrator may grant limited stock appreciation rights to
Participants in connection with any options granted under the Plan, either at
the time of the grant of such option or at any time thereafter during the term
of the option. Such limited stock appreciation rights shall cover the same
number of shares covered by the options (or such lesser number of shares of
Common Stock as the Plan Administrator may determine) and shall, except as
provided in Section 8.3, be subject to the same terms and conditions as the
related options and such further terms and conditions not inconsistent with the
Plan as shall from time to time be determined by the Plan Administrator.
     8.2 Each limited stock appreciation right shall entitle the holder of the
related option to surrender to the Company the unexercised portion of the
related option and to receive from the Company in exchange therefor an amount in
cash equal to the excess of the Fair Market Value of one (1) share of Common
Stock on the date the right is exercised over the Option Price per share times
the number of shares covered by the option, or portion thereof, which is
surrendered.
     8.3 Limited stock appreciation rights are subject to the following
restrictions:
     (a) Limited stock appreciation rights shall be exercisable only to the same
extent and subject to the same conditions as the options related thereto are
exercisable, as provided in Section 6.4(j).
     (b) The right of a Participant to exercise a limited stock appreciation
right shall be canceled if and to the extent the related option is exercised. To
the extent that a limited stock appreciation right is exercised, the related
option shall be deemed to have been surrendered unexercised and canceled.
SECTION 9 PERFORMANCE UNITS
9.1 Grants of Units
     Subject to the Maximum Annual Employee Grant, Units may be granted to
Participants in such number as the Plan Administrator shall determine, taking
into account the duties of the respective Participants, their present and
potential contributions to the success of the Company or its Subsidiaries, their
compensation provided by other

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2001 Omnibus Incentive Compensation Plan   Page 20

 

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incentive plans, their salaries, and such other factors as the Plan
Administrator shall deem appropriate. Normally, Units will be granted only at
the beginning of each Performance Cycle except in cases where a prorated grant
may be made in mid-cycle to a newly eligible Participant or a Participant whose
job responsibilities have significantly changed during the cycle.
9.2 Notice to Participants
     The Plan Administrator shall notify each Participant in writing of the
grant of Units to the Participant. Such notice shall set forth the Total
Shareholder Return requirements, vesting schedule and other terms and conditions
applicable to such Units, and may (but need not) require the Participant’s
signature.
9.3 Vesting
     (a) Vesting Schedule
     The Plan Administrator shall adopt a vesting schedule for each year of a
Performance Cycle. Vesting of Units for each year may (i) occur automatically
after a Participant has completed the specified period of continuous employment
with the Company or any of its Subsidiaries from the date of grant of such
Units, (ii) be contingent upon attaining certain levels of Total Shareholder
Return for the year in which the Units are eligible to vest, or (iii) occur at
such other times or subject to such other criteria as the Plan Administrator may
determine. The Plan Administrator may, in its discretion, at any time prior to a
Change in Control alter the vesting guidelines in the event of unusual
circumstances provided that to the extent applicable any such discretion shall
be exercised in a manner consistent with Section 162(m). Vesting of Units with
respect to Participants who begin participation or receive an additional grant
of Units during the Performance Cycle will be determined by the Plan
Administrator at the time of grant.
     (b) Change in Control
     Notwithstanding the foregoing vesting provisions, upon a Change in Control
all unvested Units shall become fully vested on a pro rata basis to the maximum
extent to which they could have vested as of the end of the year in which the
Change in Control occurs.

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9.4 Valuation of Performance Units
     All Performance Units granted to Participants under the Plan shall be
valued as follows:
     (a) Initial and Continuing Value
     Each Performance Unit shall have an initial value of one hundred dollars
($100) as of the date of the grant of Performance Units. Except where the
Adjusted Value of Performance Units is determined as provided under
Section 9.4(b), each Performance Unit shall continue to have a dollar value of
one hundred dollars ($100) on each date subsequent to the date of grant of the
Performance Unit.
     (b) Adjusted Value
     The determination of the Adjusted Value of Performance Units for benefit
payments under Sections 9.5(b)(i) and 9.5(b)(ii) as of any relevant Valuation
Date shall be made based on the Company’s Performance Ranking Position for the
applicable Performance Cycle compared to the Performance Ranking Position of the
Performance Peer Group, based on the following schedule:

          Company’s Performance   Adjusted Ranking Position   Value
1st Quartile
  $ 150  
2nd Quartile
  $ 100  
3rd Quartile
  $ 50  
4th Quartile
  $ 0  

If any company which is a member of the Performance Peer Group (i) ceases to
exist by reason of a liquidation, merger or other transaction; (ii) undergoes a
significant alteration in size, through recapitalization or otherwise, such that
its total market capitalization as determined from its published financial
statements is more than fifty percent (50%) greater or less than its total
market capitalization as of the grant date for the applicable Performance Cycle;
or (iii) otherwise changes its line of business significantly to make it
inappropriate to use such company in comparison, and if such event(s) occurs
after the time the Plan Administrator can alter the Performance Peer Group under
Section 2.20 above, then such company shall be considered to remain in the
Performance Peer Group, and to have achieved a Total Shareholder Return less
than the Company’s Total Shareholder Return without regard to any actual Total
Shareholder Return actually achieved by such company, provided, however, that
the Plan Administrator shall have the authority to reduce the Adjusted Value of
Performance Units in such event if it determines that such reduction is
appropriate in view of the Company’s

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2001 Omnibus Incentive Compensation Plan   Page 22

 

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performance relative to those companies in the Performance Peer Group and not
described in clauses (i), (ii) or (iii), above.
9.5 Entitlement to Payment
     (a) Performance Certification
     The Plan Administrator shall certify in writing, prior to payment of the
Performance Units pursuant to this Section 9.5, the Company’s Performance
Ranking Position. In no event will an award be payable under this Section 9 if
the Company’s Performance Ranking Position is in the fourth (4th) quartile.
     (b) Eligibility for Benefit Payments
     Benefit payments with respect to vested Performance Units shall be paid
under the following circumstances:
     (i) Primary Benefit Payment
     Upon the expiration of each Performance Cycle, all uncanceled Performance
Units granted with respect to such Performance Cycle shall vest and benefit
payments with respect to such Performance Units shall become payable. A
Participant who has remained an employee continuously from the date of the grant
of the Performance Units for a Performance Cycle through the last day of such
Performance Cycle shall be eligible to receive a benefit payment equal to the
Adjusted Value, as provided for in Section 9.4(b), of the Performance Units (the
“Primary Benefit”) with respect to and as of the close of such Performance
Cycle. The Valuation Date for determining such Adjusted Value shall be
established by the Plan Administrator at the time the Performance Units are
granted. The amount of any benefit payment payable with respect to Performance
Units shall be reduced by the amount of any interim benefit payments made
pursuant to Section 9.5(b)(ii) with respect to such Performance Units. If the
interim benefit payments exceed the Primary Benefit, no payment shall be made.
     (ii) Interim Benefit Payments
     The Plan Administrator may in its sole discretion provide for an interim
benefit payment to be made to a Participant with respect to Performance Units
granted for any particular Performance Cycle. The right to any interim benefit
payment shall be set forth in the grant of Performance Units to a Participant,
or at such other time as the Plan Administrator shall determine, and must
establish the terms and conditions of such interim benefit payment (including
the Company’s Total

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2001 Omnibus Incentive Compensation Plan   Page23

 

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Shareholder Return which must be attained during such Performance Period). An
interim benefit payment may be provided for after the second year of a
Performance Cycle. The interim benefit payment shall be based upon the Adjusted
Value of the Performance Units, as provided for in Section 9.4(b) for the period
up to the date of the interim payment valuation, and the amount of any such
payment shall not exceed fifty percent (50%) of such Adjusted Value for the
Performance Units which are vested at the end of the second year; provided,
however, that such interim payment will be made only if the Company’s
Performance Ranking Position is in the first (1st) or second (2nd) quartile. The
Valuation Date for determining such Adjusted Value shall be set forth in the
grant of Performance Units, or at such other time as determined by the Plan
Administrator. The Performance Units which are valued for the interim benefit
payment shall also be valued in accordance with Section 9.5(b)(i) or Section 9.7
if applicable, to determine what, if any, additional value the Participant may
be entitled to. Interim benefit payments may be made to those Participants who
have remained employees continuously from the date of the grant of the
applicable Performance Units until the date of the interim benefit payment
relating to such Performance Units. The amount of any benefit payment payable
with respect to Performance Units pursuant to Sections 9.5(b)(i) and 9.5(d)
shall be reduced by the amount of any interim benefit payment made pursuant to
this Section 9.5(b)(ii), but not below zero.
     (c) Form of Payment
     A Participant or a Participant’s Beneficiary shall be entitled to receive
from the Company a benefit payment as provided pursuant to Sections 9.5(b)(i) or
9.5(b)(ii), as applicable, equal to the product of the Adjusted Value and the
number of vested Units of a Participant. Such payment shall be made as soon as
practicable following the applicable Valuation Date in accordance with this
Section 9.5(c).
     Except as provided in Sections 9.5(d) and 9.7 (or unless the Plan
Administrator otherwise determines at any time that the form of payment should
be changed), each benefit payment made to a Participant pursuant to this
Section 9, shall be made as follows:

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(i) Participants employed by the Company holding the position of Chairman of the
Board, President or Chief Executive Officer and Participants employed by Company
Subsidiaries holding equivalent positions, but not necessarily the same title,
shall receive their Performance Unit payout as follows:
(A) 50% (fifty percent) in cash and

 
(B) 50% (fifty percent) in Common Stock.
(ii) Participants employed by the Company holding the position of Vice Chairman
of the Board, Chief Operating Officer, or Executive Vice President and
Participants employed by Company Subsidiaries holding equivalent positions, but
not necessarily the same title, shall receive their Performance Unit payout as
follows:
(A) 60% (sixty percent) in cash and

 
(B) 40% (forty percent) in Common Stock.
(iii) Participants employed by the Company holding the position of Senior Vice
President and Participants employed by Company Subsidiaries holding equivalent
positions, but not necessarily the same title, shall receive their Performance
Unit payout as follows:
(A) 75% (seventy-five percent) in cash and

 
(B) 25% (twenty-five percent) in Common Stock.
(d) Retirement, Death, Disability or Termination of Employment
     Participants (or their Beneficiaries in the case of their deaths) who have
retired, died, become Permanently Disabled, or who have terminated their
employment, prior to the end of a Performance Cycle shall not be entitled to
receive payment from the Company or its Subsidiaries for any Units which were
not vested as of the time such Participants ceased active employment with the
Company or its Subsidiaries. Notwithstanding Section 9.5(c), such Participants
(or their Beneficiaries in the case of their deaths) will be entitled to receive
a cash payment for vested Units in accordance with Section 9.5(b)(i). No
payments shall be made to such Participants (or Beneficiaries) pursuant to
Section 9.5(b)(ii). Unless the Plan Administrator otherwise determines, a
Participant who is terminated with Cause shall receive no benefit under this
Section 9.
9.6 Deferred Payment
     Prior to the time that Units first vest pursuant to Section 9.3, the
Participant may, subject to the consent of the Management Committee and in
accordance with procedures that the Management Committee has approved, elect to
have all or a portion (subject to a
 

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$1,000 minimum) of the lump-sum cash payment payable pursuant to Section 9.5(c)
with respect to such vested Units deferred according to the terms and conditions
of the Company’s Deferred Compensation Plan.
9.7 Acceleration of Payment Due to Change In Control
     Upon a Change in Control, the current Performance Cycle shall immediately
end and all vested Units (including Units that vest pursuant to Section 9.3(b))
shall be paid in cash to Participants based on a value of one hundred fifty
dollars ($150) per Unit. This payment will be reduced to reflect any interim
benefit payments made in accordance with Section 9.5(b)(ii) and shall be made
(i) in a lump sum in cash that is in lieu of any otherwise applicable form and
time of payment for such Units under the Plan and (ii) within ten (10) days
after the Change in Control.
SECTION 10 RESTRICTED STOCK
     10.1 Subject to Sections 5.2 and 5.4, Restricted Stock (including
Performance Restricted Stock) may be granted to Participants in such number and
at such times during the term of the Plan as the Plan Administrator shall
determine, the Plan Administrator taking into account the duties of the
respective Participants, their present and potential contributions to the
success of the Company, and such other factors as the Plan Administrator shall
deem relevant in accomplishing the purposes of the Plan. The granting of
Restricted Stock shall take place when the Plan Administrator by resolution,
written consent or other appropriate action determines to grant such Restricted
Stock to a particular Participant. Each grant shall be evidenced by a written
instrument delivered by or on behalf of the Company containing provisions not
inconsistent with the Plan, which may (but need not) require the Participant’s
signature. The Participant receiving a grant of Restricted Stock shall be
recorded as a stockholder of the Company. Each Participant who receives a grant
of Restricted Stock shall have all the rights of a stockholder with respect to
such shares (except as provided in the restrictions on transferability),
including the right to vote the shares and receive dividends and other
distributions; provided, however, that no Participant awarded Restricted Stock
shall have any right as a stockholder with respect to any shares subject to the
Participant’s Restricted Stock grant prior to the date of issuance to the
Participant of a certificate or certificates, or the establishment of a
book-entry account, for such shares.
     10.2 Notwithstanding any other provision to the contrary in this
Section 10, before Performance Restricted Stock can be granted or vested, as
applicable, the Plan Administrator shall:
(a) Determine the Performance Goals, if any, applicable to the particular
Performance Period; and
 

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(b) Certify in writing that any such Performance Goals for a particular
Performance Period have been attained.
     10.3 A grant of Restricted Stock shall entitle a Participant to receive, on
the date or dates designated by the Plan Administrator, or, if later, upon
payment to the Company of the par value of the Common Stock, if required, in a
manner determined by the Plan Administrator, the number of shares of Common
Stock selected by the Plan Administrator. The Plan Administrator may require,
under such terms and conditions as it deems appropriate or desirable, that the
certificates for Restricted Stock delivered under the Plan may be held in
custody by a bank or other institution, or that the Company may itself hold such
shares in custody until the Restriction Period (as defined in Section 10.4)
expires or until restrictions thereon otherwise lapse, and may require, as a
condition of any issuance of Restricted Stock that the Participant shall have
delivered a stock power endorsed in blank relating to the shares of Restricted
Stock.
     10.4 During a period of years following the date of grant, as determined by
the Plan Administrator, which shall in no event be less than one (1) year (the
“Restriction Period”), the Restricted Stock may not be sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered or disposed of by the
recipient, except in the event of death or termination of employment on account
of Permanent Disability or a Change in Control, or the transfer to the Company
as provided under the Plan.
     10.5 Except as provided in Sections 10.4, 10.6 or 10.7, if a Participant
terminates employment with the Company for any reason before the expiration of
the Restriction Period, all shares of Restricted Stock still subject to
restriction shall be forfeited by the Participant to the Company. In addition,
in the event of any attempt by the Participant to sell, exchange, transfer,
pledge or otherwise dispose of shares of Restricted Stock in violation of the
terms of the Plan without the Company’s prior written consent, such shares shall
be forfeited to the Company.
     10.6 The Restriction Period for any Participant shall be deemed to end and
all restrictions on shares of Restricted Stock shall lapse, upon the
Participant’s death or termination of employment on account of Permanent
Disability or any termination of employment determined by the Plan Administrator
to end the Restriction Period.
     10.7 The Restriction Period for any Participant shall be deemed to end and
all restrictions on shares of Restricted Stock shall terminate immediately upon
a Change in Control.
     10.8 When the restrictions imposed by Section 10.4 expire or otherwise
lapse with respect to one or more shares of Restricted Stock, the Company shall
deliver to the Participant (or the Participant’s legal representative,
Beneficiary or heir) one (1) share of Common Stock in cancellation and
satisfaction of each share of Restricted Stock.
 

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     10.9 Subject to Section 10.3 (and Section 10.2 in the case of Performance
Restricted Stock), a Participant entitled to receive Restricted Stock under the
Plan shall be issued a certificate, or have a book-entry account established,
for such shares. Such certificate, or book-entry account, shall be registered in
the name of the Participant, and shall bear an appropriate legend reciting the
terms, conditions and restrictions, if any, applicable to such shares and shall
be subject to appropriate stop-transfer orders.
     10.10 Restricted Stock awarded to Participants pursuant to Section 11 in
lieu of cash shall be considered Performance Restricted Stock for purposes of
the Plan.
     10.11 The Restriction Period for any Participant shall be deemed to end and
all restrictions on shares of Restricted Stock awarded pursuant to
Sections 11.5(a)(ii), 11.5(b)(ii), and 11.6 (except for Restricted Stock awarded
pursuant to Section 11.5(c)) shall lapse upon the Participant’s death,
retirement, Permanent Disability, or any other involuntary termination without
Cause. The Restriction Period shall be deemed to end and all restrictions on a
Participant’s shares of Restricted Stock awarded pursuant to Section 11.5(c)
shall lapse on a pro rata basis measured in years between (i) the amount of time
which has elapsed between the Award Date and the Participant’s death,
retirement, Permanent Disability, or any other involuntary termination without
Cause and (ii) the Restriction Period for such shares. All shares of Restricted
Stock for which the Restriction Period has not lapsed as described above shall
be forfeited to the Company. Notwithstanding the foregoing, the Plan
Administrator, or the Management Committee in the case of Participants other
than Section 16 Insiders, may determine that such Restriction Period should not
lapse or that the Restriction Period on additional shares of Restricted Stock
should lapse.
     10.12 A Participant may elect irrevocably (at a time and in the manner
determined by the Plan Administrator or the Company, as appropriate), prior to
vesting of Restricted Stock, that the Participant relinquishes any and all
rights in the shares of Restricted Stock in exchange for an interest in the
Deferred Compensation Plan, in which case receipt of such shares shall be
deferred until a pre-specified date in the future or until the Participant
ceases to be employed by the Company or any of its Subsidiaries, as elected by
the Participant. At the time the restrictions would have otherwise lapsed on the
shares of Restricted Stock (as specified at the time of grant, or otherwise if
changed by the Plan Administrator), the number of shares of Common Stock
issuable to the Participant shall be credited to the deferred stock account (or
such other account(s) as the Management Committee shall deem necessary and
appropriate) under a memorandum deferred account established pursuant to the
Deferred Compensation Plan, and any dividends or other distributions paid on the
Common Stock (or its equivalent) shall be deemed reinvested in additional shares
of Common Stock (or its equivalent) until all credited deferred shares shall
become issuable pursuant to the Participant’s election, unless the management
committee of the Deferred Compensation Plan shall otherwise determine.
 

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SECTION 11 INCENTIVE AWARDS
11.1 Procedures for Incentive Awards
     Prior to the beginning of a particular Performance Period, or such other
date as the Code may allow, the Plan Administrator shall specify in writing:

  (a)   the Participants who shall be eligible to receive an Incentive Award for
a Performance Period,     (b)   the Performance Goals for such Performance
Period, and     (c)   the maximum Incentive Award amount payable to each
Participant if the Performance Goals are met.

     Any Participant chosen to participate under this Section 11 for a given
Performance Period shall receive the maximum Incentive Award amount if the
designated Performance Goals are achieved, subject to the discretion of the Plan
Administrator to reduce such award, as described in Section 11.4.
11.2 Performance Goal Certification
     An Incentive Award shall become payable to the extent provided herein in
the event that the Plan Administrator certifies in writing prior to payment of
the award that the Performance Goal or Goals selected for a particular
Performance Period has or have been attained. In no event will an award be
payable under this Plan if the threshold level of performance set for each
Performance Goal for the applicable Performance Period is not attained.
11.3 Maximum Incentive Award Payable
     The maximum Incentive Award payable under this Plan to any Participant for
any Performance Period shall be ten million dollars ($10,000,000) in cash,
Restricted Stock, or a combination of cash and Restricted Stock.
11.4 Discretion to Reduce Awards; Participant’s Performance
     The Plan Administrator, in its sole and absolute discretion, prior to a
Change in Control may reduce the amount of any Incentive Award otherwise payable
to a Participant upon attainment of any Performance Goal for the applicable
Performance Period. A Participant’s individual performance must be satisfactory,
regardless of the Company’s performance and the attainment of Performance Goals,
before he or she may be granted an Incentive Award. In evaluating a
Participant’s performance, the Plan Administrator shall consider the Performance
Goals of the Company and the Participant’s responsibilities and accomplishments,
and such other factors as it deems appropriate.
 

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11.5 Required Payment of Incentive Awards
     The Plan Administrator, or the Management Committee in the case of
Participants other than Section 16 Insiders or employees subject to
Section 162(m), shall make a determination within thirty (30) days after the
Company’s financial information is available for a particular Performance Period
(the “Award Date”) whether the Performance Goals for that Performance Period
have been achieved and the amount of the award for each Participant. In the
absence of an election by the Participant pursuant to Sections 11.6 or 11.7, the
award shall be paid not later than the end of the month following the month in
which the Plan Administrator determines the amount of the award and shall be
paid as follows:
(a) Participants employed by the Company holding the position of Chairman of the
Board, President, Chief Executive Officer, Vice Chairman of the Board, Chief
Operating Officer, Executive Vice President, or Senior Vice President and
Participants employed by Company Subsidiaries with equivalent positions thereto,
but not necessarily the same titles, shall receive their incentive award as
follows:
(i) 50% (fifty percent) in cash and

 
(ii) 50% (fifty percent) in Restricted Stock.
(b) Participants employed by the Company holding the position of Vice President
and Participants employed by Company Subsidiaries with an equivalent position
thereto, but not necessarily the same title, shall receive their incentive award
as follows:
(i) 75% (seventy-five percent) in cash and

 
(ii) 25% (twenty-five percent) in Restricted Stock.
(c) Because the Participant bears forfeiture, price fluctuation, and other
attendant risks during the Restriction Period (as defined in Section 10.4)
associated with the Restricted Stock awarded under this Plan, Participants shall
be awarded an additional amount of Restricted Stock equal to the amount of
Restricted Stock which a Participant is awarded pursuant to Sections 11.5(a)(ii)
or 11.5(b)(ii), as applicable.
(d) Notwithstanding subsections (a) and (b) above, the Plan Administrator or
Management Committee, as appropriate, may determine that a Participant must
receive a greater amount of his or her award in Restricted Stock, up to and
including the entire award in Restricted Stock. (For purposes of the Plan, such
required shares shall be treated as being awarded pursuant to
Section 11.5(a)(ii) or Section 11.5(b)(ii), as applicable.) In such event, a
Participant shall be entitled to the additional shares of Restricted Stock,
awarded pursuant to Section 11.5(c) above.
 

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     The value of awards payable in Restricted Stock pursuant to this Section 11
shall be calculated by using Fair Market Value.
11.6 Restricted Stock Election
     In lieu of receiving all or any portion of the cash in accordance with
Sections 11.5(a)(i) or 11.5(b)(i), a Participant may elect to receive additional
Restricted Stock with a value equal to the portion of the incentive award which
the Participant would otherwise have received in cash, but has elected to
receive in Restricted Stock (“Restricted Stock Election”). Participants must
make their Restricted Stock Election at such time and in such a manner as
prescribed by the Management Committee. Each Participant who makes the
Restricted Stock Election shall be entitled to the additional Restricted Stock
granted pursuant to Section 11.5(c) with respect to the amount of the
Participant’s Restricted Stock Election. Except as provided in Section 10, all
shares of Restricted Stock awarded pursuant to the Restricted Stock Election are
subject to the same terms and conditions as the Restricted Stock a Participant
receives pursuant to Sections 11.5(a)(ii) or 11.5(b)(ii), as applicable.
11.7 Deferred Payment
     Each Participant may elect to have the payment of all or a portion of any
Incentive Award made pursuant to Sections 11.5(a)(i) or 11.5(b)(i), as
applicable, for the year deferred according to the terms and conditions of the
Company’s Deferred Compensation Plan. The election shall be irrevocable and
shall be made at such time and in such a manner as prescribed by the Management
Committee. The election shall apply only to that year. If a Participant has not
made an election under this Section, any incentive award granted to the
Participant for that year shall be paid pursuant to Sections 11.5 or 11.6, as
applicable.
11.8 Payment Upon Change in Control
     Notwithstanding any other provision of this Plan, in the event of a Change
in Control of the Company, the Incentive Award attributable to the Performance
Period in which the Change in Control occurs shall become fully vested and
distributable, in cash equal to the Fair Market Value of the cash and shares of
Common Stock that otherwise would have been issued to the Participant, within
thirty (30) days after the date of the Change in Control, in an amount equal to
the greater of the annual incentive percentage of Annual Salary established by
the Plan Administrator, or the following:
 

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Percentage of Annual Salary
  Participants employed by the Company holding any of the following positions
and Participants employed by Company Subsidiaries with positions equivalent
thereto, but not necessarily with the same titles:
100% of Annual Salary
  Chairman of the Board, President, Chief Executive Officer, Vice Chairman of
the Board, Chief Operating Officer, or Executive Vice President
 
   
80% of Annual Salary
  Senior Vice President
 
   
60% of Annual Salary
  Vice President

The term “Annual Salary” as used in this Plan shall mean a Participant’s annual
base salary (whether actual or illustrative) in effect on the date of a Change
in Control.
     In the event a Change in Control is deemed to have occurred after the end
of a Performance Period, but before the Award Date, each Participant shall be
entitled to receive in cash, within thirty (30) days after the date of the
Change in Control, those amounts set forth above in this Section 11.8 for such
Performance Period. Such amounts are in addition to the amount to which
Participants shall be entitled for the Performance Period in which a Change in
Control is deemed to occur.
SECTION 12 REGULATORY APPROVALS AND LISTING
     The Company shall not be required to issue any certificate for shares of
Common Stock upon the exercise of an option or a stock appreciation right
granted under the Plan, in payment of an Incentive Award, with respect to a
grant of Restricted Stock or Common Stock awarded as payment of vested Units
prior to:
     (a) obtaining any approval or ruling from the Securities and Exchange
Commission, the Internal Revenue Service or any other governmental agency which
the Company, in its sole discretion, shall determine to be necessary or
advisable;
     (b) listing of such shares on any stock exchange on which the Common Stock
may then be listed; and
     (c) completing any registration or other qualification of such shares under
any federal or state laws, rulings or regulations of any governmental body which
the Company, in its sole discretion, shall determine to be necessary or
advisable.
 

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     All certificates, or book-entry accounts, for shares of Common Stock
delivered under the Plan shall also be subject to such stop-transfer orders and
other restrictions as the Plan Administrator may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any stock exchange upon which Common Stock is then listed and any applicable
federal or State securities laws, and the Plan Administrator may cause a legend
or legends to be placed on any such certificates, or notations on such
book-entry accounts, to make appropriate reference to such restrictions. The
foregoing provisions of this paragraph shall not be effective if and to the
extent that the shares of Common Stock delivered under the Plan are covered by
an effective and current registration statement under the Securities Act of
1933, as amended, or if and so long as the Plan Administrator determines that
application of such provisions are no longer required or desirable. In making
such determination, the Plan Administrator may rely upon an opinion of counsel
for the Company. Without limiting the foregoing, the Plan Administrator may
impose such restrictions, conditions or limitations as it determines appropriate
as to the timing and manner of any resales by the Participant or other
subsequent transfers by the Participant of any shares issued under this Plan,
including without limitation (i) restrictions under an insider trading policy,
(ii) restrictions designed to delay and/or coordinate the timing and manner of
sales by the Participant and other Participants and (iii) restrictions as to the
use of a specified brokerage firm for such resales or other transfers.
SECTION 13 EFFECTIVE DATE AND TERM OF PLAN
     The Plan was adopted by the Board of Directors on January 29, 2001, and is
subject to approval by the Company’s stockholders within the earlier of the date
of the Company’s next annual meeting of stockholders and twelve (12) months
after the date the Plan is adopted by the Board of Directors. Subject to the
foregoing condition, options, limited stock appreciation rights, stock
appreciation rights, Restricted Stock, Incentive Awards and Performance Units
may be granted pursuant to the Plan from time to time within the period
commencing upon adoption of the Plan by the Board of Directors and ending ten
(10) years after the earlier of such adoption and the approval of the Plan by
the stockholders. Options, limited stock appreciation rights, stock appreciation
rights, Restricted Stock, Incentive Awards and Performance Units theretofore
granted may extend beyond that date and the terms and conditions of the Plan
shall continue to apply thereto and to shares of Common Stock acquired
thereunder. To the extent required to qualify as “performance-based
compensation” under Section 162(m), shares of Common Stock underlying options,
limited stock appreciation rights, stock appreciation rights, Restricted Stock
and Common Stock granted, subject to stockholder approval of the Plan may not be
vested, paid, exercised or sold until such stockholder approval is obtained.
 

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SECTION 14 GENERAL PROVISIONS
     14.1 Nothing contained in the Plan, or in any option, limited stock
appreciation right, stock appreciation right, Restricted Stock, Incentive Award
or Performance Unit granted pursuant to the Plan, shall confer upon any employee
any right with respect to continuance of employment by the Company or a
Subsidiary, nor interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of such employee at any time with or
without assigning any reason therefor.
     14.2 Grants, vesting or payment of stock options, limited stock
appreciation rights, stock appreciation rights, Restricted Stock, Incentive
Awards or Performance Units shall not be considered as part of a Participant’s
salary or used for the calculation of any other pay, allowance, pension or other
benefit unless otherwise permitted by other benefit plans provided by the
Company or its Subsidiaries, or required by law or by contractual obligations of
the Company or its Subsidiaries. Notwithstanding the preceding sentence, the
Restricted Stock awarded pursuant to Section 11.5(c) shall not be considered as
part of a Participant’s salary or used for the calculation of any other pay,
allowance, pension, or other benefit unless required by contractual obligations
of the Company or its Subsidiaries.
     14.3 Unless otherwise provided in the Plan, the right of a Participant or
Beneficiary to the payment of any compensation under the Plan may not be
assigned, transferred, pledged or encumbered, nor shall such right or other
interests be subject to attachment, garnishment, execution or other legal
process.
     14.4 Leaves of absence for such periods and purposes conforming to the
personnel policy of the Company, or of its Subsidiaries, as applicable, shall
not be deemed terminations or interruptions of employment, unless a Participant
commences a leave of absence from which he or she is not expected to return to
active employment with the Company or its Subsidiaries. The foregoing
notwithstanding, with respect to Incentive Stock Options, employment shall not
be deemed to continue beyond the first ninety (90) days of such leave unless the
Participant’s reemployment rights are guaranteed by statute or contract. With
respect to any Participant who, after the date an award is granted under this
Plan, ceases to be employed by the Company or a Subsidiary on a full-time basis
but remains employed on a part-time basis, the Plan Administrator may make
appropriate adjustments, as determined in its sole discretion, as to the number
of shares issuable under, the vesting schedule of or the amount payable under
any unvested awards held by such Participant.
     14.5 In the event a Participant is transferred from the Company to a
Subsidiary, or vice versa, or is promoted or given different responsibilities,
the stock options, limited stock appreciation rights, stock appreciation rights,
Restricted Stock, Incentive Awards and Performance Units granted to the
Participant prior to such date shall not be affected.
 

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     14.6 Any amounts (deferred or otherwise) to be paid to Participants
pursuant to the Plan are unfunded obligations. Neither the Company nor any
Subsidiary is required to segregate any monies from its general funds, to create
any trusts or to make any special deposits with respect to this obligation. The
Management Committee, in its sole discretion, may direct the Company to share
with its Subsidiaries the costs of a portion of the Incentive Awards paid to
Participants who are executives of those companies. Beneficial ownership of any
investments, including trust investments which the Company may make to fulfill
this obligation, shall at all times remain in the Company. Any investments and
the creation or maintenance of any trust or any Participant account shall not
create or constitute a trust or a fiduciary relationship between the Plan
Administrator, the Management Committee, the Company or any Subsidiary and a
Participant, or otherwise create any vested or beneficial interest in any
Participant or the Participant’s Beneficiary or the Participant’s creditors in
any assets of the Company or its Subsidiaries whatsoever. The Participants shall
have no claim against the Company for any changes in the value of any assets
which may be invested or reinvested by the Company with respect to the Plan.
     14.7 The designation of a Beneficiary shall be on a form provided by the
Management Committee, executed by the Participant (with the consent of the
Participant’s spouse, if required by the Management Committee for reasons of
community property or otherwise), and delivered to the Management Committee. A
Participant may change his or her Beneficiary designation at any time. A
designation by a Participant under the Predecessor Plans shall remain in effect
under the Plan for any Restricted Stock, Incentive Awards or Performance Units
unless such designation is revoked or changed under the Plan. If no Beneficiary
is designated, if the designation is ineffective, or if the Beneficiary dies
before the balance of a Participant’s benefit is paid, the balance shall be paid
to the Participant’s spouse, or if there is no surviving spouse, to the
Participant’s lineal descendants, pro rata, or if there is no surviving spouse
or any lineal descendant, to the Participant’s estate. Notwithstanding the
foregoing, however, a Participant’s Beneficiary shall be determined under
applicable state law if such state law does not recognize Beneficiary
designations under plans of this sort and is not preempted by laws which
recognize the provisions of this Section 14.7.
     14.8 The Plan shall be construed and governed in accordance with the laws
of the State of Texas.
     14.9 Appropriate provision shall be made for all taxes required to be
withheld in connection with the exercise, grant or other taxable event with
respect to options, limited stock appreciation rights, stock appreciation
rights, Restricted Stock, Incentive Awards and Performance Units under the
applicable laws and regulations of any governmental authority, whether federal,
state or local and whether domestic or foreign, including, but not limited to,
the required withholding of a sufficient number of shares of Common Stock
otherwise issuable to a Participant to satisfy the said required minimum tax
withholding obligations. To the extent provided by the Plan Administrator, a
Participant is permitted to deliver shares of Common Stock (including shares
acquired
 

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pursuant to the exercise of an option or stock appreciation right other than the
option or stock appreciation right currently being exercised, to the extent
permitted by applicable regulations) for payment of withholding taxes on the
exercise of an option, stock appreciation right, or limited stock appreciation
right, upon the grant or vesting of Restricted Stock or upon the payout of
Incentive Awards or Performance Units. At the election of the Plan Administrator
or, subject to approval of the Plan Administrator at its sole discretion, at the
election of a Participant, shares of Common Stock may be withheld from the
shares issuable to the Participant upon the exercise of an option or stock
appreciation right, upon the vesting of the Restricted Stock or upon the payout
of Performance Units to satisfy tax withholding obligations. The Fair Market
Value of Common Stock as delivered pursuant to this Section 14.9 shall be
determined as of the day prior to delivery, and shall be calculated in
accordance with Section 2.9.
     Any Participant who makes a Section 83(b) election under the Code shall,
within ten (10) days of making such election, notify the Company in writing of
such election and shall provide the Company with a copy of such election form
filed with the Internal Revenue Service.
     A Participant is solely responsible for obtaining, or failing to obtain,
tax advice with respect to participation in the Plan prior to the Participant’s
(i) entering into any transaction under or with respect to the Plan,
(ii) designating or choosing the times of distributions under the Plan, or
(iii) disposing of any shares of Common Stock issued under the Plan.
     14.10 The Plan Administrator may in its discretion provide financing to a
Participant in a principal amount sufficient to pay the purchase price of any
award under the Plan and/or to pay the amount of taxes required by law to be
withheld with respect to any award. Any such loan shall be subject to all
applicable legal requirements and restrictions pertinent thereto, including
Regulation G promulgated by the Federal Reserve Board. The grant of an award
shall in no way obligate the Company or the Plan Administrator to provide any
financing whatsoever in connection therewith.
     14.11 The Company and any Subsidiary which is in existence or hereafter
comes into existence shall not be liable to a Participant or any other person as
to (a) the non-issuance or sale of shares of Common Stock as to which the
Company has been unable to obtain from any regulatory body having jurisdiction
the authority deemed by the Company’s counsel to be necessary to the lawful
issuance and sale of any shares hereunder; and (b) any tax consequence expected,
but not realized, by any Participant or other person due to the issuance,
exercise, settlement, cancellation or other transaction involving any award
provided for hereunder.
 

El Paso Energy Corporation
2001 Omnibus Incentive Compensation Plan   Page 36

 

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SECTION 15 COMPLIANCE WITH RULE 16b-3 AND SECTION 162(m)
     The Company’s intention is that, so long as any of the Company’s equity
securities are registered pursuant to Section 12(b) or 12(g) of the Exchange
Act, with respect to awards granted to or held by Section 16 Insiders, the Plan
shall comply in all respects with Rule 16b-3 and Section 162(m) and, if any Plan
provision is later found not to be in compliance with Rule 16b-3 or
Section 162(m), that provision shall be deemed modified as necessary to meet the
requirements of Rule 16b-3 and Section 162(m). Notwithstanding the foregoing,
and subject to Section 5.2, the Plan Administrator may grant or vest Restricted
Stock in a manner which is not in compliance with Section 162(m) if the Plan
Administrator determines that it would be in the best interests of the Company.
     Notwithstanding anything in the Plan to the contrary, the Board of
Directors, in its absolute discretion, may bifurcate the Plan so as to restrict,
limit or condition the use of any provision of the Plan to Participants who are
Section 16 Insiders without so restricting, limiting or conditioning the Plan
with respect to other Participants.
SECTION 16 AMENDMENT, TERMINATION OR DISCONTINUANCE OF THE PLAN
     16.1 Subject to the Board of Directors and Section 16.2, the Plan
Administrator may from time to time make such amendments to the Plan as it may
deem proper and in the best interest of the Company without further approval of
the stockholders of the Company or any Participants, including, but not limited
to, any amendment necessary to ensure that the Company may obtain any regulatory
approval referred to in Section 12; provided, however, that after a Change in
Control no change in any option, limited stock appreciation right, stock
appreciation right, Restricted Stock, Incentive Award or Performance Unit
theretofore granted may be made without the consent of the Participant which
would impair the right of the Participant to acquire or retain Common Stock or
cash that the Participant may have acquired as a result of the Plan.
     16.2 The Plan Administrator and the Board of Directors may not amend the
Plan without the approval of the stockholders of the Company to
     (a) materially increase the number of shares, rights, Incentive Awards or
Units that may be issued under the Plan to Section 16 Insiders; or
     (b) lower the Option Price at which options may be granted pursuant to
Section 6.4(a) or lower the Option Price of any outstanding options, except as
provided by Section 5.5.
     16.3 The Board of Directors may at any time suspend the operation of or
terminate the Plan with respect to any shares of Common Stock, rights or
Performance
 

El Paso Energy Corporation
2001 Omnibus Incentive Compensation Plan   Page 37

 

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Units which are not at that time subject to option, limited stock appreciation
right, stock appreciation right or grant of Restricted Stock, Incentive Awards
or Performance Units.
     IN WITNESS WHEREOF, the Company has caused the Plan to be executed
effective as of January 29, 2001.

            EL PASO ENERGY CORPORATION
      By:   /s/ Joel Richards III         Joel Richards III        Executive
Vice President     

     Attest:

                  /s/ David L. Siddall       Corporate Secretary           

 

El Paso Energy Corporation
2001 Omnibus Incentive Compensation Plan   Page 38