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                                                                   EXHIBIT 10.16





                              EMPLOYMENT AGREEMENT

                                     BETWEEN

                               GENE T. WAGUESPACK

                                       AND

                             THE COASTAL CORPORATION

                              EMPLOYMENT AGREEMENT



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EMPLOYMENT AGREEMENT dated as of January 17, 2000 (the "Agreement") between The
Coastal Corporation, a Delaware corporation ("Company"), and Gene T. Waguespack
("Executive").

WHEREAS, the Company desires to employ Executive upon the terms and subject to
the conditions set forth herein; and

WHEREAS, the Company and Executive intend that the Agreement be void ab initio
and of no force and effect if neither the transaction contemplated by the
Agreement and Plan of Merger, dated as of January 17, 2000 by and among El Paso
Energy Corporation, a Delaware corporation, El Paso Merger Company, a Delaware
corporation and a wholly owned subsidiary of El Paso Energy Corporation, and The
Coastal Corporation, a Delaware corporation (the "Merger Agreement"), nor any
Change of Control resulting from the Company's pursuit of the Transaction
(either such transaction, the "Transaction"), is consummated;

NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the Company and Executive hereby agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

The terms set forth below have the following meanings (such meanings to be
applicable to both the singular and plural forms, except where otherwise
expressly indicated):

1.1      "Accrued Annual Bonus" means the amount of any Annual Bonus earned but
         not yet paid with respect to the Year ended prior to the Date of
         Termination.

1.2      "Accrued Base Salary" means the amount of Executive's Base Salary which
         is accrued but not yet paid as of the Date of Termination.

1.3      "Affiliate" means any Person directly or indirectly controlling,
         controlled by, or under direct or indirect common control with, the
         Company. For the purposes of this definition, the term "control" when
         used with respect to any Person means the power to direct or cause the
         direction of management or policies of such Person, directly or
         indirectly, whether through the ownership of voting securities, by
         contract or otherwise.

1.4      "Agreement" - see the recitals to this Agreement.

1.5      "Agreement Date" means the date that is specified in the recitals to
         this Agreement.

1.6      "Annual Bonus" - see Section 4.2(a).

1.7      "Annualized Total Compensation" means, as of any date, the sum of
         Executive's (i) Base Salary as of such date and (ii) Target Annual
         Bonus (in no event shall such Target Annual Bonus be less than the most
         recently awarded Annual Bonus) applicable to the Year that includes
         such date.

1.8      "Base Salary" - see Section 4.1.



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1.9      "Beneficiary" - see Section 10.3.

1.10     "Board" means the Board of Directors of the Company.

1.11     (a) "Cause" means any of the following:

                  (i)      Executive's conviction of a felony or of a
                           misdemeanor involving fraud, dishonesty or moral
                           turpitude, or

                  (ii)     Executive's willful or intentional material breach of
                           this Agreement that results in financial detriment
                           that is material to the Company and its Affiliates
                           taken as a whole.

For purposes of clause (ii) of the preceding sentence, Cause shall not include
any one or more of the following:

                  (A)      bad judgment,

                  (B)      negligence,

                  (C)      any act or omission that Executive believed in good
                           faith to have been in or not opposed to the interest
                           of the Company (without intent of Executive to gain
                           therefrom, directly or indirectly, a profit to which
                           he was not legally entitled), or

                  (D)      any act or omission of which any member of the Board
                           who is not a party to such act or omission has had
                           actual knowledge for at least 12 months.

         (b)      With respect to a termination of employment occurring prior to
                  a Change of Control, "Cause" also means:

                  (i)      the willful failure by Executive to substantially
                           perform Executive's duties with the Company (other
                           than any such failure resulting from Executive's
                           incapacity due to physical or mental illness) or

                  (ii)     the willful engaging by Executive in conduct which is
                           demonstrably and materially injurious to the Company
                           or its subsidiaries, monetarily or otherwise.

1.12     "Change of Control" means any of the following events:

         (a)      any person or group (as such terms are used in Rule 13d-5
                  under the Exchange Act and defined in Sections 3(a)(9) and
                  13(d)(3) of the Exchange Act), other than a Subsidiary or any
                  employee benefit plan (or any related trust) of the Company or
                  a Subsidiary, becomes the beneficial owner of 15% or more of
                  the Common Stock or of securities of the Company that are
                  entitled to vote generally in the election of directors of the
                  Company ("Voting Securities") representing 15% or more of the
                  combined voting power of all Voting Securities of the Company.



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         (b)      individuals who, as of the Agreement Date, constitute the
                  Board (the "Incumbent Directors") cease for any reason to
                  constitute a majority of the members of the Board; provided
                  that any individual who becomes a director after the Agreement
                  Date whose election or nomination for election by the
                  Company's shareholders was approved by a majority of the
                  members of the Incumbent Board (other than an election or
                  nomination of an individual whose initial assumption of office
                  is in connection with an actual or threatened "election
                  contest" relating to the election of the directors of the
                  Company (as such terms are used in Rule 14a-1 1 under the
                  Exchange Act), "tender offer" (as such term is used in Section
                  14(d) of the Exchange Act) or a proposed Merger (as defined
                  below)) shall be deemed to be members of the Incumbent Board;
                  or

         (c)      approval by the stockholders of the Company of either of the
                  following:

                  (i)      a merger, reorganization, consolidation or similar
                           transaction (any of the foregoing, a "Merger") as a
                           result of which the Persons who were the respective
                           beneficial owners of the outstanding Common Stock and
                           Voting Securities of the Company immediately before
                           such Merger are not expected to beneficially own,
                           immediately after such Merger, directly or
                           indirectly, more than 60% of, respectively, the
                           common stock and the combined voting power of the
                           Voting Securities of the corporation resulting from
                           such Merger in substantially the same proportions as
                           immediately before such Merger, or

                  (ii)     a plan of liquidation of the Company or a plan or
                           agreement for the sale or other disposition of all or
                           substantially all of the assets of the Company.

Notwithstanding the foregoing, there shall not be a Change of Control if, in
advance of such event, Executive agrees in writing that such event shall not
constitute a Change of Control.

1.13     "Code" means the Internal Revenue Code of 1986, as amended from time to
         time.

1.14     "Committee" means the Compensation and Executive Development Committee
         of the Board.

1.15     "Common Stock" means the common stock and Class A common stock of the
         Company

1.16     "Company" - see the recitals to this Agreement.

1.17     "Date of Termination" means the effective date of a Termination of
         Employment for any reason, including death or Disability, whether by
         either of the Company or by Executive.

1.18     "Disability" means a mental or physical condition which, in the opinion
         of the Board, renders Executive unable or incompetent to carry out the
         material job responsibilities which such Executive held or the material
         duties to which Executive was assigned at the time the disability was
         incurred; which has existed for at least three months, and which in the
         opinion of a physician mutually agreed upon by the Company and
         Executive




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         (provided that neither party shall unreasonably withhold this
         agreement) is expected to be permanent or to last for an indefinite
         duration or a duration in excess of six months.

1.19     "Employment Period" see Section 3.1.

1.20     "Exchange Act" means the Securities Exchange Act of 1934.

1.21     "Executive"- see the recitals to this Agreement.

1.22     Intentionally omitted.

1.23     "Good Reason" means the occurrence of any one or more of the following
         events unless Executive specifically agrees in writing that such event
         shall not be Good Reason:

         (a)      any material breach of this Agreement by the Company,
                  including:

                  (i)      the failure of the Company to comply with the
                           provisions of Articles II, III, IV, V, VI or VII of
                           this Agreement;

                  (ii)     any material adverse change in the status,
                           responsibilities or perquisites of Executive;

                  (iii)    any material adverse change in Executive's title; or

                  (iv)     assignment of duties materially inconsistent with his
                           position and duties described in this Agreement,

         (b)      the failure of the Company to assign this Agreement to a
                  successor to the Company or failure of a successor to the
                  Company to explicitly assume and agree to be bound by this
                  Agreement,

         (c)      requiring Executive to be principally based at any office or
                  location more than 25 miles from the current offices of the
                  Company in Houston, Texas, or

         (d)      the delivery to Executive of a Notice of Consideration
                  pursuant to Section 8.1 (b) if, within a period of 90 days
                  thereafter, the Board fails for any reason to terminate
                  Executive for Cause in compliance with all of the substantive
                  and procedural requirements of Section 8.1.

Any reasonable determination by Executive that any of the foregoing events has
occurred and constitutes Good Reason shall be conclusive and binding for all
purposes.

1.24     "Including" means including without limitation.

1.25     "Notice of Consideration" - see Section 8.1 (b).

1.26     Intentionally omitted.






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1.27     "Person" means any individual, sole proprietorship, partnership, joint
         venture, trust, unincorporated organization, association, corporation,
         institution, public benefit corporation, entity or government
         instrumentality, division, agency, body or department.

1.28     "Prorata Annual Bonus" means (a) the product of the amount of the
         Target Annual Bonus to which Executive would have been entitled if he
         had been employed by the Company on the last day of the Year that
         includes the Date of Termination and if Executive had achieved his
         Target Annual Goals for such Year, multiplied by (b) a fraction of
         which the numerator is the numbers of days which have elapsed in such
         Year through the Date of Termination and the denominator is 365.

1.29     "Replacement Pension Plan" - see Section 7.1.

1.30     "Severance Payment" means the payment of a multiple of Executive's
         Annualized Total Compensation pursuant to Section 8.3(b) or Section
         8.4, as applicable.

1.31     "Severance Period" means 2.99 years.

1.32     "Subsidiary" means, with respect to any Person, (a) any corporation of
         which more than 50% of the outstanding capital stock having ordinary
         voting power to elect a majority of the board of directors of such
         corporation (irrespective of whether, at the time, stock of any other
         class or classes of such corporation shall have or might have voting
         power by reason of the happening of any contingency) is at the time,
         directly or indirectly, owned by such Person, and (b) any partnership
         in which such Person has a direct or indirect interest (whether in the
         form of voting or participation in profits or capital contribution) of
         more than 50%.

1.33     "Target Annual Bonus" - see Section 4.2.

1.34     "Target Annual Goal" - see Section 4.2.

1.35     "Termination For Good Reason" means a Termination of Employment by
         Executive for a Good Reason.

1.36     "Termination of Employment" means a termination by the Company or by
         Executive of Executive's employment by the Company.

1.37     "Termination Without Cause" means a Termination of Employment by the
         Company for any reason other than Cause or Executive's death or
         Disability.

1.38     "Year" means a calendar year period ending on December 31.

                                    ARTICLE 2
                                     DUTIES

2.1      Duties. The Company shall employ Executive during the Employment Period
         in the position(s) which Executive holds on the Agreement Date. During
         the Employment Period, Executive shall perform the duties properly
         assigned to him hereunder, shall




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         devote substantially all of his business time, attention and effort to
         the affairs of the Company and shall use his reasonable best efforts to
         promote the interests of the Company. During the Employment Period, and
         excluding any periods of disability, vacation, or sick leave to which
         Executive is entitled, Executive agrees to devote his full attention
         and time to the business and affairs of the Company.

2.2      Other Activities. Executive may serve on corporate, civic or charitable
         boards or committees, deliver lectures, fulfill speaking engagements,
         teach at educational institutions, or manage personal investments;
         provided that such activities do not individually or in the aggregate
         significantly interfere with the performance of his duties under this
         Agreement.

                                    ARTICLE 3
                                EMPLOYMENT PERIOD

3.1      Employment Period. Subject to the termination provisions hereinafter
         provided, the term of Executive's employment under this Agreement (the
         "Employment Period") shall begin on the Agreement Date and end on the
         third anniversary of the date of consummation of the Transaction. The
         employment of Executive by the Company shall not be terminated other
         than in accordance with Article VIII. Notwithstanding the foregoing,
         the Agreement shall be void ab initio and of no force and effect if the
         Merger Agreement is terminated in accordance with its terms and if any
         Transaction other than the Transaction contemplated by the Merger
         Agreement is not consummated within six months of the termination of
         the Merger Agreement in accordance with its terms.

                                    ARTICLE 4
                                  COMPENSATION

4.1      Salary. The Company shall pay Executive in accordance with its normal
         payroll practices (but not less frequently than monthly) an annual
         salary at a rate no less favorable than the rate in effect on the
         Agreement Date ("Base Salary"). During the Employment Period, the Base
         Salary shall be reviewed at least annually by the Committee after
         consultation with Executive and may from time to time be increased as
         determined by the Committee. Effective as of the date of any such
         increase the Base Salary as so increased shall be considered the new
         Base Salary for all purposes of this Agreement and may not thereafter
         be reduced. Any increase in Base Salary shall not limit or reduce any
         other obligation of the Company to Executive under this Agreement.

4.2      Annual Bonus.

         (a)      The Company shall pay to Executive an annual cash bonus
                  ("Annual Bonus") in accordance with the terms hereof for each
                  Year which begins during the Employment Period. Executive
                  shall be eligible for an Annual Bonus pursuant to the
                  Executive Bonus Program of the Company administered by the
                  Committee.

         (b)      The Company performance goals are determined annually by the
                  Company. These performance goals are expressed as target
                  performance ("Target Annual Goal"). The level of bonus awarded
                  to the Executive pursuant to the Executive





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                  Bonus Program shall be deter mined by the Committee and will
                  vary based upon the level of Company performance with the
                  target bonus award for attainment of Target Annual Goals (the
                  "Target Annual Bonus").

         (c)      In the event that it is necessary to determine the bonus due
                  the Executive for less than a full year, then if the bonus due
                  pursuant to terns of this Agreement is the Target Annual
                  Bonus, the Executive shall be entitled to a bonus equal to the
                  Target Annual Bonus amount pursuant to the Executive Bonus
                  Program of the Company for the preceding Year had the Target
                  Annual Goal been met, regardless of whether such Target Annual
                  Goal was met. In no event shall such Target Annual Bonus be
                  less than the most recently awarded Annual Bonus. The bonus
                  calculated pursuant to this Section 4.2(c) shall be prorated
                  for the portion of the year for which such bonus is due. The
                  Commit tee may increase this amount in its discretion.

         (d)      The Company shall pay the entire Annual Bonus that is payable
                  with respect to a Year in a lump-sum cash payment as soon as
                  practicable after the Committee can determine whether and the
                  degree to which Target Annual Goal has been achieved following
                  the close of such Year. Any such Annual Bonus shall in any
                  event be paid within 120 days after the end of the Year.

                                    ARTICLE 5
                            STOCK OPTIONS AND GRANTS

5.1      Participation. The Executive shall be eligible to participate in stock
         option plans and similar programs offered by the Company to its key
         employees.

5.2      Terms and Conditions of Options. The terms and conditions of the
         programs discussed in Section 5.1 shall be established by the
         provisions of such programs.

                                    ARTICLE 6
                                 OTHER BENEFITS

6.1      Incentive, Savings and Retirement Plans. In addition to Base Salary and
         an Annual Bonus, Executive shall be entitled to participate during the
         Employment Period in all incentive, savings and (except as otherwise
         provided in Section 7.3) retirement plans, practices, policies and
         programs that are from time to time applicable to other senior
         executives of the Company.

6.2      Welfare Benefits. During the Employment Period, Executive and/or his
         family, as the case may be, shall be eligible for participation in and
         shall receive all benefits under welfare benefit plans, practices,
         policies and programs provided by the Company (including medical,
         prescription, dental, disability, salary continuance, employee life,
         group life, dependent life, accidental death and travel accident
         insurance plans and programs) applicable to other senior executives of
         the Company. After Termination of Employment by reason of a Termination
         Without Cause or a Termination for Good Reason, the Executive and/or
         his family, as the case may be, shall be eligible for participation in
         and shall receive all benefits under welfare benefit plans, practices
         and




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         programs provided by the Company (including medical, prescription and
         life insurance plans and programs) applicable to other former employees
         including former senior executives of the Company who retire from the
         Company at the time of Termination of Employment of the Executive (or
         if earlier, at the time of a Change of Control) provided that the
         requirements for the retiree medical program (medical and prescription
         coverage) and participant contributions for such coverage shall be
         modified as follows: (a) the requirement to immediately receive monthly
         retirement income from a pension plan maintained by the Company shall
         be met if the Executive begins immediately to receive such payments
         from The Coastal Corporation Replacement Pension Plan and (b) the
         contribution rate for the Executive and/or his family, as the case may
         be, for coverage shall be calculated based upon years of service
         credited for purposes of determining the benefit due from The Coastal
         Corporation Replacement Pension Plan.

6.3      Fringe Benefits. During the Employment Period, Executive shall be
         entitled to all fringe benefits that are from time to time available to
         other senior executives of the Company.

6.4      Vacation. During the Employment Period, Executive shall be entitled to
         paid vacation time in accordance with the plans, practices, policies,
         and programs applicable to other senior executives of the Company.

6.5      Expenses. During the Employment Period, Executive shall be entitled to
         receive prompt reimbursement for all reasonable employment-related
         expenses incurred by Executive upon the receipt by the Company of
         accounting in accordance with practices, policies and procedures
         applicable to other senior executives of the Company.

6.6      Office; Support Staff. During the Employment Period, Executive shall be
         entitled to an office or offices of a size and with furnishings and
         other appointments, and to personal secretarial and other assistance,
         appropriate to his position and duties under this Agreement.

                                    ARTICLE 7
                         SUPPLEMENTAL RETIREMENT BENEFIT

7.1      Supplemental Retirement Benefit. Executive shall be entitled to a
         nonqualified supplemental retirement benefit pursuant to The Coastal
         Corporation Replacement Pension Plan (the "Replacement Pension Plan")
         provided, however, that the method used to calculate the benefit due
         the Executive shall be modified as stated in Section 7.2 of this
         Agreement for determining benefits under the Replacement Pension Plan
         in the event of a Termination of Employment by reason of his death or
         Disability, a Termination Without Cause, or a Termination for Good
         Reason.

7.2      Replacement Pension Plan Benefit Modification. For purposes of Section
         7.1 of this Agreement, the benefit calculation method and the age at
         which benefit payments may begin under the Replacement Pension Plan
         shall be modified as follows: (a) the Basic Compensation (as defined in
         the Replacement Pension Plan) used to determine the five year average
         for purposes of determining Final Average Earnings (as defined in the
         Replacement Pension Plan) shall be (i) Base Salary (as defined in this
         Agreement) in





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         effect on the Date of Termination (reduced, if necessary, to comply
         with the Replacement Pension Plan limitation of $500,000 as indexed)
         for 3 of the 5 years, and (ii) Base Salary (as defined in this
         Agreement) in effect for the two calendar years preceding the Date of
         Termination (reduced, if necessary, to comply with the Replacement
         Pension Plan limitation of $500,000 as indexed); provided, however,
         that if one of such two years is 1998, then Basic Compensation (as
         defined in the Replacement Pension Plan) shall be used in lieu of Base
         Salary for such year; and provided, further, that if one of such 2
         years is 1997, then Basic Compensation (as defined in the Replacement
         Pension Plan and modified to insert $500,000 in lieu of $160,000) shall
         be used in lieu of Base Salary for such year; (b) Years of Service (as
         defined in the Replacement Pension Plan) shall be increased to include
         the Severance Period (as defined in this Agreement); and (c) the age of
         the Executive shall be equal to the sum of his actual age and the
         Severance Period (as defined in this Agreement).

7.3      Other Supplemental Retirement Benefits. Executive shall not participate
         in, or be entitled to benefits under, any other supplemental defined
         benefit retirement plans of the Company which are not qualified under
         Section 401(a) of the Code, except as otherwise provided in writing by
         the Company.

                                    ARTICLE 8
                              TERMINATION BENEFITS

8.1      Termination for Cause or Other Than for Good Reason etc.

         (a)      If the Company terminates Executive's employment for Cause or
                  Executive terminates his employment other than for Good
                  Reason, death or Disability, the Company shall pay to
                  Executive immediately after the Date of Termination an amount
                  equal to the sum of Executive's Accrued Base Salary and
                  Accrued Annual Bonus, and Executive shall not be entitled to
                  receive any Severance Payment.

         (b)      Upon and following the occurrence of a Change of Control, the
                  Company may not terminate Executive's employment for Cause
                  unless:

                  (i)      no fewer than 60 days prior to the Date of
                           Termination, the Company provides Executive with
                           written notice (the "Notice of Consideration") of its
                           intent to consider termination of Executive's
                           employment for Cause, including a detailed
                           description of the specific reasons which form the
                           basis for such consideration;

                  (ii)     for a period of not less than 30 days after the date
                           Notice of Consideration is provided, Executive shall
                           have the opportunity to appear before the Board, with
                           or without legal representation, at Executive's
                           election, to present arguments and evidence on his
                           own behalf; and

                  (iii)    following the presentation to the Board as provided
                           in (ii) above or Executive's failure to appear before
                           the Board and date and time specified in the Notice
                           of Consideration (which date shall not be less than
                           30 days





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                           after the date the Notice of Consideration is
                           provided), Executive may be terminated for Cause only
                           if (x) the Board, by the affirmative vote of all of
                           its members (excluding Executive if he is a member of
                           the Board, and any other member of the Board
                           reasonably believed by the Board to be involved in
                           the events leading the Board to terminate Executive
                           for Cause), determines that the actions or inactions
                           of Executive specified in the Notice of Termination
                           occurred, that such actions or inactions constitute
                           Cause, and that Executive's employment should
                           accordingly be terminated for Cause; and (y) the
                           Board provides Executive with a written determination
                           (a "Notice of Termination for Cause") setting forth
                           in specific detail the basis of such Termination of
                           Employment, which Notice of Termination for Cause
                           shall be consistent with the reasons set forth in the
                           Notice of Consideration.

Unless the Company establishes both (i) its full compliance with the substantive
and procedural requirements of this Section 8.1 prior to a Termination of
Employment for Cause, and (ii) that Executive's action or inaction specified in
the Notice of Termination for Cause did occur and constituted Cause, any
Termination of Employment shall be deemed a Termination Without Cause for all
purposes of this Agreement.

         (c)      With respect to a termination of employment upon or following
                  a Change of Control, after providing a Notice of Consideration
                  pursuant to the provisions of Section 8.1 (b), the Board may,
                  by the affirmative vote of all of its members (excluding for
                  this purpose Executive if he is a member of the Board, and any
                  other member of the Board reason ably believed by the Board to
                  be involved in the events issuing the Notice of
                  Consideration), suspend Executive with pay until a final
                  determination pursuant to such Section 8.1(b) has been made.

8.2      Termination for Death or Disability. If Executive's employment
         terminates during the Employment Period due to his death or Disability,
         the Company shall pay to Executive or his Beneficiaries, as the case
         may be, immediately after the Date of Termination an amount which is
         equal to the sum of Executive's Accrued Base Salary, Accrued Annual
         Bonus and Prorata Annual Bonus.

8.3      Termination Without Cause or for Good Reason. In the event of a
         Termination Without Cause or a Termination for Good Reason, Executive
         shall receive the following:

         (a)      immediately after the Date of Termination, a lump-sum amount
                  in immediately available funds equal to the sum of Executive's
                  Accrued Base Salary, Accrued Annual Bonus and Prorata Annual
                  Bonus;

         (b)      immediately after the Date of Termination, a lump-sum amount
                  in immediately available funds equal to the product of 2.99
                  multiplied by Executive's Annualized Total Compensation;

         (c)      immediately after the Date of Termination, a lump-sum amount
                  in immediately available funds equal to the total amount (if
                  any) of Executive's unvested benefits





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                  (excluding equity and equity-based benefits) under any plan or
                  program sponsored by the Company which is forfeited on account
                  of Executive's employment being terminated; and

         (d)      the continuation of the benefits (or, if such benefits are not
                  available, the after-tax economic equivalent thereof)
                  specified in Sections 6.1, 6.2 and 6.3, at the level provided
                  to other senior executives of the Company, for the entire
                  duration of the Severance Period or, at the election of
                  Executive, an immediate lump-sum cash payment equal to the
                  value of such benefits; provided that with respect to any
                  benefit to be provided on an insured basis, such value shall
                  be the present value of the premiums expected to be paid for
                  such coverage, and with respect to other benefits, such value
                  shall be the present value of the expected net cost to the
                  Company of providing such benefits.

8.4      Other Termination Benefits. In addition to any amounts or benefits
         payable upon a Termination of Employment hereunder, Executive shall,
         except as otherwise specifically provided herein, be entitled to any
         payments or benefits provided hereunder or under the terms of any plan,
         policy or program of the Company or as otherwise required by applicable
         law.

                                    ARTICLE 9
                              RESTRICTIVE COVENANTS

9.1      Non-Solicitation of Employees: Confidentiality. Non-Competition.

         (a)      Executive covenants and agrees that, at no time during the
                  period employed pursuant to this Agreement nor during the
                  one-year period immediately following a Termination of
                  Employment by the Company for Cause or by Executive other than
                  for Good Reason, death or Disability, will Executive:

                  (i)      directly or indirectly employ or seek to employ any
                           person employed at that time by the Company or any of
                           its Subsidiaries or otherwise encourage or entice any
                           such person to leave such employment;

                  (ii)     become employed by, enter into a consulting
                           arrangement with or otherwise agree to perform
                           personal services for a Competitor (as defined in
                           Section 9.1(b));

                  (iii)    acquire an ownership interest in a Competitor, or

                  (iv)     solicit any customers or vendors of the Company on
                           behalf of or for the benefit of a Competitor.

         (b)      For purposes of this Section, "Competitor" means any Person
                  which sells goods or services which are directly competitive
                  with those sold by a business that (i) is being conducted by
                  the Company or any Subsidiary at the time in question and (ii)
                  was being conducted at the Date of Termination and, for the
                  Company's most recently-completed fiscal year, contributed
                  more than 10% of the Company's





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                  consolidated revenues. Notwithstanding anything to the
                  contrary in this Section, goods or services shall not be
                  deemed to be competitive with those of the Company (A) solely
                  as a result of Executive being employed by or otherwise
                  associated with a business of which a unit is in competition
                  with the Company or any Subsidiary but as to which unit
                  Executive does not have direct or indirect responsibilities
                  for the products or services involved or (B) if the activity
                  contributes less than 10% of the consolidated revenues for the
                  most recently-completed fiscal year of the business by which
                  Executive is employed or with which he is otherwise
                  associated.

         (c)      Executive covenants and agrees that at no time during the
                  Employment Period nor at any time following any Termination of
                  Employment will Executive communicate, furnish, divulge or
                  disclose in any manner to any Person any Confidential
                  Information (as defined in Section 9.1 (d)) without the prior
                  express written consent of the Company. After a Termination of
                  Employment, Executive shall not, without the prior written
                  consent of the Company, or as may otherwise be required by law
                  or legal process, communicate or divulge such Confidential
                  Information to anyone other than the Company and its
                  designees.

         (d)      For purposes of this Section, "Confidential Information" shall
                  mean financial information about the Company, contract terms
                  with vendors and suppliers, customer and supplier lists and
                  data, trade secrets and such other competitively-sensitive
                  information to which Executive has access as a result of his
                  positions with the Company, except that Confidential
                  Information shall not include any information which was or
                  becomes generally available to the public (i) other than as a
                  result of a wrongful disclosure by Executive, (ii) as a result
                  of disclosure by Executive during the Employment Period which
                  he reasonably and in good faith believes is required by the
                  performance of his duties under this Agreement, or (iii) any
                  information compelled to be disclosed by applicable law or
                  administrative regulation; provided that Executive, to the
                  extent not prohibited from doing so by applicable law or
                  administrative regulation, shall give the Company written
                  notice of the information to be so disclosed pursuant to
                  clause (iii) of this sentence as far in advance of its
                  disclosure as is practicable.

9.2      Injunction. Executive acknowledges that monetary damages will not be an
         adequate remedy for the Company in the event of a breach of this
         Article IX, and that it would be impossible for the Company to measure
         damages in the event of such a breach. Therefore, Executive agrees
         that, in addition to other rights that the Company may have, the
         Company is entitled to an injunction preventing Executive from any
         breach of this Article IX.

                                   ARTICLE 10
                                  MISCELLANEOUS

10.1     Full Settlement. The Company's obligation to make the payments provided
         for in this Agreement and otherwise to perform its obligations
         hereunder shall not be affected by any circumstances, including
         set-off, counterclaim, recoupment, defense or other claim,






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<PAGE>

         right or action which the Company may have against Executive or others.
         In no event shall Executive be obligated to seek other employment or
         take any Other action to mitigate the amounts payable to Executive
         under any of the provisions of this Agreement, nor shall the amount of
         any payment hereunder be reduced by any compensation earned as result
         of Executive's employment by another employer, except that any
         continued welfare benefits provided for by Section 6.2 shall not
         duplicate any benefits that are provided to Executive and his family by
         such other employer and shall be secondary to any coverage provided by
         such other employer.

10.2     Legal Fees: Late Payments.

         (a)      All reasonable costs and expenses (including fees and
                  disbursements of counsel) incurred by Executive in negotiating
                  the terms and conditions of this Agreement shall be promptly
                  paid on behalf of, or reimbursed to, Executive by the Company.

         (b)      If Executive incurs legal or other fees and expenses in an
                  effort to secure or preserve or establish entitlement to
                  compensation and benefits under this Agreement, the Company
                  shall, regardless of the outcome of such effort, reimburse
                  Executive for such fees and expenses. The Company shall
                  reimburse Executive for such fees and expenses on a monthly
                  basis within 10 days after his request for reimbursement
                  accompanied by evidence that the fees and expenses were
                  incurred. If Executive does not prevail (after exhaustion of
                  all available judicial remedies) in respect of a claim by
                  Executive or by the Company hereunder, and the Company
                  establishes before a court of competent jurisdiction, by clear
                  and convincing evidence, that Executive had no reasonable
                  basis for his claim hereunder, or for his response to the
                  Company's claim hereunder, and acted in bad faith, no further
                  reimbursement for legal fees and expenses shall be due to
                  Executive in respect of such claim and Executive shall refund
                  any amounts previously reimbursed hereunder with respect to
                  such claim.

         (c)      If the Company fails to pay any amount provided under this
                  Agreement when due, the Company shall pay interest on such
                  amount at a rate equal to (i) the highest rate of interest
                  charged by the Company's principal lender plus 200 basis
                  points, or (ii) in the absence of such a lender, 300 basis
                  points over the prime commercial lending rate announced by
                  Chase Bank of Texas, N.A. on the date such amount is due or,
                  if no such rate shall be announced on such date, the
                  immediately prior date on which Chase Bank of Texas, N.A.
                  announced such a rate; provided, however, that if the interest
                  rate determined in accordance with this Section exceeds the
                  highest legally permissible interest rate, then the interest
                  rate shall the highest legally permissible interest rate.

10.3     Beneficiary. If Executive dies prior to receiving all of the amounts
         payable to him in accordance with the terms of this Agreement, such
         amounts shall be paid to one or more beneficiaries (each, a
         "Beneficiary") designated by Executive in writing to the Company during
         his lifetime, or if no such Beneficiary is designated, to Executive's
         estate. Such payments shall be made in a lump sum to the extent so
         payable and, to the extent not payable in a lump sum, in accordance
         with the terms of this Agreement. Executive,






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<PAGE>

         without the consent of any prior Beneficiary, may change his
         designation of Beneficiary or Beneficiaries at any time or from time to
         time by a submitting to the Company a new designation in writing.

10.4     Assignment: Successors. The Company may not assign its rights and
         obligations under this Agreement without the prior written consent of
         Executive except to a successor of the Company's business which
         expressly assumes the Company's obligations hereunder in writing. This
         Agreement shall be binding upon and inure to the benefit of Executive,
         his estate and Beneficiaries, the Company and the successors and
         permitted assigns of the Company.

10.5     Nonalienation. Benefits payable under this Agreement shall not be
         subject in any manner to anticipation, alienation, sale, transfer,
         assignment, pledge, encumbrance, charge, garnishment, execution or levy
         of any kind, either voluntary or involuntary, prior to actually being
         received by Executive or a Beneficiary, as applicable, and any such
         attempt to dispose of any right to benefits payable hereunder shall be
         void.

10.6     Severability. If one or more parts of this Agreement are declared by
         any court or governmental authority to be unlawful or invalid, such
         unlawfulness or invalidity shall not invalidate any part of this
         Agreement not declared to be unlawful or invalid. Any part so declared
         to be unlawful or invalid shall, if possible, be construed in a manner
         which will give effect to the terms of such part to the fullest extent
         possible while remaining lawful and valid.

10.7     Captions. The names of the Articles and Sections of this Agreement are
         for convenience of reference only and do not constitute a part hereof.

10.8     Amendment: Waiver. This Agreement shall not be amended or modified
         except by written instrument executed by the Company and Executive. A
         waiver of any term, covenant or condition contained in this Agreement
         shall not be deemed a waiver of any other term, covenant or condition,
         and any waiver of any default in any such term, covenant or condition
         shall not be deemed a waiver of any later default thereof.

10.9     Notices. All notices hereunder shall be in writing and delivered by
         hand, by nationally-recognized delivery service that guarantees
         overnight delivery, or by first-class, registered or certified mail,
         return receipt requested, postage prepaid, addressed as follows:

              If to the Company, to:    The Coastal Corporation
                                        9 Greenway Plaza
                                        Houston, Texas 77046
                                        Attention: Corporate Secretary

and if to Executive, to the most recent address furnished by Executive to the
Company. Either party may from time to time designate a new address by notice
given in accordance with this Section. Notice shall be effective when actually
received by the addressee.




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<PAGE>

10.10    Counterparts. This Agreement may be executed in several counterparts,
         each of which shall be deemed to be an original but all of which
         together will constitute one and the same instrument.

10.11    Entire Agreement. This Agreement forms the entire agreement between the
         parties hereto with respect to the subject matter contained in this
         Agreement and, except as otherwise provided herein, shall supersede all
         prior agreements, promises and representations regarding employment,
         compensation, severance or other payments contingent upon termination
         of employment, whether in writing or otherwise.

10.12    Applicable Law. This Agreement shall be interpreted and construed in
         accordance with the laws of the State of Texas, without regard to its
         choice of law principles.

10.13    Survival of Executive's Rights. All of Executive's rights hereunder,
         including his rights to compensation and benefits, and his obligations
         under Section 9.1 hereof, shall survive the termination of Executive's
         employment and/or the termination of this Agreement.



                                       15
<PAGE>


IN WITNESS WHEREOF, the parties have executed this Agreement on ____________,
2000.

ATTEST :                               THE COASTAL CORPORATION
(Seal)


     /s/ Austin M. O'Toole             By:    /s/ David A. Arledge
-----------------------------------       -------------------------------------
Austin. M. O'Toole                     David A. Arledge
Senior Vice President &                Chairman of the Board, President and
   Corporate Secretary                 Chief Executive Officer



                                          /s/ Gene T. Waguespack
                                       ----------------------------------------
                                       Gene T. Waguespack





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