Document:

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                                                                   EXHIBIT 10.25

                         TOLLGRADE COMMUNICATIONS, INC.
                    1998 EMPLOYEE INCENTIVE COMPENSATION PLAN
                        (AS AMENDED THROUGH MAY 3, 2001)

ARTICLE 1.        ESTABLISHMENT, OBJECTIVES AND DURATION.

1.1      ESTABLISHMENT OF THE PLAN. Tollgrade Communications, Inc., a
         Pennsylvania corporation (hereinafter referred to as the "Company"),
         hereby establishes an incentive compensation plan for all employees
         excluding officers and directors of the Company, to be known as the
         "Tollgrade Communications, Inc. 1998 Employee Incentive Compensation
         Plan" (hereinafter referred to as the "Plan"), as set forth in this
         document. The Plan permits the grant of Nonqualified Stock Options,
         Stock Appreciation Rights, Restricted Stock, Performance Shares and
         Performance Units. The Plan shall be effective as of January 29, 1998
         (the "Effective Date") and shall remain in effect as provided in
         SECTION 1.3 hereof.

1.2      OBJECTIVES OF THE PLAN. The objectives of the Plan are to optimize the
         profitability and growth of the Company through incentives which are
         consistent with the Company's goals and which link the personal
         interests of Employees to those of the Company's stockholders; to
         provide Employees with an incentive for excellence in individual
         performance; and to promote teamwork among Employees. The Plan is
         further intended to provide flexibility to the Company in its ability
         to motivate, attract, and retain the services of Employees who make
         significant contributions to the Company's success and allow Employees
         to share in the success of the Company.

1.3      DURATION OF THE PLAN. The Plan was adopted by the Board of Directors on
         January 29, 1998, and shall commence on the Effective Date, as
         described in SECTION 1.1 hereof, and shall remain in effect, subject to
         the right of the Board of Directors to amend or terminate the Plan at
         any time pursuant to ARTICLE 14 hereof, until all Shares subject to it
         shall have been purchased or acquired according to the Plan's
         provisions. However, in no event shall an Award be granted under the
         Plan on or after January 29, 2008.

ARTICLE 2.        DEFINITIONS

Whenever used in the Plan, the following terms shall have the meanings set forth
below, and when the meaning is intended, the initial letter of the word shall be
capitalized:

2.1      "AWARD" means, individually or collectively, a grant under this Plan of
         Nonqualified Stock Options, Stock Appreciation Rights, Restricted
         Stock, Performance Shares or Performance Units.

2.2      "AWARD AGREEMENT" means an agreement entered into by the Company and
         each Employee setting forth the terms and provisions applicable to
         Awards granted under this Plan.

2.3      "BENEFICIAL OWNER" OR "BENEFICIAL OWNERSHIP" shall have the meaning
         ascribed to such term in Rule 13d-3 of the General Rules and
         Regulations under the Exchange Act.

2.4      "BOARD" OR "BOARD OF DIRECTORS" means the Board of Directors of the
         Company.

2.5      "CAUSE" shall mean with respect to the termination of an Employee's
         employment, unless otherwise determined by the Committee at the time of
         the grant of the Award (i) in the case where there is no employment
         agreement, change of control agreement or similar agreement in effect
         between the Employee and the Company at the time of the grant of the
         Award (or where there is such an agreement but it does not define
         "cause" or words of like import), termination due to an Employee's
         dishonesty, fraud, conviction of a felony, insubordination, willful
         misconduct, refusal to perform services, or unsatisfactory

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         performance of his or her duties for the Company as determined by the
         Committee in its sole discretion; or (ii) in the case where there is an
         employment agreement, change in control agreement or similar agreement
         in effect between the Employee and the Company at the time of the grant
         of the Award that defines "cause" (or words of like import), as defined
         under such agreement.

2.6      "CHANGE IN CONTROL" of the Company shall be deemed to have occurred (as
         of a particular day, as specified by the Board) if the Board, by a
         majority vote, agrees that a Change in Control has occurred, or is
         about to occur. Such a change shall not include, however, a
         restructuring, reorganization, merger or other change in capitalization
         in which the Persons who own an interest in the Company on the
         Effective Date (the "Current Owners") (or any individual or entity
         which received from a Current Owner an interest in the Company through
         will or the laws of descent and distribution) maintain more than a
         fifty percent (50%) interest in the resultant entity.

Regardless of the Board's vote, a Change in Control will be deemed to have
occurred as of the first day any one (1) or more of the following paragraphs
shall have been satisfied:

         (a)      Any Person (other than the Person in control of the Company as
                  of the Effective Date of the Plan, or other than a trustee or
                  other fiduciary holding securities under an employee benefit
                  plan of the Company, or a corporation owned directly or
                  indirectly by the stockholders of the Company in substantially
                  the same proportions as their ownership of stock in the
                  Company), becomes the Beneficial Owner, directly or
                  indirectly, of securities of the Company representing more
                  than fifty percent (50%) of the combined voting power of the
                  Company's then outstanding securities; or

         (b)      The stockholders of the Company approve:

                  (i)      A plan of complete liquidation of the Company; or

                  (ii)     An agreement for the sale or disposition of all or
                           substantially all of the Company's assets (other than
                           one in which the stockholders of the Company, as
                           determined immediately prior to such transaction,
                           hold, directly or indirectly, as determined
                           immediately following such transaction, a majority of
                           the voting power of each surviving, resulting or
                           acquiring corporation which, immediately following
                           such transaction, holds more than 10% of the
                           consolidated assets of the Company immediately prior
                           to the transaction); or

                  (iii)    A merger, consolidation, or reorganization of the
                           Company with or involving any other corporation,
                           other than a merger, consolidation, or reorganization
                           that would result in the voting securities of the
                           Company outstanding immediately prior thereto
                           continuing to represent (either by remaining
                           outstanding or by being converted into voting
                           securities of the surviving entity) at least fifty
                           percent (50%) of the combined voting power of the
                           voting securities of the Company (or such surviving
                           entity) outstanding immediately after such merger,
                           consolidation or reorganization.

         However, in no event shall a Change in Control be deemed to have
         occurred, with respect to a Employee, if that Employee is part of a
         purchasing group which consummates the Change in Control transaction.
         The Employee shall be deemed "part of a purchasing group" for purposes
         of the preceding sentence if the Employee is an equity participant or
         has agreed to become an equity participant in the purchasing company or
         group (except for (i) passive ownership of less than five percent (5%)
         of the voting equity securities of the purchasing company; or (ii)
         ownership of equity participation in the purchasing company or group
         which is otherwise deemed not to be significant, as determined prior to
         the Change in Control by a majority of the nonemployee continuing
         Directors).

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

2.8      "COMMITTEE" means the Compensation Committee of the Board, as specified
         in ARTICLE 3 herein, or such other Committee appointed by the Board to
         administer the Plan with respect to grants of Awards.

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2.9      "COMPANY" means Tollgrade Communications, Inc., a Pennsylvania
         corporation, any successor thereto as provided in ARTICLE 17 herein.

2.10     "DIRECTOR" means any individual who is a member of the Board of
         Directors of the Company.

2.11     "EFFECTIVE DATE" shall have the meaning ascribed to such term in
         SECTION 1.1 hereof.

2.12     "EMPLOYEE" means any full-time active employee of the Company who is
         not an Officer, as defined in SECTION 2.18 hereof. Directors shall not
         be considered employees under the Plan.

2.13     "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
         from time to time, or any successor act thereto.

2.14     "FAIR MARKET VALUE" shall be the mean between the following prices, as
         applicable, for the date as of which fair market value is to be
         determined as quoted in The Wall Street Journal (or in such other
         reliable publication as the Committee, in its discretion, may determine
         to rely upon): (i) if the Common Stock is listed on the New York Stock
         Exchange, the highest and lowest sales prices per share of the Common
         Stock as quoted in the NYSE Composite Transactions listing for such
         date, (ii) if the Common Stock is not listed on such exchange, the
         highest and lowest sales prices per share of Common Stock for such date
         on (or on any composite index including) the principal united States
         securities exchange registered under the 1934 Act on which the Common
         Stock is listed or (iii) if the Common Stock is not listed on such
         exchange, the highest and lowest sales prices per share of the Common
         Stock for such date on the National Association of Securities Dealers
         Automated Quotations System or any successor system then in use
         ("NASDAQ"). If there are no such sale price quotations for the date as
         of which fair market value is to be determined but there are such sale
         price quotations within a reasonable period both before and after such
         date, then fair market value shall be determined by taking a weighted
         average of the means between the highest and lowest sales prices per
         share of the Common Stock as so quoted on the nearest date before and
         the nearest date after the date as of which fair market value is to be
         determined. The average should be weighted inversely by the respective
         number of trading days between the selling dates and the date as of
         which fair market value is to be determined. If there are no such sale
         prices quotations on or within a reasonable period both before and
         after the date as of which fair market value is to be determined, then
         fair market value of the Common Stock shall be the mean between the
         bona fide bid and asked prices per share of Common Stock as so quoted
         for such date on NASDAQ, or if none, the weighted average of the means
         between such bona fide bid and asked prices on the nearest trading date
         before and the nearest trading date after the date as of which fair
         market value is to be determined, if both such dates are within a
         reasonable period. The average is to be determined in the manner
         described above in this SECTION 2.14. If the fair market value of the
         Common Stock cannot be determined on any basis previously set forth in
         this SECTION 214 for the date as of which fair market value is to be
         determined, the Committee shall in good faith determine the fair market
         value of the Common Stock on such date. Fair market value shall be
         determined without regard to any restriction other than a restriction
         which, by its terms, will never lapse.

2.15     "FREESTANDING SAR" means an SAR that is granted independently of any
         Options, as described in ARTICLE 7 herein.

2.16     "INSIDER" shall mean an individual who, immediately prior to the grant
         of any Award, owns stock possessing more than ten percent (10%) of the
         total combined voting power of all classes of stock for the Company.
         For purposes of this SECTION 2.16, an individual (i) shall be
         considered as owning not only Shares of Stock owned individually but
         also all Shares of stock that are at the time owned, directly or
         indirectly, by or for the spouse, ancestors, lineal descendants and
         bothers and sisters (whether by whole or half blood) of such individual
         and (ii) shall be considered as owning proportionately any Shares
         owned, directly or indirectly, by or for any corporation, partnership,
         estate or trust in which such individual is a stockholder, partner or
         beneficiary.

2.17     "NONQUALIFIED STOCK OPTION" OR "NQSO" means an option to purchase
         Shares granted under ARTICLE 6 herein and which is not intended to meet
         the requirements of Code Section 422.

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2.18     "OFFICER" means any person serving as an officer on behalf of the
         Company, as defined in the Company's bylaws and by requirements of
         Pennsylvania corporate law, and by the requirements of the rules of the
         National Association of Securities Dealers, Inc.

2.19     "OPTION" means a Nonqualifed Stock Option, as described in ARTICLE 6
         herein.

2.20     "OPTION PRICE" means the price at which a Share may be purchased by a
         Employee pursuant to an Option.

2.21     "PERFORMANCE-BASED EXCEPTION" means the performance-based exception
         from the tax deductibility limitations of Code Section 162(m).

2.22     "PERFORMANCE SHARE" means an Award granted to an Employee, as described
         in ARTICLE 9 herein.

2.23     "PERFORMANCE UNIT" means an award granted to an Employee, as described
         in ARTICLE 9 herein.

2.24     "PERIOD OF RESTRICTION" means the period during which the transfer of
         Shares of Restricted Stock is limited in some way (based upon the
         passage of time, the achievement of performance goals, or upon the
         occurrence of other events as determined by the Committee, at its
         discretion), and the Shares are subject to a substantial risk of
         forfeiture, as provided in ARTICLE 8 herein.

2.25     "PERSON" shall have the meaning ascribed to such term in Section
         3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
         thereof, including a "group" as defined in Section 13(d) thereof.

2.26     "RESTRICTED STOCK" means an award granted to an Employee pursuant to
         ARTICLE 8 herein.

2.27     "RETIREMENT" shall mean any voluntary termination of employment by an
         Employee following the attainment of age 65.

2.28     "SHARES" means the shares of Common Stock of the Company.

2.29     "STOCK APPRECIATION RIGHT" OR "SAR" means an Award, granted alone or in
         connection with a related Option, designated as an SAR, pursuant to the
         terms of ARTICLE 7 herein.

2.30     "TANDEM SAR" means an SAR that is granted in connection with a related
         Option pursuant to ARTICLE 7 herein, the exercise of which shall
         require forfeiture of the right to purchase a Share under the related
         Option (and when a Share is purchased under the Option, the Tandem SAR
         shall similarly be canceled).

ARTICLE 3.        ADMINISTRATION

3.1      THE COMMITTEE. Except as set forth in SECTION 3.5 below, the Plan shall
         be administered by the Compensation Committee of the Board, or by any
         other Committee appointed by the Board consisting of not less than two
         (2) Directors who (i) are "non-employee" directors and otherwise meet
         the "disinterested administration" rules of Rule 16b-3 under the
         Exchange Act and (ii) are "outside directors" under Section
         162(m)(4)(C) of the Code, or any successor provision. The members of
         the Committee shall be appointed from time to time by, and shall serve
         at the discretion of, the Board of Directors.

3.2      AUTHORITY OF THE COMMITTEE. Except as set forth in SECTION 3.4 below,
         except as limited by law or by the Articles of Incorporation or Bylaws
         of the Company, and subject to the provisions herein, the Committee
         shall have full power to grant Options (with or without SARs) and to
         award Restricted Stock, Performance Shares and Performance Units as
         described herein and to determine the Employees to whom any such award
         shall be made and the number of Shares to be covered thereby; determine
         the sizes and types of Awards; determine terms and conditions of Awards
         in a manner consistent with the Plan; construe and interpret the Plan
         and any agreement or instrument entered into under the Plan as they
         apply to Employees; and (subject to the provisions of ARTICLE 14
         herein) amend the terms and conditions of any outstanding Award to the
         extent such terms and conditions are within the discretion of the
         Committee as provided in the Plan. Further, the Committee shall make
         all other determinations which may be necessary

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         or advisable for the administration of the Plan, as the Plan applies to
         Employees. As permitted by law the Committee may delegate its authority
         as identified herein.

3.3      DECISIONS BINDING. All determinations and decisions made by the
         Committee pursuant to the provisions of the Plan and all related orders
         and resolutions of the Board shall be final, conclusive and binding on
         all persons, including the Company, its stockholders, Employees, and
         their estates and beneficiaries.

3.4      NON-COMPETITION. If a grantee of an Option, Restricted Stock,
         Performance Units or Performance Shares (i) engages in the operation or
         management of a business (whether as owner, partner, officer, director,
         employee or otherwise and whether during or after employment) which is
         in competition with the Company, (ii) induces or attempts to induce any
         customer, supplier, licensee or other individual, corporation or other
         business organization having a business relationship with the Company
         to cease doing business with the Company or any in any way interferes
         with the relationship between any such customer, supplier, licensee or
         other person and the Company or (iii) solicits any employee of the
         Company to leave the employment thereof or in any way interferes with
         the relationship of such employee with the Company, the Committee, in
         its discretion, may immediately terminate all outstanding Options held
         by the grantee, declare forfeited all Restricted Stock held by the
         grantee as to which the restrictions have not yet lapsed and/or
         immediately cancel any award of Performance Units or Performance
         Shares. Whether a grantee has engaged in any of the activities referred
         to in the preceding sentence which would cause the outstanding Options
         to be terminated, and/or the Restricted Stock to be forfeited and/or
         any award of Performance Units or Performance Shares to be canceled
         shall be determined, in its discretion, by the Committee, and any such
         determination by the Committee shall be final and binding.

ARTICLE 4.        SHARES SUBJECT TO THE PLAN

4.1      NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to adjustment as
         provided in SECTION 4.3 herein, the number of Shares hereby reserved
         for issuance to Employees under the Plan shall be 940,000; provided
         that, of that total, the maximum number of Shares of Restricted Stock
         granted pursuant to ARTICLE 8 herein, shall be 50,000.

4.2      LAPSED AWARDS. If any Award granted under this Plan is canceled,
         terminates, expires or lapses for any reason (with the exception of
         termination of a Tandem SAR upon exercise of the related Option, or the
         termination of a related Option upon exercise of the corresponding
         Tandem SAR), any Shares subject to such Award shall again be available
         for the grant of an Award under the Plan.

4.3      ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in
         corporate capitalization, such as a stock split, or a corporate
         transaction, such as any merger, consolidation, separation, including a
         spin-off, or other distribution of stock or property of the Company,
         any reorganization (whether or nor such reorganization comes within the
         definition of such term in Code Section 368) or any partial or complete
         liquidation of the Company, such adjustment shall be made in the number
         and class of Shares which may be delivered under SECTION 4.1 and in the
         number and class of and/or price of Shares subject to outstanding
         Awards granted under the Plan, and in the number and class of and/or
         price of Shares subject to outstanding Awards granted under the Plan,
         as may be determined to be appropriate and equitable by the Committee,
         in its sole discretion, to prevent dilution or enlargement of rights;
         provided, however, that the number of Shares subject to any Award shall
         always be a whole number.

ARTICLE 5.        ELIGIBILITY AND PARTICIPATION

5.1      ELIGIBILITY. Persons eligible to participate in this Plan shall include
         all Employees of the Company, excluding Officers and Directors.

5.2      ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
         Committee may, from time to time, select from all eligible Employees
         those to whom Awards shall be granted and shall determine the nature
         and amount of each Award.

ARTICLE 6.        STOCK OPTIONS
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6.1      GRANT OF OPTIONS. Subject to the terms and provisions of the Plan, the
         Committee may grant Nonqualified Stock Options in such number, and upon
         such terms, and at any time and from time to time as shall be
         determined by the Committee.

6.2      AWARD AGREEMENT. Each Option shall be evidenced by an Award Agreement
         that shall specify the Option Price, the duration of the Option, the
         number of Shares to which the Option pertains, and such other
         provisions as the Committee shall determine.

6.3      OPTION PRICE. The Option Price at which each Option may be exercised
         shall be no less than one hundred percent (100%) of the fair market
         value per share of the Common Stock covered by the Option on the date
         of grant. For purposes of this SECTION 6.3, the fair market value of
         the Common Stock shall be as determined in SECTION 2.15.

6.4      DURATION OF OPTIONS. Each Option granted to an Employee shall expire at
         such time as the Committee shall determine at the time of grant;
         provided, however, that no Option shall be exercisable after the
         expiration of ten years from the date of grant.

6.5      EXERCISE OF OPTIONS. Options granted under this Article 6 shall be
         exercisable at such times and be subject to such restrictions and
         conditions as the Committee shall in each instance approve, which need
         not be the same for each grant or for each Employee.

6.6      PAYMENT. Options granted under this Article 6 shall be exercised by the
         delivery of a written notice of exercise to the Company, setting forth
         the number of Shares with respect to which the Option is to be
         exercised, accompanied by full payment for the Shares.

         The Option Price upon exercise of the Option shall be payable to the
         Company in full either: (a) in cash in United States Dollars (including
         check, bank draft or money order), or (b) by tendering previously
         acquired Shares having an aggregate Fair Market Value at the time of
         exercise equal to the total Option Price, or (c) by a combination of
         (a) and (b).

         The Company will also cooperate with any person exercising an Option
         who participates in a cashless exercise program of a broker or other
         agent under which all or part of the Shares received upon exercise of
         the Option are sold through the broker or other agent or under which
         the broker or other agent makes a loan to such person. Notwithstanding
         the foregoing, unless the Committee, in its discretion, shall otherwise
         determine at the time of grant the exercise of the Option shall not be
         deemed to occur and no Shares of Common Stock will be issued by the
         Company upon exercise of the Option until the Company has received
         payment of the Option Price in full.

6.7      RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose
         restrictions on any Shares acquired pursuant to the exercise of an
         Option granted under this ARTICLE 6 as it may deem advisable,
         including, without limitation, restrictions under applicable Federal
         securities laws, under the requirements of any stock exchange or market
         upon which such Shares are then listed and/or traded, and under any
         blue sky or other state securities laws applicable to such Shares.

6.8      TERMINATION OF EMPLOYMENT. Unless the Committee, in its discretion,
         shall otherwise determine:

         (i) If the employment of an Employee who is not disabled within the
         meaning of Section 422(c)(6) of the Code (a "Disabled Grantee") is
         voluntarily terminated with the consent of the Company or an Employee
         retires under any retirement plan of the Company, any Option held by
         such Employee shall be exercisable by the Employee (but only to the
         extent exercisable by the Employee immediately prior to the termination
         of employment) at any time prior to the expiration date of such Option
         or within one year after the date of termination, whichever is the
         shorter period;

         (ii) If the employment of an Employee who is a Disabled Grantee is
         voluntarily terminated with the consent of the Company, any outstanding
         Option held by such Employee shall be exercisable by the Employee in
         full (whether or not so exercisable by the Employee immediately prior
         to the termination of employment) at

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         any time prior to the expiration date of such Option or within one year
         after the date of termination of employment, whichever is the shorter
         period;

         (iii) Following the death of an Employee during employment, any
         outstanding Option held by the Employee at the time of death shall be
         exercisable in full (whether or not so exercisable by the Employee
         immediately prior to the death of the Employee) by the person entitled
         to do so under the Will of the Employee, or, if the Employee shall fail
         to make testamentary disposition of the stock option or shall die
         intestate, by the legal representative of the Employee at any time
         prior to the expiration date of such stock option or within one year
         after the date of death of the Employee, whichever is the shorter
         period;

         (iv) Following the death of an Employee after termination of employment
         during the period when an Option is exercisable, the Option shall be
         exercisable by such person entitled to do so under the Will of the
         Employee by such legal representative (but only to the extent
         exercisable by the Employee immediately prior to the termination of
         employment) at any time prior to the expiration date of such Option or
         within one year after the date of death, whichever is the shorter
         period;

         (v) Unless the exercise period of a stock option following termination
         of employment has been extended as provided in SECTION 13.1, if the
         employment of an Employee terminates for any reason other than
         voluntary termination with the consent of the Company, retirement under
         any retirement plan of the Company or death, all outstanding Options
         held by the Employee at the time of such termination of employment
         shall automatically terminate ; provided, however, that if the
         employment of an Employee is involuntarily terminated by the Company
         without Cause, any Option held by such Employee at the time of such
         termination that was granted to Employee on or after May 3, 2001, shall
         be exercisable by the Employee (but only to the extent exercisable by
         the Employee immediately prior to the termination of employment) at any
         time prior to the expiration date of such Option or within one year
         after the date of termination of employment, whichever is the shorter
         period. Whether termination of employment is a voluntary termination
         with the consent of the Company or an involuntary termination with or
         without cause shall be determined, in its discretion, by the Committee
         and any such determination by the Committee shall be final and binding.

6.9      NONTRANSFERABILITY OF OPTIONS. No Option granted under the Plan may be
         sold, transferred, pledged, assigned, or otherwise alienated or
         hypothecated, other than by Will or if the Employee dies intestate by
         the laws of descent and distribution of the state of domicile of the
         Employee at the time of death. Further, all Options granted to an
         Employee under the Plan shall be exercisable during his or her lifetime
         only by the Employee.

ARTICLE 7.        STOCK APPRECIATION RIGHTS

7.1      GRANT OF SARS. Subject to the terms and conditions of the Plan, SARs
         may be granted to Employees at any time and from time to time as shall
         be determined by the Committee. The Committee may grant Freestanding
         SARs, Tandem SARs, or any combination of these forms of SARs. The
         Committee shall have complete discretion in determining the number of
         SARs granted to each Employee (subject to ARTICLE 4 herein) and,
         consistent with the provisions of the Plan, in determining the terms
         and conditions pertaining to such SARs. The grant price of a
         Freestanding SAR shall equal the Fair Market Value of a Share on the
         date of grant of the SAR. The grant price of Tandem SARs shall equal
         the Option Price of the related Option, as provided in SECTION 6.3.

7.2      EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part
         of the Shares subject to the related Option upon the surrender of the
         right to exercise the equivalent portion of the related Option. A

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         Tandem SAR may be exercised only with respect to the Shares for which
         its related Option is then exercisable.

7.3      EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised upon
         whatever terms the Committee, in its sole discretion, imposes upon
         them.

7.4      SAR AGREEMENT. Each SAR grant shall be evidenced by an Award Agreement
         that shall specify the grant price, the term of the SAR, and such other
         provisions as the Committee shall determine.

7.5      TERM OF SARS. The term of an SAR granted under the Plan shall be
         determined by the Committee, in its sole discretion; provided however,
         that such term shall not exceed ten (10) years.

7.6      PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, an Employee shall be
         entitled to receive payment from the Company in an amount determined by
         multiplying:

(a)      the difference between the Fair Market Value of a Share on the date of
         exercise over the grant price; by

         (b) the number of Shares with respect to which the SAR is granted.

         At the discretion of the Committee, the payment upon SAR exercise may
         be in cash, in Shares of equivalent value, or in some combination
         thereof.

7.7      RULE 16B-3 REQUIREMENTS. Notwithstanding any other provision of the
         Plan, the Committee may impose such conditions on the exercise of an
         SAR as may be required to satisfy the requirements of Section 16 of the
         Exchange Act (or any successor rule).

7.8      TERMINATION OF EMPLOYMENT. Each SAR Award Agreement shall set forth the
         extent to which the Employee shall have the right to exercise the SAR
         following termination of the Employee's employment with the Company
         and/or its Subsidiaries. Such provisions shall be determined in the
         sole discretion of the Committee, shall be included in the Award
         Agreement entered into with Employees, need not be uniform among all
         SARs issued pursuant to the Plan, and may reflect distinctions based on
         the reasons for termination of such employment.

7.9      NONTRANSFERABILITY OF SARS. No SAR granted under the Plan may be sold,
         transferred, pledged, assigned, or otherwise alienated or hypothecated,
         other than by will or, if the grantee dies intestate, by the laws of
         descent and distribution of the state of domicile of the grantee at the
         time of death. Further, all SARs granted to an Employee under the Plan
         shall be exercisable during his or her lifetime only by such Employee.

ARTICLE 8.        RESTRICTED STOCK

8.1      GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the
         Plan, the Committee, at any time and from time to time, may grant
         Shares of Restricted Stock to Employees in such amounts as the
         Committee shall determine.

8.2      RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be
         evidenced by a Restricted Stock Award Agreement that shall specify the
         Period(s) of Restriction, the number of Shares of Restricted Stock
         granted, and such other provisions as the Committee shall determine.

8.3      TRANSFERABILITY. Except as provided in this ARTICLE 8, the Shares of
         Restricted Stock granted herein may not be sold, transferred, pledged,
         assigned or otherwise alienated or hypothecated until the end of the
         applicable Period of Restriction established by the Committee and
         specified in the Restricted Stock Award Agreement, or upon earlier
         satisfaction of any other conditions, as specified by the Committee in
         its sole discretion and set forth in the Restricted Stock Award
         Agreement. All rights with respect to the Restricted Stock granted to
         an Employee under the Plan shall be available during his or her
         lifetime only to such Employee.

                                                                              53
<PAGE>
8.4      OTHER RESTRICTIONS. Subject to ARTICLE 10 herein, the Committee shall
         impose such other conditions and/or restrictions on any Shares of
         Restricted Stock granted pursuant to the Plan as it may deem advisable
         including, without limitation, a requirement that Employees pay a
         stipulated purchase price for each Share of Restricted Stock,
         restrictions based upon the achievement of specific performance goals
         (Company-wide, divisional, and/or individual), time-based restrictions
         on vesting following the attainment of the performance goals, and/or
         restrictions under applicable Federal or state securities laws. The
         Company shall retain the certificates representing Shares of Restricted
         Stock in the Company's possession until such time as all conditions
         and/or restrictions applicable to such Shares have been satisfied.
         Except as otherwise provided in this ARTICLE 8, Shares of Restricted
         Stock covered by each Restricted Stock grant made under the Plan shall
         become freely transferable by the Employee after the last day of the
         applicable Period of Restriction.

8.5      VOTING RIGHTS. During the Period of Restriction, Employees holding
         Shares of Restricted Stock granted hereunder may exercise full voting
         rights with respect to those Shares.

8.6      DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction,
         Employees holding Shares of Restricted Stock granted hereunder may be
         credited with regular cash dividends paid with respect to the
         underlying Shares while they are so held. The Committee may apply any
         restrictions to the dividends that the Committee deems appropriate. In
         the event that any dividend constitutes a "derivative security" or an
         "equity security" pursuant to Rule 16(a) under the Exchange Act, such
         dividend shall be subject to a vesting period equal to the remaining
         vesting period of the Shares of Restricted Stock with respect to which
         the dividend is paid.

8.7      TERMINATION OF EMPLOYMENT. Each Restricted Stock Award Agreement shall
         set forth the extent to which the Employee shall have the right to
         receive unvested Restricted Shares following termination of the
         Employee's employment with the Company. Such provisions shall be
         determined in the sole discretion of the Committee, shall be included
         in the Award Agreement entered into with each Employee, need not be
         uniform among all Shares of Restricted Stock issued pursuant to the
         Plan, and may reflect distinctions based upon the reasons for
         termination of such employment.

ARTICLE 9.        PERFORMANCE UNITS AND PERFORMANCE SHARES

9.1      GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms of the Plan,
         Performance Units and/or Performance Shares may be granted to Employees
         in such amounts and upon such terms, and at any time and from time to
         time, as shall be determined by the Committee.

9.2      VALUE OF PERFORMANCE UNITS/SHARES. Each Performance Unit shall have an
         initial value that is established by the Committee at the time of
         grant. Each Performance Share shall have an initial value equal to the
         Fair Market Value of a Share on the date of grant. The Committee shall
         set performance goals in its discretion which, depending upon the
         extent to which they are met, will determine the number and/or value of
         Performance Units/Shares that will be paid out to the Employee. For
         purposes of this ARTICLE 9, the time period during which the
         performance goals must be met shall be called a "Performance Period."

9.3      EARNING OF PERFORMANCE UNITS/SHARES. Subject to the terms of this Plan,
         after the applicable Performance Period has ended, the holder of
         Performance Units/Shares shall be entitled to receive payout on the
         number and value of Performance Units/Shares earned by the Employee
         over the Performance Period, to be determined as a function of the
         extent to which the corresponding performance goals have been achieved.

9.4      FORM AND TIMING OF PERFORMANCE UNITS/SHARES. Payment of earned
         Performance Units/Shares shall be made in a single lump sum within
         seventy-five (75) calendar days following the close of the applicable
         Performance Period. Subject to the terms of this Plan, the Committee,
         in its sole discretion, may pay earned Performance Units/Shares in the
         form of cash or Shares (or a combination thereof) which have an
         aggregate Fair Market Value equal to the value of the earned
         Performance Units/Shares at the close of the applicable Performance
         Period. Such Shares may be granted subject to any restrictions deemed
         appropriate by the Committee.

                                                                              54
<PAGE>
         At the discretion of the Committee, Employees may be entitled to
         receive any dividends declared with respect to Shares which have been
         earned in connection with grants of Performance Units and/or
         Performance Shares which have been earned, but not yet distributed to
         Employees (such dividends shall be subject to the same accrual,
         forfeiture, and payout restrictions as apply to dividends earned with
         respect to Shares of Restricted Stock, as set forth in SECTION 8.6
         herein). In addition, Employees may, at the discretion of the
         Committee, be entitled to exercise their voting rights with respect to
         such Shares.

9.5      TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY OR RETIREMENT.
         Unless otherwise determined by the Committee and set forth in the
         Employee's Award Agreement, in the event the employment of an Employee
         is terminated by reason of death, disability or Retirement during a
         Performance Period, the Employee shall receive a payout of the
         Performance Units/Shares which is prorated, as specified by the
         Committee in its discretion. Payment of earned Performance Units/Shares
         shall be made at a time specified by the Committee in its sole
         discretion and set forth in the Employee's Award Agreement.

9.6      TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event that an
         Employee's employment terminates for any reason other than those
         reasons set forth in SECTION 9.5 herein, all Performance Units/Shares
         shall be forfeited by the Employee to the Company unless determined
         otherwise by the Committee, as set forth in the Employee's Award
         Agreement.

9.7      NONTRANSFERABILITY. Performance Units/Shares may not be sold,
         transferred, pledged, assigned or otherwise alienated or hypothecated,
         other than by will or if the grantee dies intestate by the laws of
         descent and distribution of the state of domicile of the grantee at the
         time of death. Further, an Employee's rights under the Plan shall be
         exercisable during the Employee's lifetime only by the Employee or the
         Employee's legal representative.

ARTICLE 10.       BENEFICIARY DESIGNATION

Each Employee under the Plan may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his or her death before he or
she receives any or all of such benefit. Each such designation shall revoke all
prior designations by the same Employee, shall be in a form prescribed by the
Company, and will be effective only when filed by the Employee in writing with
the Company during the Employee's lifetime. In the absence of any such
designation, benefits remaining unpaid at the Employee's death shall be paid to
the Employee's estate.

ARTICLE 11.       DEFERRALS

The Committee may permit or require an Employee to defer such Employee's receipt
of the payment of cash or the delivery of Shares that would otherwise be due to
such Employee by virtue of the exercise of an Option or SAR, the lapse or waiver
of restrictions with respect to Restricted Stock, or the satisfaction of any
requirements or goals with respect to Performance Units/Shares. If any such
deferral election is required or permitted, the Committee shall, in its sole
discretion, establish rules and procedures for such payment deferrals.

ARTICLE 12.       RIGHTS OF EMPLOYEES

12.1     EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any
         way the right of the Company to terminate any Employee's employment at
         any time, nor confer upon any Employee any right to continue in the
         employ of the Company.

12.2     PARTICIPATION. No Employee shall be entitled to have the right to be
         selected to receive an Award under this Plan, or having been so
         selected, to be selected to receive a future Award.

ARTICLE 13.       CHANGE IN CONTROL

                                                                              55
<PAGE>
13.1     TREATMENT OF OUTSTANDING AWARDS. Upon the occurrence of a Change in
         Control, unless otherwise specifically prohibited under applicable
         laws, or by the rules and regulations of any governing governmental
         agencies or national securities exchanges:

         (a) Any and all Options and SARs granted hereunder shall become
         immediately exercisable, and shall remain exercisable throughout their
         entire term;

         (b) Any restriction periods and restrictions imposed on Restricted
         Shares shall lapse;

         (c) The target payout opportunities attainable under all outstanding
         Awards of Restricted Stock, Performance Units and Performance Shares
         shall be deemed to have been fully earned for the entire Performance
         Period(s) as of the effective date of the Change in Control. The
         vesting of all Awards denominated in Shares shall be accelerated as of
         the effective date of the Change in Control, and there shall be paid
         out in cash to Employees within thirty (30) days following the
         effective date of the Change in Control an amount equal to one hundred
         percent (100%) of all targeted cash payout opportunities associated
         with outstanding cash-based Awards; and

         (d) Subject to ARTICLE 14 herein, the Committee shall have the
         authority to make any modifications to the Awards as determined by the
         Committee to be appropriate before the effective date of the Change in
         Control.

13.2     ACCELERATION OF AWARD VESTING. Notwithstanding any provision of this
         Plan or any Award Agreement provision to the contrary, the Committee,
         in its sole and exclusive discretion, shall have the power at any time
         to accelerate the vesting of any Award granted under the Plan to any
         Employee, including without limitation acceleration to such a date that
         would result in said Awards becoming immediately vested.

13.3     TERMINATION, AMENDMENT AND MODIFICATIONS OF CHANGE IN CONTROL
         PROVISIONS. Notwithstanding any other provision of this Plan or any
         Award Agreement provision, the provisions of this ARTICLE 13 may not be
         terminated, amended or modified on or after the date of a Change in
         Control to affect adversely any Award theretofore granted under the
         plan without the prior written consent of the Employee with respect to
         said Employee's outstanding Awards; provided, however, the Board of
         Directors, upon recommendation of the committee, may terminate, amend,
         or modify this ARTICLE 13 at any time and from time to time prior to
         the date of a Change in Control.

ARTICLE 14.       AMENDMENT, MODIFICATION AND TERMINATION

14.1     AMENDMENT, MODIFICATION AND TERMINATION. The Board may at any time and
         from time to time, alter, amend, suspend, or terminate the Plan in
         whole or in part.

14.2     ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
         NONRECURRING EVENTS. The Committee may make adjustments in the terms
         and conditions of, and the criteria included in, Awards in recognition
         of unusual or nonrecurring events (including, without limitation, the
         events described in SECTION 4.3 hereof) affecting the Company or the
         financial statements of the Company or of changes in applicable laws,
         regulations, or accounting principles, whenever the Committee
         determined that such adjustments are appropriate in order to prevent
         dilution or enlargement of the benefits or potential benefits intended
         to be made available under the Plan; provided that no such adjustment
         shall be authorized to the extent that such authority would be
         inconsistent with the Plan's meeting the requirements of Section 162(m)
         of the Code, as from time to time amended.

14.3     AWARDS PREVIOUSLY GRANTED. No termination, amendment, or modification
         of the Plan shall adversely affect in any material way any Award
         previously granted under the Plan, without the written consent of the
         Employee holding such Award.

14.4     COMPLIANCE WITH CODE 162(M). At all times when Code Section 162(m) is
         applicable, all Awards granted under this Plan shall comply with the
         requirements of Code Section 162(m); provided, however, that in the
         event the Committee determines that such compliance is not desired with
         respect to any Award or Awards available for grant under the Plan, then
         compliance with Code Section 162(m) will not be required. In addition,
         in the event that any changes are made to Code Section 162(m) to permit
         greater

                                                                              56
<PAGE>
         flexibility with respect to any Award or Awards available under the
         Plan, the Committee may, subject to this ARTICLE 14, make any
         adjustments it deems appropriate.

ARTICLE 15.       WITHHOLDING

15.1     TAX WITHHOLDING. The Company shall have the power and the right to
         deduct or withhold, or require any Employee to remit to the Company, an
         amount sufficient to satisfy Federal, state and local taxes, domestic
         or foreign, required by law or regulation to be withheld with respect
         to any taxable event arising as a result of this Plan.

                                                                              57
<PAGE>
15.2     SHARE WITHHOLDING. With respect to withholding required upon the
         exercise of Options or SARs, upon the lapse of restrictions on
         Restricted Stock, or upon any other taxable event arising as a result
         of Awards granted hereunder, Employees may elect, subject to the
         approval of the Committee, to satisfy the withholding requirement, in
         whole or in part, by having the Company withhold Shares having a Fair
         Market Value on the date the tax is to be determined equal to the
         minimum statutory total tax which could be imposed on the action. All
         such elections shall be irrevocable, made in writing, signed by the
         Employee, and shall be subject to any restrictions or limitations that
         the Committee, in its sole discretion, may determine.

ARTICLE 16.       INDEMNIFICATION

Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgment in any such action, suit or proceeding against him or her, provided he
or she shall give the Company an opportunity at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification shall not be exclusive of
any other right of indemnification to which such persons may be entitled under
the Company's Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.

ARTICLE 17.       SUCCESSOR

All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding upon any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.

ARTICLE 18.       LEGAL CONSTRUCTION

18.1     GENDER AND NUMBER. Except where otherwise indicated by the context, any
         masculine term used herein shall also include the feminine; the plural
         shall include the singular and the singular shall include the plural.

18.2     SEVERABILITY. In the event any provision of the Plan shall be held
         illegal or invalid for any reason, the illegality or invalidity shall
         not affect the remaining parts of the Plan, and the Plan shall be
         construed and enforced as if the illegal or invalid provision had not
         been included.

18.3     REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares
         under the Plan shall be subject to all applicable laws, rules, and
         regulations, and to such approvals by governmental agencies or national
         securities exchanges as may be required.

18.4     SECURITIES LAW COMPLIANCE. With respect to (i) any person who is
         required to file reports pursuant to the rules promulgated under
         Section 16 of the Exchange Act and (ii) insiders, transactions under
         this Plan are intended to comply with all applicable conditions of Rule
         16b-3 or its successors under the Exchange Act. To the extent any
         provision of the Plan or action by the Committee fails to so comply, it
         will be deemed null and void to the extent permitted by law and deemed
         advisable by the Committee.

                                                                              58
<PAGE>
18.5     GOVERNING LAW. To the extent not preempted by Federal law, the Plan and
         all agreements hereunder, shall be construed in accordance with and
         governed by the laws of the Commonwealth of Pennsylvania.

                                                                              59<PAGE>

                           CERTIFICATE OF DESIGNATION,

                            PREFERENCES AND RIGHTS OF

          SERIES C MANDATORILY CONVERTIBLE SINGLE RESET PREFERRED STOCK

                                       OF

                               EL PASO CORPORATION

                            (Pursuant to Section 151
            of the General Corporation Law of the State of Delaware)

                  I, David L. Siddall, Vice President, Associate General Counsel
and Corporate Secretary of El Paso Corporation (the "Company"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof, DO HEREBY
CERTIFY as follows:

                  That pursuant to the authority conferred upon the Board of
Directors by the Restated Certificate of Incorporation of the Company, said
Board of Directors delegated to the Project Gemstone Committee the power to
designate and fix the voting rights, designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions of a series of the Company's Preferred Stock. Pursuant to such
delegated authority, the Project Gemstone Committee of the Board of Directors of
the Company adopted the following resolution creating a series of 190,000 shares
of Preferred Stock designated as Series C Mandatorily Convertible Single Reset
Preferred Stock:

                  RESOLVED that pursuant to the authority granted to and vested
in the Board of Directors of this Company in accordance with the provisions of
the Restated Certificate of Incorporation of the Company, and the authority
delegated to the Project Gemstone Committee by the Board of Directors of the
Company, the Project Gemstone Committee hereby creates a series of Preferred
Stock of the Company and hereby states the designation and number of shares, and
fixes the relative rights, preferences and limitations thereof (in addition to
the provisions set forth in the Restated Certificate of Incorporation which are
applicable to the Preferred Stock of all classes and series) as follows:

                  Section 1. Designation and Amount. There shall be a series of
Preferred Stock of the Company which shall be designated as "Series C
Mandatorily Convertible Single Reset Preferred Stock", par value $.01 per share,
and the number of shares initially constituting such series shall be 190,000.
Such number of shares may be increased by resolution of the Board of Directors
to the extent necessary to fulfill the Company's obligations to issue additional
shares of Series C Mandatorily Convertible Single Reset Preferred Stock pursuant
to the Remarketing Agreement (as defined in Section 2 hereof). Such number of
shares may be decreased by resolution of the Board of Directors, provided that
no decrease shall reduce the number of shares of Series C Mandatorily
Convertible Single Reset Preferred Stock to a number less than that of the
number of shares then outstanding.

<PAGE>

                  Section 2. Definitions. Capitalized terms used herein which
are not otherwise defined herein shall have the meaning ascribed thereto in the
Company's Restated Certificate of Incorporation. In addition, the following
terms shall have the following meanings when used herein:

         "Average Trading Price" for a security for any given period means an
amount equal to (i) the sum of the Closing Price for such security on each
Trading Day in such period divided by (ii) the total number of Trading Days in
such period.

         "Board of Directors" shall mean the Board of Directors of the Company.

         "Business Day" shall mean any day other than (a) a Saturday or Sunday
or (b) a day on which commercial banking institutions in the State of New York
or the State of Texas are authorized or obligated by law or executive order to
close.

         "Closing Price" for a security means the closing price for such
security on the Trading Day in question as reported by Bloomberg L.P., or if not
so reported by Bloomberg L.P., as reported by another recognized source selected
by the Board of Directors.

         "Common Stock" shall have the meaning specified in Subsection 6(9)
hereof.

         "Dividend Payment Date" shall have the meaning specified in Subsection
3(1) hereof.

         "Failed Remarketing" shall have the meaning ascribed to such term in
the Remarketing Agreement.

         "Final Sale Date" shall have the meaning ascribed to such term in the
Remarketing Agreement.

         "junior stock" shall mean (and references to shares ranking "junior to"
the Series C Mandatorily Convertible Single Reset Preferred Stock shall refer
to), with respect to Sections 3 and 7 hereof, (a) the Series A Junior
Participating Preferred Stock of the Company, (b) the Common Stock and (c) any
other class or series of stock of the Company which by its terms is not entitled
to receive any dividends unless all dividends required to have been paid or
declared and set apart for payment on the Series C Mandatorily Convertible
Single Reset Preferred Stock shall have been so paid or declared and, with
respect to Sections 4 and 7 hereof, (i) the Series A Junior Participating
Preferred Stock of the Company, (ii) the Common Stock and (iii) any other class
or series of stock of the Company which by its terms is not entitled to receive
any assets upon the liquidation, dissolution or winding up of the affairs of the
Company until holders of the Series C Mandatorily Convertible Single Reset
Preferred Stock shall have received the entire amount to which such holders are
entitled upon liquidation, dissolution or winding up.

         "Mandatory Conversion" shall have the meaning specified in Subsection
6(1) hereof.

         "Mandatory Conversion Date" shall have the meaning specified in
Subsection 6(1) hereof.

                                       2
<PAGE>

         "Mandatory Conversion Date Market Price" shall have the meaning
specified in Subsection 6(1) hereof.

         "Mandatory Conversion Rate" shall have the meaning specified in
Subsection 6(1) hereof.

         "Market Disruption Event" shall mean the occurrence or existence on any
Trading Day during the one-half hour period prior to the regularly scheduled
closing time of the Principal Market of any material suspension of or limitation
imposed on trading (by reason of movements in price exceeding limits permitted
by the relevant Principal Market or otherwise) in shares of Common Stock.

         "Note Trigger Event" shall have the meaning ascribed to such term in
the Remarketing Agreement.

         "Optional Conversion" shall have the meaning specified in Subsection
6(2) hereof.

         "Optional Conversion Rate" shall have the meaning specified in
Subsection 6(2) hereof.

         "parity stock" shall mean (and references to shares ranking "on a
parity with" the Series C Mandatorily Convertible Single Reset Preferred Stock
shall refer to), with respect to Sections 3 and 7 hereof, (a) the Series B
Mandatorily Convertible Single Reset Preferred Stock of the Company and (b) any
other class or series of stock of the Company which by its terms is entitled to
receive payment of dividends on a parity with the Series C Mandatorily
Convertible Single Reset Preferred Stock and, with respect to Sections 4 and 7
hereof, (i) the Series B Mandatorily Convertible Single Reset Preferred Stock of
the Company and (ii) any other class or series of stock of the Company the
holders of which by its terms are entitled to receive assets upon the
liquidation, dissolution or winding up of the affairs of the Company on a parity
with the holders of Series C Mandatorily Convertible Single Reset Preferred
Stock.

         "Principal Market" shall have the meaning ascribed to such term in the
Remarketing Agreement.

         "Rate Reset Date" means the earlier to occur of (A) the consummation of
the remarketing of the Initial Shares (as such term is defined in the
Remarketing Agreement), which is expected to be on or about the third Trading
Day following the Successful Repricing Date, and (B) a Failed Remarketing.

         "Redemption Event" means the occurrence of any of the following: (i)
any consolidation or merger of the Company with or into another corporation or
entity, unless in connection with such consolidation or merger the outstanding
shares of Common Stock immediately preceding the consummation of such
consolidation or merger are converted into, exchanged for or otherwise represent
a majority of the outstanding shares of common stock of the surviving or
resulting corporation or entity immediately succeeding the consummation of such
consolidation or merger or (ii) the Company sells or conveys to another entity
(other than a Subsidiary) all or substantially all of the assets of the Company.

                                       3
<PAGE>

         "Remarketing Agents" shall have the meaning ascribed to such term in
the Remarketing Agreement.

         "Remarketing Agreement" shall mean the Remarketing and Registration
Rights Agreement dated as of November 1, 2001 among the Company, El Paso
Gemstone Share Trust, Gemstone Investor Limited, The Bank of New York, as
Indenture Trustee and Fiscal Agent, and Credit Suisse First Boston Corporation,
J.P. Morgan Securities, Inc., as Initial Remarketing Agents.

         "Reset Common Yield" shall mean the quotient of (i) the product of (x)
4 and (y) the amount of the ordinary quarterly cash dividend on one share of
Common Stock most recently declared prior to the Trigger Date (as appropriately
adjusted for the events referred to in Subsection 6(3)(a)), unless subsequent to
such declaration and prior to the Trigger Date, the Company has publicly
announced a change to, or elimination of, its ordinary quarterly cash dividend
(including a filing with the Securities and Exchange Commission including such
change or elimination), in which case clause (y) above shall be the amount of
such proposed ordinary quarterly cash dividend (or $0.00 if such dividend is to
be eliminated), divided by (ii) the Reset Price (provided, however, that if as
of the Trigger Date there is more than one class of Common Stock, then the Reset
Common Yield shall be calculated with respect to each then outstanding class of
Common Stock, and the Reset Common Yield (as used herein) shall be the amount
calculated with respect to the class of Common Stock resulting in the greatest
Reset Common Yield).

         "Reset Dividend Rate" shall mean an amount per annum per share equal to
the product of (i) the sum of (x) the Reset Common Yield (expressed as a
percentage), plus (y) 7% and (ii) $5,000.00 (rounded to the nearest cent).

         "Reset Price" shall mean the higher of (i) the Closing Price of a share
of Common Stock on the Trigger Date or (ii) the quotient (rounded up to the
nearest cent) of $950,000,000 divided by the number, as of the Trigger Date, of
the authorized but unissued shares of Common Stock that have not been reserved
as of the Trigger Date by the Board of Directors for purposes other than as
contemplated by Section 6(7), subject to adjustment as provided in Subsection
6(3)(a) hereof.

         "Rights" means rights or warrants distributed by the Company under a
shareholder rights plan or agreement to all holders of Common Stock entitling
the holders thereof to subscribe for or purchase shares of the Company's capital
stock (either initially or under certain circumstances), which rights or
warrants, until the occurrence of a specified event or events ("Rights Events"),
(i) are deemed to be transferred with such shares of Common Stock, (ii) are not
exercisable and (iii) are also issued in respect of future issuances of Common
Stock.

         "Rights Events" shall have the meaning ascribed to such term in the
definition of Rights.

         "senior stock" shall mean (and references to shares ranking "senior to"
or "prior to" the Series C Mandatorily Convertible Single Reset Preferred Stock
shall refer to), with respect to Sections 3 and 7 hereof, any class or series of
stock of the Company by its terms ranking senior to the Series C Mandatorily
Convertible Single Reset Preferred Stock in respect of the right to

                                       4
<PAGE>

receive dividends and, with respect to Sections 4 and 7 hereof, any class or
series of stock of the Company by its terms ranking senior to the Series C
Mandatorily Convertible Single Reset Preferred Stock with respect to the right
of the holders thereof to receive assets upon the liquidation, dissolution or
winding up of the affairs of the Company.

         "Subsidiary" means any corporation or other entity of which the Company
owns, directly or indirectly sufficient securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other individuals performing similar functions.

         "Successful Repricing Date" shall have the meaning ascribed to such
term in the Remarketing Agreement.

         "Threshold Appreciation Price" means the product of (i) the Reset Price
as of the time in question and (ii) 1.10.

         "Trading Day" means a day on which the Principal Market with respect to
a security is regularly scheduled to be open for trading. For purposes of this
definition, if there is a Market Disruption Event on any such day, then the
relevant Trading Day shall be the first preceding day on which the Principal
Market with respect to a security is regularly scheduled to be open for trading
and (i) on which there is no Market Disruption Event and (ii) that is not
otherwise already included as a Trading Day for purposes of computing the
"Closing Price" or the "Mandatory Conversion Date Market Price", unless there is
a Market Disruption Event on each of the five such preceding days that, but for
the Market Disruption Event, would have been a Trading Day, in which event the
fifth such preceding day shall be the Trading Day, notwithstanding the Market
Disruption Event.

         "Trigger Date" shall mean the earlier to occur of (A) the Successful
Repricing Date and (B) the date of a Failed Remarketing; provided that if any
such day is not a Trading Day, then the Trigger Date will be the next succeeding
Trading Day.

                  Section 3. Dividends.

         (1) The holders of the Series C Mandatorily Convertible Single Reset
Preferred Stock shall not be entitled to receive any dividends (nor shall
dividends commence to accrue) prior to, or with respect to any period ending
prior to, the Rate Reset Date. The holders of the Series C Mandatorily
Convertible Single Reset Preferred Stock, in preference to the rights of holders
of any junior stock but subject to the rights of holders of any senior stock and
parity stock, shall be entitled to receive, when, as and if declared by the
Board of Directors out of any funds legally available therefor cumulative cash
dividends from the Rate Reset Date at the Reset Dividend Rate, and no more,
payable on the dates as set forth in this Section 3. Dividends shall accrue on
the Series C Mandatorily Convertible Single Reset Preferred Stock from the Rate
Reset Date. Dividends shall be payable quarterly in arrears on each January 1,
April 1, July 1, and October 1 commencing on the first such date following the
Rate Reset Date (each such date being hereinafter referred to as a "Dividend
Payment Date"); provided, that if any such Dividend Payment Date is not a
Business Day, then any payment with respect to such Dividend Payment Date shall
be payable on the next succeeding Business Day. Each such dividend shall be
payable to holders of record as they appear on the books of the Company or any
transfer agent for the

                                       5
<PAGE>

Series C Mandatorily Convertible Single Reset Preferred Stock on such record
dates as shall be fixed by the Board of Directors subject to applicable law
(which record date shall be no more than 60 days prior to the date fixed for the
payment thereof). Dividends on the Series C Mandatorily Convertible Single Reset
Preferred Stock shall accrue on a daily basis commencing on and including the
Rate Reset Date, and accrued dividends for each dividend period or portion
thereof shall cumulate, to the extent not paid, as of the date on which such
dividends were to have been paid. A dividend period shall commence on a Dividend
Payment Date or the Rate Reset Date, as the case may be, and continue to the day
next preceding the next succeeding Dividend Payment Date. Accumulated unpaid
dividends shall not accrue interest. Dividends (or cash amounts equal to accrued
and unpaid dividends) payable on the Series C Mandatorily Convertible Single
Reset Preferred Stock for any period less than or more than a full quarterly
period shall be computed on the basis of a 360-day year of twelve 30-day months
and the actual number of days elapsed in any period less than one month.
Dividends on the Series C Mandatorily Convertible Single Reset Preferred Stock
shall accrue whether or not the Company has earnings, whether or not there are
funds legally available for the payment of such dividends and whether or not
such dividends are declared. Dividends in arrears for any past dividend periods
or portions thereof may be declared and paid at any time without reference to
any regular Dividend Payment Date to holders of record on such date as shall be
fixed by the Board of Directors subject to applicable law. As provided in
Subsection 6(1), dividends on the Series C Mandatorily Convertible Single Reset
Preferred Stock shall cease to accrue on the day immediately preceding the
Mandatory Conversion Date and, in the case of an Optional Redemption of the
Series C Mandatorily Convertible Single Reset Preferred Stock, dividends shall
accrue only to the extent provided in Subsection 6(2).

         (2) As long as any shares of Series C Mandatorily Convertible Single
Reset Preferred Stock are outstanding, no dividends or other distributions for
any dividend period (other than dividends or other distributions payable in
shares of, or warrants, rights or options exercisable for or convertible into,
junior stock, and cash in lieu of fractional shares of such junior stock in
connection with any such dividend or distribution) will be paid on any junior
stock unless: (i) full dividends, if any, on all outstanding shares of senior
stock, parity stock and Series C Mandatorily Convertible Single Reset Preferred
Stock have been paid, or declared and irrevocably set aside for payment, for all
dividend periods terminating on or prior to the payment date of such junior
stock dividend or distribution, to the extent such dividends on senior stock,
parity stock or Series C Mandatorily Convertible Single Reset Preferred Stock
are cumulative; (ii) the Company has paid or irrevocably set aside all amounts,
if any, then or theretofore required to be paid or set aside for all purchase,
retirement, and sinking funds, if any, for any outstanding shares of senior
stock or parity stock; and (iii) the Company is not in default on any of its
obligations to redeem any outstanding shares of senior stock or parity stock.

         In addition, as long as any Series C Mandatorily Convertible Single
Reset Preferred Stock is outstanding, no shares of any junior stock may be
purchased, redeemed, or otherwise acquired by the Company or any Subsidiary
(except in connection with a reclassification or exchange of any junior stock
through the issuance of other junior stock and cash in lieu of fractional shares
of such junior stock in connection therewith) and except for the acquisition of
shares of any junior stock pursuant to contractual obligations binding against
the Company or any Subsidiary that were entered into prior to the date of the
first issuance of shares of Series C Mandatorily Convertible Single Reset
Preferred Stock or pursuant to contractual obligations that

                                       6
<PAGE>

are entered into at a time subsequent thereto when such acquisitions of shares
could be made pursuant to this Subsection 6(2) nor may any funds be set aside or
made available for any sinking fund for the purchase or redemption of any junior
stock unless: (i) full dividends, if any, on all outstanding shares of senior
stock, parity stock and Series C Mandatorily Convertible Single Reset Preferred
Stock have been paid, or declared and irrevocably set aside for payment, for all
dividend periods terminating on or prior to the date of such purchase,
redemption or acquisition, to the extent dividends on such senior stock, parity
stock or Series C Mandatorily Convertible Single Reset Preferred Stock dividends
are cumulative, (ii) the Company has paid or irrevocably set aside all amounts,
if any, then or theretofore required to be paid or set aside for all purchase,
retirement, and sinking funds, if any, for any outstanding shares of senior
stock or parity stock; and (iii) the Company is not in default on any of its
obligations to redeem any outstanding shares of senior stock or parity stock.
Subject to the provisions described above, such dividends or other distributions
(payable in cash, property, or junior stock) as may be determined from time to
time by the Board of Directors may be declared and paid on the shares of any
junior stock and from time to time junior stock may be purchased, redeemed or
otherwise acquired by the Company or any Subsidiary. In the event of the
declaration and payment of any such dividends or other distributions, the
holders of such junior stock will be entitled, to the exclusion of holders of
any outstanding senior stock or parity stock, to share therein according to
their respective interests.

         (3) As long as any Series C Mandatorily Convertible Single Reset
Preferred Stock is outstanding, dividends or other distributions for any
dividend period may not be paid on any outstanding shares of parity stock (other
than dividends or other distributions payable in shares of, or warrants, rights
or options exercisable for or convertible into, parity stock or junior stock and
cash in lieu of fractional shares of such parity stock or junior stock in
connection with any such dividend), unless either: (a)(i) full dividends, if
any, on all outstanding shares of senior stock, parity stock and Series C
Mandatorily Convertible Single Reset Preferred Stock have been paid, or declared
and irrevocably set aside for payment, for all dividend periods terminating on
or prior to the payment date of such dividend or distribution with respect to
such senior stock, parity stock or Series C Mandatorily Convertible Single Reset
Preferred Stock, to the extent dividends on such senior stock, parity stock or
Series C Mandatorily Convertible Single Reset Preferred Stock are cumulative;
(ii) the Company has paid or irrevocably set aside all amounts, if any, then or
theretofore required to be paid or irrevocably set aside for all purchase,
retirement and sinking funds, if any, for any outstanding shares of senior stock
or parity stock; and (iii) the Company is not in default on any of its
obligations to redeem any outstanding shares of senior stock or parity stock; or
(b) any such dividends are declared and paid pro rata so that the amounts of any
dividends declared and paid per share on outstanding Series C Mandatorily
Convertible Single Reset Preferred Stock and each share of such parity stock
will in all cases bear to each other the same ratio that accrued and unpaid
dividends (including any accumulation with respect to unpaid dividends for prior
dividend periods, if such dividends are cumulative) per share of outstanding
Series C Mandatorily Convertible Single Reset Preferred Stock and such
outstanding shares of parity stock bear to each other.

         In addition, as long as any Series C Mandatorily Convertible Single
Reset Preferred Stock is outstanding, no shares of any parity stock may be
purchased, redeemed or otherwise acquired by the Company or any Subsidiary
(except with any parity stock, junior stock and cash in lieu of fractional
shares of such parity stock or junior stock in connection therewith and except

                                       7
<PAGE>

for the acquisition of shares of any parity stock pursuant to contractual
obligations binding against the Company or any Subsidiary that were entered into
prior to the date of the first issuance of shares of Series C Mandatorily
Convertible Single Reset Preferred Stock or pursuant to contractual obligations
that are entered into at a time subsequent thereto when such acquisitions of
shares could be made pursuant to this Subsection 6(3)) unless: (i) full
dividends, if any, on all outstanding shares of senior stock, parity stock and
Series C Mandatorily Convertible Single Reset Preferred Stock have been paid, or
declared and irrevocably set aside for payment, for all dividend periods
terminating on or prior to the date of such purchase, redemption or other
acquisition, to the extent dividends on such senior stock, parity stock or
Series C Mandatorily Convertible Single Reset Preferred Stock are cumulative;
(ii) the Company has paid or set aside all amounts, if any, then or theretofore
required to be paid or irrevocably set aside for all purchase, retirement, and
sinking funds, if any, for any outstanding shares of senior stock or parity
stock; and (iii) the Company is not in default of any of its obligations to
redeem any outstanding shares of senior stock or parity stock.

         (4) Any dividend payment made on the Series C Mandatorily Convertible
Single Reset Preferred Stock shall first be credited against the earliest
accrued but unpaid dividend due with respect to the Series C Mandatorily
Convertible Single Reset Preferred Stock.

         (5) All dividends paid with respect to the Series C Mandatorily
Convertible Single Reset Preferred Stock shall be paid pro rata to the holders
entitled thereto.

                  Section 4. Liquidation Preference. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Company, then, before any distribution or payments shall be made to the
holders of any junior stock, but subject to the rights of any senior stock or
parity stock, the holders of the Series C Mandatorily Convertible Single Reset
Preferred Stock shall be entitled to be paid in full in cash the amount of
$5,000.00 per share, together with, to the extent lawful, accrued dividends to
the date of such distribution or payment, whether or not earned or declared. If
such payment shall have been made in full to the holders of the Series C
Mandatorily Convertible Single Reset Preferred Stock and all preferential
payments or distributions to be made with respect to senior stock and parity
stock have been made in full, the remaining assets and funds of the Company
shall be distributed among the holders of the junior stock, according to their
respective rights and preferences and in each case according to their respective
shares. If, upon any liquidation, dissolution or winding up of the affairs of
the Company, the amounts so payable are not paid in full to the holders of all
shares of the Series C Mandatorily Convertible Single Reset Preferred Stock and
parity stock, the holders of the Series C Mandatorily Convertible Single Reset
Preferred Stock, together with holders of parity stock, shall share ratably in
any distribution of assets in proportion to the full amounts to which they would
otherwise be respectively entitled. Neither the consolidation or merger of the
Company with another entity, nor the sale, lease, transfer, exchange or
conveyance of all or a part of its assets, shall be deemed a liquidation,
dissolution or winding up of the affairs of the Company within the meaning of
the foregoing provisions of this Section 4.

                  Section 5. Redemption. The Company shall have the right to
redeem all, but not less than all, of the outstanding Series C Mandatorily
Convertible Single Reset Preferred Stock (x) at any time following a Redemption
Event and prior to a Trigger Date and (y) at any time prior to a Note Trigger
Event, in each case in cash at the redemption price of $5,000.00 per share

                                       8
<PAGE>

(the "Redemption Price"). Except as set forth in the preceding sentence and to
the extent contemplated by Section 6(1)(y), the Company shall not have the right
to redeem any or all of the Series C Mandatorily Convertible Single Reset
Preferred Stock at any other time. Notice of a redemption of the Series C
Mandatorily Convertible Single Reset Preferred Stock shall be provided in
writing to the holders of record of such shares at their respective addresses as
they shall appear on the books of the Company at least two Business Days and not
more than 60 calendar days prior to the date fixed for redemption. Each such
notice of redemption shall specify the date fixed for redemption and the
Redemption Price. On or after the date fixed for redemption as stated in such
notice, each holder of the shares called for redemption shall surrender the
certificate evidencing such shares to the Company and shall thereupon be
entitled to receive payment of the Redemption Price. If, on the date fixed for
redemption, funds necessary for the redemption shall be available therefor and
shall have been irrevocably deposited or set aside, then, notwithstanding that
the certificates evidencing any shares so called for redemption shall not have
been surrendered, the shares shall no longer be deemed outstanding, and all
rights whatsoever with respect to the shares so called for redemption (except
the right of the holders to receive the Redemption Price without interest upon
surrender of their certificates therefor) shall terminate.

                  Section 6. Conversion.

         (1) Unless previously converted at the option of the holder in
accordance with the provisions hereof, on the earlier to occur of (i) the third
anniversary of the Rate Reset Date and (ii) November 1, 2007, or if such date is
not a Business Day, the next succeeding day that is a Business Day (the
"Mandatory Conversion Date"), each outstanding share of Series C Mandatorily
Convertible Single Reset Preferred Stock shall, without additional notice to
holders thereof, convert automatically (the "Mandatory Conversion") into (x) a
number of fully paid and non-assessable shares of Common Stock at the Mandatory
Conversion Rate (as defined herein) in effect on the Mandatory Conversion Date;
and (y) the right to receive an amount in cash equal to all accrued and unpaid
dividends on such share of Series C Mandatorily Convertible Single Reset
Preferred Stock (other than previously declared dividends payable to a holder of
record as of a prior date) to and including the day immediately prior to the
Mandatory Conversion Date, whether or not earned or declared, out of funds
legally available therefor (and if sufficient funds are not then legally
available therefor, the Company shall pay such amount, if any, pro rata (based
on the amounts so owing) to the holders of the Series C Mandatorily Convertible
Single Reset Preferred Stock and any parity stock then entitled to similar
payment as is then legally available therefor and shall pay any deficiency
thereafter as soon as funds are legally available therefor). The "Mandatory
Conversion Rate" is equal to the following number of shares of Common Stock per
share of Series C Mandatorily Convertible Single Reset Preferred Stock: (a) if
the Mandatory Conversion Date Market Price is greater than or equal to the
Threshold Appreciation Price, the quotient of (i) $5,000.00 divided by (ii) the
Threshold Appreciation Price, (b) if the Mandatory Conversion Date Market Price
is less than the Threshold Appreciation Price but is greater than the Reset
Price, the quotient of $5,000.00 divided by the Mandatory Conversion Date Market
Price and (c) if the Mandatory Conversion Date Market Price is less than or
equal to the Reset Price, the quotient of $5,000.00 divided by the Reset Price,
subject to adjustment as provided in this Section 6. "Mandatory Conversion Date
Market Price" shall mean the Average Trading Price per share of Common Stock for
the 20 consecutive Trading Days immediately prior to, but not including, the
Mandatory Conversion Date; provided,

                                       9
<PAGE>

however, that if an event occurs during such 20 consecutive Trading Days that
would require an adjustment to the Mandatory Conversion Rate pursuant to
Subsections 6(3) or 6(5), the Board of Directors may make such adjustments to
the Average Trading Price for shares of Common Stock for such 20 Trading Day
period as it reasonably deems appropriate to effectuate the intent of the
adjustments in Subsections 6(3) and 6(5), in which case any such determination
by the Board of Directors shall be set forth in a resolution of the Board of
Directors and shall be conclusive absent manifest error.

         Dividends on the Series C Mandatorily Convertible Single Reset
Preferred Stock shall cease to accrue on the day immediately preceding, and the
Series C Mandatorily Convertible Single Reset Preferred Stock shall cease to be
outstanding on, the Mandatory Conversion Date. The Company shall make
arrangements as it deems appropriate for the issuance of certificates
representing Common Stock and for the payment of cash in respect of such accrued
and unpaid dividends, if any, or cash in lieu of fractional shares, if any, in
exchange for and contingent upon surrender of certificates representing the
Series C Mandatorily Convertible Single Reset Preferred Stock, and the Company
may defer the payment of dividends on such Common Stock and the voting thereof
until, and make such payment and voting contingent upon, the surrender of such
certificates representing the Series C Mandatorily Convertible Single Reset
Preferred Stock, provided that the Company shall give the holders of the Series
C Mandatorily Convertible Single Reset Preferred Stock such notice of any such
actions as the Company deems appropriate and upon such surrender such holders
shall be entitled to receive such dividends declared and paid on such Common
Stock subsequent to the Mandatory Conversion Date. Amounts payable in cash in
respect of the Series C Mandatorily Convertible Single Reset Preferred Stock or
in respect of such Common Stock shall not bear interest.

         (2) Shares of Series C Mandatorily Convertible Single Reset Preferred
Stock shall be convertible during the periods set forth in clauses (x) and (y)
at the option of the holders thereof ("Optional Conversion") at a rate equal to
the number of shares of Common Stock per share of Series C Mandatorily
Convertible Single Reset Preferred Stock (the "Optional Conversion Rate")
determined as follows: (x) at any time on or after the Rate Reset Date and
before the Mandatory Conversion Date, into Common Stock equal to the quotient of
(i) $5,000.00 divided by (ii) the Threshold Appreciation Price, subject to
adjustment as set forth in this Section 6 and (y) at any time prior to the Rate
Reset Date, provided that at such time (I) a Note Trigger Event shall have
occurred and be continuing and (II) the Company shall be prohibited from
remarketing the El Paso Series C Mandatorily Convertible Single Reset Preferred
Stock under the terms of the Remarketing Agreement, into 193.573 shares of
Common Stock, subject to adjustment as set forth in this Section 6. Prior to and
during such time as the Series C Mandatorily Convertible Single Reset Preferred
Stock shall not be convertible, the Optional Conversion Rate shall be the rate
set forth in clause (y) of the immediately preceding sentence. Optional
Conversion of shares of Series C Mandatorily Convertible Single Reset Preferred
Stock may be effected by delivering certificates evidencing such shares of
Series C Mandatorily Convertible Single Reset Preferred Stock, together with
written notice of conversion and, if required by the Company, a proper
assignment of such certificates to the Company or in blank (and, if applicable
as provided in the following paragraph, cash payment of an amount equal to the
dividends attributable to the current dividend period payable on such shares),
to the office of the transfer agent for the shares of Series C Mandatorily
Convertible Single Reset Preferred Stock or to any other office or agency
maintained by the Company for that purpose and

                                       10
<PAGE>

otherwise in accordance with Optional Conversion procedures established by the
Company. Each Optional Conversion shall be deemed to have been effected
immediately before the close of business on the date on which the foregoing
requirements shall have been satisfied. The Optional Conversion shall be at the
Optional Conversion Rate in effect at such time and on such date.

         Holders of shares of Series C Mandatorily Convertible Single Reset
Preferred Stock at the close of business on a record date for any payment of
declared dividends shall be entitled to receive the dividend payable on such
shares on the corresponding Dividend Payment Date or other date fixed for
payment of dividends notwithstanding the Optional Conversion of such shares
following such record date and on or prior to such Dividend Payment Date or
other date fixed for payment of dividends. However, shares of Series C
Mandatorily Convertible Single Reset Preferred Stock surrendered for Optional
Conversion after the close of business on a record date for any payment of
declared dividends and before the opening of business on the next succeeding
Dividend Payment Date or other date fixed for payment of dividends must be
accompanied by payment in cash of an amount equal to the dividends attributable
to the current dividend period payable on such shares on such next succeeding
Dividend Payment Date or other date fixed for payment of dividends. Except as
provided in this Subsection 6(2), upon any Optional Conversion, the Company
shall make no payment of or allowance for unpaid dividends, whether or not in
arrears, on such converted shares of Series C Mandatorily Convertible Single
Reset Preferred Stock as to which Optional Conversion has been effected or for
previously declared dividends or distributions on the shares of Common Stock
issued upon such Optional Conversion.

         (3) The Optional Conversion Rate shall be adjusted from time to time
and the Mandatory Conversion Rate shall be adjusted from time to time after the
Rate Reset Date in respect of events occurring after the Rate Reset Date, as
follows:

         (a) In case the Company shall (i) pay a dividend on its Common Stock in
other Common Stock, (ii) subdivide or split its outstanding Common Stock into a
greater number of shares, (iii) combine its outstanding Common Stock into a
smaller number of Common Stock, or (iv) issue by reclassification of its Common
Stock any other Common Stock (including in connection with a merger in which the
Company is a surviving corporation), then, in any such event, (1) the Mandatory
Conversion Rate in effect immediately prior to such event shall be adjusted such
that the Reset Price shall be adjusted by multiplying it by a fraction (which
fraction and all other fractions referred to herein may be improper fractions),
the numerator of which is one and the denominator of which is the number of
shares of Common Stock that a holder of one share of Common Stock prior to any
event described above would hold immediately after such event (assuming the
issuance of fractional shares) (the "Recapitalization Adjustment Ratio"), and
(2) the Optional Conversion Rate in effect immediately prior to such event shall
be adjusted by multiplying it by a fraction, the numerator of which is one and
the denominator of which is the Recapitalization Adjustment Ratio. Such
adjustment shall become effective immediately after the effective date of any
such event (or the earlier record date in the case of any such dividend)
whenever any of the events listed above shall occur.

         (b) In case the Company shall issue rights or warrants to all holders
of its Common Stock entitling them (for a period, except in the case of Rights,
expiring within 45 days after the record

                                       11
<PAGE>

date for determination of the shareholders entitled to receive such rights or
warrants) to subscribe for or purchase Common Stock at a price per share of
Common Stock less than the current market price per share of Common Stock (as
defined in Subsection 6(4)) on such record date, then in each such case the
Mandatory Conversion Rate on the date of such issuance shall be adjusted such
that the Reset Price shall be adjusted by multiplying it by a fraction the
numerator of which shall be the sum of (x) the number of shares of Common Stock
outstanding immediately prior to such issuance, plus (y) the number of
additional shares of Common Stock which the aggregate offering price of the
total number of shares of Common Stock so offered for subscription or purchase
would purchase at the Average Trading Price for a share of Common Stock on the
record date for such issuance, and the denominator of which shall be the sum of
(x) the number of shares of Common Stock outstanding immediately prior to such
issuance, plus (y) the number of additional shares of Common Stock offered for
subscription or purchase pursuant to such rights or warrants (the "Anti-Dilution
Adjustment Ratio"); and (B) the Optional Conversion Rate in effect on the record
date described below shall be adjusted by multiplying it by a fraction, the
numerator of which is one and the denominator of which is the Anti-Dilution
Adjustment Ratio. For purposes of this Subsection 6(3)(b), the issuance of
rights or warrants to subscribe for or purchase securities exercisable for,
convertible into, or exchangeable for, shares of Common Stock shall be deemed to
be the issuance of rights or warrants to purchase the shares of Common Stock
into which such securities are exercisable, convertible or exchangeable at an
aggregate offering price equal to the aggregate offering price of such
securities plus the minimum aggregate amount (if any) payable upon the exercise,
conversion or exchange of such securities. Such adjustment shall become
effective at the opening of business on the Business Day next following the
record date for such rights or warrants. To the extent that any shares of Common
Stock, or securities exercisable for, convertible into, or exchangeable for,
shares of Common Stock so offered for subscription or purchase are not so
subscribed or purchased by the expiration of such rights or warrants, the
Mandatory Conversion Rate and the Optional Conversion Rate shall each be
readjusted to the rates or amounts, respectively, which would then be in effect,
had the adjustment made upon the issuance of such rights or warrants been made
upon the basis of the issuance of rights or warrants in respect of only the
number of shares of Common Stock and securities exercisable for, convertible
into, or exchangeable for, shares of Common Stock actually issued upon exercise
of such rights or warrants.

         (c) If the Company shall pay a dividend or make a distribution to all
holders of its Common Stock consisting of evidences of its indebtedness or other
assets (including capital shares of the Company other than Common Stock but
excluding any Ordinary Cash Dividends (as defined below)), or shall issue to all
holders of its Common Stock rights or warrants to subscribe for or purchase any
of its securities (other than those referred to in Subsection 6(b)), then in
each such case the Mandatory Conversion Rate in effect immediately prior to such
event shall be adjusted such that the Reset Price shall be adjusted by
multiplying it by a fraction, the numerator of which shall be the Average
Trading Price for a share of Common Stock on such record date, minus the fair
market value as of such record date of the portion of evidences of indebtedness
or other assets so distributed, or of such subscription rights or warrants,
applicable to one share of Common Stock (provided that such numerator shall
never be less than $1.00) and the denominator of which shall be the Average
Trading Price for a share of Common Stock on such record date (the "Distribution
Adjustment Ratio"); and (B) the Optional Conversion Rate in effect immediately
prior to such event shall be adjusted by multiplying it by a fraction, the
numerator of which is one and the denominator of which is the Distribution
Adjustment Ratio.

                                       12
<PAGE>

Such adjustment shall become effective on the opening of business on the
Business Day next following the record date for such dividend or distribution or
the determination of shareholders entitled to receive such dividend or
distribution or rights or warrants, as the case may be. "Ordinary Cash
Dividends" shall mean (i) any regular cash dividend on the Common Stock that
does not exceed the per share amount of immediately preceding regular cash
dividend on the Common Stock (as adjusted to appropriately reflect any of the
events referred to in Subsection 6(3)(a)) and (ii) any other cash dividend or
distribution which, when combined on a per share basis with the per share amount
of all other cash dividends and distributions paid on the Common Stock during
the 365-day period ending on the date of declaration of such dividend or
distribution (as adjusted to appropriately reflect any of the events referred to
in Subsection 6(3)(a) and excluding cash dividends or distributions that
resulted in an adjustment to the Mandatory Conversion Rate or the Optional
Conversion Rate) does not exceed 10% of the current market price per Common
Stock (determined pursuant to Subsection 6(4)) on the Trading Day immediately
preceding the date of declaration of such dividend or distribution.

         (4) For the purpose of any computation under Subsection 6(3), the
"current market price per share of Common Stock" on any date in question shall
mean the Average Trading Price for shares of Common Stock for the 15 consecutive
Trading Days ending on the earlier of the day in question and, if applicable,
the day before the "ex" date with respect to the issuance or distribution
requiring such computation; provided, however, that if another event occurs that
would require an adjustment pursuant to Subsection 6(3), the Board of Directors
may make such adjustments to the Average Trading Price for shares of Common
Stock during such 15 Trading Day period as it reasonably deems appropriate to
effectuate the intent of the adjustments in Subsection 6(3), in which case any
such determination by the Board of Directors shall be set forth in a Board
resolution and shall be conclusive absent manifest error. For purposes of this
Subsection, the term "ex" date, when used with respect to any issuance or
distribution, means the first date on which the shares of Common Stock trade
regular way on the relevant exchange or in the relevant market from which the
Average Trading Price was obtained without the right to receive such issuance or
distribution. For the purpose of any computation under Subsection 6(3), the
"fair market value" of any assets, evidences of indebtedness, subscription
rights or warrants on any date in question: (i) in the event any such item is a
publicly traded security ("Publicly Traded Security"), shall be determined for
such date pursuant to the provisions of this Subsection 6(4) for determination
of the "current market price per share of Common Stock", except that (x) each
reference therein to "Common Stock" shall be deemed to mean such Publicly Traded
Security, and (y) if such Publicly Traded Security does not trade on a "when
issued" basis for the 15 consecutive Trading Days preceding the "ex" date, such
determination shall be made for the period of 15 consecutive Trading Days
commencing on the "ex" date; and (ii) in the event any such item is not a
Publicly Traded Security, shall be reasonably determined in good faith for such
date by the Board of Directors, as evidenced by a resolution of the Board, whose
determination shall be conclusive absent manifest error.

         (5) In any case of any reclassification of Common Stock (other than a
reclassification of the Common Stock referred to in Subsection 6(3)(a)); any
consolidation or merger of the Company with or into another company or other
entity (other than a merger resulting in a reclassification of the Common Stock
referred to in Subsection 6(3)(a)); or any sale or conveyance to another entity
(other than a Subsidiary) of all or substantially all of the assets of the
Company (any such event referred to herein as a "Transaction"), then the
Optional

                                       13
<PAGE>

Conversion Rate and Mandatory Conversion Rate shall be adjusted so that after
consummation of such a Transaction the holders of shares of Series C Mandatorily
Convertible Single Reset Preferred Stock will receive, in lieu of the number of
shares of Common Stock which such holder would have received upon conversion but
for such Transaction, the kind and amount of securities, cash and other property
receivable upon consummation of such Transaction by a holder of such number of
shares of Common Stock, subject to further adjustment as provided in this
Section 6, including without limitation, an adjustment to the Optional
Conversion Rate on the Rate Reset Date if such Transaction occurs prior to the
Rate Reset Date. On and after the consummation of any such Transaction, the
Mandatory Conversion Date Market Price, which shall be used for purposes of the
determination as to which of clauses (a), (b) or (c) of the definition of
Mandatory Conversion Rate applies, shall mean the sum of (i) the product of the
Average Trading Price of any Publicly Traded Security received upon consummation
of such Transaction for the 20 consecutive Trading Days immediately prior to,
but not including, the Mandatory Conversion Date multiplied by the fraction of
such security received in such Transaction per share of Common Stock (assuming
the issuance of fractional shares) plus (ii) the fair market value of the cash
and other property received upon consummation of such Transaction per share of
Common Stock as of the day preceding the Mandatory Conversion Date as determined
in accordance with Subsection 6(4). In determining the kind and amount of
securities, cash or other property receivable upon consummation of such
Transaction by a holder of shares of Common Stock, it shall be assumed that such
holder is not a person or entity with which the Company consolidated or into
which the Company was merged or which merged into the Company, as the case may
be, or an affiliate of any such Person and that such holder of Common Stock
failed to exercise rights of election, if any, as to the kind or amount of
securities, cash, or other property receivable upon consummation of such
transaction (provided that, if the kind or amount of securities, cash, or other
property receivable upon consummation of such Transaction is not the same for
each non-electing share, then the kind and amount of securities, cash, or other
property receivable upon consummation of such transaction for each non-electing
share shall be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing shares). In the event of such a reclassification,
consolidation, merger, sale or conveyance, effective provisions shall be made in
the certificate of incorporation or similar document of the resulting or
surviving Company or entity so that the conversion rate applicable to any
securities or property into which the shares of the Series C Mandatorily
Convertible Single Reset Preferred Stock shall then be convertible shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Stock
contained in Subsections 6(3)(a), 6(3)(b) and 6(3)(c) inclusive, and the other
provisions of this Section 6 with respect to the Common Stock shall apply on
terms as nearly equivalent as practicable to any such other securities and
property deliverable upon conversion of shares of Series C Mandatorily
Convertible Single Reset Preferred Stock.

         (6) Whenever any adjustments are required in the shares of Common Stock
into which each share of Series C Mandatorily Convertible Single Reset Preferred
Stock is convertible, the Company shall forthwith (a) compute the adjusted
Mandatory Conversion Rate and the Optional Conversion Rate in accordance
herewith and prepare a certificate signed by an officer of the Company setting
forth the adjusted Mandatory Conversion Rate and the Optional Conversion Rate,
describing in reasonable detail the method of calculation used and the facts
requiring such adjustment and upon which such adjustment is based, which
certificate shall be conclusive, final and binding evidence of the correctness
of the adjustment and file with the

                                       14
<PAGE>

transfer agent of the Series C Mandatorily Convertible Single Reset Preferred
Stock such certificate and (b) cause a copy of such certificate to be mailed to
each holder of record of the Series C Mandatorily Convertible Single Reset
Preferred Stock as of or promptly after the effective date of such adjustment
and, with respect to adjustments applicable after the Rate Reset Date, make a
prompt public announcement of such adjustment.

         (7) The Company shall at all times reserve and keep available, free
from preemptive rights out of its authorized but unissued shares of Common Stock
for the purpose of issuance upon conversion of the Series C Mandatorily
Convertible Single Reset Preferred Stock a number of shares of Common Stock
equal to the product of (i) the number of shares of Common Stock then
deliverable at such time upon an Optional Conversion of all shares of the Series
C Mandatorily Convertible Single Reset Preferred Stock multiplied by (ii) 1.10.

         (8) The Company will pay any and all documentary stamp or similar issue
or transfer taxes that may be payable in respect of the issuance or delivery of
shares of Common Stock on conversion of shares of the Series C Mandatorily
Convertible Single Reset Preferred Stock pursuant to this Section 6. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involving the issue and delivery of shares of Common Stock in
the name other than in that which the shares of Series C Mandatorily Convertible
Single Reset Preferred Stock so converted were registered and no such issue and
delivery shall be made unless and until the person requesting such issue has
paid to the Company the amount of any such tax, or has established to the
satisfaction of the Company, that such tax has been paid.

         (9) For the purpose of this Section 6, the term "Common Stock" shall
include any shares of the Company of any class or series which has no preference
or priority in the payment of dividends or in the distribution of assets upon
any voluntary or involuntary liquidation, dissolution or winding up of the
Company and which is not subject to redemption by the Company. However, Common
Stock issuable upon conversion of the Series C Mandatorily Convertible Single
Reset Preferred Stock shall include only shares of the class designated as
Common Stock as of the original date of issuance of the Series C Mandatorily
Convertible Single Reset Preferred Stock, or shares of the Company of any
classes or series resulting from any reclassification or reclassifications
thereof (including reclassifications referred to in clause (iv) of Subsection
6(3)(a)) and which have no preference or priority in the payment of dividends or
in the distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which are not subject to redemption
by the Company, provided that, if at any time, there shall be more than one such
resulting class or series, the shares of such class and series then so issuable
shall be in the same proportion, if possible, or if not possible, in
substantially the same proportion which the total number of shares of such class
and series resulting from all such reclassifications bears to the total number
of shares of all classes and series resulting from all such reclassifications.

         (10) No fractional shares or scrip representing fractional shares shall
be issued upon the conversion of the Series C Mandatorily Convertible Single
Reset Preferred Stock. If any such conversion would otherwise require the
issuance of a fractional share, an amount equal to such fraction multiplied by
the current market price per share of Common Stock (determined as provided in
Subsection 6(4)) of the Common Stock on the date of conversion shall be paid to
the holder in cash by the Company. If on such date there is no current market
price per share of

                                       15
<PAGE>

Common Stock, the fair market value of a share of Common Stock (determined as
provided in Subsection 6(4)) on such date, shall be used. If more than one share
of Series C Mandatorily Convertible Single Reset Preferred Stock shall be
surrendered for conversion at one time or for the same holder, the number of
full shares of Common Stock issuable upon conversion thereof shall be computed
on the basis of the aggregate number of shares of Series C Mandatorily
Convertible Single Reset Preferred Stock so surrendered.

         (11) All shares of the Series C Mandatorily Convertible Single Reset
Preferred Stock purchased or otherwise acquired by the Company (including shares
surrendered for conversion) shall be canceled and thereupon restored to the
status of authorized but unissued shares of Preferred Stock undesignated as to
series.

         (12) No adjustment in the Mandatory Conversion Rate and the Optional
Conversion Rate shall be required unless such adjustment (plus any adjustments
not previously made by reason of this Subsection 6(12)) would require an
increase or decrease of at least 1% in the number of shares of Common Stock into
which each share of the Series C Mandatorily Convertible Single Reset Preferred
Stock is then convertible; provided, however, that any adjustments which by
reason of this Subsection 6(12) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment and provided further
that any adjustment shall be required and made in accordance with the provisions
of Subsection 6(3) not later than such time as may be required in order to
preserve the tax free nature of a distribution to the holders of shares of
Common Stock. If any action or transaction would require adjustment to the
Mandatory Conversion Rate or the Optional Conversion Rate pursuant to this
Section 6, only one adjustment shall be made and such adjustment shall be the
amount of the adjustment that has the highest absolute value. All calculations
under this Section 6 shall be made to the nearest one-hundredth of a share of
Common Stock.

         (13) The Board of Directors may make such upward adjustments in the
Mandatory Conversion Rate and the Optional Conversion Rate, in addition to those
required by this Section 6, as shall be determined by the Board of Directors, as
evidenced by a resolution of the Board of Directors, to be advisable in order
that any stock dividends, subdivisions of shares, distribution of rights to
purchase stock or securities, or distribution of securities convertible into or
exchangeable for stock (or any transaction that could be treated as any of the
foregoing transactions pursuant to Section 305 of the Internal Revenue Code of
1986, as amended) made by the Company to its stockholders after the Rate Reset
Date shall not be taxable. The determination of the Board of Directors as to
whether an adjustment should be made pursuant to the provisions of this
Subsection 6(13), and if so, as to what adjustment should be made and when,
shall be conclusive, final and binding on the Company and all stockholders of
the Company.

         (14) In any case in which Section 6 shall require that an adjustment as
a result of any event become effective at the opening of business on the
Business Day next following a record date and the date fixed for conversion
occurs after such record date, but before the occurrence of such event, the
Company may, in its sole discretion, elect to defer (A) issuing to the holder of
any converted Series C Mandatorily Convertible Single Reset Preferred Stock the
additional shares of Common Stock issuable upon such conversion over the shares
of Common Stock issuable before giving effect to such adjustments and (B) paying
to such holder any amount in

                                       16
<PAGE>

cash in lieu of a fractional share of Common Stock pursuant to Subsection 6(10),
in each case until after the occurrence of such event.

         (15) Notwithstanding the foregoing provisions of this Section 6, no
adjustment of the Optional Conversion Rate or the Mandatory Conversion Rate
shall be required to be made upon the issuance of any shares of Common Stock
pursuant to any present or future plan providing for the reinvestment of
dividends or interest payable on securities of the Company and the investment of
additional optional amounts in shares of Common Stock under any such plan or
upon the issuance of shares of Common Stock (or securities, rights, warrants,
options or similar rights, which are convertible or exercisable for shares of
Common Stock) pursuant to any compensatory plan of the Company.

         (16) Notwithstanding any other provision of this Section 6, the
issuance or distribution of Rights shall not be deemed to constitute an issuance
or a distribution or dividend of rights, warrants, or other securities to which
any of the adjustment provisions described above applies until the occurrence of
the earliest Rights Event.

         (17) For purposes of this Section 6, shares of Common Stock owned by,
or held for the account of, the Company, a Subsidiary or another entity of which
a majority of the common stock or common equity interests are owned, directly or
indirectly, by the Company shall be deemed to be not outstanding.

                  Section 7. Voting Rights. The holders of Series C Mandatorily
Convertible Single Reset Preferred Stock shall have no right to vote except as
otherwise specifically provided herein, in the Company's Restated Certificate of
Incorporation or as required by statute.

         (1) So long as any shares of Series C Mandatorily Convertible Single
Reset Preferred Stock are outstanding, in addition to any other vote or consent
of shareholders required in the Company's Restated Certificate of Incorporation
or by law, the affirmative vote of the holders of at least a majority of the
Series C Mandatorily Convertible Single Reset Preferred Stock, given in person
or by proxy, either pursuant to a consent in writing without a meeting (if
permitted by law) and the Company's Restated Certificate of Incorporation or by
vote at any meeting called for the purpose, shall be necessary for effecting or
validating:

         (a) any amendment, alteration or repeal of any of the provisions of the
Company's Restated Certificate of Incorporation which affects adversely the
powers, rights or preferences of the holders of the Series C Mandatorily
Convertible Single Reset Preferred Stock or reduces the minimum time required
for any notice to which holders of Series C Mandatorily Convertible Single Reset
Preferred Stock then outstanding may be entitled; provided, that the amendment
of the provisions of the Company's Restated Certificate of Incorporation so as
to authorize or create, or to increase the authorized amount of any junior stock
or parity stock (including additional shares of Series B Mandatorily Convertible
Single Reset Preferred Stock or Series C Mandatorily Convertible Single Reset
Preferred Stock) shall not be deemed to affect adversely the powers, rights or
preferences of the holders of the Series C Mandatorily Convertible Single Reset
Preferred Stock and shall not be subject to approval by the holders of the
Series C Mandatorily Convertible Single Reset Preferred Stock and such holders
shall not be entitled to vote thereon to the fullest extent permitted by law.

                                       17
<PAGE>

         (b) the authorization, creation or issuance of, or the increase in the
authorized amount of, any stock of any class or series, or any security
convertible into stock of any class or series, ranking senior (as to receipt of
dividends, upon liquidation, dissolution or winding up or otherwise) to the
Series C Mandatorily Convertible Single Reset Preferred Stock; or

         (c) the merger or consolidation of the Company with or into any other
corporation or other entity, unless in connection with such merger or
consolidation each holder of shares of Series C Mandatorily Convertible Single
Reset Preferred Stock immediately preceding such merger or consolidation shall
either (I) with respect to a merger or consolidation consummated prior to, on or
after the Rate Reset Date, receive or continue to hold in the surviving or
resulting corporation or other entity the same number of shares, with
substantially the same rights and preferences (except as contemplated by
Subsection 6(5) and except for those rights and preferences that could be
affected without the vote of the holders of the Series C Mandatorily Convertible
Single Reset Preferred Stock, such as the authorization and issuance of parity
stock or junior stock), as correspond to the shares of Series C Mandatorily
Convertible Single Reset Preferred Stock held immediately prior to such merger
or consolidation or (II) with respect to a merger or consolidation consummated
after the Rate Reset Date, receive the kind and amount of securities, cash and
other property that would have been receivable upon consummation of such merger
or consolidation by such holder (subject to the assumptions set forth in
Subsection 6(5)) if the Mandatory Conversion had occurred immediately prior to
the consummation of such merger or consolidation and the Mandatory Conversion
Rate was determined as of such time (and if clause (I) or (II) are applicable,
then such merger or consolidation or shall not be subject to approval by the
holders of the Series C Mandatorily Convertible Single Reset Preferred Stock and
such holders shall not be entitled to vote thereon).

         (2) (a) In the event that full cumulative dividends on the Series C
Mandatorily Convertible Single Reset Preferred Stock are not paid and are in
arrears for six consecutive quarterly dividend periods following the Rate Reset
Date, the number of directors of the Company constituting the entire Board of
Directors shall be increased by two persons and the holders of shares of the
Series C Mandatorily Convertible Single Reset Preferred Stock, voting separately
as a class (together with the holders of shares of all other series of capital
stock of the Company, including the Series A Junior Participating Preferred
Stock and Series B Mandatorily Convertible Single Reset Preferred Stock or,
having the then present right to elect one or more directors as a result of a
dividend arrearage but not then entitled to other separate voting rights to
elect one or more directors in the event of such an arrearage (herein referred
to as "Class Voting Stock")), shall have the right to elect such additional two
directors to fill such positions at any regular meeting of shareholders or
special meeting held in place thereof, or at a special meeting called as
provided in Subsection 7(2)(c). Whenever all arrearages of dividends on the
Series C Mandatorily Convertible Single Reset Preferred Stock then outstanding
shall have been paid or declared and irrevocably set apart for payment, then the
right of the holders of shares of the Series C Mandatorily Convertible Single
Reset Preferred Stock to elect such additional two directors shall cease (but
subject always to the same provisions for the vesting of such voting rights in
the case of any similar future arrearages in dividends), and the terms of office
of all persons previously elected as directors by the holders of shares of the
Series C Mandatorily Convertible Single Reset Preferred Stock and such other
Class Voting Stock shall forthwith terminate and the number of the Board of
Directors shall be reduced accordingly.

                                       18
<PAGE>

         (b) At any time after the voting power referred to in Subsection
7(2)(a) shall have been so vested in the holders of shares of the Series C
Mandatorily Convertible Single Reset Preferred Stock, the Secretary of the
Company may, and upon the written request of any holder or the holders of at
least 10% of the number of shares of Series C Mandatorily Convertible Single
Reset Preferred Stock then outstanding (addressed to the Secretary at the
principal executive office of the Company) shall, call a special meeting of the
holders of shares of the Series C Mandatorily Convertible Single Reset Preferred
Stock and all other Class Voting Stock for the election of the directors to be
elected by them pursuant to Subsection 7(2)(a); provided that the Secretary
shall not be required to call such special meeting if the request for such
meeting is received less than 45 calendar days before the date fixed for the
next ensuing annual meeting of shareholders. Such call shall be made by notice
similar to that provided in the bylaws of the Company for a special meeting of
the shareholders or as required by law. Subject to the foregoing provisions, if
any such special meeting required to be called as above provided shall not be
called by the Secretary within 20 calendar days after receipt of an appropriate
request, then any holder of shares of Series C Mandatorily Convertible Single
Reset Preferred Stock may call such meeting, upon the notice above provided, and
for that purpose shall have access to the stock books and records of the
Company. Except as otherwise provided by law, at any such meeting, the holders
of a majority of the number of shares of Series C Mandatorily Convertible Single
Reset Preferred Stock and such other Class Voting Stock then outstanding shall
constitute a quorum for the purpose of electing directors as contemplated in
Subsection 7(2)(a). If at any such meeting or adjournment thereof, a quorum of
such holders of Series C Mandatorily Convertible Single Reset Preferred Stock
and, if applicable, such other Class Voting Stock shall not be present, no
election of directors by the Series C Mandatorily Convertible Single Reset
Preferred Stock and, if applicable, such other Class Voting Stock shall take
place, and any such meeting may be adjourned from time to time for periods not
exceeding 30 calendar days until a quorum of the Series C Mandatorily
Convertible Single Reset Preferred Stock and, if applicable, the Class Voting
Stock is present at such adjourned meeting. Unless otherwise provided by law or
the Company's Restated Certificate of Incorporation, directors to be elected by
the holders of shares of Series C Mandatorily Convertible Single Reset Preferred
Stock and, if applicable, such other Class Voting Stock shall be elected by a
plurality of the votes cast by such holders at a meeting at which a quorum is
present. Notwithstanding the foregoing, the absence of a quorum of the Series C
Mandatorily Convertible Single Reset Preferred Stock and, if applicable, such
other Class Voting Stock shall not prevent the voting of, including the election
of, directors by the holders of Common Stock and other classes of capital stock
at such meeting.

         (c) Any director who shall have been elected by holders of shares of
Series C Mandatorily Convertible Single Reset Preferred Stock voting separately
as a class, together, if applicable, with the holders of one or more other
series of Class Voting Stock, or any director so elected as provided below, may
be removed at any time during a class voting period, either for or without
cause, by, and only by, the affirmative vote of the holders of a majority of the
number of shares of Series C Mandatorily Convertible Single Reset Preferred
Stock then outstanding, voting separately as a class, together, if applicable,
with the holders of all other series of Class Voting Stock then outstanding,
given at a special meeting of such shareholders called for such purpose, and any
vacancy thereby created may be filled during such class voting period only by
the holder of shares of Series C Mandatorily Convertible Single Reset Preferred
Stock and, if applicable the other series, if any, of Class Voting Stock. In
case any vacancy (other than as provided in the preceding sentence) shall occur
among the directors elected by the holders of

                                       19
<PAGE>

shares of the Series C Mandatorily Convertible Single Reset Preferred Stock
(and, if applicable, such other Class Voting Stock), a successor shall be
elected by the Board of Directors to serve until the next annual meeting of the
shareholders or special meeting held in place thereof upon the nomination of the
then remaining director elected by the holders of the Series C Mandatorily
Convertible Single Reset Preferred Stock (and, if applicable, such other Class
Voting Stock) or the successor of such remaining director.

         (d) Holders of Series C Mandatorily Convertible Single Reset Preferred
Stock shall not be entitled to receive notice of any meeting of shareholders at
which they are not entitled to vote or consent except as otherwise provided by
applicable law.

                  Section 8. Other Rights. Shares of Series C Mandatorily
Convertible Single Reset Preferred Stock shall not have any relative,
participating, optional or other special rights or powers other than as set
forth herein, in the Company's Restated Certificate of Incorporation or as
required by law.

                  Section 9. Notices. Subsequent to the Rate Reset Date, at any
time while any shares of Series C Mandatorily Convertible Single Reset Preferred
Stock are outstanding, (i) the Company shall declare a dividend (or any other
distribution) on its Common Stock, excluding any cash dividends, (ii) the
Company shall authorize the issuance to all holders of its Common Stock of
rights or warrants to subscribe for or purchase shares of Common Stock or of
securities exercisable for, convertible into, or exchangeable for, shares of
Common Stock or (iii) the Company shall authorize any reclassification of its
Common Stock (other than a subdivision or combination thereof) or any
consolidation or merger to which the Company is a party and for which approval
of any stockholders of the Company is required (except for a merger of the
Company into one of its subsidiaries solely for the purpose of changing the
corporate name or corporate domicile of the Company to another state of the
United States and in connection with which there is no substantive change in the
rights or privileges of any securities of the Company other than changes
resulting from differences in the corporate statutes of the then existing and
the new state of domicile), or the sale or transfer to another corporation of
the property of the Company as an entirety or substantially as an entirety, then
the Company shall cause to be filed at each office or agency maintained for the
purpose of conversion of the Series C Mandatorily Convertible Single Reset
Preferred Stock, and shall cause to be mailed to the holders of Series C
Mandatorily Convertible Single Reset Preferred Stock at their last addresses as
they shall appear on the stock register, at least 10 days before the date
hereinafter specified (or the earlier of the dates hereinafter specified, in the
event that more than one date is specified), a notice stating (A) the date on
which a record is to be taken for the purpose of such dividend, distribution,
rights or warrants, or, if a record is not to be taken the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined, or (B) the date on which any such
reclassification, consolidation, merger, sale or transfer is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their Common Stock for securities or
other property (including cash), if any, deliverable upon such reclassification,
consolidation, merger, sale or transfer. The failure to give or receive the
notice required hereby or any defect therein shall not affect the legality or
validity of such dividend, distribution, right or warrant or other action.

                                       20
<PAGE>

                  IN WITNESS WHEREOF, EL PASO CORPORATION has caused this
Certificate of Designation, Preferences and Rights of Series C Mandatorily
Convertible Single Reset Preferred Stock to be executed by its Vice President,
Associate General Counsel and Corporate Secretary this 31st day of October,
2001.

                                             EL PASO CORPORATION

                                             /s/ David L. Siddall
                                             -----------------------------------
                                             David L. Siddall
                                             Vice President, Associate General
                                                Counsel and Corporate Secretary

                                       21

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