Document:

exhibit10_a.htm

 

Exhibit 10.A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

El Paso Corporation

2005 Omnibus Incentive Compensation Plan

(as amended and restated)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

  

 

 

 

 

TABLE OF CONTENTS

	
SECTION 1

	  	
ESTABLISHMENT AND OBJECTIVES

	
1

	  	  	  	  
	
SECTION 2

	  	
DEFINITIONS

	
1

	
2.1

	  	
Award

	
1

	
2.2

	  	
Award Agreement

	
1

	
2.3

	  	
Beneficiary

	
2

	
2.4

	  	
Board of Directors

	
2

	
2.5

	  	
Cash Awards

	
2

	
2.6

	  	
Cause

	
2

	
2.7

	  	
Change in Capitalization

	
2

	
2.8

	  	
Change in Control

	
2

	
2.9

	  	
Code

	
5

	
2.10

	  	
Common Stock

	
5

	
2.11

	  	
Covered Employee

	
5

	
2.12

	  	
Effective Date

	
5

	
2.13

	  	
Employer

	
5

	
2.14

	  	
Exchange Act

	
5

	
2.15

	  	
Fair Market Value

	
5

	
2.16

	  	
Good Reason

	
5

	
2.17

	  	
Incentive Award

	
6

	
2.18

	  	
Incentive Stock Option

	
6

	
2.19

	  	
Management Committee

	
7

	
2.20

	  	
Maximum Annual Employee Grant

	
7

	
2.21

	  	
Nonqualified Option

	
7

	
2.22

	  	
Option Price

	
7

	
2.23

	  	
Other Stock-Based Award

	
7

	
2.24

	  	
Participant

	
7

	
2.25

	  	
Performance Goals

	
7

	
2.26

	  	
Performance Period

	
9

	
2.27

	  	
Performance Shares

	
9

	
2.28

	  	
Performance Units

	
10

	
2.29

	  	
Plan Administrator

	
10

	
2.30

	  	
Prior Plans

	
10

	
2.31

	  	
Restricted Stock

	
10

	
2.32

	  	
Restricted Stock Units

	
10

	
2.33

	  	
Restriction Period

	
10

	
2.34

	  	
Rule 16b-3

	
10

	
2.35

	  	
Section 16 Insider

	
10

	
2.36

	  	
Section 162(m)

	
10

	
2.37

	  	
Subsidiary

	
11

 

 

 

 

 

El Paso Corporation

2005 Omnibus Incentive Compensation Plan

(as amended and restated)

i

  

 

 

 

 

	  	  	  	  
	
SECTION 3

	  	
ADMINISTRATION

	
11

	
3.1

	  	
Plan Administrator

	
11

	
3.2

	  	
Authority of Plan Administrator

	
11

	
3.3

	  	
Indemnification of Plan Administrator

	
12

	
3.4

	  	
Delegation to Management Committee

	
13

	  	  	  	  
	
SECTION 4

	  	
ELIGIBILITY

	
13

	  	  	  	  
	
SECTION 5

	  	
SHARES AVAILABLE FOR THE PLAN

	
13

	
5.1

	  	
Aggregate Shares

	
13

	
5.2

	  	
Limitations

	
14

	
5.3

	  	
Adjustments in Authorized Shares

	
14

	
5.4

	  	
Effect of Certain Transactions

	
15

	  	  	  	  
	
SECTION 6

	  	
STOCK OPTIONS

	
16

	
6.1

	  	
Grant of Options

	
16

	
6.2

	  	
Special Provisions Applicable to Incentive Stock Options

	
16

	
6.3

	  	
Terms of Options

	
17

	  	  	  	  
	
SECTION 7

	  	
STOCK APPRECIATION RIGHTS

	
20

	
7.1

	  	
Grant of Stock Appreciation Rights

	
20

	
7.2

	  	
Exercise of Stock Appreciation Rights

	
21

	
7.3

	  	
Special Provisions Applicable to Stock Appreciation Rights

	
21

	  	  	  	  
	
SECTION 8

	  	
PERFORMANCE SHARES AND PERFORMANCE UNITS

	
22

	
8.1

	  	
Grant of Performance Shares and Performance Units

	
22

	
8.2

	  	
Value of Performance Shares and Performance Units

	
23

	
8.3

	  	
Payment of Performance Shares and Performance Units

	
23

	
8.4

	  	
Form and Timing of Payment

	
23

	
8.5

	  	
Nontransferabilty of Performance Shares and Performance Units

	
24

	  	  	  	  
	
SECTION 9

	  	
RESTRICTED STOCK

	
24

	
9.1

	  	
Grant of Restricted Stock

	
24

	
9.2

	  	
Restriction Period

	
24

	
9.3

	  	
Other Restrictions

	
24

	
9.4

	  	
Voting Rights; Dividends and Other Distributions

	
25

	
9.5

	  	
Issuance of Shares; Settlement of Awards

	
25

	  	  	  	  
	
SECTION 10

	  	
RESTRICTED STOCK UNITS

	
25

	
10.1

	  	
Grant of Restricted Stock Units

	
25

	
10.2

	  	
Restriction Period

	
26

 

 

 

 

 

El Paso Corporation

2005 Omnibus Incentive Compensation Plan

(as amended and restated)

  

ii

  

 

 

 

 

 

	
 10.3

	  	
Other Restrictions

	
26

	
10.4

	  	
Dividend Equivalents

	
26

	
10.5

	  	
Issuance of Shares; Settlement of Awards

	
26

	  	  	  	  
	
SECTION 11

	  	
INCENTIVE AWARDS

	
27

	
11.1

	  	
Incentive Awards

	
27

	
11.2

	  	
Performance Goal Certification

	
27

	
11.3

	  	
Discretion to Reduce Awards; Participant’s Performance

	
27

	
11.4

	  	
Required Payment of Incentive Awards

	
27

	
11.5

	  	
Restricted Stock Election

	
28

	
11.6

	  	
Nontransferability of Incentive Awards

	
28

	  	  	  	  
	
SECTION 12

	  	
CASH AWARDS AND OTHER STOCK-BASED AWARDS

	
29

	
12.1

	  	
Grant of Cash Awards

	
29

	
12.2

	  	
Other Stock-Based Awards

	
29

	
12.3

	  	
Value of Cash Awards and Other Stock-Based Awards

	
29

	
12.4

	  	
Payment of Cash Awards and Other Stock-Based Awards

	
29

	
12.5

	  	
Transferability of Cash Awards and Other Stock-Based Awards

	
30

	  	  	  	  
	
SECTION 13

	  	
TERMINATION OF EMPLOYMENT

	
30

	  	  	  	  
	
SECTION 14

	  	
EFFECT OF A CHANGE IN CONTROL

	
30

	  	  	  	  
	
SECTION 15

	  	
REGULATORY APPROVALS AND LISTING

	
31

	  	  	  	  
	
SECTION 16

	  	
TERM OF PLAN

	
32

	  	  	  	  
	
SECTION 17

	  	
GENERAL PROVISIONS

	
32

	
17.1

	  	
Forfeiture Events

	
32

	
17.2

	  	
No Individual Rights

	
33

	
17.3

	  	
Other Compensation

	
33

	
17.4

	  	
Nontransferabilty

	
33

	
17.5

	  	
Leaves of Absence

	
33

	
17.6

	  	
Transfers

	
33

	
17.7

	  	
Unfunded Obligations

	
34

	
17.8

	  	
Beneficiaries

	
34

	
17.9

	  	
Governing Law

	
34

	
17.10

	  	
Satisfaction of Tax Obligations

	
34

	
17.11

	  	
Participants in Foreign Jurisdictions

	
35

	  	  	  	  
	
SECTION 18

	  	
COMPLIANCE WITH RULE 16b-3, SECTION 162(m) AND SECTION 409A

	
35

	
18.1

	  	
Rule 16b-3 of the Exchange Act and Section 162(m) of the Code

	
35

	
18.2

	  	
Section 409A of the Code

	
36

 

 

 

 

 

 

El Paso Corporation

2005 Omnibus Incentive Compensation Plan

(as amended and restated)

  

iii

  

 

 

 

 

 

 

 

	  	  	  	  
	
SECTION 19

	  	
AMENDMENT, TERMINATION OR DISCONTINUANCE OF THE PLAN

	
36

	
19.1

	  	
Amendment of Plan

	
36

	
19.2

	  	
Termination or Suspension of Plan

	
36

	  	  	  	  
	
SECTION 20

	  	
DEFERRAL ELECTIONS

	
36

 

 

 

 

 

 

 

El Paso Corporation

2005 Omnibus Incentive Compensation Plan

(as amended and restated)

  

iv

Table of Contents

 

 

 

 

 

El Paso Corporation

2005 Omnibus Incentive Compensation Plan

(as amended and restated)

 

 

 

SECTION 1    ESTABLISHMENT AND OBJECTIVES

 

El Paso Corporation (hereinafter referred to as the “Company”) hereby establishes an incentive compensation plan to be known as the “El Paso Corporation 2005 Omnibus Incentive Compensation Plan” (hereinafter referred to as the “Plan”).  The Plan first became effective on May 26, 2005 (the “Effective Date”) and was amended and restated effective May 6, 2009.  The Plan, as presently amended and restated, will become effective on May 19, 2010 if it is approved by the Company’s stockholders at the Company’s 2010 annual meeting.  The Plan shall remain in effect as provided in Section 16 hereof.

 

The objectives of the Plan are to promote the interests of the Company and its stockholders by strengthening its ability to attract and retain salaried employees of the Company and its Subsidiaries (as defined below) by furnishing suitable recognition of their ability and experience, to align their interests and efforts to the long-term interests of the Company’s stockholders, and to provide them with a direct incentive to achieve the Company’s strategic and financial goals.  In furtherance of these purposes, the Plan provides for the grant of stock options, stock appreciation rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Incentive Awards, Cash Awards, and Other Stock-Based Awards to Participants in accordance with the terms and conditions set forth below.

 

 

SECTION 2    DEFINITIONS

 

Unless otherwise required by the context, the following terms when used in the Plan shall have the meanings set forth in this Section 2:

 

2.1        Award

 

An “Award” granted under the Plan means any stock option, stock appreciation right, Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit, Incentive Award, Cash Award or Other Stock-Based Award, in each case payable in cash or in shares of Common Stock as may be designated by the Plan Administrator.

 

2.2        Award Agreement

 

The “Award Agreement” is the written agreement setting forth the terms and conditions applicable to an Award granted under the Plan (which, in the discretion of the Plan Administrator, need not be countersigned by a Participant).  The Plan Administrator may, in its discretion, provide for the use of electronic, internet or other non-paper Award Agreements.

 

 

 

 

 

 

 

 

 

El Paso Corporation

2005 Omnibus Incentive Compensation Plan

(as amended and restated)

  

  

Table of Contents

 

 

 

 

2.3        Beneficiary

 

The person or persons designated by the Participant pursuant to Section 6.3(f) or Section 17.8 of this Plan to whom payments are to be paid pursuant to the terms of the Plan in the event of the Participant’s death.

 

2.4        Board of Directors

 

The Board of Directors of the Company.

 

2.5        Cash Awards

 

As defined in Section 12.1.

 

2.6        Cause

 

A termination of a Participant by his or her Employer shall be for “Cause” if the Employer determines that the Participant has (i) failed to substantially perform his or her duties to the Employer’s satisfaction (other than a failure resulting from the Participant’s incapacity due to physical or mental illness) which has not been cured to the Employer’s satisfaction; (ii) willfully engaged in conduct which is injurious to the Company or any of its affiliates, monetarily or otherwise; (iii) has been convicted of any felony, or a misdemeanor involving moral turpitude; or (iv) willfully engaged in conduct in violation of the Company’s policies or Code of Business Conduct. Whether a Participant has been terminated for Cause will be determined by the Employer in the exercise of its discretion.

 

2.7        Change in Capitalization

 

A “Change in Capitalization” means any increase or reduction in the number of shares of Common Stock, any change (including, without limitation, in the case of a spin-off, dividend or other distribution in respect of shares, a change in value) in the shares of Common Stock or any exchange of shares of Common Stock for a different number or kind of shares of Common Stock or other securities of the Company or another corporation, by reason of a reclassification, recapitalization, merger, consolidation, reorganization, spin-off, split-up, issuance of warrants, rights or debentures, stock dividend, stock split or reverse stock split, cash dividend, property dividend, combination or exchange of shares, repurchase of shares, change in corporate structure or otherwise.

 

2.8        Change in Control

 

A “Change in Control” shall mean the occurrence of any of the following after the Effective Date:

 

(a)           An acquisition (other than directly from the Company) of any voting securities of the Company (the “Voting Securities”) by any “Person” (as the term “person” is used for purposes of Section 13(d) or 14(d) of the Exchange Act), immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than twenty percent (20%) of (1) the then-outstanding shares of Common Stock (or any other securities into which such shares of Common Stock are changed or for which such shares of Common Stock are exchanged) (the “Shares”) or (2) the combined voting power of the Company’s then-outstanding Voting Securities; provided, however, that in determining whether a Change in Control has occurred pursuant to this paragraph (a), the acquisition of Shares or Voting Securities in a “Non-Control Acquisition” (as hereinafter defined) shall not constitute a Change in Control.  A “Non-Control Acquisition” shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B) any corporation or other Person the majority of the voting power, voting equity securities or equity interest of which is owned, directly or indirectly, by the Company (for purposes of this definition, a “Related Entity”), (ii) the Company or any Related Entity, or (iii) any Person in connection with a “Non-Control Transaction” (as hereinafter defined);

 

 

 

 

 

 

 

El Paso Corporation

2005 Omnibus Incentive Compensation Plan

(as amended and restated)

  

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(b)           The individuals who, as of the Effective Date, are members of the Board of Directors (the “Incumbent Board of Directors”), cease for any reason to constitute at least a majority of the members of the Board of Directors or, following a Merger (as hereinafter defined), the board of directors of (x) the corporation resulting from such Merger (the “Surviving Corporation”), if fifty percent (50%) or more of the combined voting power of the then-outstanding voting securities of the Surviving Corporation is not Beneficially Owned, directly or indirectly, by another Person (a “Parent Corporation”) or (y) if there is one or more than one Parent Corporation, the ultimate Parent Corporation; provided, however, that, if the election, or nomination for election by the Company’s common stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board of Directors, such new director shall, for purposes of the Plan, be considered a member of the Incumbent Board of Directors; and provided, further, however, that no individual shall be considered a member of the Incumbent Board of Directors if such individual initially assumed office as a result of an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors (a “Proxy Contest”), including by reason of any agreement intended to avoid or settle any Proxy Contest; or

 

(c)           The consummation of:

 

(i)         A merger, consolidation or reorganization (1) with or into the Company or (2) in which securities of the Company are issued (a “Merger”), unless such Merger is a “Non-Control Transaction.”  A “Non-Control Transaction” shall mean a Merger in which:

 

(A)           the stockholders of the Company immediately before such Merger own directly or indirectly immediately following such Merger at least fifty percent (50%) of the combined voting power of the outstanding voting securities of (x) the Surviving Corporation, if there is no Parent Corporation or (y) if there is one or more than one Parent Corporation, the ultimate Parent Corporation;

 

 

 

 

 

 

 

 

 

 

 

 

 

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2005 Omnibus Incentive Compensation Plan

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(B)           the individuals who were members of the Incumbent Board of Directors immediately prior to the execution of the agreement providing for such Merger constitute at least a majority of the members of the board of directors of (x) the Surviving Corporation, if there is no Parent Corporation, or (y) if there is one or more than one Parent Corporation, the ultimate Parent Corporation; and

 

(C)           no Person other than (1) the Company, (2) any Related Entity, or (3) any employee benefit plan (or any trust forming a part thereof) that, immediately prior to the Merger, was maintained by the Company or any Related Entity, or (4) any Person who, immediately prior to the Merger had Beneficial Ownership of twenty percent (20%) or more of the then outstanding Shares or Voting Securities, has Beneficial Ownership, directly or indirectly, of twenty percent (20%) or more of the combined voting power of the outstanding voting securities or common stock of (x) the Surviving Corporation, if fifty percent (50%) or more of the combined voting power of the then outstanding voting securities of the Surviving Corporation is not Beneficially Owned, directly or indirectly by a Parent Corporation, or (y) if there is one or more than one Parent Corporation, the ultimate Parent Corporation;

 

(ii)         A complete liquidation or dissolution of the Company; or

 

(iii)        The sale or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any Person (other than (x) a transfer to a Related Entity, (y) a transfer under conditions that would constitute a Non-Control Transaction, with the disposition of assets being regarded as a Merger for this purpose or (z) the distribution to the Company’s stockholders of the stock of a Related Entity or any other assets).

 

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the “Subject Person”) acquired Beneficial Ownership of more than the permitted amount of the then outstanding Shares or Voting Securities as a result of the acquisition of Shares or Voting Securities by the Company which, by reducing the number of Shares or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Persons; provided, that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Shares or Voting Securities by the Company and, after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Shares or Voting Securities and such Beneficial Ownership increases the percentage of the then outstanding Shares or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

El Paso Corporation

2005 Omnibus Incentive Compensation Plan

(as amended and restated)

  

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2.9        Code

 

The Internal Revenue Code of 1986, as amended and in effect from time to time, and the temporary or final regulations of the Secretary of the U.S. Treasury adopted pursuant to the Code.

 

2.10      Common Stock

 

The Common Stock of the Company, $3 par value per share, or such other class of shares or other securities as may be applicable pursuant to the provisions of Section 5.

 

2.11      Covered Employee

 

A “Covered Employee” means, with respect to any grant of an Award, a Participant who the Plan Administrator deems is or may be or become a “covered employee” as defined in Section 162(m)(3) of the Code for any year and who may receive remuneration over $1 million in such year which would not be deductible under Section 162(m).

 

2.12      Effective Date

 

“Effective Date” shall have the meaning ascribed to such term in Section 1 hereof.

 

2.13      Employer

 

“Employer” shall mean, as to any Participant on any date, the Company or the affiliate of the Company that employs the Participant on such date.

 

2.14      Exchange Act

 

The Securities Exchange Act of 1934, as amended.

 

2.15      Fair Market Value

 

The “Fair Market Value” of the Common Stock on any date shall be deemed to be the average between the highest and lowest quoted selling prices at which Common Stock is sold on such date as reported in the NYSE-Composite Transactions by The Wall Street Journal or any other comparable service the Plan Administrator may determine is reliable for such date, or if no Common Stock was traded on such date, on the next preceding day on which Common Stock was so traded.  If the Fair Market Value of the Common Stock cannot be determined pursuant to the preceding provisions, the “Fair Market Value” of the Common Stock shall be determined by the Plan Administrator in good faith.

 

2.16      Good Reason

 

“Good Reason” shall mean, as to any Participant who is an officer of his or her Employer, the occurrence of any of the following events or conditions following a Change in Control:

 

 

 

 

 

 

 

 

El Paso Corporation

2005 Omnibus Incentive Compensation Plan

(as amended and restated)

  

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(a)          a change in the Participant’s status, position or responsibilities (including reporting responsibilities) which represents a substantial reduction of his or her status, position or responsibilities as in effect immediately prior thereto; the assignment to the Participant of any duties or responsibilities which are inconsistent with such status, position or responsibilities; or any removal of the Participant from or failure to reappoint or reelect him or her to any of such positions, except in connection with the termination of his or her employment for Cause, Permanent Disability, as a result of his or her death, or by the Participant other than for Good Reason;

 

(b)           a reduction in the Participant’s annual base salary;

 

(c)           the requirement by the Participant’s Employer (without the consent of the Participant) that he or she have a principal place of employment which is outside a fifty (50) mile radius of his or her principal place of employment immediately prior to a Change in Control;

 

(d)           the failure by the Company or any of its affiliates to (i) continue in effect any material compensation or benefit plan, program or practice in which the Participant was participating immediately prior to the Change in Control, including, without limitation, this Plan, the El Paso Corporation Pension Plan, the El Paso Corporation Supplemental Benefits Plan and the El Paso Corporation Retirement Savings Plan, with any amendments and restatements of such plans made prior to such Change in Control, or (ii) provide the Participant with compensation and benefits at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each compensation or employee benefit plan, program and practice of the Company and its affiliates as in effect immediately prior to the Change in Control (or as in effect following the Change in Control, if greater);

 

(e)           any material breach by the Company of any provision of this Plan; or

 

(f)            any purported termination of the Participant’s employment for Cause by the Employer which does not otherwise comply with the terms of this Plan.

 

2.17      Incentive Award

 

A percentage of base salary, fixed dollar amount or other measure of compensation which Participants are eligible to receive, in cash and/or other Awards under the Plan, at the end of a Performance Period if certain performance measures are achieved.

 

2.18      Incentive Stock Option

 

An option intended to meet the requirements of an Incentive Stock Option as defined in Section 422 of the Code, as in effect at the time of grant of such option, or any statutory provision that may hereafter replace such Section.

 

 

 

 

 

 

 

 

 

 

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2005 Omnibus Incentive Compensation Plan

(as amended and restated)

  

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2.19      Management Committee

 

A committee consisting of the Chief Executive Officer and such other officers of the Company appointed by the Chief Executive Officer.

 

2.20      Maximum Annual Employee Grant

 

The Maximum Annual Employee Grant set forth in Section 5.2.

 

2.21      Nonqualified Option

 

An option which is not intended to meet the requirements of an Incentive Stock Option as defined in Section 422 of the Code.

 

2.22      Option Price

 

The price per share of Common Stock at which an option is exercisable.

 

2.23.     Other Stock-Based Award

 

As defined in Section 12.2.

 

2.24      Participant

 

An eligible employee to whom Awards are granted under the Plan as set forth in Section 4.

 

2.25      Performance Goals

 

The Plan Administrator may grant Awards subject to Performance Goals to any Participant, including, without limitation, to any Covered Employee.  As to any such Awards, the Plan Administrator shall establish one or more of the following Performance Goals for each Performance Period in writing.  Each Performance Goal selected for a particular Performance Period shall include any one or more of the following, either individually, alternatively or in any combination, applied to either the Company as a whole or to a Subsidiary or business unit, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to the pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Plan Administrator:

 

Financial Goals

earnings;

earnings per share;

net income;

revenues;

operating cash flow;

 

 

 

 

 

 

 

 

El Paso Corporation

2005 Omnibus Incentive Compensation Plan

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free cash flow (defined as operating cash flow less capital expenditures less dividends);

debt level;

equity ratios;

expenses;

cost reduction targets;

capital expended;

working capital;

weighted average cost of capital;

operating or profit margins;

interest-sensitivity gap levels;

return on assets;

return on equity or capital employed;

return on total capital;

Production and Non-Regulated Business Unit Goals

amount of the oil and gas reserves;

oil and gas reserve additions;

oil and gas reserve replacement ratios;

costs of finding oil and gas reserves;

daily natural gas and/or oil production;

Regulated Business Unit Goals

contracted capacity on pipelines;

throughput levels on pipelines;

Corporate and Other

total shareholder return;

market share;

charge-offs;

assets;

non-performing assets;

asset sale targets;

asset quality levels;

value of assets;

Fair Market Value of the Common Stock;

employee retention/attrition rates;

investments;

regulatory compliance;

satisfactory internal or external audits;

improvement of financial ratings;

safety targets;

economic value added;

value creation; or

achievement of balance sheet or income statement objectives. 

 

 

 

 

 

 

 

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2005 Omnibus Incentive Compensation Plan

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The Plan Administrator shall adjust the Performance Goals to include or exclude extraordinary charges, gain or loss on the disposition of business units, losses from discontinued operations, restatements and accounting changes and other unplanned special charges such as restructuring expenses, acquisitions, acquisition expenses, including expenses related to goodwill and other intangible assets, stock offerings, stock repurchases and loan loss provisions.  The Plan Administrator may also provide for the manner in which performance will be measured against the Performance Goals (or may adjust the Performance Goals) to reflect the impact of specified corporate transactions (such as a stock split, stock dividend or other Change in Capitalization), special charges, and tax law changes.  In addition, the Plan Administrator may make such adjustments to the Performance Goals applicable to Participants who are not Covered Employees as it determines are appropriate.  Such adjustments may occur at the time of the granting of an Award, or at any time thereafter, but, in the case of Covered Employees, only to the extent permitted by Section 162(m).  The foregoing terms shall have the same meaning as used in the Company’s financial statements, or if the terms are not used in the Company’s financial statements, they shall have the meaning generally applied pursuant to general accepted accounting principles.  Performance Goals may include a threshold level of performance below which no Award shall be earned, target levels of performance at which specific Awards will be earned, and a maximum level of performance at which the maximum level of Awards will be earned.

 

In establishing Performance Goals with respect to Covered Employees, the Plan Administrator shall ensure such Performance Goals (i) are established no later than the end of the first 90 days of the Performance Period (or such other time permitted by the Internal Revenue Service), and (ii) satisfy all other applicable requirements imposed by Section 162(m), including the requirement that such Performance Goals be stated in terms of an objective formula or standard, and the Plan Administrator may not in any event increase the amount of compensation payable to a Covered Employee upon the satisfaction of any Performance Goal.  Prior to the payment of any “performance-based compensation” within the meaning of Section 162(m), the Plan Administrator shall certify in writing the extent to which the applicable Performance Goals were, in fact, achieved and the amounts to be paid, vested or delivered as a result thereof; provided, that the Plan Administrator may reduce, but not increase, such amount.

 

2.26      Performance Period

 

That period of time during which Performance Goals are evaluated to determine the vesting or granting of Awards under the Plan, as the Plan Administrator may determine.

 

2.27      Performance Shares

 

An award granted under the Plan representing the right to receive a number of shares of Common Stock for each performance share granted, as the Plan Administrator may determine.

 

 

 

 

 

 

 

 

 

 

 

 

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2005 Omnibus Incentive Compensation Plan

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2.28      Performance Units

 

An award granted under the Plan representing the right to receive a payment equal to the value of a performance unit, as the Plan Administrator may determine.

 

2.29      Plan Administrator

 

Those committees appointed and authorized pursuant to Section 3 to administer the Plan.

 

2.30      Prior Plans

 

El Paso Corporation 2001 Omnibus Incentive Compensation Plan, El Paso Corporation Strategic Stock Plan, El Paso Corporation Restricted Stock Award Plan for Management Employees and El Paso Corporation Omnibus Plan for Management Employees.

 

2.31      Restricted Stock

 

Common Stock granted under the Plan that is subject to the requirements of Section 9 and such other restrictions as the Plan Administrator deems appropriate.  References to Restricted Stock in this Plan shall include Restricted Stock awarded in conjunction with Incentive Awards pursuant to Section 11 unless the context otherwise requires.

 

2.32      Restricted Stock Units

 

An award granted under the Plan representing a right to receive a payment equal to the value of a share of Common Stock.

 

2.33      Restriction Period

 

As defined in Section 9.2.

 

2.34      Rule 16b-3

 

Rule 16b-3 of the General Rules and Regulations under the Exchange Act.

 

2.35      Section 16 Insider

 

Any person who is selected by the Plan Administrator to receive an Award pursuant to the Plan and who is or may be or become subject to the requirements of Section 16 of the Exchange Act, and the rules and regulations promulgated thereunder.

 

2.36      Section 162(m)

 

Section 162(m) of the Code, and regulations promulgated thereunder.

 

 

 

 

 

 

 

 

 

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2.37      Subsidiary

 

An entity that is designated by the Plan Administrator as a subsidiary for purposes of the Plan and that is a corporation, partnership, joint venture, limited liability company, limited liability partnership, or other entity in which the Company owns directly or indirectly, fifty percent (50%) or more of the voting power or profit interests, or as to which the Company or one of its affiliates serves as general or managing partner or in a similar capacity.  Notwithstanding the foregoing, for purposes of options intended to qualify as Incentive Stock Options, the term “Subsidiary” shall mean a corporation (or other entity treated as a corporation for tax purposes) in which the Company directly or indirectly holds more than fifty percent (50%) of the voting power.

 

 

SECTION 3    ADMINISTRATION

 

3.1        Plan Administrator

 

(a)           The Compensation Committee of the Board of Directors shall be the Plan Administrator with respect to all Covered Employees and all Section 16 Insiders.  As to these officers, the Plan Administrator shall be constituted at all times so as to (i) be “independent” as such term is defined pursuant to the rules of any stock exchange on which the Common Stock may then be listed, and (ii) meet the non-employee director standards of Rule 16b-3 and the outside director requirements of Section 162(m), so long as any of the Company’s equity securities are registered pursuant to Section 12(b) or 12(g) of the Exchange Act.

 

(b)           Other than as set forth in Section 3.1(a), the Management Committee shall be the Plan Administrator.  The Chief Executive Officer may from time to time remove members from, or add members to, the Management Committee.

 

(c)           Notwithstanding Sections 3.1(a) and 3.1(b), the Board of Directors may designate itself or the Compensation Committee of the Board of Directors as the Plan Administrator as to any Participant or groups of Participants.

 

3.2        Authority of Plan Administrator

 

Subject to the express terms and conditions set forth herein, the Plan Administrator shall have the power from time to time to:

 

(a)           determine those individuals to whom Awards shall be granted under the Plan and the number of shares or amount of cash subject to such Awards and prescribe the terms and conditions (which need not be identical) of each such Awards, including, in the case of stock options and stock appreciation rights, the Option Price, vesting schedule and duration;

 

 

 

 

 

 

 

 

 

 

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(b)           set the terms and conditions of any Award consistent with the terms of the Plan (which may be based on Performance Goals or other performance measures as the Plan Administrator shall determine), and make any amendments, modifications or adjustments to such Awards as are permitted by the Plan;

 

(c)           construe and interpret the Plan and the Awards granted hereunder and establish, amend and revoke rules and regulations for the administration of the Plan, including, without limitation, correcting any defect or supplying any omission, or reconciling any inconsistency in the Plan or in any Award Agreement, in the manner and to the extent it shall deem necessary or advisable, including so that the Plan and the operation of the Plan comply with Rule 16b-3, the Code to the extent applicable and other applicable law, and otherwise to make the Plan fully effective;

 

(d)           exercise its discretion with respect to the powers and rights granted to it as set forth in the Plan; and

 

(e)           generally, exercise such powers and perform such acts as are deemed necessary or advisable to promote the best interests of the Company with respect to the Plan.

 

All decisions and determinations by the Plan Administrator in the exercise of the above powers shall be final, binding and conclusive upon the Company, its Subsidiaries, the Participants and all other persons having or claiming any interest therein.  The Plan Administrator shall cause the Company at the Company’s expense to take any action related to the Plan which may be necessary to comply with the provisions of any federal or state law or any regulations issued thereunder, which the Plan Administrator determines are intended to be complied with.

 

Notwithstanding the foregoing, the Plan Administrator shall not be entitled to exercise any discretion otherwise authorized hereunder with respect to any Awards held by Covered Employees if the ability to exercise such discretion or the exercise of such discretion itself would cause the compensation attributable to such Awards to fail to qualify as performance-based compensation under Section 162(m).

 

3.3        Indemnification of Plan Administrator

 

Each member of any committee acting as Plan Administrator, while serving as such, shall be entitled, in good faith, to rely or act upon any advice of the Company’s independent auditors, counsel or consultants hired by the committee, or other agents assisting in the administration of the Plan.  The Plan Administrator and any officers or employees of the Company acting at the direction or on behalf of the Company shall not be personally liable for any action or determination taken or made, or not taken or made, in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected under the Company’s charter or by-laws with respect to any such action or determination.

 

 

 

 

 

 

 

 

 

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3.4        Delegation to Management Committee

 

To the maximum extent permitted by applicable law, the Board of Directors may delegate to the Management Committee the authority (i) to designate the officers and employees who shall be Participants, (ii) to determine the Awards to be granted to any such Participants or (iii) both (i) and (ii); provided, however, that the Management Committee shall not have the authority to grant Awards to any member of the Management Committee.  Any such delegation shall be made by resolution of the Board of Directors, and such resolution shall set forth the total number of shares of Common Stock subject to such delegation.

 

 

SECTION 4    ELIGIBILITY

 

To be eligible for selection by the Plan Administrator to participate in the Plan, an individual must be an employee (other than an employee who is a member of a unit covered by a collective bargaining agreement) of the Company, or of any Subsidiary, as of the date on which the Plan Administrator grants to such individual an Award under the Plan, or a person who, in the judgment of the Plan Administrator, holds a position of responsibility and is able to contribute substantially to the Company’s continued success.  Members of the Board of Directors who are employees of the Company shall be eligible to participate in the Plan.  Members of the Board of Directors who are not employees are not eligible to participate in the Plan.  Each grant of an Award under the Plan shall be evidenced by an Award Agreement.

 

 

SECTION 5    SHARES AVAILABLE FOR THE PLAN

 

5.1        Aggregate Shares

 

Subject to adjustment as provided in Section 5.3, the maximum number of shares of Common Stock that may be delivered pursuant to Awards granted under the Plan is 54,500,000 shares of Common Stock.

 

Any shares of Common Stock that are potentially deliverable under an Award granted under this Plan that is cancelled, forfeited, settled in cash, expires or is otherwise terminated without delivery of such shares shall not be counted as having been delivered under the Plan.  Likewise, shares of Common Stock that have been issued in connection with an Award of Restricted Stock that is canceled or forfeited prior to vesting or settled in cash, causing the shares to be returned to the Company, shall not be counted as having been delivered under the Plan.  

 

If shares of Common Stock are returned to the Company in satisfaction of taxes relating to Restricted Stock, in connection with a cash out of Restricted Stock (but excluding upon forfeiture of Restricted Stock) or in connection with the tendering of shares by a Participant in satisfaction of the exercise price or taxes relating to an Award, such issued shares shall not become available again under the Plan.  Each stock appreciation right issued under the Plan will be counted as one share issued under the Plan without regard to the number of shares issued to the Participant upon exercise of such stock appreciation right.

 

 

 

 

 

 

 

 

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Notwithstanding any other provision in this Section 5.1, the grant of any Award that cannot by its terms be settled in shares of Common Stock shall not result in the reduction of the number of shares of Common Stock available for Awards under the Plan.

 

Shares of Common Stock may be issued under the Plan from shares held in the Company’s treasury or out of authorized but unissued shares of the Company, or partly out of each, as shall be determined by the Plan Administrator.

 

5.2        Limitations

 

Subject to adjustment as provided in Section 5.3, the following limitations shall apply:

 

(a)           All of the shares of Common Stock that may be issued under this Plan may be granted as stock options (including Incentive Stock Options) or stock appreciation rights.

 

(b)           The number of shares of Common Stock issued under this Plan with respect to Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units and Other Stock-Based Awards may not exceed 21,500,000 shares of Common Stock.

 

(c)           The maximum number of shares, as calculated in accordance with the provisions of Section 5.1, and maximum amount with respect to which Awards under this Plan may be granted to any eligible employee in any one calendar year shall not exceed: (a) 2,000,000 shares, in the case of options or stock appreciation rights; (b) 1,000,000 shares in the case of Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units or Other Stock-Based Awards; and (c) $10,000,000 worth of other Awards under the Plan, including Incentive Awards.  Collectively, the foregoing maximums referred to in this Section 5.2(c) shall be referred to as the “Maximum Annual Employee Grants.”

 

5.3        Adjustments in Authorized Shares

 

(a)           In the event of a Change in Capitalization, the Plan Administrator shall make such adjustments, if any, as it determines are appropriate and equitable to (a) the maximum number and class of shares of Common Stock or other stock or securities with respect to which Awards may be granted under the Plan, (b) the maximum number and class of shares of Common Stock or other stock or securities that may be issued upon exercise of Nonqualified Options and Incentive Stock Options, (c) the Maximum Annual Employee Grants, (d) the number and class of shares of Common Stock or other stock or securities which are subject to outstanding Awards granted under the Plan and the Option Price or grant price therefor, if applicable and (e) the Performance Goals. Any such adjustment shall be final, binding and conclusive on all persons claiming any right or interest under the Plan.

 

 

 

 

 

 

 

 

 

 

 

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(b)           Any such adjustment in the shares of Common Stock or other stock or securities (x) subject to outstanding Incentive Stock Options (including any adjustments in the exercise price) shall be made in such manner as not to constitute a modification as defined by Section 424(h)(3) of the Code and only to the extent otherwise permitted by Sections 422 and 424 of the Code or (y) subject to outstanding Awards that are intended to qualify as performance-based compensation under Section 162(m) shall be made in such a manner as not to adversely affect the treatment of the Awards as performance-based compensation.

 

(c)           If, by reason of a Change in Capitalization, a Participant shall be entitled to, or shall be entitled to exercise an option or stock appreciation right with respect to, new, additional or different shares of stock or securities of the Company or any other corporation, such new, additional or different shares shall thereupon be subject to all of the conditions, restrictions and performance criteria which were applicable to the shares of Common Stock subject to the option or stock appreciation right, as the case may be, prior to such Change in Capitalization.

 

5.4        Effect of Certain Transactions

 

Following (a) the liquidation or dissolution of the Company or (b) a merger or consolidation of the Company (a “Transaction”), (i) each outstanding Award shall be treated as provided for in the agreement entered into in connection with the Transaction (which treatment may be different as among different types of Awards and different holders thereof) or (ii) if not so provided in such agreement, each Participant shall be entitled to receive in respect of each share of Common Stock subject to any outstanding Awards, upon exercise of any stock option or stock appreciation right or payment or transfer in respect of any other Award, the same number and kind of stock, securities, cash, property or other consideration that each holder of a share of Common Stock was entitled to receive in the Transaction in respect of a share of Common Stock; provided, however, that such stock, securities, cash, property, or other consideration shall remain subject to all of the conditions, restrictions and performance criteria which were applicable to Awards prior to such Transaction, but giving effect to any applicable provision of this Plan or any Award Agreement if the Transaction is a Change in Control.  Without limiting the generality of the foregoing, the treatment of outstanding stock options and stock appreciation rights pursuant to clause (i) of this Section 5.4 in connection with a Transaction in which the consideration paid or distributed to the Company’s stockholders is not entirely shares of common stock of the acquiring or resulting corporation may include the cancellation of outstanding stock options and stock appreciation rights upon consummation of the Transaction provided either (x) the holders of affected stock options and stock appreciation rights have been given a period of at least fifteen (15) days prior to the date of the consummation of the Transaction to exercise the stock options and stock appreciation rights (whether or not they were otherwise exercisable) or (y) the holders of the affected stock options and stock appreciation rights are paid (in cash or cash equivalents) in respect of each share of Common Stock covered by the stock options or stock appreciation rights being cancelled an amount equal to the excess, if any, of the per share price paid or distributed to stockholders in the Transaction (the value of any non-cash consideration to be determined by the Plan Administrator in its sole discretion) over the exercise price thereof.  For avoidance of doubt, (1) the cancellation of stock options and stock appreciation rights pursuant to clause (y) of the preceding sentence may be effected notwithstanding anything to the contrary contained in this Plan or any Award Agreement and (2) if the amount determined pursuant to clause (y) of the preceding sentence is zero or less, the affected stock options and stock appreciation rights may be cancelled without any payment therefor.  The treatment of any Award as provided in this Section 5.4 shall be conclusively presumed to be appropriate for purposes of Section 5.3.

 

 

 

 

 

 

 

 

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SECTION 6    STOCK OPTIONS

 

6.1        Grant of Options

 

(a)           Options may be granted to eligible employees in such number, and at such times during the term of the Plan as the Plan Administrator shall determine, the Plan Administrator taking into account the duties of the respective employees, their present and potential contributions to the success of the Company or its Subsidiaries, and such other factors as the Plan Administrator shall deem relevant in accomplishing the purposes of the Plan.  The Plan Administrator may grant an option or provide for the grant of an option, either from time to time in the discretion of the Plan Administrator or automatically upon the occurrence of specified events, including, without limitation, the achievement of Performance Goals or other performance measures, the satisfaction of an event or condition within the control of the recipient of the option or within the control of others.  The granting of an option shall take place when the Plan Administrator by resolution, written consent or other appropriate action determines to grant such an option to a particular Participant at a particular price.

 

(b)           An option granted under the Plan may be either an Incentive Stock Option or a Nonqualified Option.

 

6.2        Special Provisions Applicable to Incentive Stock Options

 

Each provision of the Plan and each Incentive Stock Option granted thereunder shall be construed so that each such option shall qualify as an Incentive Stock Option, and any provision thereof that cannot be so construed shall be disregarded, unless the Participant agrees otherwise.  The total number of shares which may be purchased upon the exercise of Incentive Stock Options granted under the Plan shall not exceed the total specified in Section 5.2(a), as adjusted pursuant to Section 5.3. Incentive Stock Options, in addition to complying with the other provisions of the Plan relating to options generally, shall be subject to the following conditions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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(a)        Ten Percent (10%) Stockholders

 

A Participant must not, immediately before an Incentive Stock Option is granted to him or her, own stock representing more than ten percent (10%) of the voting power or value of all classes of stock of the Company or of a Subsidiary.  This requirement is waived if (i) the Option Price of the Incentive Stock Option to be granted is at least one hundred ten percent (110%) of the Fair Market Value of the stock subject to the option, determined at the time the option is granted, and (ii) the option is not exercisable more than five (5) years from the date the option is granted.

 

(b)        Annual Limitation

 

To the extent that the aggregate Fair Market Value (determined at the time of the grant of the option) of the stock with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year exceeds One Hundred Thousand Dollars ($100,000), such options shall be treated as Nonqualified Options.  In applying the limitation in the preceding sentence in the case of multiple option grants, unless otherwise required by applicable law, options which were intended to be Incentive Stock Options shall be treated as Nonqualified Options according to the order in which they were granted such that the most recently granted options are first treated as Nonqualified Options.

 

(c)        Additional Terms

 

Any other terms and conditions which the Plan Administrator determines, upon advice of counsel, must be imposed for the option to be an Incentive Stock Option.

 

(d)        Notice of Disqualifying Disposition

 

If a Participant shall make any disposition of shares of Common Stock issued pursuant to an Inventive Stock Option under the circumstances described in Section 421(b) of the Code (relating to disqualifying distributions), the Participant shall notify the Company of such disposition within twenty days thereof.

 

6.3        Terms of Options

 

Except as otherwise provided in Section 6.2, all Incentive Stock Options and Nonqualified Options under the Plan shall be granted subject to the following terms and conditions:

 

(a)        Option Price

 

The Option Price shall be determined by the Plan Administrator in any reasonable manner, but shall not be less than the Fair Market Value of the Common Stock on the date the option is granted; provided, however, that this restriction shall not apply to Awards that are adjusted pursuant to Section 5.3 herein.

 

 

 

 

 

 

 

 

 

 

 

 

 

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(b)        Duration of Options

 

Options shall be exercisable at such time and under such conditions as set forth in the Award Agreement, but in no event shall any stock option (whether a Nonqualified Option or an Incentive Stock Option) be exercisable later than the tenth (10th) anniversary of the date of its grant.

 

(c)        Exercise of Options

 

Shares of Common Stock covered by an option may be purchased at one time or in such installments over the option period as may be provided in the Award Agreement.  Any shares not purchased on an applicable installment date may be purchased thereafter at any time prior to the expiration of the option in accordance with its terms.  To the extent that the right to purchase shares has accrued thereunder, options may be exercised from time to time by written notice to the Company setting forth the number of shares with respect to which the option is being exercised.

 

(d)        Payment

 

The purchase price of shares purchased under options shall be paid in full to the Company upon the exercise of the option by delivery of consideration equal to the product of the Option Price and the number of shares of Common Stock purchased (the “Purchase Price”).  Such consideration may be either (i) in cash or (ii) at the discretion of the Plan Administrator, in Common Stock (by either actual delivery of Common Stock or by attestation presenting satisfactory proof of beneficial ownership of such Common Stock) already owned by the Participant, or any combination of cash and Common Stock.  The Fair Market Value of such Common Stock as delivered shall be valued as of the day prior to delivery.  The Plan Administrator can determine that additional forms of payment will be permitted.  To the extent permitted by the Plan Administrator and applicable laws and regulations (including, without limitation, federal tax and securities laws, regulations and state corporate law), an option may also be exercised in a “cashless” exercise by delivery of a properly executed exercise notice together with irrevocable instructions to a broker selected by the Company to promptly deliver to the Company sufficient proceeds to pay the Purchase Price.  A Participant shall have none of the rights of a stockholder until the shares of Common Stock are issued to the Participant.

 

The Plan Administrator may permit a Participant to pay all or a portion of the Purchase Price by having shares of Common Stock with a Fair Market Value equal to all or a portion of the Purchase Price be withheld from the shares issuable to the Participant upon the exercise of the option.  The Fair Market Value of such Common Stock as is withheld shall be determined as of the same day as the exercise of the option.

 

 

 

 

 

 

 

 

 

 

 

 

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(e)        Restrictions

 

The Plan Administrator shall determine and reflect in the Award Agreement, with respect to each option, the nature and extent of the restrictions, if any, to be imposed on the shares of Common Stock which may be purchased thereunder, including, without limitation, restrictions on the transferability of such shares acquired through the exercise of such options for such periods as the Plan Administrator may determine and, further, that in the event a Participant’s employment by the Company, or a Subsidiary, terminates during the period in which such shares are nontransferable, the Participant shall be required to sell such shares back to the Company at such prices as the Plan Administrator may specify.  In addition, to the extent permitted by applicable laws and regulations, the Plan Administrator may require that a Participant who wants to effectuate a “cashless” exercise of options be required to sell the shares of Common Stock acquired in the associated exercise to the Company, or in the open market through the use of a broker selected by the Company, at such price and on such terms as the Plan Administrator may determine at the time of grant, or otherwise.  Without limiting the foregoing, the Plan Administrator may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any shares issued as a result of the exercise of an option, including without limitation (i) restrictions under an insider trading policy, (ii) restrictions designed to delay and/or coordinate the timing and manner of sales by the Participant and other participants and (iii) restrictions as to the use of a specified brokerage firm for such resales or other transfers.

 

(f)         Nontransferability of Options

 

         Options granted under the Plan and the rights and privileges conferred thereby shall not be subject to execution, attachment or similar process and may not be transferred, assigned, pledged or hypothecated in any manner (whether by operation of law or otherwise) other than by will or by the applicable laws of descent and distribution.  Notwithstanding the foregoing and only as provided by the Plan Administrator or the Company, as applicable, Nonqualified Options may be transferred to a Participant’s immediate family members, directly or indirectly or by means of a trust, corporate entity or partnership (a person who thus acquires this option by such transfer, a “Permitted Transferee”).  A transfer of an option may only be effected by the Company at the request of the Participant and shall become effective upon the Permitted Transferee agreeing to such terms as the Plan Administrator may require and only when recorded in the Company’s record of outstanding options.  In the event an option is transferred as contemplated hereby, the option may not be subsequently transferred by the Permitted Transferee except a transfer back to the Participant or by will or the laws of descent and distribution.  A transferred option may be exercised by a Permitted Transferee to the same extent as, and subject to the same terms and conditions as, the Participant (except as otherwise provided herein), as if no transfer had taken place.  As used herein, “immediate family” shall mean, with respect to any person, such person’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, and shall include adoptive relationships.  In the event of exercise of a transferred option by a Permitted Transferee, any amounts due to (or to be withheld by) the Company upon exercise of the option shall be delivered by (or withheld from amounts due to) the Participant, the Participant’s estate or the Permitted Transferee, in the reasonable discretion of the Company.

 

 

 

 

 

 

 

 

 

 

 

 

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In addition, to the extent permitted by applicable law and Rule 16b-3, the Plan Administrator may permit a recipient of a Nonqualified Option to designate in writing during the Participant’s lifetime a Beneficiary to receive and exercise the Participant’s Nonqualified Options in the event of such Participant’s death.  Except as otherwise provided for herein, if any Participant attempts to transfer, assign, pledge, hypothecate or otherwise dispose of any option under the Plan or of any right or privilege conferred thereby, contrary to the provisions of the Plan or such option, or suffers the sale or levy or any attachment or similar process upon the rights and privileges conferred hereby, all affected options held by such Participant shall be immediately forfeited.

 

(g)        Purchase for Investment

 

The Plan Administrator shall have the right to require that each Participant or other person who shall exercise an option under the Plan, and each person into whose name shares of Common Stock shall be issued pursuant to the exercise of an option, represent and agree that any and all shares of Common Stock purchased pursuant to such option are being purchased for investment only and not with a view to the distribution or resale thereof and that such shares will not be sold except in accordance with such restrictions or limitations as may be set forth in the option or by the Plan Administrator.  This Section 6.3(g) shall be inoperative during any period of time when the Company has obtained all necessary or advisable approvals from governmental agencies and has completed all necessary or advisable registrations or other qualifications of shares of Common Stock as to which options may from time to time be granted as contemplated in Section 15.

 

(h)        No Repricing or Cashout

 

The Plan Administrator shall have no authority to make any adjustment (other than in connection with a Change in Capitalization in which an adjustment is permitted or required under the terms of the Plan) or amendment, and no such adjustment or amendment shall be made, that reduces or would have the effect of reducing the exercise price of a stock option previously granted under the Plan, whether through amendment, cancellation or replacement grants, or other means, unless the Company’s shareholders shall have approved such adjustment or amendment.  In addition, the Plan Administrator is not permitted to purchase for cash previously granted options with an exercise price that is greater than the Company’s trading price on the proposed date of purchase without shareholder approval.

 

 

SECTION 7    STOCK APPRECIATION RIGHTS

 

7.1       Grant of Stock Appreciation Rights

 

     Stock appreciation rights may be granted to eligible employees in such number, and at such times during the term of the Plan as the Plan Administrator shall determine, the Plan Administrator taking into account the duties of the respective employees, their present and potential contributions to the success of the Company or its Subsidiaries, and such other factors as the Plan Administrator 

 

 

 

 

 

 

 

 

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shall deem relevant in accomplishing the purposes of the Plan.  The Plan Administrator may grant a stock appreciation right or provide for the grant of a stock appreciation right, either from time to time in the discretion of the Plan Administrator or automatically upon the occurrence of specified events, including, without limitation, the achievement of Performance Goals or other performance measures, the satisfaction of an event or condition within the control of the recipient of the stock appreciation right or within the control of others.  The granting of a stock appreciation right shall take place when the Plan Administrator by resolution, written consent or other appropriate action determines to grant such a stock appreciation right to a particular Participant at a particular price.  A stock appreciation right may be granted freestanding or in tandem or in combination with any other Award under the Plan.  The grant price of a freestanding stock appreciation right shall at least equal the Fair Market Value of a share of Common Stock on the date of grant of the stock appreciation right, and the grant price of a tandem stock appreciation right shall equal the Option Price of the related option; provided, however, that this restriction shall not apply to Awards that are adjusted pursuant to Section 5.3 herein.

 

7.2       Exercise of Stock Appreciation Rights

 

A stock appreciation right may be exercised upon such terms and conditions and for a term such as the Plan Administrator shall determine; provided, however, no stock appreciation right shall be exercisable later than the tenth (10th) anniversary of the date of its grant.  Upon exercise of a stock appreciation right, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying (i) the difference between the Fair Market Value of a share of Common Stock on the date of exercise of the stock appreciation right over the price fixed at the date of grant (which price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant) times (ii) the number of shares of Common Stock with respect to which the stock appreciation right is exercised.  At the discretion of the Plan Administrator, the payment upon stock appreciation right exercise may be in cash, in shares of Common Stock of equivalent value, or in some combination thereof.

 

7.3       Special Provisions Applicable to Stock Appreciation Rights

 

Stock appreciation rights are subject to the following restrictions:

 

(a)        A stock appreciation right granted in tandem with any other Award under the Plan shall be exercisable at such time or times as the Award to which it relates shall be exercisable, or at such other times as the Plan Administrator may determine.

 

 

 

 

 

 

 

 

 

 

 

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(b)        The right of a Participant to exercise a stock appreciation right granted in tandem with any other Award under the Plan shall be canceled if and to the extent the related Award is exercised or canceled.  To the extent that a stock appreciation right is exercised, the related Award shall be deemed to have been surrendered unexercised and canceled.

 

(c)        A holder of stock appreciation rights shall have none of the rights of a stockholder until shares of Common Stock, if any, are issued to such holder pursuant to such holder’s exercise of such rights.

 

(d)        The acquisition of Common Stock pursuant to the exercise of a stock appreciation right shall be subject to the same restrictions as would apply to the acquisition of Common Stock acquired upon exercise of an option, as set forth in Section 6.3.

 

(e)        Except as may otherwise be permitted by the Plan Administrator, stock appreciation rights granted under the Plan and the rights and privileges conferred thereby shall not be subject to execution, attachment or similar process and may not be transferred, assigned, pledged or hypothecated in any manner (whether by operation of law or otherwise) other than by will or by the applicable laws of descent and distribution.

 

(f)         The Plan Administrator shall have no authority to make any adjustment (other than in connection with a Change in Capitalization in which an adjustment is permitted or required under the terms of the Plan) or amendment, and no such adjustment or amendment shall be made, that reduces or would have the effect of reducing the grant price of a stock appreciation right previously granted under the Plan, whether through amendment, cancellation or replacement grants, or other means, unless the Company’s shareholders shall have approved such adjustment or amendment.  In addition, the Plan Administrator is not permitted to purchase for cash previously granted stock appreciation rights with a grant price that is greater than the Company’s trading price on the proposed date of purchase without shareholder approval.

 

 

SECTION 8    PERFORMANCE SHARES AND PERFORMANCE UNITS

 

8.1        Grant of Performance Shares and Performance Units

 

Subject to the limitations in Section 5.2, Performance Shares or Performance Units may be granted to eligible employees at any time and from time to time as the Plan Administrator shall determine.  The Plan Administrator shall have complete discretion in determining the number of Performance Shares or Performance Units granted to each Participant and the terms and conditions thereof, taking into account the duties of the respective Participants, their present and potential contributions to the success of the Company or its Subsidiaries, and such other factors as the Plan Administrator shall deem appropriate.  Performance Shares and Performance Units may be granted alone or in combination with any other Award under the Plan.

 

 

 

 

 

 

 

 

 

 

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8.2        Value of Performance Shares and Performance Units

 

The Plan Administrator shall set Performance Goals over Performance Periods.  Prior to each grant of Performance Shares or Performance Units, the Plan Administrator shall establish an initial number of shares of Common Stock for each Performance Share and an initial value for each Performance Unit granted to each Participant for that Performance Period.  Prior to each grant of Performance Shares or Performance Units, the Plan Administrator also shall set the Performance Goals that will be used to determine the extent to which the Participant receives the number of shares of Common Stock for the Performance Shares or payment of the value of the Performance Units awarded for such Performance Period.  With respect to each such Performance Goal utilized during a Performance Period, the Plan Administrator may assign percentages or other relative values to various levels of performance which shall be applied to determine the extent to which the Participant shall receive a payout of the number of Performance Shares or value of Performance Units awarded.

 

8.3        Payment of Performance Shares and Performance Units

 

After a Performance Period has ended, the holder of a Performance Share or Performance Unit shall be entitled to receive the value thereof as determined by the Plan Administrator.  The Plan Administrator shall make this determination by first determining the extent to which the Performance Goals set pursuant to Section 8.2 have been met.  The Plan Administrator shall then determine the applicable percentage or other relative value to be applied to, and will apply such percentage or other relative value to, the number of Performance Shares or value of Performance Units to determine the payout to be received by the Participant.  In addition, with respect to Performance Shares and Performance Units granted to each Participant, no payout shall be made hereunder except upon written certification by the Plan Administrator that the applicable Performance Goals have been satisfied to a particular extent.

 

8.4        Form and Timing of Payment

 

The payment described in Section 8.3 shall be made in shares of Common Stock, or in cash, or partly in shares of Common Stock and partly in cash, at the discretion of the Plan Administrator and set forth in the Award Agreement.  The value of any fractional shares shall be paid in cash.  Payment shall be made in a lump sum or installments as prescribed by the Plan Administrator and set forth in the Award Agreement; provided that each Award Agreement shall comply with the timing of payment requirements set forth in Section 409A of the Code, including, but not limited to the timing of payments to “specified employees” as defined in Section 409A(a)(2)(B)(i) of the Code.  If a number of shares of Common Stock is to be converted into an amount of cash on any date, or if an amount of cash is to be converted into a number of shares of Common Stock on any date, such conversion shall be done at the then-current Fair Market Value of the Common Stock on such date.

 

 

 

 

 

 

 

 

 

 

 

 

 

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8.5        Nontransferability of Performance Shares and Performance Units

 

Except as otherwise provided by the Plan Administrator, Performance Shares and Performance Units granted under the Plan and the rights and privileges conferred thereby shall not be subject to execution, attachment or similar process and may not be transferred, assigned, pledged or hypothecated in any manner (whether by operation or law or otherwise) other than by will or by the applicable laws of descent and distribution.

 

 

SECTION 9    RESTRICTED STOCK

 

9.1        Grant of Restricted Stock

 

Subject to the limitations in Section 5.2, Restricted Stock may be granted to eligible employees in such number and at such times during the term of the Plan as the Plan Administrator shall determine, the Plan Administrator taking into account the duties of the respective Participants, their present and potential contributions to the success of the Company or its Subsidiaries, and such other factors as the Plan Administrator shall deem relevant in accomplishing the purposes of the Plan.  The Plan Administrator may grant Restricted Stock or provide for the grant of Restricted Stock, either from time to time in the discretion of the Plan Administrator or automatically upon the occurrence of specified events.

 

9.2        Restriction Period

 

During a period following the date of grant, as determined by the Plan Administrator, which in no event shall be less than three (3) years with respect to Restricted Stock subject to restrictions based upon time and one (1) year with respect to Restricted Stock subject to restrictions based upon the achievement of specific Performance Goals or other performance measures (the “Restriction Period”), the Restricted Stock may not be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of by the recipient.  In the event of any attempt by the Participant to sell, exchange, transfer, pledge or otherwise dispose of Restricted Stock in violation of the terms of the Plan without the Company’s prior written consent, such Restricted Stock shall be forfeited to the Company.  During the Restriction Period, the Plan Administrator shall evidence the restrictions on the shares of Restricted Stock in such a manner as it determines is appropriate (including, without limitation, (i) by means of appropriate legends on shares of Restricted Stock that have been certificated and (ii) by means of appropriate stop-transfer orders on shares of Restricted Stock credited to book-entry accounts).

 

9.3        Other Restrictions

 

The Plan Administrator shall impose such other restrictions on Restricted Stock granted pursuant to the Plan as it may deem advisable, including Performance Goals or other performance measures.  The Plan Administrator may require, under such terms and conditions as it deems appropriate or desirable, that the certificates for Restricted Stock delivered under the Plan may be held in custody by a bank or other institution, or that the Company may itself hold such shares in custody until the Restriction Period expires or until restrictions thereon otherwise lapse, and may require, as a condition of any issuance of Restricted Stock that the Participant shall have delivered a stock power endorsed in blank relating to the shares of Restricted Stock.

 

 

 

 

 

 

 

 

 

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9.4        Voting Rights; Dividends and Other Distributions

 

A Participant receiving a grant of Restricted Stock shall be recorded as a stockholder of the Company.  Each Participant who receives a grant of Restricted Stock shall have all the rights of a stockholder with respect to such shares (except as provided in the restrictions on transferability), including the right to vote the shares and receive dividends and other distributions paid with respect to the underlying shares of Restricted Stock; provided, however, that no Participant awarded Restricted Stock shall have any right as a stockholder with respect to any shares subject to the Participant’s Restricted Stock grant prior to the date of issuance to the Participant of a certificate or certificates, or the establishment of a book-entry account, for such shares.

 

9.5        Issuance of Shares; Settlement of Awards

 

When the restrictions imposed by Section 9.2 expire or otherwise lapse with respect to one or more shares of Restricted Stock, the Participant shall be obligated to return to the Company such shares of Restricted Stock (if applicable), and the Company shall deliver to the Participant one (1) share of Common Stock in satisfaction of each share of Restricted Stock, which shares so delivered shall not contain any legend.  The delivery of shares pursuant to this Section 9.5 shall be subject to any required share withholding to satisfy tax withholding obligations pursuant to Section 17.10.  Any fractional shares subject to such Restricted Stock shall be paid to the Participant in cash.

 

 

SECTION 10    RESTRICTED STOCK UNITS

 

10.1      Grant of Restricted Stock Units

 

Subject to the limitations in Section 5.2, Restricted Stock Units may be granted to eligible employees in such number and at such times during the term of the Plan as the Plan Administrator shall determine, the Plan Administrator taking into account the duties of the respective Participants, their present and potential contributions to the success of the Company or its Subsidiaries, and such other factors as the Plan Administrator shall deem relevant in accomplishing the purposes of the Plan.  The Plan Administrator may grant Restricted Stock Units or provide for the grant of Restricted Stock Units, either from time to time in the discretion of the Plan Administrator or automatically upon the occurrence of specified events.

 

 

 

 

 

 

 

 

 

 

 

 

 

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10.2      Restriction Period

 

During the Restriction Period as defined in Section 9.2, Restricted Stock Units may not be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of by the recipient.  In the event of any attempt by the Participant to sell, exchange, transfer, pledge or otherwise dispose of Restricted Stock Units in violation of the terms of the Plan without the Company’s prior written consent, such Restricted Stock Units shall be forfeited to the Company.

 

10.3      Other Restrictions

 

The Plan Administrator shall impose such other restrictions on Restricted Stock Units granted pursuant to the Plan as it may deem advisable.  A Participant receiving a grant of Restricted Stock Units shall not be recorded as a stockholder of the Company and shall not acquire any rights of a stockholder unless or until the Participant is issued shares of Common Stock in settlement of such Restricted Stock Units.

 

10.4      Dividend Equivalents

 

The Plan Administrator may provide that Restricted Stock Units awarded under the Plan shall be entitled to an amount per Restricted Stock Unit equal in value to the cash dividend, if any, paid per share of Common Stock on issued and outstanding shares, on the dividend payment dates occurring during the period between the date on which the Restricted Stock Units are granted to the Participant and the date on which such Restricted Stock Units are settled, cancelled, forfeited, waived, surrendered or terminated under the Plan.  Such paid amounts called “dividend equivalents” shall be (i) paid in cash or Common Stock or (ii) credited to the Participant as additional Restricted Stock Units, or any combination thereof, as the Plan Administrator shall determine.  A Restricted Stock Unit credited to a Participant as a dividend equivalent shall vest at such time as the Restricted Stock Unit to which it relates vests.

 

10.5      Issuance of Shares; Settlement of Awards

 

When the restrictions imposed by Section 10.2 expire or otherwise lapse with respect to one or more Restricted Stock Units, Restricted Stock Units shall be settled (i) in cash or (ii) by the delivery to the Participant of the number of shares of Common Stock equal to the number of the Participant’s Restricted Stock Units that are vested, or any combination thereof, as the Plan Administrator shall determine.  The payment hereunder shall comply with the timing of payment requirements set forth in Section 409A of the Code, including, but not limited to the timing of payments to “specified employees” as defined in Section 409A(a)(2)(B)(i) of the Code.  The delivery of shares pursuant to this Section 10.5 shall be subject to any required share withholding to satisfy tax withholding obligations pursuant to Section 17.10.  Any fractional shares subject to such Restricted Stock Units shall be paid to the Participant in cash.

 

 

 

 

 

 

 

 

 

 

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SECTION 11    INCENTIVE AWARDS

 

11.1      Incentive Awards

 

Prior to the beginning of each Performance Period, or not later than 90 days following the commencement of the relevant fiscal year, the Plan Administrator shall establish Performance Goals or other performance measures which must be achieved for any Participant to receive an Incentive Award for that Performance Period.  The Performance Goals or other performance measures may be based on any combination of corporate and business unit Performance Goals or other performance measures.  The Plan Administrator may also establish one or more Company-wide Performance Goals or other performance measures which must be achieved for any Participant to receive an Incentive Award for that Performance Period.  Such Performance Goals or other performance measures may include a threshold level of performance below which no Incentive Award shall be earned, target levels of performance at which specific Incentive Awards will be earned, and a maximum level of performance at which the maximum level of Incentive Awards will be earned.  Each Incentive Award shall specify the amount of cash and the amount of any other Awards subject to such Incentive Award.

 

11.2      Performance Goal Certification

 

An Incentive Award shall become payable to the extent provided herein in the event that the Plan Administrator certifies in writing prior to payment of the Incentive Award that the Performance Goals or other performance measures selected for a particular Performance Period have been attained.  In no event will an Incentive Award be payable under this Plan if the threshold level of performance set for each Performance Goal or other performance measure for the applicable Performance Period is not attained.

 

11.3      Discretion to Reduce Awards; Participant’s Performance

 

The Plan Administrator, in its sole and absolute discretion, prior to a Change in Control, may reduce the amount of any Incentive Award otherwise payable to a Participant upon attainment of any Performance Goal or other performance measure for the applicable Performance Period.  A Participant’s individual performance must be satisfactory, regardless of the Company’s performance and the attainment of Performance Goals or other performance measures, before he or she may be paid an Incentive Award.  In evaluating a Participant’s performance, the Plan Administrator shall consider the Performance Goals or other performance measures, the Participant’s responsibilities and accomplishments, and such other factors as it deems appropriate.

 

11.4      Required Payment of Incentive Awards

 

The Plan Administrator shall make a determination within thirty (30) days after the  information that is necessary to make such a determination is available for a particular Performance Period whether the Performance Goals or other performance measures for the Performance Period have been achieved and the amount of the Incentive Award for each Participant.  The Plan Administrator shall certify the foregoing determinations in writing.  In the absence of an election by the Participant pursuant to Section 11.5, the Incentive Award shall be paid not later than December 31 of the calendar year in which the foregoing determinations have been made as follows.

 

 

 

 

 

 

 

 

 

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(a)        Participants shall receive their Incentive Awards in any combination of cash and/or other Awards under the Plan as determined by the Plan Administrator.  The payment hereunder shall comply with the timing of payment requirements set forth in Section 409A of the Code, including, but not limited to the timing of payments to “specified employees” as defined in Section 409A(a)(2)(B)(i) of the Code.

 

(b)        Because the Participant bears forfeiture, price fluctuation, and other attendant risks during the Restriction Period associated with Restricted Stock, the Plan Administrator may determine, as set forth in the Award Agreement, that Participants who are awarded Restricted Stock as part of their Incentive Award shall be awarded additional Restricted Stock up to the amount of Restricted Stock which a Participant is awarded pursuant to Section 11.4(a).  No additional Restricted Stock is required to be awarded pursuant to this Section 11.4(b).

 

11.5      Restricted Stock Election

 

To the extent permitted by applicable law, in lieu of receiving all or any portion of cash awarded as part of a Participant’s Incentive Award pursuant to Section 11.4(a), the Plan Administrator may determine, as set forth in the Award Agreement, that Participants may elect to receive Restricted Stock with a value equal to the portion of the Incentive Award which the Participant would otherwise have received in cash, but has elected to receive in Restricted Stock (“Restricted Stock Election”).  Participants must make their Restricted Stock Election at such time and in such a manner as prescribed by the Plan Administrator, which may determine, as set forth in the Award Agreement, that each Participant who makes the Restricted Stock Election shall be awarded additional shares of  Restricted Stock granted pursuant to Section 11.4(b) up to the amount of the Participant’s Restricted Stock Election.  Notwithstanding the foregoing, no additional shares of Restricted Stock are required to be awarded pursuant to this Section 11.5.

 

11.6      Nontransferability of Incentive Awards

 

Except as otherwise determined by the Plan Administrator, Incentive Awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SECTION 12    CASH AWARDS AND OTHER STOCK-BASED AWARDS

 

12.1      Grant of Cash Awards

 

Subject to the terms and provisions of this Plan, the Plan Administrator, at any time and from time to time, may grant cash awards to Participants in such amounts and upon such terms, including the achievement of specific performance criteria, as the Plan Administrator may determine (each, a “Cash Award”).

 

12.2      Other Stock-Based Awards

 

The Plan Administrator may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted shares of Common Stock) in such amounts and subject to such terms and conditions, as the Plan Administrator shall determine (each, an “Other Stock-Based Award”).  Such Other Stock-Based Awards may involve the transfer of actual shares of Common Stock to Participants, or payment in cash or otherwise of amounts based on the value of shares of Common Stock.  Notwithstanding the above, the minimum vesting period for Other Stock-Based Awards with no performance-based vesting characteristics shall be three (3) years (vesting may occur ratably each month, quarter or anniversary of the grant date over such vesting period), and the minimum vesting period for Other Stock-Based Awards subject to restrictions based upon the achievement of specific Performance Goals or performance measures shall be one (1) year; provided, however, that the Plan Administrator may grant a “de minimis” number of Other Stock-Based Awards that do not comply with the foregoing minimum vesting standards.  For this purpose “de minimis” means five percent (5%) or less of the maximum number of shares of Common Stock that may be issued under the Plan pursuant to Section 5.2(b) herein, subject to adjustment under Section 5.3.

 

12.3      Value of Cash Awards and Other Stock-Based Awards

 

Each Cash Award granted pursuant to this Section 12 shall specify a payment amount or payment range as determined by the Plan Administrator.  Each Other Stock-Based Award shall be expressed in terms of shares of Common Stock or units based on shares of Common Stock, as determined by the Plan Administrator.  The Plan Administrator may establish performance criteria applicable to such awards in its discretion.  If the Plan Administrator exercises its discretion to establish performance criteria, the number and/or value of such cash awards or Other Stock-Based Awards that will be paid out to the Participant will depend on the extent to which the performance goals are met.

 

12.4      Payment of Cash Awards and Other Stock-Based Awards

 

Payment, if any, with respect to a Cash Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash or shares of Common Stock as the Plan Administrator determines.  The value of any fractional shares shall be paid in cash.  The payment hereunder shall comply with the timing of payment requirements set forth in Section 409A of the Code, including, but not limited to the timing of payments to “specified employees” as defined in Section 409A(a)(2)(B)(i) of the Code.

 

 

 

 

 

 

 

 

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12.5      Transferability of Cash Awards and Other Stock-Based Awards

 

Except as otherwise determined by the Plan Administrator, neither Cash Awards nor Other Stock-Based Awards may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.

 

 

SECTION 13    TERMINATION OF EMPLOYMENT

 

The Award Agreement applicable to each Award shall set forth the effect of a termination of the holder’s employment upon such Award; provided, however, that, unless explicitly set forth otherwise in an Award Agreement or as determined by the Plan Administrator, (1) all of a Participant’s unvested and/or unexercisable Awards shall automatically be forfeited upon termination of the Participant’s employment for any reason, and, as to Awards consisting of stock options or stock appreciation rights, the Participant shall be permitted to exercise the vested portion of the option or stock appreciation right for at least three months following termination of his or her employment, and (2) all of a Participant’s Awards (whether vested or unvested, exercisable or unexercisable) shall automatically be forfeited upon termination of the Participant’s employment for Cause.  Provisions relating to the effect of a termination of employment upon an Award shall be determined in the sole discretion of the Plan Administrator and need not be uniform among all Awards or among all Participants.  Unless the Plan Administrator determines otherwise, the transfer of employment of a Participant as between the Company and its affiliates and Subsidiaries shall not constitute a termination of employment.  The Plan Administrator shall have the discretion to determine the effect, if any, that a sale or other disposition of a Participant’s Employer will have on the Participant’s Awards.

 

 

SECTION 14    EFFECT OF A CHANGE IN CONTROL

 

Except as otherwise provided in an Award Agreement, in the event of a Participant’s termination of employment (i) by his or her Employer without Cause or (ii) if Section 2.16 is applicable to the Participant, by the Participant for Good Reason, in each case within two years following a Change in Control:

 

(a)        all options and stock appreciation rights then held by the Participant shall become fully vested and exercisable;

 

(b)        the Restriction Periods applicable to all shares of Restricted Stock and all Restricted Stock Units then held by the Participant shall immediately lapse;

 

 

 

 

 

 

 

 

 

 

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(c)        the performance periods applicable to any Performance Shares, Performance Units and Incentive Awards that have not ended shall end and such Awards shall become vested and payable in cash in an amount equal to the target amount thereof (assuming achievement of target levels by both Participants and the Company) within ten days following such termination; and

 

(d)        any restrictions applicable to Cash Awards and Other Stock-Based Awards shall immediately lapse and, if applicable, become payable within ten days following such termination.

 

 

SECTION 15   REGULATORY APPROVALS AND LISTING

 

The Company shall not be required to issue any certificate for shares of Common Stock under the Plan prior to:

 

(a)        obtaining any approval or ruling from the Securities and Exchange Commission, the Internal Revenue Service or any other governmental agency which the Company, in its sole discretion, shall determine to be necessary or advisable;

 

(b)        listing of such shares on any stock exchange on which the Common Stock may then be listed; and

 

(c)        completing any registration or other qualification of such shares under any federal or state laws, rulings or regulations of any governmental body which the Company, in its sole discretion, shall determine to be necessary or advisable.

 

All certificates, or book-entry accounts, for shares of Common Stock delivered under the Plan shall also be subject to such stop-transfer orders and other restrictions as the Plan Administrator may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which Common Stock is then listed and any applicable federal or state securities laws, and the Plan Administrator may cause a legend or legends to be placed on any such certificates, or notations on such book-entry accounts, to make appropriate reference to such restrictions.  The foregoing provisions of this paragraph shall not be effective if and to the extent that the shares of Common Stock delivered under the Plan are covered by an effective and current registration statement under the Securities Act of 1933, as amended, or if and so long as the Plan Administrator determines that application of such provisions are no longer required or desirable.  In making such determination, the Plan Administrator may rely upon an opinion of counsel for the Company.  Without limiting the foregoing, the Plan Administrator may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any shares issued under this Plan, including without limitation (i) restrictions under an insider trading policy, (ii) restrictions designed to delay and/or coordinate the timing and manner of sales by the Participant and other Participants and (iii) restrictions as to the use of a specified brokerage firm for such resales or other transfers. 

 

 

 

 

 

 

 

 

 

 

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SECTION 16    TERM OF PLAN

 

The Plan shall remain in effect, subject to the right of the Board of Directors to terminate the Plan at any time pursuant to Section 19, until all shares of Common Stock subject to it shall have been purchased or acquired according to the provisions herein.  However, in no event may an Award be granted under the Plan on or after the tenth (10th) anniversary of the Effective Date.  After this Plan is terminated, no future Awards may be granted pursuant to the Plan, but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and this Plan’s terms and conditions. The Plan replaced the Prior Plans, and no further Awards may be made under the Prior Plans.

 

 

SECTION 17    GENERAL PROVISIONS

 

17.1      Forfeiture Events

 

(a) The Plan Administrator may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award.  Such events may include, without limitation, termination of employment for Cause, violation of material policies that may apply to the Participant, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company or any of its affiliates or Subsidiaries.

 

(b) If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, and if a Participant knowingly engaged in the misconduct, was grossly negligent with respect to such misconduct, or knowingly or grossly negligently failed to prevent the misconduct (whether or not the Participant is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002), the Participant shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the twelve-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document embodying such financial reporting requirement.

 

 

 

 

 

 

 

 

 

 

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17.2      No Individual Rights

 

Nothing contained in the Plan, or in any Award granted pursuant to the Plan, shall confer upon any employee any right with respect to continuance of employment by the Company or a Subsidiary, nor interfere in any way with the right of the Company or a Subsidiary to terminate the employment of such employee at any time with or without assigning any reason therefor.

 

17.3      Other Compensation

 

Unless determined otherwise by the Plan Administrator or required by contractual obligations, the grant, vesting or payment of Awards under the Plan shall not be considered as part of a Participant’s salary or used for the calculation of any other pay, allowance, pension or other benefit unless otherwise permitted by other benefit plans provided by the Company or its Subsidiaries, or required by law or by contractual obligations of the Company or its Subsidiaries.

 

17.4      Nontransferability

 

Unless otherwise provided in the Plan, the right of a Participant or Beneficiary to the payment of any Award under the Plan may not be assigned, transferred, pledged or encumbered, nor shall such right or other interests be subject to attachment, garnishment, execution or other legal process.

 

17.5      Leaves of Absence

 

Leaves of absence for such periods and purposes conforming to the personnel policy of the Company, or of its Subsidiaries, as applicable, shall not be deemed terminations or interruptions of employment, unless a Participant commences a leave of absence from which he or she is not expected to return to active employment with the Company or its Subsidiaries.  The foregoing notwithstanding, with respect to Incentive Stock Options, employment shall not be deemed to continue beyond the first ninety (90) days of such leave unless the Participant’s reemployment rights are guaranteed by statute or contract.  With respect to any Participant who, after the date an Award is granted under this Plan, ceases to be employed by the Company or a Subsidiary on a full-time basis but remains employed on a part-time basis, the Plan Administrator may make appropriate adjustments, as determined in its sole discretion, as to the number of shares issuable under, the vesting schedule of or the amount payable under any unvested Awards held by such Participant.

 

17.6      Transfers

 

In the event a Participant is transferred from the Company to a Subsidiary, or vice versa, or is promoted or given different responsibilities, Awards granted to the Participant prior to such date shall not be affected.

 

 

 

 

 

 

 

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17.7      Unfunded Obligations

 

Any amounts (deferred or otherwise) to be paid to Participants pursuant to the Plan are unfunded obligations.  Neither the Company nor any Subsidiary is required to segregate any monies from its general funds, to create any trusts or to make any special deposits with respect to this obligation.  The Plan Administrator, in its sole discretion, may direct the Company to share with its Subsidiaries the costs of a portion of the Incentive Awards paid to Participants who are executives of those companies.  Beneficial ownership of any investments, including trust investments which the Company may make to fulfill this obligation, shall at all times remain in the Company.  Any investments and the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or a fiduciary relationship between the Plan Administrator, the Company or any Subsidiary and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s Beneficiary or the Participant’s creditors in any assets of the Company or its Subsidiaries whatsoever.  The Participants shall have no claim against the Company for any changes in the value of any assets which may be invested or reinvested by the Company with respect to the Plan.

 

17.8      Beneficiaries

 

The designation of a Beneficiary shall be on a form provided by the Company, executed by the Participant (with the consent of the Participant’s spouse, if required by the Company for reasons of community property or otherwise), and delivered to a designated representative the Company.  A Participant may change his or her Beneficiary designation at any time.  A designation by a Participant under any predecessor plans shall remain in effect under the Plan unless such designation is revoked or changed under the Plan.  If no Beneficiary is designated, if the designation is ineffective, or if the Beneficiary dies before the balance of a Participant’s benefit is paid, the balance shall be paid to the Participant’s spouse, or if there is no surviving spouse, to the Participant’s lineal descendants, pro rata, or if there is no surviving spouse or any lineal descendant, to the Participant’s estate.  Notwithstanding the foregoing, however, a Participant’s Beneficiary shall be determined under applicable state law if such state law does not recognize Beneficiary designations under plans of this sort and is not preempted by laws which recognize the provisions of this Section 17.8.

 

17.9      Governing Law

 

The Plan shall be construed and governed in accordance with the laws of the State of Texas.

 

17.10    Satisfaction of Tax Obligations

 

Appropriate provision shall be made for all taxes required to be withheld in connection with the exercise, grant, vesting or other taxable event of Awards under the applicable laws and regulations of any governmental authority, whether federal, state or local and whether domestic or foreign, including, without limitation, the required withholding of a sufficient number of shares of Common Stock otherwise issuable to a Participant to satisfy the said required minimum tax withholding obligations.  To the extent provided by the Plan Administrator, a Participant is permitted to deliver shares of Common Stock (including shares acquired pursuant to the exercise of an option or stock appreciation right other than the option or stock appreciation right currently being exercised, to the extent permitted by applicable regulations) for payment of withholding taxes on the exercise of an option or stock appreciation right, upon the grant or vesting of Restricted Stock or Restricted Stock Units or upon the payout of Performance Shares, Performance Units or Incentive Awards.  Shares of Common Stock may be required to be withheld from the shares issuable to the Participant upon the exercise of an option or stock appreciation right, upon the vesting of Restricted Stock or Restricted Stock Units or upon the payout of Performance Shares or Performance Units to satisfy tax withholding obligations.  The Fair Market Value of Common Stock as delivered pursuant to this Section 17.10 shall be determined as of the day prior to delivery, and shall be calculated in accordance with Section 2.15.

 

 

 

 

 

 

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Any Participant who makes a Section 83(b) election under the Code shall, within ten (10) days of making such election, notify the Company in writing of such election and shall provide the Company with a copy of such election form filed with the Internal Revenue Service.

 

A Participant is solely responsible for obtaining, or failing to obtain, tax advice with respect to participation in the Plan prior to the Participant’s (i) entering into any transaction under or with respect to the Plan, (ii) designating or choosing the times of distributions under the Plan, or (iii) disposing of any shares of Common Stock issued under the Plan.

 

17.11    Participants in Foreign Jurisdictions

 

The Plan Administrator shall have the authority to adopt such modifications, procedures and subplans as may be necessary or desirable to comply with provisions of the laws of any countries in which the Company may operate to ensure the viability of the benefits from Awards granted to Participants employed in such countries, to meet the requirements of local laws that permit the Plan to operate in a qualified or tax-efficient manner, to comply with applicable foreign laws and to meet the objectives of the Plan.

 

 

SECTION 18    COMPLIANCE WITH RULE 16b-3, SECTION 162(m) AND SECTION 409A

 

18.1      Rule 16b-3 of the Exchange Act and Section 162(m) of the Code

 

The Company’s intention is that, so long as any of the Company’s equity securities are registered pursuant to Section 12(b) or 12(g) of the Exchange Act, the Plan shall comply in all respects with the rules of any exchange on which the shares of Common Stock are traded and with Rule 16b-3.  In addition, it is the Company’s intention that, as to Covered Employees, unless otherwise indicated in an Award Agreement, stock options, stock appreciation rights, Performance Shares, Performance Units and Incentive Awards shall qualify as performance-based compensation under Section 162(m).  If any Plan provision is determined not to be in compliance with the foregoing intentions, that provision shall be deemed modified as necessary to meet the requirements of any such exchange, Rule 16b-3 and Section 162(m).

 

 

 

 

 

 

 

 

 

 

El Paso Corporation

2005 Omnibus Incentive Compensation Plan

(as amended and restated)

  

35

Table of Contents

 

 

 

 

 

 

 

 

18.2      Section 409A of the Code

 

The Plan is intended to be administered, operated and construed in compliance with Section 409A of the Code and any guidance issued thereunder. Notwithstanding this or any other provision of the Plan to the contrary, the Board of Directors and the Plan Administrator may amend the Plan in any manner, or take any other action, that either of them determines, in its sole discretion, is necessary, appropriate or advisable to cause the Plan to comply with Section 409A and any guidance issued thereunder. Any such action, once taken, shall be deemed to be effective from the earliest date necessary to avoid a violation of Section 409A and shall be final, binding and conclusive on all Participants and other individuals having or claiming any right or interest under the Plan.

 

 

SECTION 19    AMENDMENT, TERMINATION OR DISCONTINUANCE OF THE PLAN

 

19.1      Amendment of Plan

 

Subject to the Board of Directors, the Plan Administrator may from time to time make such amendments to the Plan as it may deem proper and in the best interest of the Company, including, without limitation, any amendment necessary to ensure that the Company may obtain any regulatory approval referred to in Section 15; provided, however, that (a) to the extent required by applicable law, regulation or stock exchange rule, stockholder approval shall be required, and (b) no change in any Award previously granted under the Plan may be made without the consent of the Participant if such change would impair the right of the Participant under the Award to acquire or retain Common Stock or cash that the Participant may have acquired as a result of the Plan.

 

19.2      Termination or Suspension of Plan

 

The Board of Directors may at any time suspend the operation of or terminate the Plan with respect to any shares of Common Stock or rights which are not at that time subject to any Award outstanding under the Plan.

 

 

 

SECTION 20    DEFFERAL ELECTIONS

 

The Plan Administrator may, to the extent permitted by applicable law, including, but not limited to Section 409A of the Code, permit Participants to defer Awards under the Plan.  Any such deferrals shall be subject to such terms, conditions and procedures that the Plan Administrator may establish from time to time in its sole discretion.

 

 

 

 

 

 

 

 

 

 

El Paso Corporation

2005 Omnibus Incentive Compensation Plan

(as amended and restated)

  

36

Table of Contents

 

 

 

 

 

 

 

IN WITNESS WHEREOF, the Company has caused the Plan to be amended and restated effective as of May 19, 2010.

 

 

 

	  	 	
EL PASO CORPORATION

 

 

	  	 	  	  
	  	 	  	  
	  	 	
By:

	 /s/ Susan B. Ortenstone
	  	 	  	
Susan B. Ortenstone

	  	 	  	

Its Executive Vice President and Chief Administrative Officer

	  	 	  	 
	  	 	  	  
	

ATTEST:

	 	  	  
	 	 	 	 
	 By  	/s/ Marguerite Woung-Chapman	 	 
	 	Corporate Secretary	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 

                                                              

      

 

 

 

 

 

El Paso Corporation

2005 Omnibus Incentive Compensation Plan

(as amended and restated)Exhibit 10.1

 

STAPLES,
INC.

 

Amended and
Restated 

Supplemental Executive Retirement Plan

(as amended
through March 31, 2010)

 

WHEREAS, Staples, Inc. (the “Company”)
heretofore adopted the Staples, Inc. Supplemental Executive Retirement
Plan (the “Plan”), an unfunded plan maintained for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees within the meaning of the United States Code of Federal Regulations Section 2520.104-23
and Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee
Retirement Income Security Act of 1974 (“ERISA”); and

 

WHEREAS, the Company desires to
amend the Plan to satisfy the requirements of Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code);

 

NOW, THEREFORE, effective January 1,
2008, the Plan is amended and restated to comply with Section 409A of the
Code, with the Plan being operated in good faith compliance with Code Section 409A
for the period January 1, 2005 to December 31, 2007.

 

Section 1. 
Purpose of Plan

 

The
purpose of the Plan is to permit certain executives of the Company to elect to
defer receipt of a portion of their annual compensation in supplement to their
pre-tax contributions made to the Staples, Inc. Employees’ 401(k) Savings
Plan (the “401(k) Plan”).

 

The
Plan is intended to qualify as an unfunded, deferred compensation plan for a
select group of management or highly compensated employees under ERISA.

 

The
obligation of the Company to make payments under the Plan constitutes solely an
unsecured (but legally enforceable) promise of the Company to make such
payments, and no person, including any employee, shall have any lien, prior
claim or other security interest in any property of the Company as a result of
this Plan.  Rather, any employee
participating in the Plan shall have the status of a general unsecured creditor
of the Company.  It is the intention of
the parties hereunder that the Plan be unfunded for tax purposes and for
purposes of Title I of ERISA.  The
Company shall be the sole owner and beneficiary of any account provided for
herein below and any property used to measure such account shall remain the
sole and exclusive property of the Company.

 

Section 2. 
Definitions

 

2.1          “Administrator”
means the Committee on Employee Benefit Plans as described in Section 15.

 

2.2          “Beneficiary” means the
person or entity determined to be a Participant’s beneficiary pursuant to Section 12.

 

2.3          “Board” means the
board of directors of the Company.

 

2.4          “Change in
Control” means a “change in ownership” of the Company, a “change
in effective control” of the Company, or a “change in the ownership of a
substantial portion of the assets” of the Company (within the meaning of Section 409A
of the Code).

 

1

 

2.5          “Code” means the
Internal Revenue Code of 1986, as amended from time to time.

 

2.6          “Company” means Staples, Inc.

 

2.7          “Compensation” means the
annual compensation paid to a Participant in cash by the Company for the
calendar year (after any requisite tax withholding and payroll deductions),
including base pay, other regular earnings, overtime, shift differentials,
commissions, any amounts deferred under a salary reduction agreement pursuant
to the 401(k) Plan or under a “cafeteria plan” (within the meaning of Section 125
of the Code) maintained by the Company, but exclusive of severance pay, expense
reimbursements, awards, any moving expenses paid by the Company, car allowance,
taxable fringe benefits, group term life insurance over $50,000, expatriate
compensation, exercised stock options and short and long-term disability paid
by a third party.

 

Effective the date of stockholder approval of the
Long Term Cash Incentive Plan, the following  definition will be used:

 

“Compensation” means the
annual compensation paid to a Participant in cash by the Company for the
calendar year (after any requisite tax withholding and payroll deductions),
including base pay, other regular earnings, overtime, shift differentials,
commissions, any amounts deferred under a salary reduction agreement pursuant
to the 401(k) Plan or under a “cafeteria plan” (within the meaning of Section 125
of the Code) maintained by the Company, but exclusive of payments from the
Executive Officer Incentive Plan, the Key Management Bonus Plan, the Retail
Management Bonus Plan and the Long Term Cash Incentive Plan or any other bonus
payments, severance pay, expense reimbursements, awards, any moving expenses
paid by the Company, car allowance, taxable fringe benefits, group term life
insurance over $50,000, expatriate compensation, exercised stock options and
short and long-term disability paid by a third party.

 

2.8          “ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time.

 

2.9          “401(k) Plan” means the Staples, Inc.
Employees’ 401(k) Savings Plan, as amended from time to time.

 

2.10        “Participant” means an
employee of the Company who is eligible to participate in the Plan pursuant to Section 2.

 

2.11        “Plan” means the
Staples, Inc. Supplemental Executive Retirement Plan, as set forth herein
and as amended from time to time.

 

2.12        “Plan Year” means the
calendar year.

 

Section 3. 
Eligible Employees

 

The
employees eligible to participate in the Plan shall be those individuals who
qualify under the criteria set forth on Schedule A and who have both attained
age twenty-one (21) and completed “six (6) Months of Service” (as defined,
for purposes of eligibility to participate, under the 401(k) Plan, the
terms of which are incorporated herein by this reference).

 

2

 

Section 4.  Election to Defer Compensation

 

An eligible employee may begin participating in the
Plan, as of the first day of the calendar quarter (October 1, January 1,
April 1 or July 1, the “entry date”) coinciding with or next
following the date on which the eligibility requirements (set forth under Section 3)
are first satisfied, by making a deferral election during the thirty (30) day
period immediately preceding such entry date. 
Any such deferral election shall be made in accordance with the
provision of Section 409A of the Code and shall apply only to Compensation
earned after the applicable entry date. In this regard, a Participant may elect
to defer one percent (1%) to one hundred percent (100%) of his Compensation,
less any requisite tax withholding and payroll deductions, for the balance of
the Plan Year.  Any election so made
shall be binding for each following Plan Year, provided that it may be revised
or revoked on or before December 31 for any subsequent Plan Year, or such
earlier date as the Administrator may specify.

 

A
Participant may elect to defer a specified percentage (from one percent (1%) to
one hundred percent (100%) of any key man bonus and/or retail management bonus
(which are intended to qualify as “performance-based compensation” within the
meaning of Section 409A of the Code) to be paid on his behalf for a fiscal
year by filing an election with the Administrator (pursuant to Section 5)
on or prior to July 31 of such fiscal year.

 

Effective
the date of stockholder approval of the Long Term Cash Incentive Plan, the
second paragraph of this section will be replaced by the following paragraph and
the additional below paragraph will be added:

 

A
Participant may elect to defer a specified percentage  (from one percent (1%) to one hundred percent
(100%)) of any payments from the Executive Officer Incentive Plan, the Key
Management Bonus Plan and the Retail Management Bonus Plan (which are intended
to qualify as “performance-based compensation” within the meaning of Section 409(A) of
the Code) to be paid on behalf of the Participant for a fiscal year by filing
an election with the Administrator (pursuant to Section 5) on or prior to
the last day of the sixth month of such fiscal year.

 

A
Participant may elect to defer a specified percentage (from one percent (1%) to
one hundred percent (100%)) of any payments from the Long Term Cash Incentive
Plan, which are intended to qualify as “performance-based compensation” within
the meaning of Section 409A of the Code, to be paid on behalf of the
Participant upon the conclusion of a three (3) fiscal year period, by
filing an election with the Administrator (pursuant to Section 5) on or
prior to the last day of the sixth month of the first fiscal year of the three (3) fiscal
year period.

 

An
otherwise eligible employee who fails to begin participating in the Plan as of
the first possible entry date may not begin participating until the first day
of any following Plan Year.

 

Section 5. 
Accounts

 

Each
Participant may elect to establish a separate “in-service withdrawal account”
for each year of participation, such account to be established and maintained
on the Company’s books and shall record (a) any Compensation deferred by
the Participant under the Plan which the Participant has elected to be credited
into such account, and (b) the allocation of any hypothetical investment
experience. There shall also be established for each Participant a separate “retirement
account” which shall record (a) any Compensation deferred by the
Participant, under the Plan which the Participant has not elected to be
credited to the “in-service withdrawal account” and any Company contributions
made on his behalf under the Plan and (b) the allocation of any
hypothetical investment experience.  Each
Participant’s account hereunder shall be reduced by any distributions made plus
any federal, state and/or local tax withholding 

 

3

 

and
any social security withholding tax as may be required by law.

 

Section 6. 
Manner of Election

 

Any
election(s) made by a Participant pursuant to this Plan shall be made at
the time(s) and in the manner as the Administrator shall from time to time
prescribe.

 

Section 7. 
Company Contributions

 

Each
year, the Company shall contribute to the Plan on behalf of each Participant, a
matching contribution equal to one hundred percent (100%) of the first four
percent (4%) of the Participant’s Compensation (excluding any bonuses) deferred
under the Plan, and with respect to any key man bonuses and/or retail
management bonuses deferred under the Plan for the fiscal year, a matching
contribution in an amount equal to one hundred percent (100%) of the first four
percent (4%) of any such bonus so deferred.

 

Effective
the date of stockholder approval of the Long Term Cash Incentive Plan, the first
paragraph of this section will be replaced by the following:

 

Each
year, the Company shall contribute to the Plan on behalf of each Participant, a
matching contribution equal to one hundred percent (100%) of the first four
percent (4%) of the Participant’s Compensation (excluding any bonuses) deferred
under the Plan, and with respect to any bonus payments from the Executive
Officer Incentive Plan, Key Management Bonus Plan and the Retail Management
Bonus Plan deferred under the Plan for the fiscal year, a matching contribution
in an amount equal to one hundred percent (100%) of the first four percent (4%)
of any such bonuses deferred.

 

The
Company reserves the right to make a supplemental matching contribution for any
Participant at the end of the year to ensure the full matching contribution is
received.

 

In addition to the matching
contribution described above, for any Plan Year, the Company may elect to
allocate an additional discretionary contribution to the account of any
Participant, or any group of Participants, as selected by the Board, in any
amount and manner as determined by the Board.

 

Section 8.  Investment of Accounts

 

The Administrator, in its
discretion, may from time to time designate one or more investment media in
which the portion of a Participant’s account representing his deferrals shall
be hypothetically invested.  The
Administrator shall provide the Participant the opportunity to determine how
such portion of the Participant’s account shall be deemed to be hypothetically
invested from among the available investment options, and may permit changes in
those investment directions at whatever frequency it deems appropriate and
within whatever limitations are applicable to any investment option.  As of January 1, 2008, a Participant may
also direct the hypothetical investment of the portion of his account
attributable to any Company contributions made on his behalf, after September 30,
2004.  If a Participant makes an investment
selection, the Administrator may follow such investment selection but shall not
be legally bound to do so.

 

Any Company contributions
made on behalf of a Participant beginning October 1, 2004 through December 31,
2007 were hypothetically invested in insurance contracts designated by the
Administrator. Such rate of interest for each calendar year was the insurer’s
declared crediting rate on such insurance policies, as of December 1 of
the preceding year, plus 125 basis points, with the rate being rounded to the 

 

4

 

nearest one tenth of a
percent.

 

The portion, if any, of a
Participant’s account derived from Company matching contributions made prior to
October 1, 2004 shall be credited with gains and losses as if it had been
invested in Staples, Inc. common stock, provided however, that a
Participant shall have the same investment diversification rights (except with
respect to the available investment options), as exist under the 401(k) Plan.

 

Beginning with the Plan Year
2011, the portion of any Participant’s account that is hypothetically invested
in an insurance contract’s fixed account shall be credited with a rate of
interest announced by the Administrator at the beginning of the Plan Year.  The Administrator shall choose the rate that
is the higher of (1) the insurance carrier’s fixed account crediting rate
at the beginning of the Plan Year; or (2) the Internal Revenue Service’s
mid-term Applicable Federal Rate (AFR) for January 1 of the Plan Year, compounded
annually.

 

Section 9.  Vested Status of a Participant’s Account

 

A Participant shall at all
times have a nonforfeitable (“vested”) right to the fair market value of any
in-service withdrawal account(s) established under Section 5.

 

Subject to the following
provisions of this Section, if a Participant separates from service with the
Company (within the meaning of Section 409A of the Code) for any reason on
or after his Normal Retirement Age (within the meaning of the 401(k) Plan),
or prior to that date as a result of the Participant’s “disability”, or as a
result of the Participant’s death, such Participant shall have a nonforfeitable
(vested) right to the fair market value of the Participant’s retirement
account.  For this purpose, a Participant
shall be considered “disabled” if he is determined to be “permanently and
totally disabled” by the Social Security Administration.

 

Except as otherwise provided herein below, if a
Participant separates from service with the Company for any other reason other
than Normal Retirement, death, or disability, such Participant shall be
entitled to receive the vested value of his retirement account.  For this purpose, each Participant shall at
all times have a nonforfeitable (vested) right to his retirement account derived
from any Compensation deferred pursuant to Section 4.  However, with respect to any Company matching
contributions made on the Participant’s behalf pursuant to Section 7, the
Participant shall have a nonforfeitable (vested) right to a percentage of the
fair market value of such portion of his retirement account as follows:

 

	
  Years of Service

  	
   

  	
  Vested Percentage

  	
   

  
	
  Less than 1 year

  	
   

  	
  0

  	
  %

  
	
  1 year but less than 2 years

  	
   

  	
  20

  	
  %

  
	
  2 years but less than 3 years

  	
   

  	
  40

  	
  %

  
	
  3 years but less than 4 years

  	
   

  	
  60

  	
  %

  
	
  4 years but less than 5 years

  	
   

  	
  80

  	
  %

  
	
  5 years or more

  	
   

  	
  100

  	
  %

  

 

For this purpose, a
Participant shall be credited with Year(s) of Service in accordance with
the terms of the 401(k) Plan as then in effect (as it pertains to vesting
purposes).  Provided, however, that any
member of the Company’s board of directors who is not an employee of the
Company, who subsequently becomes 

 

5

 

an eligible employee and
then a Participant, shall be credited with any prior service as a director in
determining said Participant’s Year(s) of Service.

 

With respect to any
additional discretionary contributions made on the Participant’s behalf
pursuant to Section 7, the Participant shall have a nonforfeitable
(vested) right to a percentage of the fair market value of such portion of his
retirement account in accordance with the vesting schedule established by the
Administrator at the time such additional discretionary contribution is made by
the Company.

 

The nonvested portion of a
Participant’s retirement account, as determined above, shall be forfeited as of
the Participant’s separation from service. 
If any contributions have been made to a trust with respect to such
account, the forfeited portion shall remain in such trust and be used to fund
future contributions by the Company and/or used to pay Plan administrative
expenses

 

Section 10.  Payment of a Participant’s Account

 

Each Participant may also
elect, on the election form used to make his or her initial deferral election
hereunder, or through such other method acceptable to the Administrator, either
of the following modes of distribution for his retirement account:

 

(a)   a single lump sum payment;
or

 

(b)   annual installments over a
period of up to fifteen (15) years, the amount of each installment to equal the
balance of the Participant’s vested retirement account as of the date of the
distribution divided by the number of installments remaining to be paid.  Each subsequent installment shall be made in
the calendar month containing the one (1) year anniversary of the prior
payment.   Such installment election
however, shall be given effect only if the Participant separates from service
after having both attained age fifty-five (55) and completed five (5) years
of service (as measured from date of hire and each anniversary date, without
regard to hours).

 

If a Participant does not
otherwise have a valid distribution election on file, or if the balance of the
Participant’s retirement account does not exceed the amount in effect for the
applicable year under Code Section 402(g)(1)(B) as of the date of the
Participant’s separation from service, the Participant’s vested retirement
account shall be distributed in a lump sum payment.

 

Any Participant, who on or
before December 31, 2003 elected annual cash installments over a period
not exceeding five (5) years, shall retain the right to have his vested
retirement account distributed in the manner so elected, without regard to age
or service.

 

Upon a Participant’s separation from service
with the Company  (within the meaning of Section 409A
of the Code), distribution of the Participant’s vested retirement account shall
normally be made or commence in the calendar month following the month in which
the separation from service occurs; provided, however, that, to the extent
permitted under Section 409A of the Code, in the event that it is not
administratively feasible to have payment made at that time, distribution can
be made at a later date within the same calendar year; and provided further
that, if the Company is subject to the provisions of Section 409A(2)(B)(i) of
the Code, and if the Participant is a “specified employee” of the Company (as
determined under said Section 409A), distribution shall be made or
commence in the seventh (7th) calendar month following the month in which the  separation from service occurs; provided,
however, that, to the extent permitted under Section 409A of the Code, in
the event that it is not administratively feasible to have payment made at that
time, distribution can be made at a later date within the same calendar year.
For purposes of identifying a “specified employee,” the definition of
compensation under 

 

6

 

Section 1.415(c)-2(d)(2) of the
Income Tax Regulations shall apply, the specified employee identification date
shall be December 31, and the specified employee effective date shall be
the first day of the fourth month following such identification date.

 

Subject to the following
provisions of this Section, a Participant may elect to change the mode of
distribution for his retirement account, subject to the following conditions: (i) any
such election may not take effect until twelve (12) months after the date on
which the election is made; and (ii) the payment with respect to such
election must be deferred for a period of at least five (5) years from the
date on which payment would otherwise have been made or commenced; and (iii) in
the event of an installment election, the election shall be given effect only
if the Participant separates from service after having both attained age
fifty-five (55) and completed five (5) years of service (as measured from
the Participant’s date of hire and each anniversary date, without regard to
hours).

 

Subject to the following
provisions of this Section, any “in-service” withdrawal account(s) established
for a Participant under Section 5 shall be distributed in a lump sum
payment on the date designated by the Participant as part of his annual
deferral election with respect to which the in-service withdrawal account was
established under the Plan, which date may not be earlier than five years
following the year of the deferral election. However, a Participant may elect
to extend any in-service withdrawal date for a period of not less than 5 years;
provided such election was made at least 12 months prior to the date on which
the payment would otherwise have been made.

 

Provided, however, that a
Participant shall be permitted to make withdrawal and/or distribution elections
in 2006 and 2007 subject to the provisions of IRS Notice 2006-79 and withdrawal
and/or distribution elections in 2008 subject to the provisions of IRS Notice
2007-86 or any subsequent guidance.

 

Notwithstanding the foregoing provisions of this Section 10,
if distribution of a Participant’s vested retirement account is to be made or
commence prior to the selected distribution date of any in-service withdrawal
account, any remaining in-service withdrawal account(s) shall be
distributed at the same time and in the same manner as the Participant’s
retirement account.

 

Section 11.  Death Benefit

 

In the event of the death of
a Participant while in the employ of the Company or any “affiliate” thereof,
vesting in the Participant’s retirement account shall be one hundred percent
(100%), if not otherwise one hundred percent (100%) vested under Section 9,
with the fair market value of the Participant’s retirement account, (and any
outstanding in-service withdrawal account(s)), being distributed to the
Participant’s Beneficiary in a lump-sum cash payment. In the event of the death
of a Participant after termination of employment, but prior to the complete
distribution of his vested account under the Plan, the balance of the
Participant’s vested retirement account (and any remaining in-service
withdrawal account(s)) shall be distributed to the Participant’s Beneficiary in
a lump-sum payment.

 

Any such lump sum death
benefit shall be distributed in the calendar month following the calendar month
of the Participants death; provided, however, that, to the extent permitted
under Section 409A of the Code, in the event that it is not
administratively feasible to have payment made at that time, distribution can
be made at a later date within the same calendar year.

 

Section 12.  Beneficiary Designation

 

A Participant’s Beneficiary
hereunder shall be the same person or persons designated by the Participant
under the 401(k) Plan unless a separate Beneficiary designation has been
established under the Plan in the manner prescribed by the Administrator.

 

7

 

In the absence of any such
designation, or if no designated Beneficiary survives the Participant, any
amounts payable following the Participant’s death shall be paid to the
Participant’s surviving spouse, or if none, to the Participant’s estate.

 

Section 13. 
Domestic Relations Orders

 

If a domestic relations
order issued by any court of proper authority directs assignment of all or any
portion of a Participant’s vested account(s) to the Participant’s spouse
or former spouse as part of a divorce settlement, the portion so assigned shall
be distributed, in a lump-sum, to the spouse or former spouse within ninety
(90) days following the close of the Plan Year in which the order was received
by the Administrator or, if later, following the close of the Plan Year in
which the order clearly specifies the amount to be assigned and any other terms
necessary to comply with such order and with the provisions of Code Section 409A.

 

Section 14. 
Distribution in the event of Unforeseeable Emergency

 

In
the event of an “unforeseeable emergency” (within the meaning of Section 409A
of the Code), a Participant may, by filing a written election with the
Administrator, elect to receive a distribution from the Plan in an amount not
to exceed the lesser of (i) the fair market value of the Participant’s
vested retirement account or (ii) the amount necessary to satisfy the
unforeseeable emergency, subject to ordinary income tax withholding.

 

Section 15.  Administration

 

The Committee on Employee
Benefit Plans, as constituted pursuant to the terms of the 401(k) Plan
(the “Administrator”), shall have the general authority to control and manage
the operation and administration of the Plan. 
In connection herewith, the Administrator shall also have the following
powers and duties:  (1) to adopt rules and
regulations necessary for the performance of its duties under the Plan; (2) to
construe the Plan and to decide all questions arising under the Plan; (3) to
act for the Company in connection with any administrative or judicial
proceeding affecting the Plan; (4) to employ, subject to the requirements
of the financial officers of the Company, persons to render accounting,
actuarial, legal, investment or insurance advice and to rely on such advice; (5) to
determine the eligibility of Participants to receive benefits and the amount of
benefits to which any Participant or Beneficiary may be entitled under the Plan
and to enforce the claims procedure set forth in Section 16; and (6) such
other responsibilities as are provided for under the terms of this Plan.

 

In connection with the
administration of the Plan, any two of the Chief Executive Officer, President,
Chief Financial Officer, Treasurer, Secretary or Executive Vice President —
Human Resources of Staples, Inc., acting jointly, by and on behalf of the
Company, are hereby authorized:

 

(1)         to negotiate, fix and vary
the terms of, and to execute and deliver, contracts, agreements, indentures,
trusts, assignments, concessions, licenses, options, and all other similar
instruments;

 

(2)         to appoint trustees and to
engage any agents or contractors, including banks, insurance brokers, and
attorneys;

 

(3)         to amend or terminate the
Plan;

 

(4)         to otherwise do all acts and
things necessary or suitable in connection with the exercise of any of the
aforementioned powers;

 

8

 

provided, however, that no such authorization
shall extend to any implementation, amendment, approval, or modification of the
Plan which is reserved to the Board or stockholders of the Company by the Plan,
statute, rule or regulation, including without limitation, rules promulgated
under Section 16 of the Securities and Exchange Act of 1934.

 

Section 16. 
Claims Procedure

 

(a)         Application for Benefits.  The Administrator shall furnish to each
Participant information about the benefits to which he or she is entitled under
the Plan.  The Administrator may require
any person claiming benefits under the Plan to submit a written application,
together with such documents, evidence, and information as it considers
necessary to process the claim.

 

(b)         Action on Application.  Within ninety (90) days after receipt of an
application and all necessary documents and information, the Administrator
shall furnish the claimant with a written notice of its decision.  If the Administrator denies the claim in
whole or in part, the notice will set forth (1) specific reasons for the
denial, with specific reference to Plan provisions upon which the denial is
based; (2) a description of any additional information or material
necessary to process the application with an explanation why such material or
information is necessary; and (3) an explanation of the Plan’s claim
review procedure.

 

If special circumstances
require an extension of time for processing the claim, the Administrator shall
furnish the claimant written notice of the extension before the end of the
initial ninety (90)-day period.  In no
event shall the extension exceed a period of ninety (90) days from the end of
the initial period.  The notice shall
explain the circumstances requiring an extension of time and the date by which
the Administrator expects to render a decision.

 

(c)         Claim Review.  The claimant who does not agree with the
decision rendered on his application may request that the Administrator review
the decision.  The request must be made
within sixty (60) days after the claimant receives the decision, or if the
application has neither been approved nor denied within the ninety (90)-day
period specified in subsection (b), then the request must be made within sixty
(60) days after expiration of the ninety (90)-day period.

 

Each request for review must be in writing and addressed to the
Administrator.  Concurrently with filing
the request for review, or within the sixty (60) days request period, the
claimant may submit in writing to the Administrator a statement of the issues
raised by his appeal and supporting arguments and comments.

 

During the pendency of his
appeal, the claimant may inspect all documents which are reasonably pertinent
to his case, upon reasonable notice to the Administrator.  However, under no circumstance shall the
Administrator be required to disclose to any claimant information concerning
any person other than the Participant whose benefit is being claimed, to the
extent such information is normally treated as confidential.

 

Where the Administrator believes that the issues raised by the claimant’s
appeal may be more efficiently or fairly processed by taking testimony of the
claimant or others, it shall set the matter for oral hearing and give the
claimant reasonable notice of the time and place.  Whether or not an oral hearing is scheduled,
the Administrator shall proceed promptly to resolve all issues raised by the
claimant’s appeal and shall render a written decision on the merits, with a
statement of the reasons and references to the pertinent supporting provisions
of the Plan, within sixty (60) days following receipt of the claimant’s request
for review.

 

9

 

If
special circumstances require an extension of time, the Administrator shall
render a decision as soon as possible, but not later than one hundred and
twenty (120) days after receipt of the request for review.  If an extension is required, the
Administrator shall furnish to the claimant written notice of the extension,
including an explanation of the circumstances requiring the extension, before
the extension period begins.

 

Section 17. 
Securing Payment of Plan Benefits

 

The
Plan shall be operated at all times as an unfunded plan as required under
ERISA.  However, the Company reserves the
right to take reasonable steps to secure the payment of Plan benefits to the
greatest extent possible without compromising the unfunded status of the
Plan.  Those steps may include, but is
not limited to, the establishment of an irrevocable nonqualified grantor trust
(within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A
of the Code).

 

Section 18. 
Amendment

 

The Company, by resolution
of the Board, shall have the right to amend, suspend or terminate the Plan at
any time subject to the provisions of Section 409A of the Code; provided,
however, that, subject to the provisions of Section 15, any two of the
Chief Executive Officer, President, Chief Financial Officer, Treasurer,
Secretary or Executive Vice President — Human Resources of Staples, Inc.,
acting jointly, by and on behalf of the Company shall have such right. Provided
however, that any termination of the Plan, with respect to some or all of the
Participants, and any resulting distribution of the account balances of such
affected Participants, shall be made in accordance with the provisions of Section 409A
of the Code and shall not constitute the impairment of such Participant’s
rights hereunder.

 

Section 19.  No Liability

 

No member of the Board or of
the committee serving as the Administrator, and no officer or employee of the
Company shall be liable to any person for any action taken or omitted in
connection with the administration of the Plan unless attributable to his own
fraud or willful misconduct; nor shall the Company be liable to any person for
any such action unless attributable to fraud or willful misconduct on the part
of the Administrator or a director, officer or employee of the Company.

 

Section 20.  No Assignment

 

Except as otherwise provided herein, a Participant’s
right to the amount credited to his or her account(s) under the Plan shall
not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment or garnishment by creditors of the
Participant or the Participant’s Beneficiary. 
Provided, however, that the Company shall have the unrestricted right to
set off against or recover out of any payments or benefits becoming payable to
or for the benefit of a Participant, at the time such payments or benefits
otherwise become payable hereunder, any amounts owed or owing to the Company by
such Participant.

 

Section 21. 
Successors and Assigns

 

The provisions of this Plan
shall be binding upon and inure to the benefit of the Company, its successors
and assigns, and the Participant, his beneficiaries, heirs, legal
representatives and assigns.

 

10

 

Section 22.  No
Contract of Employment

 

Nothing
contained herein shall be construed as a contract of employment between a
Participant and the Company, or as a right of the Participant to continue in
employment with the Company, or as a limitation of the right of the Company to
discharge the Participant at any time, with or without cause.

 

Section 23. 
Termination of Plan Upon Change in Control

 

The
Company may elect to terminate the Plan within thirty (30) days preceding or
the twelve (12) months following a Change in Control, subject to the provisions
of Section 409A of the Code).  For
this purpose, the Plan shall be treated as terminated only if substantially
similar arrangements sponsored by the Company are terminated, so that all
Participants in the Plan and all participants under substantially similar
arrangements are required to receive all amounts deferred under the terminated
arrangements within twelve (12) months of the date of termination of the
arrangements.

 

Section 24. 
Governing Law

 

This
Plan shall be interpreted in a manner consistent with Code Section 409A
and the guidance issued thereunder by the Department of the Treasury and the
Internal Revenue Service and shall also be subject to and construed in
accordance with the provisions of ERISA, where applicable, and otherwise by the
laws of the Commonwealth of Massachusetts, without regard to the conflict of
law provisions of any jurisdiction.

 

11

 

SCHEDULE A

 

Any
employee at Grade Level of 41 and above, except as otherwise specified by the
Board.  However,  as of September 1, 2009, any participating
employee or any employee who at the time of a grade level change to an
ineligible grade is participating in the Plan shall remain an eligible
participant until such time as they terminate employment with the Company.

 

12

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