Document:

exv10wr

 

EXHIBIT 10.R

[EL PASO ENERGY LOGO]

		
	POLICY SUBJECT: 	RELOCATION FOR EMPLOYEES RELOCATING FROM

EL PASO, TEXAS TO HOUSTON, TEXAS, AS A RESULT

OF RELOCATING THE CORPORATE OFFICE

EFFECTIVE: NOVEMBER 1, 1996

	 	I.  	POLICY

 When a regular full-time employee is requested to transfer to Houston,
Texas, in 1996 or within the first six months of 1997, as a result of
the relocation of El Paso Energy Corporation’s headquarters from El
Paso, Texas, to Houston, the employee will be reimbursed for certain
relocation expenses. The employee is to exercise prudence in any
relocation transaction to ensure that reimbursable costs are minimized.

The company has contracted with Prudential Relocation to provide
relocation assistance for employees.

	 	II.  	GENERAL PROVISIONS

	 	•  	Transfer must be made at request of the company.
	 
	 	•  	A Transfer must meet IRS regulations specifying that the move must be over 50 miles and employee must work full time in the
general area of the new work location for at least 39 weeks
during the 12 months immediately following the move.
	 
	 	•  	One set of benefits per household.
	 
	 	•  	Covers employee and all persons residing permanently in employee’s household when transfer request is made.

	 	III.  	GENERAL PROVISIONS

	 	A.  	LUMP SUM PAYMENTS

	 	1.  	INCIDENTAL ALLOWANCE

The company will provide an incidental allowance equal to 10
percent of his or her annual post-move base salary, grossed
up for taxes. The incidental allowance is to be used for
expenses not covered elsewhere in this policy. Examples of
items which are considered incidental expenses include, but
are not limited to, deposits for utilities, deposits for
renting and leasing, movement of possessions not covered by
this policy (Item III, Section B), cleaning/painting/repairs
of new residence, dependent care, equity in new

 

 

	 	   	residence, upgrade of fixtures and appliances, landscaping,
movement of a mobile home that is not the primary residence,
babysitting and boarding of pets necessitated by the
relocation, drivers license, automobile registration,
forfeited membership fees, housecleaning and any expenses
related to establishing a residence at the new location not
covered by the homefinding allowance. Prudential will issue
this payment.

	 	2.  	HOMEFINDING ALLOWANCE

The company will provide a lump sum payment, grossed up for
taxes, for the purpose of establishing a residence at the new
location. The payment is based on one-half of the cost of an
8-day, 7-night trip for the employee and one household member
to the new location, including round-trip coach airfare,
accommodations at a moderately priced hotel, car rental and
meals. Prudential will issue this payment.
	 
	 	3.  	TEMPORARY LIVING ALLOWANCE

The company will provide a lump sum payment, grossed up for
taxes, equal to 3 percent of their annual post-move base
salary (a minimum of $1,500) for temporary living expenses
for the employee. The Prudential counselor can help make
temporary housing arrangements. The employee should call the
Prudential counselor and discuss temporary living
requirements.

	 	B.  	MOVEMENT OF HOUSEHOLD GOODS AND STORAGE

Prudential Relocation will arrange for packing, transporting, and
unpacking of furniture and normal household effects and the costs
will be paid directly by the company. The Prudential counselor
will work directly with the employee to arrange for the movement
of household effects. Prudential can make arrangements to ship up
to two cars.

The following and similar items will not be moved at the
company’s expense:

	 	•  	recreational motor vehicles
	 
	 	•  	boats, tractors (too large for regular shipment along with household goods)
	 
	 	•  	more than two vehicles, i.e., personal automobiles and motorcycles
	 
	 	•  	patio slate, rocks, shrubbery, firewood, etc.
	 
	 	•  	lumber or other building material such as cement, gravel, sand, bricks, etc.
	 
	 	•  	frozen food
	 
	 	•  	pets
	 
	 	•  	plants

	 	   	Coverage through Prudential includes the purchase of full
replacement cost insurance of up to $150,000. The employee is
responsible for declaring the actual value of the household goods
for the full replacement coverage. Full

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	 	   	replacement cost coverage for any declaration of actual value
which exceeds $150,000 must have special approval by the
Executive Vice President, Human Resources and Administration.
Charges for full replacement cost coverage will be paid by the
company. In the event of damage to any property, the Prudential
counselor will assist in processing insurance claims to
facilitate timely resolution of disputes.
	 
	 	   	Prudential will arrange for the storage of household goods for a
period of 60 days if it is not feasible to immediately move them
into a newly acquired residence at the new location. Only those
items on the original bill of lading will be stored at company
expense. The storage expenses will be paid directly by the
company.
	 
	 	   	In lieu of company arranged movement of household goods, an
employee is eligible for a lump sum payment of $750, not grossed
up for taxes, to move his/her household goods. The employee will
be responsible for obtaining insurance associated with the move.
	 
	 	   	The expense of moving a mobile home, when it is in moveable
condition and if the employee does not own the land on which it
is situated, is covered if it is the primary residence. Movement
of household goods will also be covered, but only when such items
cannot be moved within the mobile home. Normal covered costs
include tow truck charges, removal and reinstallation of fences,
skirting and porches, utilities connection, lease penalty up to
three months, insurance and applicable state and local fees to
transport and reinstallation of safety devices. If the employee
owns the land, the company will not cover the cost of moving the
mobile home. It will be covered under the provisions of the home
sale program in Section III, paragraph D2.
	 
	 	C.  	TRAVEL TO NEW LOCATION

The company will reimburse the costs associated with moving the
employee and all permanent members of the household to the new
location. The following expenses will be reimbursed or arranged:

	 	•  	If the employee elects to drive to the new location, mileage at current IRS rate for up to two cars;
	 
	 	•  	Cost of one-way coach airfare for employee and all persons residing permanently in the household;
	 
	 	•  	Moderate hotel lodging, not to exceed two nights, and reasonable meals not to exceed $25 per person per day for
three days.

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	 	D.  	HOME SALE PROGRAM

An employee who owns his/her primary residence is eligible for
home sale benefits offered by Prudential Relocation. The employee
must contact his/her Prudential counselor to ensure the maximum
benefits are obtained.

	 	1.  	INELIGIBLE PROPERTIES — The following properties are considered ineligible properties and therefore will not be
eligible for reimbursement of costs associated with sale or
purchase of such properties:

	 	•  	Farms, ranches, orchards, summer homes, duplexes or any multiple unit properties
	 
	 	•  	Cooperative apartments
	 
	 	•  	Any property with excess acreage for the area
	 
	 	•  	Any property with over 5 acres
	 
	 	•  	Any residence that contains hazardous or toxic substances or is near hazardous or toxic substances
	 
	 	•  	Non-residential use property, either partial or whole use
	 
	 	•  	Any property with no access/no easement
	 
	 	•  	Properties without marketable title (i.e., landlocked properties and properties with a cloud on the title)
	 
	 	•  	Any properties that have repairs that are more than 10 percent of the appraised value
	 
	 	•  	Mobile homes — see Item III, Section D #2

	 	   	All properties must be in marketable condition with no major
repairs, structural or code problems which have not been
repaired or deducted from equity.
	 
	 	2.  	MOBILE HOMES — In lieu of purchasing mobile homes, the company will make a lump sum payment to the employee,
grossed up for taxes, if the mobile home meets the following
criteria:

	 	•  	it is the primary residence
	 
	 	•  	it is permanently affixed
	 
	 	•  	it meets state requirements
	 
	 	•  	it is on property (land) owned by the employee

	 	   	The lump sum will be based on the average of one appraisal
and one broker’s price opinion (must be within 5 percent of
each other) times 8 percent.
	 
	 	   	Mobile homes of a moveable nature and reasonable distance
are addressed in this policy under Item III, Section B. If
the mobile home is moved, the employee is not eligible for a
lump sum payment.

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	 	3.  	GUARANTEED OFFER AND HOME MARKETING ASSISTANCE — Employees are encouraged to list their home with a qualified broker
and to actively participate in the marketing of the home.
The Prudential counselor can assist the employee in the
selection of a qualified broker to help maximize marketing
efforts. It is recommended that an employee speak to the
Prudential counselor before signing any documents with
realtors/agents. Any commission that is not considered
normal for the area will not be reimbursed by the company.
	 
	 	   	The employee must market their home for at least 60 days and
the list price cannot be more than 110 percent of the
appraised price in order to be eligible for the Loss
Protection on Sale of Home and the Home Sale Program. When
listing a home, the employee must include the following
exclusion clause to be eligible for the guaranteed offer
and/or the amended sale benefits:
	 
	 	   	“It is understood and agreed that regardless of whether or
not an offer is presented by a ready, willing, and able
buyer:

	 	1.  	No commission or compensation shall be earned by, or due and payable to broker until the sale of the
property has been consummated between seller and buyer,
the deed delivered to the buyer, and the purchase price
delivered to the seller; and
	 
	 	2.  	The seller reserves the right to sell the property at any time to Prudential Relocation, a Division of
Prudential Residential Services, Limited Partnership or                    [Name of any other party to
be covered by this exclusion clause] (individually and
collectively a “Named Prospective Purchaser”) to either
pay a commission or to continue this listing.”

	 	   	While marketing the home, the Prudential counselor will work
with the employee to establish a guaranteed offer which is
based on the appraisal process. The employee will be able to
choose an appraiser and a broker from a list of independent
appraisers and brokers provided by the Prudential counselor
and approved by the company. To the extent the lower value
is within 5 percent of the higher, the two values will be
averaged to determine the guaranteed offer. If the two
values are not within a 5 percent spread, the employee will
be asked to choose a second appraiser from the approved
list. The two highest values will then be averaged to
determine the guaranteed offer. The employee will have 90
days from the day Prudential makes the guaranteed offer to
accept it.

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	 	4.  	AMENDED VALUE — If an acceptable offer is received, the employee should contact the Prudential counselor
immediately. The employee should not orally accept an
offer, deposit, or sign any agreement until speaking
with the Prudential counselor. If the employee presents
an offer which is 97 percent of the Prudential
guaranteed offer, the company will ensure the
guaranteed offer will be realized. If an employee
receives a bona fide offer for more than the guaranteed
offer, the guaranteed offer will be amended to the
higher offer.
	 
	 	5.  	HOME SALE BONUS — As an incentive to the transferring employee, the company will pay a bonus based on 3
percent of the sale price of the home. The bonus will
not be grossed up for taxes and will be:

	 	•  	based on the sale price of the home
	 
	 	•  	paid if the sale is at least 97 percent of the guaranteed offer
	 
	 	•  	a minimum of $2,000
	 
	 	•  	paid upon confirmation of legal closing and funding

	 	   	EXAMPLE # 1:

 Pam finds a buyer who will pay less than the guaranteed
offer from the relocation service. She doesn’t reject
the contract to hold out for the higher price and calls
her Prudential counselor to review the offer. She knows
that as long as the buyer’s contract is 97 percent or
more of the relocation service’s offer, she will still
receive the higher guaranteed offer. The company wants
the home to sell and encourages employees to bring all
reasonable offers to the relocation service.
	 
	 	   	Pam’s guaranteed offer $100,000
Pam’s buyer $97,000
	 
	 	   	Pam’s equity will be based on the guaranteed $100,000
and will be eligible for a home sale bonus of $2,910
($97,000 X 3%).
	 
	 	   	EXAMPLE # 2:
	 
	 	   	John finds a buyer who will pay more than the
guaranteed offer from the relocation service. He
doesn’t reject the contract from Prudential, and he
calls his Prudential counselor to review the offer to
make sure it will net him more and then simply amends
the Prudential contract for the higher offer.
	 
	 	   	John’s guaranteed offer $100,000

John’s amended value $102,000
	 
	 	   	John’s equity will be based on the amended offer of
$102,000 and will be eligible for a home sale bonus of
$3,060 ($102,000 X 3%).

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	 	6.  	LOSS ON SALE — If the guaranteed offer or amended value of the old home is less than the original price, the
company will offset the loss. To qualify, the employee
must participate in the Home Marketing Assistance
Program and market the home for at least 60 days. The
employee will receive 100 percent of the loss, grossed
up for taxes, which is calculated based on the
difference between the original purchase price (based
on closing statement) plus any eligible capital
improvements and the greater of the guaranteed offer or
amended value. If the employee built the home, an
itemized list of building expenses and receipts are
required to support original purchase price. The
employee should call the Prudential counselor with
questions regarding original purchase price and sale
price definitions.

	 	7.  	SELLING ON YOUR OWN — If an employee decides to sell the home without the help of the relocation company,
for a period of not more than one year from the date of
transfer, the company will authorize payment of various
fees and charges involved in the sale of the employee’s
residence. These expenses may vary by state. Therefore,
before executing an agreement, the employee should
contact the Prudential counselor to ensure that these
costs will be covered. Such expenses may include:

	 	•  	attorney’s fees, escrow services charges
	 
	 	•  	revenue stamps
	 
	 	•  	transfer taxes
	 
	 	•  	settlement, recording and processing fees
	 
	 	•  	sale commission if paid to a licensed real estate broker and limited to the prevailing normal rate in the area
	 
	 	•  	mortgage prepayment penalty in accordance with theterms of the mortgage
	 
	 	•  	prepayment penalty on existing primary or secondary loan upon proper verification from the
institution.

	 	   	The company will not reimburse for mortgage discount
points or other closing costs which are agreed to be
paid on behalf of the purchaser.
	 
	 	   	Costs associated with selling expenses and reimbursed
outside the relocation company are not grossed up for
taxes.

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	 	E.  	PURCHASE OF NEW RESIDENCE

	 	1.  	The Prudential counselor will coordinate the assistance required for the employee to purchase his/her new residence.
It is important that the employee seek assistance from the
Prudential counselor before executing any agreement to
purchase a new home.
	 
	 	2.  	The company will reimburse for various fees and charges which the employee is required by law or local practice to
pay in connection with the purchase of a home at the new
location. This amount will be grossed up for taxes. The
provision will be applicable for a period of not more than
one year from the date of transfer. The employee must check
with the Prudential counselor for verification of allowable
reimbursements. Such expenses may include:

	 	•  	attorney’s fees, escrow service charge
	 
	 	•  	up to 2 percent discount points including loan origination fee
	 
	 	•  	recording fees
	 
	 	•  	title insurance policy/binder
	 
	 	•  	transfer taxes
	 
	 	•  	credit report
	 
	 	•  	fees for home appraisals if required by the lending institution before a mortgage loan will be approved.
	 
	 	•  	inspection fees (termite, structural) when normal, customary or required by the lender

	 	3.  	Equity Loan — Prudential will provide an equity loan for the purpose of purchasing a home at the new work location. In
order to receive an equity loan, a copy of a fully executed
purchase agreement or binder for the new residence must be
submitted before any money is advanced. The loan will not be
for more than 120 days, and the interest on the loan will be
paid by the company. The maximum loan amount may not exceed
90 percent of the equity in the old home as determined by
appraisals. The employee will be required to sign an equity
loan note, which will become due and payable at the time
full equity is disbursed and Prudential acquires the
employee’s property.

	 	F.  	MORTGAGE SUBSIDY

In order to ease the burden which occurs in those cases in which
the transferred employee has a home mortgage at the previous
location at a lesser interest rate than he or she is able to
obtain on a home mortgage at the new location, a mortgage subsidy
may be available if the following qualifications are met:

	 	•  	Old mortgage interest rate is at least 7 percent (if the old rate is less than 7 percent, then 7 percent will be used).

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	 	•  	New interest rate is at least 1 percent higher than the old. New mortgage loan must be the same type as the old one
(i.e., if the old loan was a 30-year fixed rate, the new
loan must be a 30-year fixed rate).

	 	   	The amount of subsidy is based on the percentage difference
between the old and the new mortgages according to the following
schedule:

	 	•  	1 percent difference = 1 point
	 
	 	•  	3 percent difference = 4 points
	 
	 	•  	4 percent difference = 6 points
	 
	 	•  	5 percent difference = 8 points
	 
	 	•  	6 percent difference = 10 points

	 	   	Each point is equal to 1 percent of the mortgage.
	 
	 	   	The subsidy is paid in one lump sum and is not grossed up for
taxes. The Prudential counselor will advise the employee if
he/she is eligible.
	 
	 	G.  	RENTAL OVERLAP AND LEASE CANCELLATION

The company will reimburse rental overlap not to exceed one
month’s rent when an employee locates a rental home or apartment
at the new location before being able to vacate the former
residence. The company will reimburse the employee for the actual
expense (grossed up for taxes) of a lease cancellation for up to
two months’ rent if required.
	 
	 	H.  	RENTAL ASSISTANCE

The Prudential counselor will provide information on the local
practice and procedures for renting a home in the destination
area. The counselor will recommend a real estate broker or rental
agency in the destination area to provide the employee with
information packages on orientation tours of communities.
Prudential will also work with the broker to guide the employee
through the rental and lease execution process.
	 
	 	I.  	SPOUSE ASSISTANCE

An employee’s spouse may find it necessary to give up a job
because of the relocation. There are often additional expenses
associated with securing a position in the new location. The
company will reimburse up to $1,000, not grossed up for taxes,
for expenses associated with the spouse securing a position in
the new location. This includes costs associated with such items
as:

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	 	•  	requirements for special certifications
	 
	 	•  	specialized training
	 
	 	•  	placement counseling

	 	   	The employee should ask the Prudential counselor to clarify the
costs that qualify for reimbursement.
	 
	 	J.  	TAX ASSISTANCE
	 
	 	   	Most of the money the company pays to an employee for relocation
expenses is considered by the Internal Revenue Service (and many
states) as income and is therefore taxable. The company will
assist the employee by paying the tax (i.e., provide extra
income, also referred to as “gross-up”) on most expenses
considered non-deductible which cause the employee tax liability.
	 
	 	   	The following information lists those items that are grossed up
and those items that are not grossed up for federal and FICA tax
purposes. Gross-up for state and local taxes will depend on the
various state and local laws.
	 
	 	   	Items grossed up include:

	 	•  	incidental allowance
	 
	 	•  	homefinding allowance
	 
	 	•  	temporary living allowance
	 
	 	•  	loss protection
	 
	 	•  	lease cancellation
	 
	 	•  	mobile home lump sum payment
	 
	 	•  	closing costs at new location
	 
	 	•  	meals for final move to new location
	 
	 	•  	mileage that is not deductible
	 
	 	•  	storage over 30 days and up to 60 days

	 	   	Items not grossed up include:

	 	•  	mortgage subsidy
	 
	 	•  	spousal assistance
	 
	 	•  	home sale bonus
	 
	 	•  	reimbursed costs (associated with selling expenses and reimbursed outside the relocation company) for self closing
	 
	 	•  	lump sum for self move
	 
	 	•  	household goods shipment — excluded from income
	 
	 	•  	transportation to new location (except meals) — excluded from income
	 
	 	•  	mileage that is deductible — excluded from income
	 
	 	•  	storage less than 30 days — excluded from income

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	 	   	Discount points on new home purchase will be tax assisted at time
of payment, subject to year-end tax reconciliation.
	 
	 	   	Tax assistance includes federal, state, local and FICA (Medicare
and social security) and is based on the transferred employee’s
total compensation from company sources only. Other sources of
income, including spouse’s income, will not be included in this
process. Year-end tax reconciliation is performed and, therefore,
may possibly cause adjustments to be made to employee’s income
and/or taxes at the end of the year.
	 
	 	   	If the employee has any questions concerning taxes, he/she should
seek professional income tax accountant/consultant guidance.
	 
	 	K.  	PURCHASE OF HOUSTON RESIDENCE
	 
	 	   	The company will agree to purchase the home acquired by an
employee in connection with the transfer to Houston for an amount
equal to the greater of (1) the appraised value (as determined
under paragraph D.3 regarding “guaranteed offer”), or (2) the
amount of the employee’s investment (plus a tax gross-up for
applicable taxes that may be due on the difference between the
market value and the investment) (as determined under paragraph
D.6 regarding “loss on sale”). The company’s obligation to
purchase a residence under this provision applies if (a) the
employee is transferred by the company, (b) there is a change of
control of El Paso Energy Corporation, or (3) the employee dies,
retires or becomes permanently disabled. This benefit applies
only to executive officers at grade level D or higher.

	 	   	Major deviations from policy require approval by the senior functional
officer of Human Resources and Administration of El Paso Energy
Corporation.
	 
	 	   	This practice does not constitute nor imply a contract between the company
and its employees or their dependents. It has been voluntarily adopted for
the sole and exclusive use of the company and may be amended or withdrawn
at any time without prior notice.

Page 11exv10ws

 

1

EXHIBIT 10.S

EXECUTIVE AWARD PLAN

OF

SONAT INC.

(AS AMENDED AND RESTATED AS OF JULY 23, 1998)

I. GENERAL

1.1 PURPOSE OF THE PLAN

     The Executive Award Plan (the “Plan”) of Sonat Inc. (the “Company”) is intended to advance the best interests of the Company and its subsidiaries by
providing key employees with additional incentives through the grant of options
(“Options”) to purchase shares of Common Stock of the Company (“Common Stock”)
and through the award of shares of restricted Common Stock (“Restricted Stock”),
thereby increasing the personal stake of such employees in the continued success
and growth of the Company and encouraging them to remain in the employ of the
Company.

     The Plan was adopted effective May 1, 1981, and has been amended at various times. The provisions of the Plan as hereby amended and restated may, at the
discretion of the Committee referred to below, be made available to all grants
outstanding on the effective date of this Amendment and Restatement, and all
awards granted after such date, except that no such provision shall alter any
outstanding grant in a manner unfavorable to the holder thereof without the
written consent of the holder.

1.2 ADMINISTRATION OF THE PLAN

     (A) The Plan shall be administered by the Executive Compensation Committee or other designated committee (the “Committee”) of the Board of Directors of the
Company (the “Board of Directors”) which shall consist of at least three
Directors all of whom are not eligible to participate in the Plan and are
“disinterested” within the meaning of Rule 16b-3 under the Securities Exchange
Act of 1934 (the “Exchange Act”). The Committee shall have authority to
interpret conclusively the provisions of the Plan, to adopt such rules and
regulations for carrying out the Plan as it may deem advisable, to decide
conclusively all questions of fact arising in the application of the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan. All decisions and acts of the Committee shall be final and binding
upon all affected Plan participants.

     (b) The Committee shall meet once each fiscal year, and at such additional times as it may determine or at the request of the chief executive officer of
the Company, to designate the eligible employees, if any, to be granted awards
under the Plan and the type and amount of such awards and the time when awards
will be granted. All awards granted under the Plan shall be on the terms and
subject to the conditions hereinafter provided.

 

 

1.3 ELIGIBLE PARTICIPANTS

     Key employees, including officers, of the Company and its subsidiaries, and of partnerships or joint ventures in which the Company and its subsidiaries have
a significant ownership interest as determined by the Committee (all of such
subsidiaries, partnerships and joint ventures being referred to as
“Subsidiaries”) shall be eligible to participate in the Plan. Directors who are
not employees of the Company or its Subsidiaries shall not be eligible to
participate in the Plan.

1.4 AWARDS UNDER THE PLAN

     Awards under the Plan may be in the form of (i) Options to purchase shares of Common Stock, (ii) Stock Appreciation Rights and Limited Stock Appreciation
Rights which may be issued in tandem with such Options, (iii) shares of
Restricted Stock, and (iv) Supplemental Payments which may be awarded with
respect to Options, Stock Appreciation Rights, Limited Stock Appreciation
Rights, and Restricted Stock, or (v) any combination of the foregoing.

1.5 SHARES SUBJECT TO THE PLAN

     The aggregate number of shares of Common Stock which may be issued with respect to Options or Restricted Stock granted after April 27, 1995 (including
Stock Appreciation Rights, Limited Stock Appreciation Rights and Supplemental
Payments related thereto) shall not exceed (i) 4,000,000 shares plus (ii) the
number of shares previously authorized for use in the Plan which have not been
issued or have again become available for grants pursuant to the following
paragraph. At no time shall the number of shares issued plus the number of
shares subject to outstanding awards under the Plan exceed the number of shares
that may be issued under the Plan. Options with respect to more than 250,000
shares of Common Stock shall not be granted to any optionee in any 12-month
period. Shares distributed pursuant to the Plan may consist of authorized but
unissued shares or treasury shares of the Company, as shall be determined from
time to time by the Board of Directors.

     If any Option under the Plan shall expire, terminate or be canceled (except upon the holder’s exercise of a related Stock Appreciation Right or Limited
Stock Appreciation Right) for any reason without having been exercised in full,
or if any shares of Restricted Stock shall be forfeited to the Company, the
unexercised Options and forfeited shares of Restricted Stock shall not count
against the above limit and shall again become available for grants under the
Plan (regardless of whether the holder of such Options or shares received
dividends or other economic benefits with respect to such Options or shares).
Shares of Common Stock equal in number to the shares surrendered in payment of
the option price, and shares of Common Stock which are withheld in order to
satisfy federal, state or local tax liability, shall not count against the above
limit and shall again become available for grants under the Plan.
Notwithstanding the foregoing, any shares which were authorized for issuance
under the Plan as in effect on April 25, 1985 shall not be available for
issuance with respect to awards granted after April 24, 1995.

2

 

1.6 OTHER COMPENSATION PROGRAMS

     The existence and terms of the Plan shall not limit the authority of the Board of Directors in compensating employees of the Company and its subsidiaries
in such other forms and amounts, including compensation pursuant to any other
plans as may be currently in effect or adopted in the future, as it may
determine from time to time.

II. STOCK OPTIONS

2.1 TERMS AND CONDITIONS OF OPTIONS

     Subject to the following provisions, all Options granted under the Plan shall be in such form and shall have such terms and conditions as the Committee,
in its discretion, may from time to time determine.

     (a) Option Price. The option price per share shall not be less than the fair market value of the Common Stock (as determined by the Committee)
on the date the Option is granted.

     (b) Term of Option. The term of an Option shall not exceed ten years from the date of grant, and, notwithstanding any other provision of this
Plan, no Option shall be exercised after the expiration of its term.

     (c) Exercise of Options. Options shall be exercisable at such time or times and subject to such terms and conditions as the Committee shall
specify in the Option grant. The Committee shall have discretion to at any
time declare all or any portion of the Options held by any optionee to be
immediately exercisable. An Option may be exercised in accordance with its
terms as to any or all shares purchasable thereunder.

     (d) Payment for Shares. Payment for shares as to which an Option is exercised shall be made in such manner and at such time or times as shall
be provided by the Committee in the Option grant. Payment may be made in
cash or in such other manner as the Committee in its discretion may
authorize.

     (e) Nontransferability of Options. No Option or any interest therein shall be transferable by the optionee other than by will or by the laws of
descent and distribution. During an optionee’s lifetime, all Options shall
be exercisable only by such optionee or by the guardian or legal
representative of the optionee.

     (f) Shareholder Rights. The holder of an Option shall, as such, have none of the rights of a shareholder.

     (g) Termination of Employment. The Committee shall have discretion to specify in the Option grant or an amendment thereof, provisions with
respect to the

3

 

period, not extending beyond the term of the Option, during which the
Option may be exercised following the optionee’s termination of employment.

     (h) Change of Control. Notwithstanding the exercisability schedule governing any Option, upon the occurrence of a Change of Control (as
defined in Section 4.9) all Options outstanding at the time of such Change
of Control and held by optionees who are employees of the Company or its
Subsidiaries at the time of the Change of Control shall become immediately
exercisable and, unless the optionee agrees otherwise in writing, shall
remain exercisable for a period of three years following the optionee’s
termination of employment or such longer period as may be provided in the
Option, but in no event beyond the term of the Option established pursuant
to Section 2.1(b).

2.2 STOCK APPRECIATION RIGHTS IN TANDEM WITH OPTIONS

     (a) The Committee may, either at the time of grant of an Option or at any time during the term of the Option, grant Stock Appreciation Rights or Limited
Stock Appreciation Rights with respect to all or any portion of the shares of
Common Stock covered by such Option. A Stock Appreciation Right may be exercised
at any time the Option to which it relates is then exercisable. A Limited Stock
Appreciation Right may be exercised only within 60 days after the occurrence of
a Change of Control. A Stock Appreciation Right or a Limited Stock Appreciation
Right may only be exercised to the extent the Option to which it relates is
exercisable, and shall be subject to the conditions applicable to such Option.
When a Stock Appreciation Right or Limited Stock Appreciation Right is
exercised, the Option to which it relates shall cease to be exercisable to the
extent of the number of shares with respect to which the Stock Appreciation
Right or Limited Stock Appreciation Right is exercised. Similarly, when an
Option is exercised, the Stock Appreciation Rights or Limited Stock Appreciation
Rights relating to the shares covered by such Option exercise shall terminate.
Any Stock Appreciation Right which is outstanding on the last day of the term of
the related Option (as determined pursuant to Section 2.1(b)) shall be
automatically exercised on such date without any action by the optionee.

     (b) Upon exercise of a Stock Appreciation Right, the holder shall receive, for each share with respect to which the Stock Appreciation Right is exercised,
an amount (the “Appreciation”) equal to the difference between the option price
per share of the Option to which the Stock Appreciation Right relates and the
fair market value (as determined by the Committee) of a share of Common Stock on
the date of exercise of the Stock Appreciation Right. The Appreciation shall be
payable in cash, Common Stock, or a combination of both, at the option of the
Committee, and shall be paid within 30 days of the exercise of the Stock
Appreciation Right.

     (c) Notwithstanding the foregoing, if a Stock Appreciation Right is exercised within 60 days after the occurrence of a Change of Control, in
addition to the Appreciation and any Supplemental Payment (as defined in Section
2.3) to which the holder is entitled, the holder shall receive (in cash, in
Common Stock, or a combination of both, at the discretion of the Committee) (1)
the amount by which the greater of

4

 

(a) the highest market price per share of Common Stock during the 60-day period
preceding exercise of the Stock Appreciation Right or (b) the highest price per
share of Common Stock (or the cash- equivalent thereof as determined by the
Board of Directors) paid by an acquiring person during the 60-day period
preceding a Change of Control, exceeds the fair market value of a share of
Common Stock on the date of exercise of the Stock Appreciation Right, plus (2)
if the holder is entitled to a Supplemental Payment, an additional payment,
calculated under the same formula as used for calculating such holder’s
Supplemental Payment, with respect to the amount referred to in clause (1) of
this sentence.

     (d) Upon exercise of a Limited Stock Appreciation Right, the holder shall receive, for each share with respect to which the Limited Stock Appreciation
Right is exercised, the sum of (i) the Appreciation, as defined in Section
2.2(b); (ii) any Supplemental Payment (as defined in Section 2.3) to which the
holder is entitled with respect to the Appreciation; (iii) the amount by which
the greater of (a) the highest market price per share of Common Stock during the
60-day period preceding exercise of the Limited Stock Appreciation Right or (b)
the highest price per share of Common Stock (or the cash-equivalent thereof as
determined by the Board of Directors) paid by an acquiring person during the
60-day period preceding a Change of Control, exceeds the fair market value of a
share of Common Stock on the date of exercise of the Limited Stock Appreciation
Right; and (iv) if the holder is entitled to a Supplemental Payment, an
additional payment, calculated under the same formula as used for calculating
such holder’s Supplemental Payment, with respect to the amount referred to in
clause (iii) of this sentence. All of such amounts shall be paid within 30 days
of the exercise of the Limited Stock Appreciation Right, and shall be paid in
cash, in Common Stock, or a combination of both, at the discretion of the
Committee.

2.3 SUPPLEMENTAL PAYMENT ON EXERCISE OF OPTIONS OR STOCK APPRECIATION RIGHTS

     The Committee, either at the time of grant or at the time of exercise of any Option or related Stock Appreciation Right or Limited Stock Appreciation
Right, may provide for a supplemental payment (the “Supplemental Payment”) by
the Company to the optionee with respect to the exercise of any Option or
related Stock Appreciation Right or Limited Stock Appreciation Right. The
Supplemental Payment shall be in the amount specified by the Committee, which
shall not exceed, but may be equal to, the amount necessary to pay the federal
income tax payable with respect to both exercise of the Option or related Stock
Appreciation Right or Limited Stock Appreciation Right and receipt of the
Supplemental Payment, assuming the optionee is taxed at the maximum effective
federal income tax rate applicable thereto. The Supplemental Payment shall be
paid in cash, Common Stock, or a combination of both, at the option of the
Committee. The Supplemental Payment shall be paid within 30 days of the date of
exercise of an Option or Stock Appreciation Right or Limited Stock Appreciation
Right (or, if later, within 30 days of the date on which income is recognized
for federal income tax purposes with respect to such exercise).

5

 

2.4 STATUTORY OPTIONS

     Subject to the limitations on Option terms set forth in Section 2.1, the Committee shall have the authority to grant (i) incentive stock options within
the meaning of Section 422 of the Code and (ii) Options containing such terms
and conditions as shall be required to qualify such Options for preferential tax
treatment under the Code as in effect at the time of such grant. Options granted
pursuant to this Section 2.4 may contain such other terms and conditions
permitted by Article II of this Plan as the Committee, in its discretion, may
from time to time determine (including, without limitation, provision for Stock
Appreciation Rights, Limited Stock Appreciation Rights and Supplemental
Payments), to the extent that such terms and conditions do not cause the Options
to lose their preferential tax treatment. To the extent the Code and Regulations
promulgated thereunder require a plan to contain specified provisions in order
to qualify options for preferential tax treatment, such provisions shall be
deemed to be stated in this Plan.

III. RESTRICTED STOCK

3.1 TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS

     Subject to the following provisions, all awards of Restricted Stock shall be in such form and shall have such terms and conditions as the Committee, in
its discretion, may from time to time determine:

     (a) The Restricted Stock award shall specify the number of shares of Restricted Stock to be awarded, the price, if any, to be paid by the
recipient of the Restricted Stock, and the date or dates on which the
Restricted Stock will vest. The vesting of Restricted Stock may be
conditioned upon the completion of a specified period of service with the
Company or its Subsidiaries, upon the attainment of specified performance
goals, or upon such other criteria as the Committee may determine in its
sole discretion.

     (b) Stock certificates representing the Restricted Stock granted to an employee shall be registered in the employee’s name. Such certificates
shall either be held by the Company on behalf of the employee, or delivered
to the employee bearing a legend to restrict transfer of the certificate
until the Restricted Stock has vested, as determined by the Committee. The
Committee shall determine whether the employee shall have the right to vote
and/or receive dividends on the Restricted Stock before it has vested. No
share of Restricted Stock may be sold, transferred, assigned, or pledged by
the employee until such share has vested in accordance with the terms of
the Restricted Stock award. In the event of an employee’s termination of
employment before all of his Restricted Stock has vested, or in the event
other conditions to the vesting of Restricted Stock have not been satisfied
prior to any deadline for the satisfaction of such conditions set forth in
the award, the shares of Restricted Stock which have not vested shall be
forfeited and any purchase price paid by the employee shall be

6

 

returned to the employee. At the time Restricted Stock vests (and, if the
employee has been issued legended certificates of Restricted Stock, upon
the return of such certificates to the Company), a certificate for such
vested shares shall be delivered to the employee (or the beneficiary
designated by the employee in the event of death), free of all
restrictions.

     (c) Notwithstanding the vesting conditions set forth in the Restricted Stock award, (i) the Committee may in its discretion accelerate the vesting
of Restricted Stock at any time, and (ii) all shares of Restricted Stock
shall vest upon a Change of Control of the Company.

3.2 SUPPLEMENTAL PAYMENT ON VESTING OF RESTRICTED STOCK

     The Committee, either at the time of grant or at the time of vesting of Restricted Stock, may provide for a Supplemental Payment by the Company to the
employee in an amount specified by the Committee which shall not exceed, but may
be equal to, the amount necessary to pay the federal income tax payable with
respect to both the vesting of the Restricted Stock and receipt of the
Supplemental Payment, assuming the employee is taxed at the maximum effective
federal income tax rate applicable thereto and has not elected to recognize
income with respect to the Restricted Stock before the date such Restricted
Stock vests. The Supplemental Payment shall be paid within 30 days of each date
that Restricted Stock vests. The Supplemental Payment shall be paid in cash,
Common Stock, or a combination of both, at the discretion of the Committee.

IV. ADDITIONAL PROVISIONS

4.1 GENERAL RESTRICTIONS

     Each award under the Plan shall be subject to the requirement that, if at any time the Committee shall determine that (i) the listing, registration or
qualification of the shares of Common Stock subject or related thereto upon any
securities exchange or under any state or federal law, or (ii) the consent or
approval of any government regulatory body, or (iii) an agreement by the
recipient of an award with respect to the disposition of shares of Common Stock
is necessary or desirable (in connection with any requirement or interpretation
of any federal or state securities law, rule or regulation) as a condition of,
or in connection with, the granting of such award or the issuance, purchase or
delivery of shares of Common Stock thereunder, such award may not be consummated
in whole or in part unless such listing, registration, qualification, consent,
approval or agreement shall have been effected or obtained free of any
conditions not acceptable to the Committee.

7

 

4.2 ADJUSTMENTS FOR CHANGES IN CAPITALIZATION

     In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, rights offer, liquidation, dissolution, merger,
consolidation, spin-off, sale of assets, payment of an extraordinary cash
dividend, or any other change in or affecting the corporate structure or
capitalization of the Company, the Committee shall make appropriate adjustment
in the number and kind of shares authorized by the Plan (including any
limitations on individual awards), in the number, price or kind of shares
covered by the awards and in any outstanding awards under the Plan.

4.3 AMENDMENTS

     (a) The Board of Directors may amend the Plan from time to time. No such amendment shall require approval by the stockholders unless stockholder approval
is required by applicable law or stock exchange requirements.

     (b) The Committee shall have the authority to amend any grant to include any provision which, at the time of such amendment, is authorized under the
terms of the Plan; provided, however, that (1) no outstanding award may be
revoked or altered in a manner unfavorable to the holder without the written
consent of the holder, and (2) no outstanding Option may be altered in a manner
that reduces the option price (except as provided in Section 4.2).

4.4 CANCELLATION OF AWARDS

     Any award granted under the Plan may be canceled at any time with the consent of the holder and a new award may be granted to such holder in lieu
thereof, which award may, in the discretion of the Committee, be on more
favorable terms and conditions than the canceled award; provided, however, that
any Option that is granted in lieu of a canceled Option shall have an option
price at least equal to the option price of the canceled Option.

4.5 WITHHOLDING

     (a) Whenever the Company proposes or is required to issue or transfer shares of Common Stock under the Plan, the Company shall have the right to
require the holder to remit to the Company an amount sufficient to satisfy any
federal, state or local withholding tax liability prior to the delivery of any
certificate for such shares. Whenever under the Plan payments are to be made in
cash, such payments shall be net of an amount sufficient to satisfy any federal,
state or local withholding tax liability.

     (b) An employee entitled to receive Common Stock under the Plan who has not received a cash Supplemental Payment may elect to have the federal, state and
local tax liability (or a specified portion thereof) with respect to such Common
Stock satisfied by having the Company withhold from the shares otherwise
deliverable to the employee shares of Common Stock having a value equal to the
amount of the tax liability to be satisfied with respect to the Common Stock. An
election to have all or a

8

 

portion of the tax liability satisfied using Common Stock shall comply with such
requirements as may be imposed by the Committee and shall be subject to the
disapproval of the Committee (if expressed prior to the making of such
election).

4.6 NON-ASSIGNABILITY

     Except as expressly provided in the Plan, no award under the Plan shall be assignable or transferable by the holder thereof except by will or by the laws
of descent and distribution. During the life of the holder, awards under the
Plan shall be exercisable only by such holder or by the guardian or legal
representative of such holder.

4.7 NON-UNIFORM DETERMINATIONS

     Determinations by the Committee under the Plan (including, without limitation, determinations of the persons to receive awards; the form, amount
and timing of such awards; the terms and provisions of such awards and the
agreements evidencing same; and provisions with respect to termination of
employment) need not be uniform and may be made by it selectively among persons
who receive, or are eligible to receive, awards under the Plan, whether or not
such persons are similarly situated.

4.8 NO GUARANTEE OF EMPLOYMENT

     The grant of an award under the Plan shall not constitute an assurance of continued employment for any period.

4.9 CHANGE OF CONTROL

     A “Change of Control” shall mean:

     (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”)
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of either (1) the then outstanding shares
of common stock of the Company (the “Outstanding Common Stock”) or (2) the
combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
“Outstanding Voting Securities”); provided, however, that for purposes of
this subsection (i), the following acquisitions shall not constitute a
Change of Control: (A) any acquisition directly from the Company, (B) any
acquisition by the Company, (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (D) any acquisition by any
corporation pursuant to a transaction which complies with clauses (A), (B)
and (C) of subsection (iii); or

     (ii) Individuals who, as of December 1, 1995, constitute the Board of Directors (the “Incumbent Board”) cease for any reason to constitute at
least a majority of the Board of Directors; provided, however, that any
individual becoming

9

 

a director subsequent to such date whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board of Directors; or

     (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the
Company (a “Business Combination”), in each case, unless, following such
Business Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Common Stock and Outstanding Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company’s assets either directly
or through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Business Combination, of the
Outstanding Common Stock and Outstanding Voting Securities, as the case may
be, (B) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company
or such corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (C) at least a
majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement, or of the
action of the Board of Directors, providing for such Business Combination.

4.10 DURATION AND TERMINATION

     (a) The Plan shall be of unlimited duration. Notwithstanding the foregoing, no incentive stock option (within the meaning of Section 422 of the Code) shall
be granted under the Plan after April 26, 2005, but awards granted prior to such
date may extend beyond such date, and the terms of this Plan shall continue to
apply to all awards granted hereunder.

     (b) The Board of Directors may discontinue or terminate the Plan at any time. Such action shall not impair any of the rights of any holder of any award
outstanding on the date of the Plan’s discontinuance or termination without the
holder’s written consent.

10

 

     This document incorporates into a single document the provisions of the Plan as amended as of July 23, 1998.

     IN WITNESS WHEREOF, this document has been executed as of July 23, 1998.

	 	 	 	 	 
	

	 	 	 	SONAT INC.
	 
	 	 	 	 
	

	 	by:
	 	/s/ RONALD L. KUEHN, JR.
	

	 	 	 	 
	

	 	 	 	Ronald L. Kuehn, Jr.
	

	 	 	 	Chairman of the Board,
	

	 	 	 	President and Chief Executive Officer

11

 

AMENDMENT TO EXECUTIVE AWARD PLAN

AND CERTAIN STOCK OPTIONS GRANTED THEREUNDER

     The Executive Award Plan of Sonat Inc., as amended and restated as of July 23, 1998 (the “Plan”), and each Affected Option (as defined below) that has been
granted thereunder, are each hereby amended as set forth below, effective as May
27, 1999.

          1. A new Section 2.2(e) is hereby added to the Plan, reading in its entirety as follows:

     (e) (i) Notwithstanding the foregoing, the provisions of this Section 2.2(e) shall apply to the exercise of any Stock Appreciation
Right or Limited Stock Appreciation Right in connection with the
merger (the “Merger”) between the Company and El Paso Energy
Corporation (“El Paso”) pursuant to the Second Amended and Restated
Agreement and Plan of Merger, as amended from time to time (the
“Merger Agreement”) dated as of March 3, 1999 by and between the
Company and El Paso.

     (ii) All Limited Stock Appreciation Rights shall be exercisable only at the time of the Merger and shall, if not so exercised,
terminate immediately after the Merger. In addition, the amounts
payable pursuant to Section 2.2(d) in connection with such exercise
shall be determined by (x) excluding the amount described in clause
(iii) thereof, (y) including an additional amount equal to the value
(if any) of (I) the right of the holder to receive a payment based
upon the pricing mechanism set forth in said clause (iii) and (II) the
right of the holder to exercise the Limited Stock Appreciation Right
during the 60-day period following the Merger, which rights (the
“Rights”) are eliminated pursuant to this Section 2.2(e), and (z)
determining the amount described in clause (iv) thereof by reference
to the value of the Rights determined in accordance with (y) hereof
rather than by reference to the amount referred to in clause (iii) of
Section 2.2(d). The value of the Rights shall be determined by the
Committee based upon the advice of Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Donaldson, Lufkin & Jenrette Securities
Corporation.

     (iii) All Stock Appreciation Rights shall be exercisable at the time of the Merger and, if so exercised, the amounts payable pursuant
to Section 2.2(c) in connection with such exercise shall be determined
by: (A) excluding the amount described in clauses (a) and (b) thereof,
(B) including an additional amount determined in the same manner as
set forth in clause (y) of Section 2.2(e)(ii) hereof with respect to
Limited Stock Appreciation Rights; and (C) determining the amount
described in clause (2) thereof by reference to the value of the
Rights determined in accordance with clause (B) hereof rather than by
reference to the amount

12

 

13

described in clauses (a) and (b) thereof. If a Stock Appreciation
Right is exercised at any time other than at the time of the Merger,
Section 2.2(c) shall not apply to such exercise.

     (iv) The consideration to be paid pursuant to Sections 2.2(c) and (d) as modified hereby (including the Supplemental Payment (if any))
shall be paid in the form of common stock of El Paso, based upon the
value of such common stock on the day of the Merger.

          2. Each outstanding Option granted under the Plan that includes a Stock Appreciation Right or a Limited Stock Appreciation Right (or both) (an
“Affected Option”) is hereby amended to incorporate the provisions of new
Section 2.2(e) of the Plan set forth above.

          3. It is acknowledged and agreed that as a result of the amendments set forth above: (i) with respect to an Affected Option with an associated
Limited Stock Appreciation Right, to the extent that the holder of such Affected
Option does not exercise the associated Limited Stock Appreciation Right at the
time of the Merger, the Affected Option will be convened into an option to
acquire common stock of El Paso pursuant to Section 2.7 of the Merger Agreement,
which new option will not include a Limited Stock Appreciation Right; and (ii)
with respect to any Affected Option with an associated Stock Appreciation Right,
to the extent that the holder of such Affected Option does not exercise the
associated Stock Appreciation Right at the time of the Merger, the Affected
Option will be converted into an option to acquire common stock of El Paso
pursuant to Section 2.7 of the Merger Agreement, which new option will include
an associated Stock Appreciation Right to which Section 2.2(c) of the Plan does
not apply.

	 	 	 	 	 	 	 
	 	 	 	 	SONAT INC.
	 
	 	 	 	 	 	 
	

	 	 	 	By:
	 	/s/ Beverely T. Krannich
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Consented, agreed to and accepted:	 	 	 	 
	 
	 	 	 	 	 	 
	EL PASO ENERGY CORPORATION	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Britton White Jr.	 	 	 	 
	

	 	 	 	 	 	 
	

	 	Britton White Jr., Esq.	 	 	 	 
	

	 	Date: October 25, 1999

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