Document:

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                                                                    EXHIBIT 10.Z

                               EL PASO CORPORATION
                               SEVERANCE PAY PLAN
            (AS AMENDED AND RESTATED EFFECTIVE AS OF OCTOBER 1, 2002)

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                               EL PASO CORPORATION
                               SEVERANCE PAY PLAN
            (AS AMENDED AND RESTATED EFFECTIVE AS OF OCTOBER 1, 2002)

                                    SECTION 1
                                     PURPOSE

                  The purpose of the Plan is to provide Severance Pay,
outplacement benefits and continued health benefits to each Eligible Employee
whose employment is terminated by his or her Employer in a Qualifying
Termination. The Plan is not intended to provide Severance Pay or benefits to
any Eligible Employee who does not suffer a loss of employment.

                  The Plan was initially adopted on January 1, 1998. Effective
as of October 1, 2002, the Plan has been amended and restated as set forth
herein. It is intended that the Plan as in effect prior to its amendment and
restatement shall apply to the termination of employment of any Eligible
Employee occurring prior to October 1, 2002 and that the Plan as amended and
restated shall apply to the termination of employment of any Eligible Employee
occurring on or after October 1, 2002.

                                    SECTION 2
                                   DEFINITIONS

                  For purposes of the Plan, the following terms shall have the
following meanings:

         2.1 "AFFILIATE" shall mean, with respect to any person or entity, any
entity directly or indirectly controlled by, controlling or under common control
with such person or entity.

         2.2 "ANNUAL BASE PAY" shall mean the product of twelve (12) times an
Eligible Employee's Monthly Base Pay.

         2.3 "COMPANY" shall mean El Paso Corporation.

         2.4 "COMPARABLE JOB" shall mean, as it relates to any Eligible Employee
on any date, a position with a Monthly Base Pay at least equal to the Eligible
Employee's Monthly Base Pay on such date.

         2.5 "ELIGIBLE EMPLOYEE" shall mean each regular, full-time, active,
salaried employee (other than (A) any employee who is subject to the provisions
of a collective

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bargaining agreement or (B) any employee whose employment is terminated pursuant
to the Company's employment practices relating to its disability plans),
employed by a Participating Employer on his or her Termination Date and
regularly scheduled to work at least thirty (30) hours per week. An individual
classified as an independent contractor by a Participating Employer shall not be
deemed to be an Eligible Employee even if such individual is deemed to be a
common law employee for any other purpose.

         2.6 "EMPLOYER" shall mean, as it relates to any Eligible Employee on
any date, the entity that employs the Eligible Employee on such date.

         2.7 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.

         2.8 "LENGTH OF SERVICE DATE" shall mean, as it relates to any Eligible
Employee, the most recent date of entry by the Eligible Employee into service
with an Employer which is used by the Employer for purposes of determining the
commencement of an Eligible Employee's continuous service with the Employer.

         2.9 "MONTHLY BASE PAY" shall mean, as it relates to any Eligible
Employee, the amount the Eligible Employee is entitled to receive as monthly
base salary or monthly wages at the rate in effect on the Eligible Employee's
Termination Date.

         2.10 "PARTICIPATING EMPLOYER" shall mean the Employers set forth on
Exhibit A attached hereto.

         2.11 "PLAN" shall mean the El Paso Corporation Severance Pay Plan (As
Amended and Restated Effective as of October 1, 2002).

         2.12 "PLAN ADMINISTRATOR" shall mean the Executive Vice President,
Human Resources and Administration, of the Company.

         2.13 "PLAN YEAR" of the Plan shall be the calendar year.

         2.14 "QUALIFYING TERMINATION" shall mean the termination of employment
of an Eligible Employee which entitles the Eligible Employee to Severance Pay,
as provided in Section 3.1(a).

         2.15 "SEPARATION AGREEMENT" shall mean the agreement, substantially in
the form attached hereto as Exhibit C and with such changes as the Plan
Administrator in its sole discretion may deem necessary or desirable, which an
Eligible Employee must execute in order to receive Severance Pay under the Plan.

         2.16 "SEVERANCE PAY" shall mean the cash benefit payable under the Plan
pursuant to Section 4.1.

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         2.17 "TERMINATION DATE" shall mean, as it relates to any Eligible
Employee, the date designated by his or her Employer as the Eligible Employee's
date of termination of employment with the Employer.

         2.18 "YEARS OF SERVICE" shall mean, as it relates to any Eligible
Employee, the period elapsed from the Eligible Employee's Length of Service Date
to the Eligible Employee's Termination Date expressed in a number of whole and
partial years. An Eligible Employee's Years of Service is subject to adjustment
pursuant to Section 5 hereof.

                                    SECTION 3
                          ENTITLEMENT TO SEVERANCE PAY

         3.1 ELIGIBILITY FOR SEVERANCE PAY

                  (a) Subject to Sections 3.1(b), 3.3, 4.3, and 5, an Eligible
Employee will become entitled to Severance Pay under the Plan if his or her
employment is involuntarily terminated by an Employer for any of the following
reasons (any such termination of employment is herein referred to as a
"Qualifying Termination"):

                           (i)  termination upon elimination of an Eligible
                                Employee's position; or

                           (ii) termination as a result of a reduction in force.

                  (b)      (i)  An Eligible Employee shall not be entitled to
Severance Pay if (A) he or she fails to remain in his or her position through
the Termination Date, or (B) his or her employment is terminated by an Employer
for cause (which shall include, but not be limited to, (w) a violation of the
Code of Conduct of the Company, (x) inadequate or substandard performance, (y)
the termination of employment of the Eligible Employee in connection with the
Eligible Employee's refusal to accept a Comparable Job with the Company or one
of its Affiliates and (z) the Eligible Employee's death)).

                           (ii) An Eligible Employee shall not be entitled to
Severance Pay if his or her employment is terminated by an Employer in
connection with (x) a sale or other disposition of assets by his or her Employer
or (y) the outsourcing of any operations or functions performed by his or her
Employer (or, in the case of (x) and (y), the sale or other disposition or
outsourcing of an Affiliate of the Company to which the services of the Eligible
Employee primarily relate, as determined by the Plan Administrator in his or her
sole discretion) if, in the case of (x) or (y), the Eligible Employee is offered
a Comparable Job (whether or not the Eligible Employee accepts such offer) by
the purchaser or recipient of such assets or any Affiliate of such purchaser or
recipient, by the
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Company or any of its Affiliates or by the entity that assumes the operations or
functions that are outsourced or an Affiliate of that entity.

                  (c)       An Eligible Employee will cease to be an Eligible
Employee on the date on which a majority of the voting securities of his or her
Employer ceases to be owned directly or indirectly by the Company, and no
Severance Pay will be payable under the Plan if, immediately after the
transaction giving rise to the cessation of his or her status as an Eligible
Employee, the Eligible Employee is in the same position or a Comparable Job as
held immediately before the transaction.

         3.2 DEATH OF AN ELIGIBLE EMPLOYEE

                  If an Eligible Employee whose employment terminates in a
Qualifying Termination dies after his or her Termination Date but before the
Eligible Employee receives the Severance Pay to which he or she is entitled, the
Severance Pay will be paid to the Eligible Employee's surviving spouse or, if
the Eligible Employee does not have a surviving spouse, to the Eligible
Employee's estate; provided, however, that no Severance Pay will be paid
pursuant to this Section 3.2 unless the surviving spouse or the executor of the
Eligible Employee's estate, or both, upon the request of the Plan Administrator,
properly execute and deliver to the Company a Separation Agreement and such
Separation Agreement has become irrevocable as provided therein.

         3.3 REQUIREMENT FOR SEPARATION AGREEMENT

                  No Severance Pay will be paid to any Eligible Employee unless
that Eligible Employee, in the sole determination of the Plan Administrator, has
properly executed and delivered to the Company a Separation Agreement and such
Separation Agreement has become irrevocable as provided therein. To be "properly
executed," such Separation Agreement must (among other requirements the Plan
Administrator may establish) be executed on or after the Eligible Employee's
Termination Date.

                                    SECTION 4
                 AMOUNT OF SEVERANCE PAY; OUTPLACEMENT BENEFITS;
                            CONTINUED HEALTH BENEFITS

         4.1 AMOUNT OF SEVERANCE PAY

                  (a) Subject to Sections 3.1(b), 3.3, 4.1(b), 4.3, and 5, in
the event of a Qualifying Termination of an Eligible Employee, the amount of
Severance Pay to which the Eligible Employee shall be entitled, upon
satisfaction of the conditions to payment of Severance Pay set forth in this
Plan (such satisfaction to be determined by the Plan Administrator in his or her
sole discretion), shall be an amount equal to the sum of (i) one-half (1/2) of
the Eligible Employee's Monthly Base Pay times a fraction, the numerator

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of which is the Eligible Employee's Annual Base Pay and the denominator of which
is $10,000, and (ii) one-half ( 1/2) of the Eligible Employee's Monthly Base Pay
times the Eligible Employee's Years of Service.

                  (b) The maximum amount of Severance Pay to which an Eligible
Employee shall be entitled under the Plan shall be an amount equal to the
Eligible Employee's Annual Base Pay, and the minimum amount of Severance Pay to
which an Eligible Employee shall be entitled under the Plan shall be an amount
equal to three (3) times the Eligible Employee's Monthly Base Pay.

         4.2 FORM AND TIME OF PAYMENT

                  Severance Pay shall be paid in a lump sum in cash, less any
applicable federal, state, local and foreign taxes required to be withheld.
Severance Pay shall be paid as soon as administratively practicable after the
expiration of the period during which the Eligible Employee may revoke the
Separation Agreement pursuant to the terms of the Separation Agreement. The
Severance Pay payable to any Eligible Employee shall be solely the obligation of
the Employer by whom the Eligible Employee was employed on his or her
Termination Date.

         4.3 REDUCTION OF SEVERANCE PAY TO AVOID DUPLICATION

                  (a) If an Eligible Employee is a party to an employment,
severance, termination, salary continuation or other, similar agreement with the
Company or any of its Affiliates, or is a participant in any other severance
plan, practice or policy of the Company or any of its Affiliates, the Severance
Pay to which the Eligible Employee may be entitled under this Plan shall be
reduced (but not below zero) by the amount of severance pay to which he or she
may be entitled under such other agreement, plan, practice or policy; provided,
that the reduction set forth in this Section 4.3 shall not apply to retention
bonuses, project bonuses or transition pay (the payments subject to this proviso
to be determined by the Plan Administrator in his or her sole discretion);
provided, further, that the reduction set forth in this sentence shall not apply
as to any such other agreement, plan, practice or policy which contains a
reduction provision substantially similar to this sentence, so long as the Plan
Administrator establishes to his or her satisfaction that the reduction
provision of such other agreement, plan, practice or policy shall be applied.
The Severance Pay to which an Eligible Employee is otherwise entitled shall be
further reduced (but not below zero) by any payments and benefits to which the
Eligible Employee may be entitled under any federal, state or local
plant-closing (or similar or analogous) law (including, but not limited to,
entitlement to pay and continued employee benefits (or the cash value of either
of the foregoing) pursuant to the Worker Adjustment and Retraining Notification
Act).

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                  (b) To the extent permitted by applicable law, the Severance
Pay to which any Eligible Employee is entitled may, in the sole discretion of
the Plan Administrator, be reduced by the amount of any indebtedness of the
Eligible Employee to the Company or any of its Affiliates, and the amount of any
such reduction shall be applied as a repayment or forgiveness of such
indebtedness to such extent.

         4.4 OUTPLACEMENT BENEFITS

                  Each Eligible Employee whose termination of employment
entitles him or her to Severance Pay shall be entitled to receive outplacement
benefits from the Company at its expense. The scope, nature and duration of such
outplacement benefits shall be as determined by the Company in its sole
discretion.

         4.5 CONTINUED HEALTH BENEFITS

                  Each Eligible Employee whose termination of employment
entitles him or her to Severance Pay shall be entitled to receive the continued
health benefits from the Company set forth on the attached Exhibit B.

                                    SECTION 5
              REEMPLOYMENT BY THE COMPANY OR ANY OF ITS AFFILIATES

                  In the event an Eligible Employee receives Severance Pay under
the Plan and is, subsequent to the receipt of such Severance Pay, offered
reemployment with the Company or any of its Affiliates (including, but not
limited to, any Participating Employer), such reemployment shall be contingent
upon payment to the Company of cash equal to that portion of the Severance Pay
in excess of an amount equal to the salary or other wages that would have been
paid to the Eligible Employee during the period between the Eligible Employee's
Termination Date and the reemployment date. The amount required to be repaid by
the Eligible Employee will reflect the taxes withheld at the time the Severance
Pay was paid and the taxes applicable to the Eligible Employee's salary or other
wages that would have been paid during the period between the Eligible
Employee's Termination Date and the reemployment date. Upon such repayment (or a
repayment required by any other severance plan of the Company or any of its
Affiliates), the Plan Administrator shall determine the portion of the Eligible
Employee's Years of Service that shall be re-credited to the Eligible Employee.
In no event shall the Plan Administrator re-credit an Eligible Employee's Years
of Service if the Eligible Employee is not required to repay any portion of his
or her Severance Pay.

<PAGE>
                                    SECTION 6
                    ADMINISTRATION, AMENDMENT AND TERMINATION

         6.1 ADMINISTRATION

                  (a) The Plan Administrator shall be administrator and "Named
Fiduciary" (within the meaning of Section 402(a) of ERISA) of the Plan and shall
have full authority to control and manage the operation and administration of
the Plan, and to take all such action in respect of the Plan as he or she deems
necessary or appropriate. The Plan Administrator may delegate any of the duties
and responsibilities set forth in this Section 6.1 to one or more persons
designated by him or her.

                  (b) The Plan will be interpreted by the Plan Administrator in
accordance with the terms and conditions of the Plan and their intended
meanings. The Plan Administrator will have the discretion to make any findings
of fact needed in the administration of the Plan and will have the discretion to
interpret or construe ambiguous, unclear or implied (but omitted) terms in any
fashion he or she deems to be appropriate in his or her sole judgment. The
validity of any such finding of fact, interpretation, construction or decision
will not be given de novo review if challenged in court, by arbitration or any
other forum and will be upheld unless clearly arbitrary or capricious.

                  (c) To the extent the Plan Administrator has been granted
discretionary authority under the Plan, the Plan Administrator's exercise of
such authority will not obligate him or her to exercise his or her authority in
a like fashion thereafter. If due to errors in drafting any Plan provision does
not accurately reflect its intended meaning, as demonstrated by consistent
interpretations, customary practice of the Company and its Affiliates or other
evidence of intent, or as determined by the Plan Administrator in his or her
sole and exclusive judgment, the provision will be considered ambiguous and will
be interpreted by the Plan Administrator in a fashion consistent with its
intent, as determined by the Plan Administrator in his or her sole discretion.

                  (d) The Plan Administrator may amend the Plan retroactively to
cure any such ambiguity. This Section 6.1 may not be invoked by any person to
require the Plan to be interpreted in a manner which is inconsistent with its
interpretation by the Plan Administrator. All actions and all determinations
made in good faith by the Plan Administrator shall be final and binding upon all
persons claiming any interest in or under the Plan.

         6.2 AMENDMENT AND TERMINATION

                  (a) Subject to Section 6.2(c), the Company reserves the right
to amend, terminate or otherwise modify all or any part of the Plan at any time,
and from time to time, without the consent of or notice to any person. In
addition, subject to Section

<PAGE>

6.2(c), the Company may, by one or more written supplements to this Plan, adopt
provisions to this Plan applicable to one or more Eligible Employees which
enlarge or diminish the rights of such Eligible Employees under the Plan. Such
written supplements may be adopted and revoked by the Company at any time, and
from time to time, without the consent of or notice to any person.

                  (b) The Plan Administrator shall have the authority to amend
the Plan; provided, however, that any amendment of the Plan involving a
substantial change to the amount of Severance Pay that may be payable under the
Plan shall be approved in advance by formal action of the Chief Executive
Officer of the Company (or his or her designee).

                  (c) Neither the termination of the Plan nor any amendment,
modification or written supplement to the Plan by the Company or the Plan
Administrator may reduce the Severance Pay which may be payable under the Plan
to any Eligible Employee whose Termination Date is on or prior to the effective
date of such termination, amendment, modification or supplement.

                                    SECTION 7
                               GENERAL PROVISIONS

         7.1 UNFUNDED OBLIGATION

                  Severance Pay and benefits under the Plan shall be an unfunded
obligation of the Employer of such Eligible Employee and shall be payable only
from such Employer's general assets.

         7.2 APPLICABLE LAW

                  The Plan and all rights thereunder shall be governed and
construed in accordance with applicable federal law and, to the extent not
preempted by federal law, with the laws of the State of Texas, wherein venue
shall lie for any dispute arising hereunder.

         7.3 SEVERABILITY

                  If a court of competent jurisdiction holds any provision of
the Plan invalid or unenforceable, the Plan shall be construed or enforced as if
such provision had not been included herein, and the remaining provisions of the
Plan shall continue to be fully effective.

<PAGE>

         7.4 EMPLOYMENT AT WILL

                  Each Eligible Employee shall be an employee-at-will of the
Eligible Employee's Employer. No provision of the Plan shall be construed to
constitute a contract of employment or impose on any Employer any obligation to
(a) retain any Eligible Employee, (b) make any payments upon termination of
employment (except as otherwise provided herein), (c) change the status of any
Eligible Employee's employment or (d) change any employment policies of any
Employer.

<PAGE>

                  IN WITNESS WHEREOF, the Company has caused the Plan as amended
and restated to be executed effective as of October 1, 2002.

                                           EL PASO CORPORATION

                                                /s/ David E. Zerhusen
                                           -------------------------------------

                                           By:  David E. Zerhusen
                                                --------------------------------

                                           Its: Executive Vice President
                                                --------------------------------

ATTEST:

      /s/ Linda F. Camarillo
--------------------------------------

By:   Linda F. Camarillo
      --------------------------------

Its:  Director, Corp. Benefits
      --------------------------------

<PAGE>
                   SUPPLEMENT NO. 1 TO THE EL PASO CORPORATION
                               SEVERANCE PAY PLAN

1. Applicability. This Supplement No. 1 to the El Paso Corporation Severance Pay
Plan (the "Supplement No. 1") applies to each Eligible Employee whose name is
set forth on Exhibit A attached hereto (the "Exhibit") as of his or her
Termination Date.

2. Amount of Severance Pay. In the event of a Qualifying Termination of an
Eligible Employee to whom this Supplement No. 1 applies, the amount of Severance
Pay to which the Eligible Employee shall be entitled, upon satisfaction of the
conditions to payment of Severance Pay set forth in the Plan, shall be an amount
equal to two (2) times the sum of (i) his or her Annual Base Pay and (ii) his or
her Annual Bonus Amount (as defined below); provided, that, for purposes of
clarification, the maximum amount of Severance Pay set forth in Section 4.1(b)
of the Plan shall not apply to any such Eligible Employee.

3. Additional Terms. For purposes of an Eligible Employee to whom this
Supplement No. 1 applies:

         (a) The term "cause" in Section 3.1(b) of the Plan shall have the
         following meaning, and not the meaning set forth in Section 3.1(b) of
         the Plan, and the following procedure shall apply to any termination
         for cause:

                  A termination for "cause" shall be a termination evidenced by
                  a resolution adopted in good faith by the vote of at least
                  three-quarters (3/4) of the independent directors (as defined
                  under the New York Stock Exchange rules) of the Board of
                  Directors of the Company (the "Board") that the Eligible
                  Employee has (i) willfully and repeatedly failed to
                  substantially perform his or her duties (other than a failure
                  resulting from the Eligible Employee's incapacity due to
                  physical or mental illness) which failure continues for a
                  period of at least thirty (30) days after a written notice of
                  demand for substantial performance has been delivered to the
                  Eligible Employee specifying the manner in which the Eligible
                  Employee has so failed to substantially perform, or (ii)
                  willfully engaged in conduct which is demonstrably and
                  materially injurious to the Company or any of its Affiliates.

<PAGE>
                  No termination of an Eligible Employee's employment shall be
                  for cause until (A) there shall have been delivered to the
                  Eligible Employee a copy of a written notice setting forth
                  that the Eligible Employee is guilty of the conduct
                  constituting cause and specifying the particulars thereof in
                  reasonable detail, (B) the Eligible Employee shall have been
                  provided an opportunity to be heard by the Board (with the
                  assistance of the Eligible Employee's counsel if the Eligible
                  Employee so desires) and a period of not less than thirty (30)
                  days in which to elect to be so heard, and (C) following such
                  hearing or the Eligible Employee's failure to elect to be
                  heard within the aforesaid thirty (30) day period, the vote of
                  at least three-quarters (3/4) of the independent directors of
                  the Board to terminate the Eligible Employee's employment for
                  cause. No act, nor failure to act, on the part of the Eligible
                  Employee shall be considered "willful" unless he or she has
                  acted, or failed to act, with an absence of good faith and
                  without a reasonable belief that his or her action or failure
                  to act was in the best interest of the Company and its
                  Affiliates. For purposes of clarification, no failure to
                  perform by the Eligible Employee after a termination of
                  employment by the Eligible Employee with Good Reason or a
                  voluntary resignation by the Eligible Employee shall
                  constitute cause.

         (b) The term "Qualifying Termination" shall mean, in addition to the
         meanings set forth in the Plan, a termination of employment by the
         Eligible Employee with Good Reason.

         (c) An Eligible Employee shall have terminated his or her employment
         with "Good Reason" if he or she shall terminate his or her employment
         within ninety (90) days following the date on which he or she learns
         that any of the following events have occurred:

                  (i) the removal of all or substantially all of the authority
                  and responsibilities held by the Eligible Employee as an
                  employee and officer of the Company

<PAGE>
                  and its Affiliates as of the Effective Date, except in
                  connection with (x) the termination of his or her employment
                  for cause, disability, as a result of his or her death, or by
                  the Eligible Employee other than with Good Reason or (y) the
                  Eligible Employee's transfer to a new position with the
                  Company that the Board reasonably determines is consistent
                  with the Eligible Employee's experience and ability;

                  (ii) receipt by the Eligible Employee of notice of either (a)
                  the removal of the Eligible Employee's name from the Exhibit,
                  or (b) any amendment to the Plan purporting to terminate this
                  Supplement, which notice shall in either event be given to the
                  Eligible Employee at least ninety (90) days in advance of such
                  removal or amendment;

                  (iii) subject to Section 4 hereof, any material reduction in
                  the Eligible Employee's compensation or benefits from the
                  levels in effect as of the Effective Date (including, without
                  limitation, the revocation of this Supplement No. 1), notice
                  of which shall be given to the Eligible Employee at least
                  ninety (90) days in advance of the date of such reduction or
                  revocation, provided that a reduction in benefits applicable
                  to employees of the Company generally (i.e., not limited to
                  one or more employees based upon position, title or grade)
                  shall not constitute a material reduction hereunder;

                  (iv) any requirement by the Company that the Eligible Employee
                  (without his or her consent) be based at any place outside a
                  fifty (50) mile radius of his or her place of employment prior
                  to the Effective Date, except for reasonably required travel
                  on the Company's business which is not materially greater than
                  such travel requirements prior to the Effective Date; or

<PAGE>
                  (v) any purported termination of the Eligible Employee's
                  employment for cause by the Company which does not comply with
                  the terms of this Supplement No. 1.

         (d) The term "Annual Bonus Amount" shall mean the target bonus amount
         applicable to the Eligible Employee for the year in which his or her
         Termination Date occurs.

         (e) For purposes of calculating the amount of Severance Pay due to the
         Eligible Employee pursuant to this Supplement No. 1, the Termination
         Date of the Eligible Employee shall be deemed to be the date on which
         notice is given by the Employer or the Eligible Employee of his or her
         termination of employment.

4. Termination of Supplement. This Supplement No. 1 shall automatically
terminate without further required action at 11:59 p.m. on the second
anniversary of the Effective Date. The termination of this Supplement No. 1
pursuant to this Section 4 shall not constitute an event that permits an
Eligible Employee to terminate his or her employment with Good Reason. The
termination of this Supplement No. 1 (whether pursuant to this Section 4 or
otherwise) may not reduce the Severance Pay due to any Eligible Employee whose
Termination Date (determined pursuant to Section 3(e) hereof) is on or prior to
the second anniversary the Effective Date.

5. Termination of the Plan. The termination of the Plan shall not constitute a
termination of this Supplement No. 1 unless the action terminating the Plan also
explicitly terminates this Supplement No. 1. In the event that the Plan is
terminated and this Supplement No. 1 is not terminated, (1) this Supplement No.
1 shall be deemed to constitute a separate plan, (2) the only individuals who
participate in such separate plan shall be the Eligible Employees to whom this
Supplement No. 1 applies and (3) subject to the preceding clause (2) of this
Section 5, such separate plan shall be deemed to consist of this Supplement No.
1 and the terms and conditions of the Plan as modified hereby.

6. Other Defined Terms. Capitalized terms used herein but not defined herein
shall have the meaning set forth in the Plan.

7. Effect on Plan Provisions. Except to the extent modified as set forth herein,
the Plan shall remain in full force and effect.

         IN WITNESS WHEREOF, this Supplement No. 1 has been executed and is
effective as of the 1st day of January, 2003 (the "Effective Date").

<PAGE>

                                        EL PASO CORPORATION

                                        By: /s/ David E. Zerhusen
                                            ------------------------------------
                                            David E. Zerhusen
                                            Its Executive Vice President
                                            Administration

ATTEST:

By: /s/ David L. Siddall
    ---------------------------
        Corporate Secretary

<PAGE>

                             AMENDMENT NO. 1 TO THE
                             SUPPLEMENT NO. 1 TO THE
                               EL PASO CORPORATION
                           EMPLOYEE SEVERANCE PAY PLAN

         Exhibit A of Supplement No. 1 to the El Paso Corporation Employee
Severance Pay Plan effective as of January 1, 2003 (the "Supplement No. 1"), is
hereby amended, as attached, to add an Eligible Employee who shall be deemed to
be a participant covered by Supplement No. 1 effective as of March 21, 2003.

         IN WITNESS WHEREOF, the Company has caused this amendment to be duly
executed on the 21st day of March, 2003.

                                           EL PASO CORPORATION

                                           By: /s/ David E. Zerhusen
                                               ---------------------------------
                                               David E. Zerhusen
                                               Its Executive Vice President
                                               Administration

Attest:

    /s/ David L. Siddall
-----------------------------
    Corporate Secretary

<PAGE>

                                    Exhibit A
              Eligible Employees Covered by Supplement No. 1 to the
                     El Paso Corporation Severance Pay Plan
                             (as of January 1, 2003)

H. Brent Austin
Robert W. Baker
Norma F. Dunn
Rodney D. Erskine
Peggy A. Heeg
Greg G. Jenkins
Robert G. Phillips
D. Dwight Scott
Clark C. Smith
John W. Somerhalder II
David E. Zerhusen

<PAGE>

                                    Exhibit A
                         List of Participating Employers

ANR Pipeline
Coastal Chemical, Inc.
Coastal Coal LLC
Coastal Coal WV LLC
Coastal Oil New England
Coastal Oil New York
Coastal Unilube, Inc.
Colorado Interstate Gas Company
Coscol Petroleum Corporation
El Paso Corporation
El Paso Energy Service Company
El Paso Field Services Management, Inc.
El Paso Global Networks Company
El Paso Javelina Company, LP
El Paso Merchant Energy - Petroleum Company
El Paso Merchant Energy N. America
El Paso Natural Gas Company
El Paso Power Operations Company
El Paso Production Company
Southern Natural Gas Company
Tennessee Gas Pipeline

<PAGE>
                                    Exhibit B
                            Continued Health Benefits

I.       Subject to Section II, with respect to an Eligible Employee who has
become entitled to Severance Pay by reason of a Qualifying Termination (as set
forth more fully in Section 3.1(a) of the Plan), the Eligible Employee shall be
entitled to receive continued medical and dental coverage under the plan in
which the Eligible Employee participated immediately prior to the Eligible
Employee's Termination Date for three (3) months following the month in which
the Termination Date occurs.

II.      General Terms and Conditions Applicable to Continued Health Benefits

         (a) The coverage to be provided under the Plan shall be secondary to
any other coverage that an Eligible Employee may have as an employee on any
date.

         (b) The Company's obligation to provide the continued health coverage
set forth in this Exhibit B shall be subject to the payment of required
contributions. The amount of required contributions to be paid by Eligible
Employees shall be established by the Plan Administrator in his or her sole
discretion. The amount of contributions required to be paid by one or more
Eligible Employees may differ from the contributions required to be paid by
other Eligible Employees.

         (c) The Company's obligation to provide the continued health coverage
set forth in this Exhibit B shall be subject to an Eligible Employee's
satisfaction of generally applicable administrative procedures as the Plan
Administrator may establish.

<PAGE>

                                    Exhibit C
                          Form of Separation Agreement

         1. I, ____________________________________, understand that in return
for my release of claims set forth in Paragraphs 3, 4, and 11 of this Separation
Agreement and my promise not to sue set forth in Paragraph 5 of this Separation
Agreement, I am entitled to severance benefits in the amounts set forth in
Exhibit A (the "Payment") to this Separation Agreement pursuant to the severance
pay plan in which I participate in ("the Plan"). I acknowledge that this Payment
is in addition to any amounts that are owed to me for the services that I have
performed for the Employer. I further acknowledge that I will receive the
Payments set forth in Exhibit A if and only if I sign this Separation Agreement,
and only after this Separation Agreement becomes irrevocable in accordance with
Paragraph 9. As used in this Separation Agreement, the term "Employer" shall
consist of El Paso Corporation, their present and former parents and their
trusts and plans, their direct or indirect subsidiaries, and their affiliates
and related companies or entities, regardless of its or their form of business
organization.

         2. I understand that if I do not sign this Separation Agreement or if I
revoke this Separation Agreement, I will not be eligible for the Payment but
will only be entitled to normal termination benefits. The normal termination
benefits that are available to me are set forth in Exhibit B to this Separation
Agreement. I acknowledge that I will receive those normal termination benefits
described in Exhibit B even if I do not sign this Separation Agreement.

         3. In return for the Payment in the amounts set forth in Exhibit A, I
hereby release the Employer, the affiliates of each of them, the employee
benefit plans of each of them, the directors, officers, employees, agents,
stockholders, administrators of each of them and all other persons acting on
behalf of each of them, together with the predecessors, successors and assignees
of each of the foregoing (collectively referred to as the "Parties Released")
from all liabilities, demands, claims, actions, causes of action, and suits of
whatsoever nature that I may have against the Parties Released arising from or
in any way related to my employment with the Employer and from the termination
of my employment, whether known or unknown to me, or suspected or unsuspected,
that I may have individually or as a member of a class. I also release the
Parties Released from any and all liabilities, demands, claims or suits that I
may have against any of the Parties Released arising from any act occurring
prior to the execution of this Separation Agreement, whether known or unknown to
me, or suspected or unsuspected, that I may have individually or as a member of
a class.

         4. Notwithstanding the release set forth in Paragraph 3, this
Separation Agreement does not release any claim (i) for continuation health care
coverage under COBRA, (ii) for benefits arising from any retirement plan or
welfare plan in which I was

<PAGE>

a participant during my employment, (iii) for workers compensation benefits
available to me, and (iv) for rights arising under the Plan and this Separation
Agreement. The release set forth in Paragraph 3 does apply to and release any
claim for unlawful discharge or discrimination that I might assert arising under
any state workers compensation act, and any claim that I might assert for
unlawful discharge or discrimination for exercising any right under any benefit
plan of the Employer.

          5. Subject to Section 8(g), I agree that I will never sue the Parties
Released concerning any claim I may have relating to my employment with the
Employer or the termination of that employment. In the event that any dispute
arises in connection with, relating to, or concerning this Separation Agreement,
or in the event of any claim for breach or violation of any provision of this
Separation Agreement, in accordance with the Federal Arbitration Act I agree
that such dispute or claim will be resolved exclusively by arbitration. Any
arbitration proceeding related to this Separation Agreement will be conducted in
accordance with the rules of the American Arbitration Association ("AAA"). The
Employer and I agree that any such dispute or claim will be presented to a
single arbitrator selected by mutual agreement by me and the Employer (or, if
the Employer and I cannot mutually agree on an arbitrator, the arbitrator will
be selected in accordance with the rules of the AAA). All determinations of the
arbitrator will be final and binding upon me and the Employer. Each party to the
arbitration proceeding will bear the costs of such Party in connection with any
and all arbitration proceedings under this Paragraph 5, except that the costs
and expenses of the arbitrator will be divided evenly between me and the
Employer. The venue for any arbitration proceeding under this Paragraph 5 will
be in the city nearest my place of employment (determined on the last day of my
employment with the Employer) that has an AAA office. The venue for any judicial
proceeding related to this arbitration provision (including a judicial
proceeding to enforce this provision) will be in Houston, Texas.

         6. I expressly acknowledge that I would not be entitled to the Payment
described in Exhibit A on account of my employment with the Employer or for the
services that I performed for the Employer. I have no agreement with the
Employer that gives me any right or claim to the Payment without providing a
release to the Parties Released, and there is no practice or policy of the
Employer that gives me any right or claim to the Payment without providing a
release to the Parties Released.

         7. If and to the extent that I have had any questions in connection
with this Separation Agreement, I have had the opportunity to seek clarification
about the meaning of this Separation Agreement from representatives of El Paso
Corporation's Employee Benefits Department. I understand that no one other than
representatives of El Paso Corporation's Employee Benefits Department is
authorized to interpret this Separation Agreement, and that no one including the
representatives of El Paso Corporation's Employee Benefits Department is
authorized to vary the terms of this Separation

<PAGE>

Agreement. I expressly acknowledge that in connection with my decision to accept
the Payment described on Exhibit A and to provide a release of claims and a
promise not to sue, I have not relied on any statement, representations,
promises, or agreements of any kind made by any of the parties or by any of the
parties' agents, attorneys, or representatives with regard to the subject
matter, basis, or effect of this Separation Agreement or otherwise, other than
those specifically stated in this written Separation Agreement. This Separation
Agreement sets forth the entire agreement between the parties hereto and fully
supersedes any and all prior agreements or understandings, written or oral,
between the parties hereto pertaining to the subject matter hereof.

         8. In connection with this Separation Agreement:

         a) I acknowledge that I have been given a full and fair opportunity to
review this Separation Agreement;

         b) I understand that I have been given up to 21 days to consider
whether to accept the Payment described in Exhibit A in return for providing a
release to the Employer and the Parties Released;

         c) If I have made the decision to sign this Separation Agreement before
the expiration of 21 days, I certify that the decision to provide a release
before the expiration of the 21-day period was knowing and voluntary and was not
induced by the Employer or by the Parties Released through fraud,
misrepresentation, a threat to withdraw or alter to offer prior to the
expiration of the 21-day time period, or by providing different terms to other
employees who sign the release prior to the expiration of such time period;

         d) I have carefully read and fully understand all of the provisions of
this Separation Agreement, and I have signed this Separation Agreement knowing
that I have given a release to the Parties Released that will prevent me from
suing the Employer or the Parties Released;

         e) I understand that this Separation Agreement applies to any claims
that I have against the Employer, including claims under the Age Discrimination
in Employment Act, 29 U.S.C. Sections 621-634;

         f) The Employer has specifically advised me to consult with an attorney
of my choice before executing this Separation Agreement, and I have had the
opportunity to do so; and

         g) I understand that nothing in this Separation Agreement, including
Paragraph 5, shall be construed to prohibit me from filing a charge of
discrimination, including a challenge to the validity of this Separation
Agreement, with the Equal Employment Opportunity Commission or participating in
any investigation or proceeding conducted by

<PAGE>

the Equal Employment Opportunity Commission. I understand that, if I have
questions concerning the validity of this Separation Agreement, I should contact
my local office of the Equal Employment Opportunity Commission.

         9. I understand that I may revoke my acceptance of this Separation
Agreement at any time within seven days after I execute it by sending written
notice of my revocation to the Employer by certified mail return receipt
requested addressed to El Paso Corporation, 1001 Louisiana, Houston, TX 77002,
c/o Benefits Department. I further understand that if I do not revoke this
Separation Agreement within seven days following its execution (excluding the
date of execution), it will become effective, binding, and enforceable on the
next following day.

         10. I acknowledge that when I received this Separation Agreement, I
also received Exhibits A, B, and C. Exhibit C contains information related to
the Employer's reduction-in-force program.

         11. Subject only to the potential claims referred to in Paragraph 4, it
is my express intent to waive and release any and all liabilities, demands,
claims or suits relating to or arising from my employment or the termination of
my employment with the Employer whether the claims are known or unknown,
suspected or unsuspected.

         12. To the extent that the Employer determines that I possess relevant
information relative to cases that are active or may be filed or instituted or
investigations by governmental agencies that are active or may be filed or
instituted, I agree to make myself available from time to time at the Employer's
request to provide information and assistance, including but not limited to for
deposition testimony, pretrial preparation and trial testimony and to respond to
requests for information from governmental authorities. The Employer
acknowledges that my primary duty after my termination of employment, shall be
to my subsequent employer (if any). Consequently, the Employer agrees to
accommodate my commitments in scheduling depositions, pretrial preparation and
trial testimony, insofar as is practicable to minimize any inconvenience to me.
The Employer shall promptly reimburse me for reasonable out-of-pocket travel
expenses in connection with the performance of services pursuant to this
Paragraph 12.

         13. I will not make or publish any disparaging statements (whether
written, electronic or oral) regarding, or otherwise malign the business
reputation of, the Employer or any of its subsidiaries, directors, officers or
employees.

         14. I shall maintain in the strictest confidence and will not, directly
or indirectly, intentionally or inadvertently, use, publish, or otherwise
disclose to any person or entity whatever, any of the information of or
belonging to the Employer or to any agent, joint venture, contractor, customer,
vendor, or supplier of the Employer regardless

<PAGE>

of its form, without the prior written explicit consent of the Employer. I shall
take reasonable precautions to protect the inadvertent disclosure of
information. I specifically acknowledge that I have returned to the Employer any
and all documents that contain confidential information concerning or relating
to the business, business plans or business practices of the Employer.

         15. I further agree, promise, and covenant that the terms and
provisions of this Separation Agreement shall remain and be kept strictly
confidential and shall not be disclosed. I specifically agree to make no
statements to the press or electronic news media or respond in any manner to
inquiries from the press or electronic news media relating to the Employer or my
employment with the Employer but shall promptly refer any such inquiries to the
Employer.

         16. I further agree that if, at any time, I directly or indirectly (and
including for this purpose any person who acts at my direction or encouragement)
breach the provisions contained in Paragraphs 12, 13, 14 and 15 of this
Separation Agreement, I will be liable to the Parties Released for all remedies,
both legal and equitable, incurred as a result of said breach plus any and all
attorneys' fees and costs incurred in filing, maintaining or prosecuting suit to
obtain such remedies. Any act taken to obtain an award of remedies, or any award
made to the Parties Released pursuant to this provision shall not, however,
negate or affect in any way this Separation Agreement or any of the obligations
or terms agreed to by me in this Separation Agreement. All duties and
obligations set forth in this Separation Agreement shall be in addition to those
which exist under statute and at common law and shall not negate but shall be in
addition to or coextensive with those obligations arising under any agreements
or documents executed by me during my employment with Employer.

         17. I have read this document and I acknowledge that it is written in a
manner that I can understand. I understand that I am giving a full and final
release to the Parties Released and I declare that it is my intent to provide
such a release. I agree that this document is a full and final expression of my
agreement with the Employer and with the Parties Released, and I acknowledge
that no other promises have been made to me by either the Employer or the
Parties Released that are not set forth in this document. I execute this
document voluntarily and of my own free will.

         18. This Separation Agreement shall be interpreted and applied in
accordance with applicable provisions of the Employee Retirement Income Security
Act (ERISA) and the Older Workers Benefit Protection Act (OWBPA). To the extent
that federal law does not apply, this Separation Agreement shall be deemed to
have been executed and delivered within the state of Texas and the rights and
obligations of the parties shall be construed and enforced in accordance with,
and governed by, the laws of the state of Texas without regard to that state's
rules regarding conflict of laws.

<PAGE>

                                       SIGNED this ____ day of __________, 200_.

SUBSCRIBED AND SWORN to before
me by the said ________________, on the
_______ day of _________, 200_.

---------------------------------
Notary Public in and for the State of
________<PAGE>

                                                                   EXHIBIT 10.AA

                          EL PASO PRODUCTION COMPANIES

                            LONG-TERM INCENTIVE PLAN

                         EFFECTIVE AS OF JANUARY 1, 2003

<PAGE>

                                TABLE OF CONTENTS

<Table>
<S>               <C>                                                                                 <C>
SECTION 1         PURPOSE...............................................................................1

SECTION 2         DEFINITIONS...........................................................................1
         2.1      Adjusted Value........................................................................1
         2.2      Annual Target Award...................................................................1
         2.3      Beneficiary...........................................................................1
         2.4      Board of Directors....................................................................2
         2.5      Change in Control.....................................................................2
         2.6      Code..................................................................................3
         2.7      Common Stock..........................................................................3
         2.8      Exchange Act..........................................................................3
         2.9      Fair Market Value.....................................................................3
         2.10     Management Committee..................................................................4
         2.11     Parent Company........................................................................4
         2.12     Participant...........................................................................4
         2.13     Performance Cycle.....................................................................4
         2.14     Performance Peer Group................................................................4
         2.15     Performance Period....................................................................4
         2.16     Performance Ranking Position..........................................................4
         2.17     Permanent Disability or Permanently Disabled..........................................5
         2.18     Plan Administrator....................................................................5
         2.19     Production Companies..................................................................5
         2.20     Restricted Stock......................................................................5
         2.21     Valuation Date........................................................................5

SECTION 3         ADMINISTRATION........................................................................5
         3.1      Administration........................................................................5

SECTION 4         ELIGIBILITY...........................................................................6
         4.1      Participants..........................................................................6

SECTION 5         RESTRICTED COMMON STOCK AWARD POOL....................................................6

SECTION 6         LONG-TERM INCENTIVE AWARD.............................................................7
         6.1      Performance Period....................................................................7
         6.2      Annual Target Award...................................................................7
         6.3      Adjusted Value........................................................................7
         6.4      Performance Certification.............................................................8
         6.5      Required Payment......................................................................8
         6.6      Conversion Right......................................................................8
         6.7      Death, Disability, Termination of Employment or Change in Control....................10
</Table>

<PAGE>

<Table>
<S>               <C>                                                                                 <C>
SECTION 7         REGULATORY APPROVALS AND LISTING.....................................................11

SECTION 8         EFFECTIVE DATE AND TERM OF PLAN......................................................12
         8.1      Effective Date and Term of Plan......................................................12

SECTION 9         GENERAL PROVISIONS...................................................................12

SECTION 10        AMENDMENT, TERMINATION OR DISCONTINUANCE
                   OF THE PLAN.........................................................................15
         10.1     Termination and Amendment............................................................15
</Table>

<PAGE>

                          EL PASO PRODUCTION COMPANIES
                            LONG-TERM INCENTIVE PLAN

                                SECTION 1 PURPOSE

1.1      PURPOSE

         The purposes of the El Paso Production Companies Long-Term Incentive
Plan (the "Plan") are to promote the interests of El Paso Production Company or
its successor in interest (the "Company") by strengthening its ability to retain
officers and key management employees in the employ of the Production Companies
(as defined below) by (i) furnishing suitable recognition of their ability and
industry which contribute materially to the success of the Production Companies,
(ii) providing a direct relationship between individual performance and business
unit objectives, and (iii) providing a direct incentive to achieve the
Production Companies strategic and financial goals. The Plan provides for a
long-term incentive award in the form of a cash payment or restricted stock in
the event conversation rights are applicable.

                              SECTION 2 DEFINITIONS

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

2.1      ADJUSTED VALUE

         The percentage of the Annual Target Award the Participant shall be
entitled to receive determined as of a Valuation Date.

2.2      ANNUAL TARGET AWARD

         The amount of cash compensation to be credited to a Participant's
ledger account assuming that the Company performed in the second (2nd) quartile,
as determined under Section 6.3.

2.3      BENEFICIARY

         The person or persons designated by the Participant pursuant to Section
9.8 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.

                                       1
<PAGE>

2.4      BOARD OF DIRECTORS

         The Board of Directors of the Company.

2.5      CHANGE IN CONTROL

         As used in the Plan, a Change in Control of the Company shall be deemed
to occur following an initial public offering of the Company (i) if any person
(as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act), other
than the Parent Company or any of its subsidiaries or affiliated companies, is
or becomes the "beneficial owner" (as defined in Rule 13d-3 of the Exchange
Act), directly or indirectly, of securities of the Company representing twenty
percent (20%) or more of the combined voting power of the Company's then
outstanding securities, other than persons who exceed such percentage solely as
a result of being executive officers, directors and/or other affiliates of the
Company or its subsidiaries or affiliates who are deemed to constitute a "group"
(ii) upon the first purchase of the Common Stock pursuant to a tender or
exchange offer (other than a tender or exchange offer made by the Company, the
Parent Company or any of their subsidiaries or affiliated companies), (iii) upon
the approval by the Company's stockholders of a merger or consolidation, a sale
or disposition of all or substantially all of the Company's assets or a plan of
liquidation or dissolution of the Company, or (iv) if, during any period of two
(2) consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority thereof, unless the election or nomination for
the election by the Company's stockholders of each new director was approved by
a vote of at least two-thirds (2/3) of the directors then still in office who
were directors at the beginning of the period and such new director's initial
assumption of office does not occur in connection with an actual or threatened
election contest, including but not limited to a consent solicitation, relating
to the election of director's of the Company. Notwithstanding the foregoing, a
Change in Control shall not be deemed to occur if the Company either merges or
consolidates with or into another company or sells or disposes of all or
substantially all of its assets to another company, if such merger,
consolidation, sale or disposition is in connection with a corporate
restructuring wherein the stockholders of the Company immediately before such
merger, consolidation, sale or disposition own, directly or indirectly,
immediately following such merger, consolidation, sale or disposition at least
eighty percent (80%) of the combined voting power of all outstanding classes of
securities of the Company resulting from such merger or consolidation, or to
which the Company sells or disposes of its assets, in substantially the same
proportion as their ownership in the Company immediately before such merger,
consolidation, sale or disposition.

         Notwithstanding any other provision to the contrary, (i) a Change in
Control shall be deemed to occur upon (x) a "Change in Control" of the Parent
Company (as defined in the El Paso Corporation Key Executive Severance
Protection Plan) (a "Parent Change in Control"), provided that at the time of
such Parent Change in Control, the Parent Company owns at least eighty percent
(80%) of the combined voting power of all classes

                                       2
<PAGE>

of securities in the Company, or (y) the Parent Company sells or disposes (other
than pursuant to a public offering of the Company's Common Stock or spin-off of
the Company) of all its shares of the Company's securities and in the event of
clause (y) above, the Participant's employment is terminated (other than a
termination by the Company for cause or a voluntary termination by the
Participant) within six (6) months following such sale or disposition, and (ii)
a Change in Control shall not be deemed to occur upon (x) a public offering of
the Company's Common Stock or (y) any spin-off of the Company.

2.6      CODE

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

2.7      COMMON STOCK

         The common stock of the Company or such other class of shares or other
securities as may be applicable pursuant to the provisions of Section 5.

2.8      EXCHANGE ACT

         The Securities Exchange Act of 1934, as amended.

2.9      FAIR MARKET VALUE

         If shares of Common Stock are publicly traded on a national securities
exchange at the time a determination of its value is required to be made
hereunder, and unless otherwise provided by the Plan Administrator prior to the
date of a Change in Control as applied to a specific date, Fair Market Value
shall be deemed to be the mean between the highest and lowest quoted selling
prices at which Common Stock is sold on such date as reported in the
NYSE-Composite Transactions by The Wall Street Journal or any other comparable
service the Plan Administrator may determine is reliable (or, if such Common
Stock is not then listed on such exchange, such other national securities
exchange on which such Common Stock is then listed) 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 Fair Market Value cannot be determined by means of the
previous sentence, then the Plan Administrator shall determine Fair Market Value
using any reasonable method of valuation. Notwithstanding the previous two
sentences, Fair Market Value with respect to an initial public offering shall
mean the price at which the Common Stock of the Company is priced to the public.

                                       3
<PAGE>

2.10     MANAGEMENT COMMITTEE

         A committee consisting of the Chief Executive Officer of the Parent
Company and such other officers as the Chief Executive Officer shall designate.

2.11     PARENT COMPANY

         El Paso Corporation or its successor.

2.12     PARTICIPANT

         An eligible employee under the Plan as set forth in Section 4.

2.13     PERFORMANCE CYCLE

         That period commencing with January 1 of each year and ending on
December 31 of the third succeeding year, or such other time period as the Plan
Administrator may determine. The Plan Administrator, at its discretion, may
initiate an overlapping Performance Cycle that begins before an existing
Performance Cycle has ended.

2.14     PERFORMANCE PEER GROUP

         Those publicly held companies selected by the Plan Administrator prior
to the commencement of a Performance Period to form a comparative performance
group in applying Section 6.3.

2.15     PERFORMANCE PERIOD

         That period of time during which the Company's Performance Ranking
Position is measured to determine the Annual Target Award to be credited for the
Participant in accordance with Section 6.5.

2.16     PERFORMANCE RANKING POSITION

         The relative placement of the Company measured against the other
companies in the Performance Peer Group equals the sum of the numerical ranking
for each performance criteria multiplied by the weighting assigned to each of
the performance criteria ("Point Total"). The performance criteria include, but
are not limited to, net operating cash flow per unit, finding and development
costs per unit, reserve replacement ratio and volume increase, as determined by
the Plan Administrator. The overall ranking of the Company shall be determined
by quartile with a ranking in the first (1st) quartile (e.g., the Company's
Point Total is equal to or greater than the Point Total of at least seventy-five
percent (75%) of the Performance Peer Group) corresponding to the highest
quartile of Point Totals, a ranking in the second (2nd) quartile (e.g., the
Company's Point Total is equal to or greater than the Point Total of a least
fifty percent (50%) of the

                                       4
<PAGE>

Performance Peer Group) corresponding to the second highest quartile of Point
Totals, a ranking in the third (3rd) quartile (e.g., the Company's Point Total
is equal to or greater than the Point Total of at least twenty-five percent
(25%) of the Performance Peer Group) corresponding to the third highest quartile
of Point Totals and a ranking in the fourth (4th) quartile (e.g., the Company's
Point Total is less than the Point Total of twenty-five percent (25%) of the
Performance Peer Group) corresponding to the last quartile of Point Totals.

2.17     PERMANENT DISABILITY OR PERMANENTLY DISABLED

         A Participant shall be deemed to have become Permanently Disabled for
purposes of the Plan if the Management Committee shall find upon the basis of
medical evidence satisfactory to the Management Committee that the Participant
is totally disabled, whether due to physical or mental condition, so as to be
prevented from engaging in further employment by any of the Production
Companies, and that such disability will be permanent and continuous during the
remainder of the Participant's life.

2.18     PLAN ADMINISTRATOR

         The Management Committee shall, pursuant to Section 3, administer the
Plan.

2.19     PRODUCTION COMPANIES

         The Company and its subsidiaries and affiliated companies that produce
oil and natural gas.

2.20     RESTRICTED STOCK

         Common Stock granted under the Plan that is subject to certain
requirements and restrictions, as the Plan Administrator may determine.

2.21     VALUATION DATE

         The date for determining the Adjusted Value for Annual Target Awards to
be credited to a ledger account for the Participant in accordance with Section
6.5.

                            SECTION 3 ADMINISTRATION

3.1      ADMINISTRATION

         The Plan shall be administered by the Management Committee, unless the
Board of Directors or Compensation Committee of the Board of Directors of the
Parent Company shall otherwise designate a different administrator of the Plan.
The administrator of the Plan is referred to herein as the "Plan Administrator."
The members

                                       5
<PAGE>

of the Management Committee serving as Plan Administrator shall be appointed by
the Chief Executive Officer of the Parent Company for such term as the Chief
Executive Officer may determine. The Chief Executive Officer may from time to
time remove members from, or add members to, the Management Committee.

         Except for the terms and conditions explicitly set forth in the Plan,
the Plan Administrator shall have sole authority to construe and interpret the
Plan, to establish, amend and rescind rules and regulations relating to the
Plan, to select persons eligible to participate in the Plan, to pay or credit
awards hereunder, to administer the Plan, to make recommendations to the Board
of Directors or the Compensation Committee thereof, and to take all such steps
and make all such determinations in connection with the Plan and awards
hereunder as it may deem necessary or advisable, which determination shall be
final and binding upon all Participants. The Plan Administrator shall cause the
Company, at its expense, to take any action related to the Plan which may be
necessary to comply with the provisions of any federal or state law or any
regulations issued thereunder, which the Plan Administrator determines are
intended to be complied with.

         Each member of the Management Committee acting as Plan Administrator,
while serving as such, shall be considered to be acting in his or her capacity
as an officer of the Company. Members of the Management Committee shall be fully
protected in relying in good faith upon the advice of counsel and shall incur no
liability except for gross negligence or willful misconduct in the performance
of their duties.

                              SECTION 4 ELIGIBILITY

4.1      PARTICIPANTS

         To be eligible for selection by the Plan Administrator to participate
in the Plan, an individual must be an officer or key management employee (other
than an employee who is a member of a unit covered by a collective bargaining
agreement) of one or more of the Production Companies. The Plan Administrator
shall determine whether employees hired by the Production Companies or
transferred into positions of responsibility eligible to participate in the Plan
after the beginning of a Performance Period shall become eligible to participate
in the Plan. Employees eligible to participate in the Plan shall be identified
on Exhibit A of the Plan. Exhibit A shall be amended as necessary to include new
Participants in the Plan or remove Participants from the Plan who are no longer
eligible to participate in the Plan, as determined by the Plan Administrator.
Participation in the Plan shall not preclude Participants from being eligible to
participate in corporate incentive compensation plans and programs of the Parent
Company.

                   RESERVED: SECTION 5 RESTRICTED COMMON STOCK
                                   AWARD POOL

                                       6
<PAGE>

                       SECTION 6 LONG-TERM INCENTIVE AWARD

6.1      PERFORMANCE PERIOD

      The "Performance Period" as used in the Plan shall mean the period of
twelve (12) consecutive months beginning on January 1 and ending on December 31,
or such other period as the Plan Administrator shall determine.

6.2      ANNUAL TARGET AWARD

         Prior to the beginning of each Performance Period or within ninety (90)
days thereafter, the Plan Administrator shall determine the Annual Target Award
for each Participant for that particular Performance Period.

6.3      ADJUSTED VALUE

      The determination of the Adjusted Value for crediting of the Annual Target
Award as of any relevant Valuation Date shall be made based on the Company's
Performance Ranking Position for the applicable Performance Period compared to
the Performance Ranking Position of the Performance Peer Group, based on the
following schedule:

<Table>
<Caption>
                          Company's Performance                        Adjusted
                            Ranking Position                            Value
                          ---------------------                        --------
<S>                                                                    <C>
                                1st Place                                200%
                              1st Quartile                               150%
                              2nd Quartile                               100%
                              3rd Quartile                               50%
                              4th Quartile                                0%
</Table>

The Adjusted Value may be increased or decreased by ten percent (10%) based on
the Company's safety and/or environmental performance as determined in
accordance with the Company's Environmental, Health & Safety Action Plan and
compared against industry standards, including total loss time and reportable
incident rates, as determined by the Plan Administrator.

         If any company which is a member of the Performance Peer Group (i)
ceases to exist by reason of a liquidation, merger or other transaction; (ii)
undergoes a significant alteration in size, through recapitalization or
otherwise, such that its total market capitalization as determined from its
published financial statements is more than fifty percent (50%) greater or less
than its total market capitalization as of the Valuation Date for the applicable
Performance Period; or (iii) otherwise changes its line of business
significantly to make it inappropriate to use such company in comparison, and if
such event(s) occurs after the time the Plan Administrator may alter the
Performance Peer Group under Section 2.14 above, then such company shall be
considered to remain in the

                                       7
<PAGE>

Performance Peer Group, and to have achieved a Point Total less than the
Company's Point Total without regard to any actual Point Total actually achieved
by such company, provided, however, that the Plan Administrator shall have the
authority to reduce the Adjusted Value in such event if it determines that such
reduction is appropriate in view of the Company's performance relative to those
companies in the Performance Peer Group and not described in clauses (i), (ii)
or (iii), above or make any other adjustments to the Adjusted Value as the Plan
Administrator shall determine is appropriate.

6.4      PERFORMANCE CERTIFICATION

         The Plan Administrator shall certify in writing, prior to crediting the
Annual Target Award to a ledger account for the Participant for the Performance
Period pursuant to Section 6.5, the Company's Performance Ranking Position. In
no event will an award be payable under the Plan in respect of a Performance
Period if the Company's Performance Ranking Position in that Performance Period
is in the fourth (4th) quartile.

6.5      REQUIRED PAYMENT

         (a)      ANNUAL TARGET AWARD

         Except as provided in Section 6.7 (or unless the Plan Administrator
otherwise determines at any time that the form of payment should be changed), an
amount equal to the product of the Adjusted Value and the Annual Target Award
shall be credited to a ledger account for the Participant as soon as reasonably
practicable following the Valuation Date at the end of the Performance Period.

         (b)      TOTAL MAXIMUM AWARD

         Subject to Section 6.7, an amount equal to the sum of the Annual Target
Award(s), if any, credited to the Participant's ledger account at the end of the
Performance Cycle shall be paid, in cash, or if Section 6.6 is applicable, in
shares of restricted stock, to the Participant as soon as reasonably practicable
following the applicable Valuation Date of the last Performance Period in the
Performance Cycle.

6.6      CONVERSION RIGHT

         (a)      RESTRICTED COMMON STOCK

         Subject to Section 6.7, if at any time before the end of a Performance
Cycle, an initial offering of the Company's Common Stock is made to the public
("Initial Public Offering") or the Company is spun off from the Parent Company
("Spin-off"), the total amount credited to the Participant's ledger account at
the time of the Initial Public Offering or Spin-off shall be converted into
shares of Restricted Common Stock. The value of the Restricted Common Stock
shall be equal to the Fair Market Value of the Company's Common Stock on the
first business day the Common Stock is traded to the

                                       8
<PAGE>

public. If an Initial Public Offering or Spin-off occurs on any day of the
Performance Period other than the first day, the Company's Performance Ranking
Position shall be determined after the end of the Performance Period in which
the Initial Public Offering or Spin-off occurs, and the Annual Target Award
pursuant to Section 6.5, if any, shall be in the form of Restricted Common Stock
for the Performance Period in which the Initial Public Offering or Spin-off
occurs and each remaining Performance Period of the Performance Cycle. The
restrictions on the shares will lapse at the end of the Performance Cycle (the
"Restriction Period").

         Each conversion or award of Restricted Common Stock shall be evidenced
by a written instrument delivered by or on behalf of the Company containing
provisions not inconsistent with this Plan, which may (but need not) require the
Participant's signature. The Participant receiving such Restricted Common Stock
shall be recorded as a stockholder of the Company. Each Participant who receives
Restricted Common Stock shall have all the rights of a stockholder with respect
to the shares, including the right to vote the shares and receive dividends and
other distributions; provided, however, that no Participant who receives
Restricted Common Stock shall have any right as a stockholder with respect to
any shares 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.

         An award of Restricted Common Stock shall entitle a Participant to
receive, on the date or dates designated by the Plan Administrator, or, if
later, upon payment to the Company of the par value of the Common Stock, if
required, in a manner determined by the Plan Administrator, the number of shares
of Common Stock selected by the Plan Administrator. The Plan Administrator may
require, under such terms and conditions as it deems appropriate or desirable,
that the certificates for Restricted Common 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 Common Stock that the Participant shall have delivered a
stock power endorsed in blank relating to the shares of Restricted Common Stock.

         (b)      CERTIFICATE OR BOOK-ENTRY ACCOUNT

         Subject to Section 6.6(a), a Participant entitled to receive Restricted
Common Stock under the Plan shall be issued a certificate, or have a book-entry
account established, for such shares. Such certificate, or book-entry account,
shall be registered in the name of the Participant, and shall bear an
appropriate legend reciting the terms, conditions and restrictions, if any,
applicable to such shares and shall be subject to appropriate stop-transfer
orders.

         (c)      TRANSFERABILITY

         During the term of the Restriction Period, the Restricted Common Stock
may not be sold, assigned, transferred, pledged, hypothecated or otherwise
encumbered or

                                       9
<PAGE>

disposed of by the recipient, except in the event of death or termination of
employment on account of Permanent Disability or a Change in Control, or the
transfer to the Company as provided under the Plan. In the event of any attempt
by the Participant to sell, exchange, transfer, pledge or otherwise dispose of
shares of Restricted Common Stock in violation of the terms of the Plan without
the Company's prior written consent, such shares shall be forfeited to the
Company.

         (d)      DELIVERY OF COMMON STOCK

         When the restrictions imposed by Section 6.6(c) expire or otherwise
lapse with respect to one or more shares of Restricted Common Stock, the Company
shall deliver to the Participant (or the Participant's legal representative,
Beneficiary or heir) a certificate, or have a book-entry account established,
representing one (1) share of Common Stock in cancellation and satisfaction of
each share of Restricted Common Stock.

SECTION 6.7       DEATH, DISABILITY, TERMINATION OF EMPLOYMENT OR CHANGE IN
                  CONTROL

         (a)      PAYMENT UPON DEATH OR DISABILITY

         Participants (or their Beneficiaries in the case of their deaths) who
have died or become Permanently Disabled prior to the end of the Performance
Cycle, shall be entitled to a benefit under the Plan in an amount equal to the
total amount credited to the Participant's ledger account, if any, plus the pro
rata portion of the Participant's Annual Target Award for the Performance Period
in which the Participant's death or Permanent Disability occurred. Such payment
shall be made as soon as reasonably practicable following the end of the
Performance Period in which the Participant's death or Permanent Disability
occurred. The Restriction Period for any Participant shall be deemed to end and
all restrictions on shares of Restricted Stock shall lapse in the event of a
Participant's death or Permanent Disability.

         (b)      PAYMENT UPON A TERMINATION OF EMPLOYMENT

         Participants who are involuntarily terminated from the Company without
cause prior to the end of the Performance Cycle shall be entitled to a benefit
under the Plan in an amount equal to the total amount credited to the
Participant's ledger account at the time of the Participant's termination, if
any, plus the pro rata portion of the Participant's Annual Target Award for the
Performance Period in which the Participant's termination occurred; provided,
however, the Plan Administrator shall determine whether a participant who is
involuntarily terminated without cause during the first plan year shall be
entitled to receive any award under the Plan. Such payment shall be made as soon
as reasonably practicable following the end of the Performance Period in which
the Participant's termination occurred. Participants who transfer from the
Production Companies to the Parent Company or any of its subsidiaries or
affiliates prior to the end of the Performance Cycle shall be entitled to a
benefit under the Plan in an amount equal to the total amount credited to the
Participant's ledger account, if any, plus the pro rata

                                       10
<PAGE>

portion of the Participant's Annual Target Award for the Performance Period in
which the Participant's transfer occurred; provided, however, the Plan
Administrator shall determine whether a participant who is transferred during
the first plan year shall be entitled to receive any award under the Plan. Such
payment shall be made as soon as reasonably practicable following the end of the
Performance Period in which the Participant's transfer occurred. Unless the Plan
Administrator shall determine otherwise, Participants who voluntarily terminate
their employment or are terminated with cause before the end of the Performance
Cycle shall not be entitled to receive payment for any amount credited to their
ledger account under this Section 6.7.

         The Restriction Period shall be deemed to end and all restrictions
shall lapse on shares of Restricted Stock upon any termination of employment
determined by the Plan Administer to end the Restriction Period; provided,
however, in the case of a Participant who voluntarily terminates his or her
employment or is terminated with cause before the end of the Performance Cycle,
any shares of Restricted Common Stock still subject to restriction shall be
forfeited by the Participant to the Company.

         (c)      PAYMENT UPON A CHANGE IN CONTROL

         Notwithstanding any other provision in the Plan to the contrary, in the
event of a Change in Control of the Company, the current Performance Cycle shall
immediately end and the Participant shall be paid a benefit under the Plan in an
amount equal to the total amount credited to the Participant's ledger account at
the time of the Change in Control, plus the pro rata portion of the
Participant's Annual Target Award for the Performance Period in which the Change
in Control occurred. In the event of a Change in Control of the Company after an
Initial Public Offering or Spin-off, the Restriction Period for any Participant
shall be deemed to end and all restrictions on shares of Restricted Common Stock
shall terminate immediately.

                  SECTION 7   REGULATORY APPROVALS AND LISTING

         The Company shall not be required to issue any certificate for
Restricted Common Stock awarded 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

                                       11
<PAGE>

         which the Company, in its sole discretion, shall determine to be
         necessary or advisable.

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

                  SECTION 8 EFFECTIVE DATE AND TERM OF THE PLAN

8.1      EFFECTIVE DATE AND TERM OF THE PLAN

         The Plan was approved by the Compensation Committee of the Board of
Directors of the Parent Company on December 6, 2003, and adopted by the
Management Committee on December 6, 2003. The Plan shall be effective as of
January 1, 2003, and shall continue through December 31, 2005 or until
terminated pursuant to Section 10.

                          SECTION 9 GENERAL PROVISIONS

9.1      NO RIGHT TO CONTINUED EMPLOYMENT

         Nothing contained in the Plan, or in any right to an award under the
Plan, shall confer upon any employee any right with respect to continuance of
employment by the Production Companies, nor interfere in any way with the right
of the Production Companies to terminate the employment of such employee at any
time with or without assigning any reason therefor.

                                       12
<PAGE>

9.2      OTHER BENEFITS

         The awards to be paid 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 Production Companies, or required by law or by contractual
obligations of the Production Companies.

9.3      ASSIGNMENT

         The right of a Participant or Beneficiary to an 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. The Plan and any and all obligations under the Plan may be transferred
or assigned, as determined by the Plan Administrator, by the Company to an
affiliate or subsidiary at any time.

9.4      LEAVES OF ABSENCE

         Leaves of absence for such periods and purposes conforming to the
personnel policy of the Production Companies, 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 Production Companies. With respect to any Participant who
after the date an award is received under this Plan ceases to be employed by the
Production Companies 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 amount payable to such Participant.

9.5      TRANSFERS AND PROMOTIONS

         In the event a Participant is transferred from one of the Production
Companies to another of the Production Companies, or is promoted or given
different responsibilities, an award received by the Participant prior to such
date shall not be affected.

9.6      UNFUNDED OBLIGATIONS

         The awards (including any and all amounts credited to a Participant's
ledger account) to be paid to Participants pursuant to the Plan are unfunded
obligations of the Company. The Plan Administrator, in its sole discretion, may
allocate to a Production Company the costs of the awards paid to Participants
who are employees of that Production Company. No Production Company 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. 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

                                       13
<PAGE>

Participant account shall not create or constitute a trust or a fiduciary
relationship between the Plan Administrator, any Production Company 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 any Production Company 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.

9.7      DISCRETIONARY INVESTMENT BY COMPANY

         The Management Committee may from time to time direct that an amount
equal to the credited amounts in the Participants' ledger accounts shall be
invested by the Company as the Management Committee, in its sole discretion,
shall determine. The Management Committee may, in its sole discretion, determine
that all or some portion of an amount equal to the credited amounts shall be
paid into one or more grantor trusts to be established by the Company of which
it shall be the beneficiary, and to the assets of which it shall become entitled
as and to the extent that Participants receive benefits under this Plan (or
their Beneficiaries in the case of their deaths). The Management Committee may
designate an investment advisor(s) to direct investments and reinvestments of
funds, including investments of any grantor trusts hereunder.

9.8      BENEFICIARY

         The designation of a Beneficiary shall be on a form provided by the
Plan Administrator, executed by the Participant (with the consent of the
Participant's spouse, if required by the Plan Administrator for reasons of
community property or otherwise), and delivered to the Plan Administrator. A
Participant may change his or her Beneficiary designation at any time. 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 9.8.

9.9      WITHHOLDING TAXES

         Appropriate provision shall be made for all taxes required to be
withheld in connection with any taxable event with respect to awards paid under
the Plan under the applicable laws and regulations of any governmental
authority, whether federal, state or local and whether domestic or foreign,
including, but not limited to, the required withholding of a sufficient number
of shares of Common Stock otherwise issuable to a Participant to satisfy the
said required minimum tax withholding obligations. At the election of the Plan
Administrator or, subject to approval of the Plan Administrator at its sole
discretion, at the election of a Participant, shares of Common Stock may be
withheld

                                       14
<PAGE>

from the shares issuable to the Participant upon the vesting of the Restricted
Common Stock to satisfy tax withholding obligations. The Fair Market Value of
Common Stock as delivered pursuant to this Section 9.9 shall be determined as of
the day prior to delivery, and shall be calculated in accordance with Section
2.9.

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

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

9.10     APPLICABLE LAW

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

         SECTION 10 AMENDMENT, TERMINATION OR DISCONTINUANCE OF THE PLAN

10.1     TERMINATION AND AMENDMENT

         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, but not limited to, any amendment necessary to ensure that the
Company may obtain any regulatory approval referred to in Section 7; provided,
however, that no amendment to the Plan shall reduce any amount credited to the
Participant as of the effective date of the amendment.

         The Plan Administrator may at any time suspend the operation of or
terminate the Plan. Any such suspension or termination of the Plan shall be
effective as of the end of the Performance Period. In the event the Plan is
suspended or terminated under this Section 10, any benefit due to the
Participants under the Plan shall be paid as soon as reasonably possible at the
time of termination of the Plan.

                                       15
<PAGE>

         IN WITNESS WHEREOF, the Company has caused the Plan to be executed
effective as of January 1, 2003.

                                            EL PASO PRODUCTION COMPANY

                                            By:   /s/ David E. Zerhusen
                                                --------------------------------
                                                David E. Zerhusen
                                                Executive Vice President
                                                Administration

ATTEST:

By:      /s/ David L. Siddall
    --------------------------------------
Title: Corporate Secretary

                                       16

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