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Exhibit 4.2  

 
 

DIALPAD ACQUISITION CORPORATION
  2002 STOCK PLAN
  (AS AMENDED ON 10/17/03)    
    

        1.    Purposes of the Plan.    The purposes of this Stock Plan are to attract and retain the best available personnel
for positions of substantial responsibility, to provide additional incentive to Employees, Directors and Consultants and to promote the success of the Company's business. Options granted under the
Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant. Stock Purchase Rights may also be granted under the Plan. 

        2.    Definitions.    As used herein, the following definitions shall apply: 

        (a)   "Administrator" means the Board or any of its Committees as shall be administering the Plan in accordance with
Section 4 hereof. 

        (b)   "Applicable Laws" means the requirements relating to the administration of stock option plans under U.S. state corporate
laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or
jurisdiction where Options or Stock Purchase Rights are granted under the Plan. 

        (c)   "Board" means the Board of Directors of the Company. 

        (d)   "Code" means the Internal Revenue Code of 1986, as amended. 

        (e)   "Committee" means a committee of Directors appointed by the Board in accordance with Section 4 hereof. 

        (f)    "Common Stock" means the Common Stock of the Company. 

        (g)   "Company" means Dialpad Acquisition Corporation, a Delaware corporation. 

        (h)   "Consultant" means any person who is engaged by the Company or any Parent or Subsidiary to render consulting or advisory
services and is compensated for such services. 

        (i)    "Director" means a member of the Board of Directors of the Company. 

        (j)    "Employee" means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the
Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 181st day of such leave any Incentive Stock Option held by
the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as a Director nor payment of a director's fee
by the Company shall be sufficient to constitute "employment" by the Company. 

        (k)   "Exchange Act" means the Securities Exchange Act of 1934, as amended. 

        (l)    "Fair Market Value" means, as of any date, the value of Common Stock determined as follows: 

          (i)  If
the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq
SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such 

 

exchange
or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; 

         (ii)  If
the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high
bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination; or 

        (iii)  In
the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator. 

        (m)  "Incentive Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of
Section 422 of the Code. 

        (n)   "Nonstatutory Stock Option" means an Option not intended to qualify as an Incentive Stock Option. 

        (o)   "Officer" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and
the rules and regulations promulgated thereunder. 

        (p)   "Option" means a stock option granted pursuant to the Plan. 

        (q)   "Option Agreement" means an agreement between the Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan. 

        (r)   "Option Exchange Program" means a program whereby outstanding Options are exchanged for Options with a lower exercise
price. 

        (s)   "Optioned Stock" means the Common Stock subject to an Option or a Stock Purchase Right. 

        (t)    "Optionee" means the holder of an outstanding Option or Stock Purchase Right granted under the Plan. 

        (u)   "Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the
Code. 

        (v)   "Plan" means this 1999 Stock Plan. 

        (w)  "Restricted Stock" means shares of Common Stock acquired pursuant to a grant of a Stock Purchase Right under
Section 11 below. 

        (x)   "Section 16(b)" means Section 16(b) of the Securities Exchange Act of 1934, as amended. 

        (y)   "Service Provider" means an Employee, Director or Consultant. 

        (z)   "Share" means a share of the Common Stock, as adjusted in accordance with Section 12 below. 

        (aa) "Stock Purchase Right" means a right to purchase Common Stock pursuant to Section 11 below. 

        (bb) "Subsidiary" means a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of
the Code. 

        3.    Stock Subject to the Plan.    Subject to the provisions of Section 12 of the Plan, the maximum aggregate
number of Shares which may be subject to option and sold under the Plan is 5,500,000 Shares. The Shares may be authorized but unissued, or reacquired Common Stock. 

2

 

        If
an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased
Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). However, Shares that have actually been issued under the Plan, upon
exercise of either an Option or Stock Purchase Right, shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if Shares of Restricted Stock
are repurchased by the
Company at their original purchase price, such Shares shall become available for future grant under the Plan. 

        4.    Administration of the Plan.    

        (a)   The
Plan shall be administered by the Board or a Committee appointed by the Board, which Committee shall be constituted to comply with Applicable Laws. 

        (b)    Powers of the Administrator.    Subject to the provisions of the Plan and, in the case of a Committee, the
specific duties delegated by the Board to such Committee, and subject to the approval of any relevant authorities, the Administrator shall have the authority in its discretion: 

          (i)  to
determine the Fair Market Value; 

         (ii)  to
select the Service Providers to whom Options and Stock Purchase Rights may from time to time be granted hereunder; 

        (iii)  to
determine the number of Shares to be covered by each such award granted hereunder; 

        (iv)  to
approve forms of agreement for use under the Plan; 

         (v)  to
determine the terms and conditions, of any Option or Stock Purchase Right granted hereunder. Such terms and conditions include, but are not limited to, the exercise
price, the time or times when Options or Stock Purchase Rights may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Option or Stock Purchase Right or the Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall
determine; 

        (vi)  to
determine whether and under what circumstances an Option may be settled in cash under subsection 9(f) instead of Common Stock; 

       (vii)  to
reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option has declined since
the date the Option was granted; 

      (viii)  to
initiate an Option Exchange Program; 

        (ix)  to
prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the
purpose of qualifying for preferred tax treatment under foreign tax laws; 

         (x)  to
allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or Stock
Purchase Right that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by Optionees to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem
necessary or advisable; and 

3

 

        (xi)  to
construe and interpret the terms of the Plan and awards granted pursuant to the Plan. 

        (c)    Effect of Administrator's Decision.    All decisions, determinations and interpretations of the Administrator
shall be final and binding on all Optionees. 

        5.    Eligibility.    

        (a)   Nonstatutory
Stock Options and Stock Purchase Rights may be granted to Service Providers. Incentive Stock Options may be granted only to Employees. 

        (b)   Each
Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to
the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans
of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted. 

        (c)   Neither
the Plan nor any Option or Stock Purchase Right shall confer upon any Optionee any right with respect to continuing the Optionee's relationship as a Service
Provider with the Company, nor shall it interfere in any way with his or her right or the Company's right to terminate such relationship at any time, with or without cause. 

        6.    Term of Plan.    The Plan shall become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 14 of the Plan. 

        7.    Term of Option.    The term of each Option shall be stated in the Option Agreement; provided, however, that the
term shall be no more than ten (10) years from the date of grant thereof. In the case of an Incentive Stock Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of
grant or such shorter term as may be provided in the Option Agreement. 

        8.    Option Exercise Price and Consideration.    

        (a)   The
per share exercise price for the Shares to be issued upon exercise of an Option shall be such price as is determined by the Administrator, but shall be subject to
the following: 

          (i)  In
the case of an Incentive Stock Option 

        (A)  granted
to an Employee who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. 

        (B)  granted
to any other Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. 

         (ii)  In
the case of a Nonstatutory Stock Option 

        (A)  granted
to a Service Provider who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock
of the Company or any Parent or Subsidiary, the exercise price shall be no less than 110% of the Fair Market Value per Share on the date of the grant. 

4

 

        (B)  granted
to any other Service Provider, the per Share exercise price shall be no less than 85% of the Fair Market Value per Share on the date of grant. 

        (iii)  Notwithstanding
the foregoing, Options may be granted with a per Share exercise price other than as required above pursuant to a merger or other corporate transaction. 

        (b)   The
consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in
the case of an Incentive Stock Option, shall be determined at the time of grant). Such consideration may consist of (1) cash, (2) check, (3) promissory note, (4) other
Shares which (x) in the case of Shares acquired upon exercise of an Option, have been owned by the Optionee for more than six months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option shall be exercised, (5) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan, or (6) any combination of the foregoing methods of payment. In making its determination as to the type of consideration
to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company. 

        9.    Exercise of Option.    

        (a)    Procedure for Exercise; Rights as a Shareholder.    ny Option granted hereunder shall be exercisable according
to the terms hereof at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement, but in no case at a rate of less than 20% per year over five
(5) years from the date the Option is granted. Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be tolled during any unpaid leave of absence. An Option
may not be exercised for a fraction of a Share. 

        An
Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to
exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the
name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Shares, notwithstanding the exercise
of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is
prior to the date the Shares are issued, except as provided in Section 12 of the Plan. 

        Exercise
of an Option in any manner shall result in a decrease in the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of
Shares as to which the Option is exercised. 

        (b)    Termination of Relationship as a Service Provider.    If an Optionee ceases to be a Service Provider, such
Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement (of at least thirty (30) days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option as set forth in the Option Agreement). To the extent that the Optionee is not entitled to exercise the Option on the
date of such termination, or if the Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan. 

5

 

        (c)    Disability of Optionee.    If an Optionee ceases to be a Service Provider as a result of Optionee's disability,
the Optionee may within twelve (12) months from the date of such termination (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement),
exercise an Option to the extent otherwise entitled to exercise it at the date of such termination. If such disability is not a "disability" as such term is defined in Section 22(e)(3) of the
Code, in the case of an Incentive Stock Option such Incentive Stock Option shall automatically cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option on the day three months and one day following such termination. To the extent that the Optionee is not entitled to exercise the Option on the date of termination, or if the Optionee does
not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. 

        (d)    Death of Optionee.    If an Optionee dies while a Service Provider, the Option may be exercised at any time
within twelve (12) months following the date of death (but in no event later than the expiration of the term of such Option as set forth in the Notice of Grant) to the extent vested on the date
of death. If, at the time of death, the Optionee is not vested as to the entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. The Option may be exercised
by the executor or administrator of the Optionee's estate or, if none, by the person(s) entitled to exercise the Option under the Optionee's will or the laws of descent or distribution. If the Option
is not so exercised within
the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. 

        (e)    Buyout Provisions.    The Administrator may at any time offer to buy out for a payment in cash or Shares, an
Option previously granted, based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made. 

        10.    Non-Transferability of Options and Stock Purchase Rights.    Options and Stock Purchase Rights may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. 

        11.    Stock Purchase Rights.    

        (a)    Rights to Purchase.    Stock Purchase Rights may be issued either alone, in addition to, or in tandem with
other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree
in writing or electronically of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid, and
the time within which such person must accept such offer. The terms of the offer shall comply in all respects with Section 260.140.42 of Title 10 of the California Code of Regulations. The
offer shall be accepted by execution of a Restricted Stock purchase agreement in the form determined by the Administrator. 

        (b)    Repurchase Option.    Unless the Administrator determines otherwise, the Restricted Stock purchase agreement
shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser's service with the Company for any reason (including death or disability). The
purchase price for Shares repurchased pursuant to the Restricted Stock purchase agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at such rate as the Administrator may determine, but in no case at a rate of less than 20% per year over five years from the date of
purchase. 

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        (c)    Other Provisions.    The Restricted Stock purchase agreement shall contain such other terms, provisions and
conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. 

        (d)    Rights as a Shareholder.    Once the Stock Purchase Right is exercised, the purchaser shall have rights
equivalent to those of a shareholder and shall be a shareholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment shall be made
for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 12 of the Plan. 

        12.    Adjustments Upon Changes in Capitalization, Merger or Asset Sale.    

        (a)    Changes in Capitalization.    Subject to any required action by the shareholders of the Company, the number of
shares of Common Stock covered by each outstanding Option or Stock Purchase Right, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no
Options or Stock Purchase Rights have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option or Stock Purchase Right, as well as the price per share of
Common Stock covered by each such outstanding Option or Stock Purchase Right, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company. The conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock
subject to an Option or Stock Purchase Right. 

        (b)    Dissolution or Liquidation.    In the event of the proposed dissolution or liquidation of the Company, the
Administrator shall notify the Optionee at least fifteen (15) days prior to such proposed action. To the extent it has not been previously exercised, the Option or Stock Purchase Right shall
terminate immediately prior to the consummation of such proposed action. 

        (c)    Merger or Asset Sale.    In the event of a merger of the Company with or into another corporation, or the sale
of substantially all of the assets of the Company, each outstanding Option and Stock Purchase Right shall be assumed or an equivalent option or right substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option or Stock Purchase Right, the Optionee shall fully vest in
and have the right to exercise the Option or Stock Purchase Right as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or Stock
Purchase Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee in writing or
electronically that the Option or Stock Purchase Right shall be fully exercisable for a period of fifteen (15) days from the date of such notice, and the Option or Stock Purchase Right shall
terminate upon the expiration of such period. For the purposes of this paragraph, the Option or Stock Purchase Right shall be considered assumed if, following the merger or sale of assets, the option
or right confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option or Stock Purchase Right immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of 

7

 

consideration
chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets is not solely common stock of the
successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock Purchase Right, to be solely common stock of the successor corporation or its Parent equal in fair market value to the
per share consideration received by holders of Common Stock in the merger or sale of assets. 

        13.    Time of Granting Options and Stock Purchase Rights.    The date of grant of an Option or Stock Purchase Right
shall, for all purposes, be the date on which the Administrator makes the determination granting such Option or Stock Purchase Right, or such other date as is determined by the Administrator. Notice
of the determination shall be given to each Employee or Consultant to whom an Option or Stock Purchase Right is so granted within a reasonable time after the date of such grant. 

        14.    Amendment and Termination of the Plan.    

        (a)    Amendment and Termination.    The Board may at any time amend, alter, suspend or terminate the Plan. 

        (b)    Shareholder Approval.    The Board shall obtain shareholder approval of any Plan amendment to the extent
necessary and desirable to comply with Applicable Laws. 

        (c)    Effect of Amendment or Termination.    No amendment, alteration, suspension or termination of the Plan shall
impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such
termination. 

        15.    Conditions Upon Issuance of Shares.    

        (a)    Legal Compliance.    Shares shall not be issued pursuant to the exercise of an Option unless the exercise of
such Option and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance. 

        (b)    Investment Representations.    As a condition to the exercise of an Option, the Administrator may require the
person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute
such Shares if, in the opinion of counsel for the Company, such a representation is required. 

        16.    Inability to Obtain Authority.    The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 

        17.    Reservation of Shares.    The Company, during the term of this Plan, shall at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. 

        18.    Shareholder Approval.    The Plan shall be subject to approval by the shareholders of the Company within twelve
(12) months after the date the Plan is adopted. Such shareholder approval shall be obtained in the degree and manner required under Applicable Laws. 

        19.    Information to Optionees and Purchasers.    The Company shall provide to each Optionee and to each individual
who acquires Shares pursuant to the Plan, not less frequently than annually during 

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the
period such Optionee or purchaser has one or more Options or Stock Purchase Rights outstanding, and, in the case of an individual who acquires Shares pursuant to the Plan, during the period such
individual owns such Shares, copies of annual financial statements. The Company shall not be required to provide such statements to key employees whose duties in connection with the Company assure
their access to equivalent information. 

9

QuickLinks

DIALPAD ACQUISITION CORPORATION 2002 STOCK PLAN (AS AMENDED ON 10/17/03)Exhibit 10.1 2005 Comp Plan for Non-Employee Directors

    
      
        
          
            

          

        

        EXHIBIT
          10.1

      

       

       

       

      EL
        PASO
        CORPORATION

      

      

      2005
        COMPENSATION PLAN

      FOR

      NON-EMPLOYEE
        DIRECTORS

       

      

      

      TABLE
        OF
        CONTENTS

       

       

      

      
        	
                SECTION
                  1

              	 	
                PURPOSE

              	
                1

              
	
                1.1

              	 	
                Purpose

              	
                1

              
	 	 	 	 
	
                SECTION
                  2

              	 	
                ADMINISTRATION

              	
                1

              
	
                2.1

              	 	
                Management
                  Committee

              	
                1

              
	 	 	 	 
	
                SECTION
                  3

              	 	
                PARTICIPATION

              	
                1

              
	
                3.1

              	 	
                Participants

              	
                1

              
	 	 	 	 
	
                SECTION
                  4

              	 	
                SHARES
                  AVAILABLE FOR THE PLAN

              	
                2

              
	
                4.1

              	 	
                Maximum
                  Number of Shares

              	
                2

              
	
                4.2

              	 	
                Adjustment
                  to
                  Number of Shares

              	
                2

              
	 	 	 	 
	
                SECTION
                  5

              	 	
                COMPENSATION

              	
                2

              
	
                5.1

              	 	
                Amount
                  of
                  Compensation

              	
                2

              
	
                5.2

              	 	
                Compensation
                  Election

              	
                2

              
	
                5.3

              	 	
                Plan
                  Year

              	
                3

              
	
                5.4

              	 	
                Plan
                  Quarter

              	
                3

              
	 	 	 	 
	
                SECTION
                  6

              	 	
                DEFERRED
                  COMPENSATION

              	
                3

              
	
                6.1

              	 	
                Deferred
                  Cash

              	
                3

              
	
                6.2

              	 	
                Deferred
                  Common Stock

              	
                3

              
	
                6.3

              	 	
                Memorandum
                  Deferred Account

              	
                4

              
	
                6.4

              	 	
                Discretionary
                  Investment by Company

              	
                5

              
	 	 	 	 
	
                SECTION
                  7

              	 	
                LONG-TERM
                  EQUITY

              	
                5

              
	
                7.1

              	 	
                Long-Term
                  Equity Credit

              	
                5

              
	 	 	 	 
	
                SECTION
                  8

              	 	
                PHANTOM
                  STOCK
                  UNITS

              	
                5

              
	
                8.1

              	 	
                Phantom
                  Stock
                  Units

              	
                5

              
	 	 	 	 
	
                SECTION
                  9

              	 	
                PAYMENT
                  OF
                  DEFFERED COMPENSATION

              	
                6

              
	
                9.1

              	 	
                Payment
                  of
                  Deferred Cash

              	
                6

              
	
                9.2

              	 	
                Payment
                  of
                  Deferred Common Stock

              	
                7

              
	
                9.3

              	 	
                Acceleration
                  of Payment of Deferred Cash and Deferred Common Stock

              	
                7

              
	 	 	 	 
	
                SECTION
                  10

              	 	
                GENERAL
                  PROVISIONS

              	
                10

              
	
                10.1

              	 	
                Issuance
                  of
                  Common Stock

              	
                10

              
	
                10.2

              	 	
                Unfunded
                  Obligation

              	
                11

              
	
                10.3

              	 	
                Beneficiary

              	
                11

              
	
                10.4

              	 	
                Permanent
                  Disability

              	
                12

              
	
                10.5

              	 	
                Incapacity
                  of
                  Participant or Beneficiary

              	
                12

              
	
                10.6

              	 	
                Nonassignment

              	
                12

              
	
                10.7

              	 	
                Termination
                  and Amendment

              	
                12

              
	
                10.8

              	 	
                Applicable
                  Law

              	
                13

              
	
                10.9

              	 	
                Effective
                  Date and Term of the Plan

              	
                13

              
	
                10.10

              	 	
                Compliance
                  With Section 16(b) of the Exchange Act

              	
                13

              
	
                10.11

              	 	
                Impact
                  of
                  Future Regulations

              	
                13

              

      

      
      

       

       

       

       

       

      EL
        PASO CORPORATION

       

      2005
        COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS

       

       

       

    

               
      

     

        

    SECTION
      1
      PURPOSE

     

    1.1 Purpose

     

    The
      purpose of the
      Plan is to provide a compensation program for non-employee Directors of El
      Paso
      Corporation (the “Company”), that will attract and retain highly qualified
      individuals to serve as members of the Company’s Board of Directors
      (the “Board”). The Plan permits non-employee Directors of the Company to
      receive their Compensation (as defined below) in the form of cash, deferred
      cash, deferred shares of Company common stock, par value $3 per share, (“Common
      Stock”) or any combination of the foregoing. For purposes of the Plan, the term
“Compensation” shall mean the Participant’s annual retainer and meeting fees, if
      any, for each regular or special meeting of the Board and for any committee
      meetings attended.

     

     

    SECTION
      2
      ADMINISTRATION

    

    2.1 Management
      Committee

     

    Subject
      to Section
      10.7, the Plan shall be administered by a management committee (the “Management
      Committee”) consisting of the Chief Executive Officer of the Company or such
      other senior officers as the Chief Executive Officer shall designate. The
      Management Committee shall interpret the Plan, shall prescribe, amend and
      rescind rules relating to it from time to time as it deems proper and in the
      best interests of the Company, and shall take any other action necessary for
      the
      administration of the Plan. Any decision or interpretation adopted by the
      Management Committee shall be final and conclusive and shall be binding upon
      all
      Participants (as defined in Section 3.1).

     

     

    SECTION
      3
      PARTICIPATION

     

    3.1 Participants

     

    Each
      person who is
      a non-employee Director of the Company on the Effective Date (as defined in
      Section 10.9) of the Plan shall become a participant in the Plan
      (a “Participant”) on the Effective Date. Thereafter, each non-employee
      Director of the Company shall become a Participant immediately upon election
      to
      the Board.

     

     

    SECTION
      4
      SHARES AVAILABLE FOR THE PLAN

     

    4.1 Maximum
      Number of Shares

     

        Subject
      to Section
      4.2, the maximum number ofshares of Common Stock which may at any time be
      awarded under the Plan is two million five hundred thousand (2,500,000) shares
      of Common Stock. Awards may befrom shares held in the Company’s treasury or
      issued out of authorized butunissued shares of the Company, or partly out of
      each, as shall be determined bythe Management Committee.

    

    4.2 Adjustment
      to Number of Shares

     

    In
      the event of
      recapitalization, stock split, stock dividend, exchange of shares, merger,
      reorganization, change in corporate structure or shares of the Company or
      similar event, the Board, upon recommendation of the Management Committee,
      may
      make appropriate adjustments to the number of shares (i) authorized for the
      Plan, and (ii) allocated under the Common Stock Deferral (as defined
      in
      Section 6.2).

     

     

    SECTION
      5
      COMPENSATION

     

    5.1 Amount
      of
      Compensation

     

    Each
      Director’s
      Compensation shall be determined in accordance with the Company’s By-laws and
      shall be paid, unless deferred pursuant to Section 6, in the Plan Year (as
      defined in Section 5.3) in which it is earned in four equal quarterly
      installments with each installment being made on or about the last day of the
      applicable Plan Quarter (as defined in Section 5.4) (the “Payment Date”). The
      Management Committee, if necessary, may determine prior to the beginning of
      the
      applicable Plan Quarter for which Compensation is to be paid that payment shall
      be made at a date later than the Payment Date. 

     

    5.2 Compensation
      Election

     

    Except
      as provided
      in Section 7, by December 31 of the calendar year prior to each Plan Year,
      or at
      such later time as may be provided by Treasury Regulations promulgated under
      Section 409A of the Internal Revenue Code (the “Code”), each Participant may
      elect to receive his or her Compensation for the following Plan Year (as defined
      below) in the form of cash, deferred cash, deferred Common Stock or any
      combination of the foregoing, by submitting a written notice to the Company
      in
      the manner prescribed by the Management Committee. In the case of a
      newly-elected Director, such election may be made within thirty (30) days of
      the
      Director’s election to the Board with respect to Compensation for services
      performed subsequent to the election. Any combination of the alternatives may
      be
      elected, provided the aggregate of the alternatives elected may not exceed
      one
      hundred percent (100%) of the Participant’s Compensation, except as provided in
      Section 6.2(a). Unless otherwise provided under the terms of the Compensation,
      if no election is received by the Company, the Participant shall be deemed
      to
      have made an election to receive his or her Compensation in undeferred cash.
      An
      election under this Section 5.2 shall be irrevocable and shall apply to the
      Compensation earned during the Plan Year (as defined below) for which the
      election is effective.

     

    5.3 Plan
      Year

     

    The
      term “Plan
      Year” shall mean the period which begins on the day of the Company’s annual
      stockholders’ meeting and terminates the day before the succeeding annual
      stockholders’ meeting.

     

    5.4 Plan
      Quarter

     

    The
      term “Plan
      Quarter” shall mean each calendar quarter except that (i) the first Plan Quarter
      of any Plan Year which normally shall be a “short” quarter beginning on the day
      of the annual stockholders’ meeting and ending on June 30, and (ii) the fourth
      Plan Quarter of any Plan Year normally shall be a “long” quarter beginning on
      January 1 and ending on the day before the annual stockholders’
      meeting.

     

     

    SECTION
      6  DEFERRED COMPENSATION

     

    6.1 Deferred
      Cash

     

    If
      a Participant
      elects pursuant to Section 5.2 to have all or a specified percentage of his
      or
      her Compensation deferred in cash, such amount (a “Cash Deferral”) shall be
      recorded in a Memorandum Deferred Account (as defined in Section 6.3) as of
      the
      date the Compensation otherwise would have been paid. 

     

    6.2 Deferred
      Common Stock

     

    (a) If
      a Participant
      elects pursuant to Section 5.2 to have all or a specified percentage of his
      or
      her cash Compensation deferred in Common Stock, or if an amount is required
      to
      be taken in Common Stock pursuant to Section 5.1, and/or the Company’s By-laws,
      an amount shall be recorded in a Memorandum Deferred Account, in the form of
      shares of Common Stock, as determined in subsection (b) below, as of the date
      the Compensation otherwise would have been paid. The amount credited to the
      Participant’s Memorandum Deferred Account in such case (the “Common Stock
      Deferral”) shall be equal to the amount actually deferred plus a premium (the
“Conversion Premium”). The Conversion Premium shall be twenty-five percent (25%)
      of the Compensation actually deferred.

     

    (b) The
      number of
      shares of Common Stock credited to a Participant’s Memorandum Deferred Account
      shall equal the Common Stock Deferral divided by the Fair Market Value of the
      Common Stock on the applicable Payment Date. For purposes of this Plan, “Fair
      Market Value” shall be the mean between the highest and lowest quoted selling
      prices at which the Common Stock is sold on the applicable Payment Date as
      reported in the NYSE Composite Transactions by The
      Wall Street
      Journal
      or any other
      comparable service the Management Committee may determine is reliable on such
      date, or if no Common Stock was traded on such date, on the next preceding
      date
      on which Common Stock was so traded.

     

    (c) Subject
      to Section
      10.1, each Participant who elects deferred Common Stock shall, once the shares
      of Common Stock have been credited to his or her Memorandum Deferred Account,
      receive dividend equivalents and other distributions on such shares, subject
      to
      applicable laws. Any such dividend equivalents and other distributions shall
      be
      deemed reinvested promptly in additional shares of Common Stock and such
      additional shares shall be credited to the Memorandum Deferred Account. To
      the
      extent a trust is established pursuant to Section 6.4, and Common Stock is
      held
      by such trust, each Participant who elects deferred Common Stock shall have
      the
      right, subject to applicable law and the applicable trustee, to direct the
      trustee to vote a percentage of the Common Stock held by the trust that
      corresponds to the total number of shares of Common Stock credited to the
      Participant’s Memorandum Deferred Account over the total shares of Common Stock
      credited to Participants’ accounts under all plans covered by the trust
      arrangement. 

     

    (d) The
      deferred Common
      Stock balance in the Memorandum Deferred Account shall be payable to the
      Participant in Common Stock.

     

    6.3 Memorandum
      Deferred Account

     

    The
      Company shall
      establish a ledger account (the “Memorandum Deferred Account”) for each
      Participant for the purpose of recording the Company’s obligation to pay the
      Compensation as provided in Sections 9.1 and 9.2, and for recording the
      Long-Term Equity Credit, described below in Section 7. 

     

    (a) Except
      as provided
      in Section 6.4, interest shall accrue on all Cash Deferrals to the date of
      distribution and shall be credited to the Memorandum Deferred Account at the
      end
      of each calendar quarter or such other periods as may be determined by the
      Management Committee. The Management Committee shall determine the rate of
      interest or earnings/losses credited to the Memorandum Deferred Account
      periodically and in so doing may take into account the earnings, losses,
      appreciation or depreciation attributable to discretionary investments made
      pursuant to Section 6.4, and any other factors it deems
      appropriate.

     

    (b) The
      Company shall
      promptly credit each Participant’s Memorandum Deferred Account with the number
      of shares of Common Stock calculated in accordance with Section 6.2(b) and
      (c).

     

    6.4 Discretionary
      Investment by Company

     

    The
      deferred
      amounts to be paid to the Participants are unfunded obligations of the Company.
      The Management Committee may direct that an amount equal to the deferred amount
      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 Common Stock
      Deferrals and Cash Deferrals, and (where appropriate) interest thereon, shall
      be
      paid into one or more grantor trusts to be established by the Company. The
      Management Committee may designate an investment advisor to direct investments
      and reinvestments of the funds, including investment of any grantor trusts
      hereunder.

     

     

    SECTION 7
      LONG-TERM EQUITY

     

    7.1 Long-Term
      Equity Credit

     

    In
      addition to
      elective deferrals under Section 6.2(a), each Participant’s Memorandum Deferred
      Account shall be credited on each Payment Date with an amount equal to
      one-fourth (1/4) of the Participant’s annual Compensation (the “Long-Term Equity
      Credit”) or as otherwise determined in accordance with the Company’s By-laws.
      The Long-Term Equity Credit shall be in the form of a Common Stock Deferral,
      but
      such credit shall not be entitled to the Conversion Premium. Except for the
      absence of the Conversion Premium, the Long-Term Equity Credit shall be treated
      the same as all other Common Stock Deferrals under this Plan. 

    

     

    SECTION
      8
      PHANTOM STOCK UNITS

     

    8.1 Phantom
      Stock Units

     

    (a) Notwithstanding
      Section 5.2, if the Management Committee determines that the maximum number
      of
      shares of Common Stock which may be awarded pursuant to Section 4.1 of the
      Plan
      has been issued, then phantom stock units which shall have an accounting value
      equal to the Fair Market Value of one (1) share of Common Stock (“PSUs”) shall
      be credited to the Participant’s Memorandum Deferred Account for his or her
      Common Stock Deferral and/or Long-Term Equity Credit for the Plan Year. The
      amount of PSUs credited to the Participant’s Memorandum Deferred Account for his
      or her Common Stock Deferral shall include the Conversion Premium.

     

    (b) Each
      Participant
      who receives PSUs shall, once the PSUs have been credited to his or her
      Memorandum Deferred Account, have the right to receive dividend equivalents
      and
      other distributions on such PSUs, subject to applicable laws. Any such dividend
      equivalents and other distributions shall be deemed reinvested promptly in
      additional PSUs and such additional PSUs shall be credited to the Memorandum
      Deferred Account until the Memorandum Deferred Account is distributed.
      Participants do not have the right to vote the PSUs.

     

    (c) When,
      and if,
      additional shares of Common Stock become available under the Plan or a successor
      plan, the PSUs credited to a Participant’s Memorandum Deferred Account shall be
      replaced with an equivalent number of shares of deferred Common Stock credited
      to the Participant’s Memorandum Deferred Account. Such shares of deferred Common
      Stock shall be treated as all other Common Stock Deferrals under the Plan.
      If no
      additional shares of Common Stock become available under the Plan at the time
      of
      distribution of the PSUs to the Participant, an amount equal to the PSU balance
      of the Participant’s Memorandum Deferred Account shall be paid to the
      Participant (or the Participant’s Beneficiary in the case of the Participant’s
      death) in a lump sum cash payment based on the Common Stock’s Fair Market Value
      on the day preceding the date of such payment. Payment of PSUs in cash shall
      be
      made in the month following the date on which the Participant ceases to be
      a
      Director. PSUs credited to the Participant’s Memorandum Deferred Account for the
      Participant’s Long-Term Equity Credit shall be subject to any additional
      restrictions of such other Long-Term Equity Credits under the Plan.

     

     

    SECTION
      9
      PAYMENT OF DEFERRED COMPENSATION

     

    9.1 Payment
      of
      Deferred Cash

     

    When
      a Participant
      ceases to be a Director, the Company shall pay to the Participant (or the
      Participant’s Beneficiary in the case of the Participant’s death) an amount
      equal to the deferred cash balance of his or her Memorandum Deferred Account,
      plus interest (at a rate determined pursuant to Section 6.3) on the outstanding
      deferred cash account balance to the date of distribution, as
      follows:

     

    
      
        	
              	(a)	
                a
                  lump sum
                  cash payment, or

              

      

       

      
        
          	
                	(b)	
                  in
                    periodic
                    installments over a period of years as determined at the time
                    the deferral
                    election is made under Section
                    5.2.

                

        

      

       

    

    Payment
      of deferred
      cash shall be made or, in the case of installments over a period of years,
      shall
      begin to be made, in the month following the date on which a Participant ceases
      to be a Director.

     

    9.2 Payment
      of
      Deferred Common Stock

     

    When
      a Participant
      ceases to be a Director, the Company shall distribute Common Stock to the
      Participant (or the Participant’s Beneficiary in the case of the Participant’s
      death) in an amount equal to the number of whole shares of Common Stock in
      a
      Participant’s Memorandum Deferred Account, as follows:

     

    
      
        	
              	(a)	
                a
                  lump sum
                  distribution, or

              

      

       

      
        	
              	(b)	
                in
                  annual
                  installments over a period of years as determined at the time the
                  deferral
                  election is made under Section
                  5.2.

              

      

    

    
       

    

    Any
      fractional
      shares of Common Stock held in the Participant’s account shall be paid to the
      Participant (or the Participant’s Beneficiary in the case of the Participant’s
      death) in a lump sum cash payment based on the Common Stock’s Fair Market Value
      on the day preceding the date of such payment.

     

    Payment
      of deferred
      Common Stock shall be made or, in the case of installments over a period of
      years, shall begin to be made, in the month following the date on which a
      Participant ceases to be a Director, or such later date as may be necessary
      to
      comply with Section 16(b) of the Securities Exchange Act, as amended and rules
      promulgated thereunder (the “Exchange Act”).

     

    9.3 Acceleration
      of Payment of Deferred Cash and Deferred Common Stock

     

    (a) In
      the event of a
      Participant’s death or Permanent Disability, notwithstanding the Participant’s
      elections made with respect to form of distribution under Section 9.1 and 9.2,
      the balance of the Participant’s Deferred Memorandum Account shall be
      distributed in full as soon as practicable (but in no event later than
      thirty (30) days) following the Participant’s death or Permanent
      Disability.

     

    (b) Subject
      to Section
      409A of the Code, in case of an unforeseeable emergency, a Participant may
      request a distribution from the Participant’s Deferred Memorandum Account
      earlier than the date to which it was deferred.

     

    For
      purposes of
      this Section 9.3(b), an “unforeseeable emergency” shall be limited to a severe
      financial hardship to the Participant resulting from an illness or accident
      of
      the Participant, the Participant’s spouse, or a dependent (as defined in Section
      152(a) of the Code) of the Participant, loss of the Participant’s property due
      to casualty, or other similar extraordinary and unforeseeable circumstances
      arising as a result of events beyond the control of the Participant. The
      circumstances that will constitute an unforeseeable emergency will depend upon
      the facts of each case, but, in any case, amounts distributed with respect
      to an
      unforeseeable emergency may not exceed amounts necessary to satisfy such
      emergency, plus amounts necessary to pay taxes reasonably anticipated as a
      result of the distribution, after taking into account the extent to which such
      hardship is or may be relieved: (i) through reimbursement or compensation by
      insurance or otherwise or (ii) by liquidation of the Participant’s assets, to
      the extent the liquidation of such assets would not itself cause severe
      financial hardship. 

     

    The
      Committee shall
      consider any requests for payment on the basis of an unforeseeable emergency
      under this Section 9.3(b) on a uniform and nondiscriminatory basis and in
      accordance with the standards of interpretation described in Section 457 of
      the
      Code and the regulations thereunder. 

     

    (c) All
      deferred cash
      and deferred Common Stock under this Plan shall be paid to a Participant (or
      his
      or her Beneficiary in the case of his or her death) in the event of a Change
      in
      Control within thirty (30) days after the date of the Change in Control, or
      at
      such later time as may be required to enable the Director to avoid liability
      under Section 16(b) of the Exchange Act. Notwithstanding the foregoing,
      no
      such deferred amounts shall be paid to a Participant who continues to serve
      as a
      Director of the Company or its successor, until such time said deferrals would
      otherwise be paid. For purposes of this Plan, a “Change in Control” shall be
      deemed to occur upon the occurrence of any of the following after the Effective
      Date:

     

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

     

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

     

    (iii) The
      consummation
      of:

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

     

     

    SECTION
      10
      GENERAL PROVISIONS

     

    10.1 Issuance
      of
      Common Stock

     

    The
      Company shall
      not be required to issue any certificate for shares of Common Stock 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, deems necessary or advisable;

     

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

     

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

     

    All
      certificates
      for shares of Common Stock delivered under the Plan also shall be subject to
      such stop transfer orders and other restrictions as the Management Committee
      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
      Management Committee may cause a legend or legends to be placed on any such
      certificates 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 Management Committee determines that
      application of such provisions is no longer required or desirable. In making
      such determination, the Management Committee may rely upon an opinion of counsel
      for the Company.

     

    10.2 Unfunded
      Obligation

     

    Any
      deferred amount
      to be paid to Participants pursuant to the Plan is an unfunded obligation of
      the
      Company. The Company is not 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 that 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 memorandum accounts shall not create or constitute a trust or
      a
      fiduciary relationship between the Management Committee or the 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 the Company whatsoever. The Participants shall have no claim
      against the Company for any changes in the value of any assets that may be
      invested or reinvested by the Company with respect to the Plan.

     

    10.3 Beneficiary

     

    The
      term
“Beneficiary” shall mean the person or persons to whom payments are to be paid
      pursuant to the terms of the Plan in the event of the Participant’s death. The
      designation shall be on a form provided by the Management Committee, executed
      by
      the Participant, and delivered to the Management Committee. A Participant may
      change his or her Beneficiary designation at any time. A designation by a
      Participant under a predecessor plan shall remain in effect under this Plan
      unless it is revoked or changed under this Plan. If no Beneficiary is
      designated, the designation is ineffective, or in the event the Beneficiary
      dies
      before the balance of the Memorandum Deferred Account is paid, the balance
      shall
      be paid to the Participant’s spouse, or if there is no surviving spouse, to his
      or her lineal descendants, pro rata, or if there is no surviving spouse or
      lineal descendants, to the Participant’s legal representatives, the
      Participant’s estate or the person or persons to whom the deceased’s rights
      under the Plan shall have passed by will or the laws of descent and distribution
      (unless the Management Committee for a given year has designated investment
      in
      an annuity, in which case the payment options selected by the Participant with
      respect thereto shall govern).

     

    10.4 Permanent
      Disability

     

    A
      Participant shall
      be deemed to have become “Permanently Disabled” if the Participant (i) is unable
      to engage in any substantial gainful activity by reason of any medically
      determinable physical or mental impairment which can be expected to result
      in
      death or can be expected to last for a continuous period of not less than twelve
      (12) months, or (ii) is, by reason of any medically determinable physical
      or mental impairment which can be expected to result in death or can be expected
      to last for a continuous period of not less than twelve (12) months, receiving
      income replacement benefits for a period of not less than three (3)
      months
      under an accident and health plan of the Company.

     

    10.5 Incapacity
      of Participant or Beneficiary

     

    If
      the Management
      Committee finds that any Participant or Beneficiary to whom a payment is payable
      under the Plan is unable to care for his or her affairs because of illness
      or
      accident or is under a legal disability, any payment due (unless a prior claim
      therefor shall have been made by a duly appointed legal representative), at
      the
      discretion of the Management Committee, may be paid to the spouse, child,
      parent, brother or sister of such Participant or Beneficiary or to any person
      whom the Management Committee has determined has incurred expense for such
      Participant or Beneficiary. Any such payment shall be a complete discharge
      of
      the obligations of the Company under the provisions of the Plan.

     

    10.6 Nonassignment

     

    The
      right of a
      Participant or Beneficiary to the payment of any amounts under the Plan may
      not
      be assigned, transferred, pledged or encumbered nor shall such right or other
      interest be subject to attachment, garnishment, execution or other legal
      process.

     

    10.7 Termination
      and Amendment

     

    Subject
      to the
      Board, the Management Committee 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 above; provided, however,
      that to the extent required by applicable law, regulation or stock exchange
      rule, stockholder approval shall be required. Subject to Section 409A
      of
      the Code, the Board may at any time suspend the operation of or terminate the
      Plan. No amendment, suspension or termination may impair the right of a
      Participant or the Participant’s designated Beneficiary to receive benefits
      accrued prior to the effective date of such amendment, suspension or
      termination. 

     

    10.8 Applicable
      Law

     

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

     

    10.9 Effective
      Date and Term of the Plan

     

    The
      Plan was
      adopted by the Board on February 18, 2005, and is subject to approval by the
      Company’s stockholders. If approved by the stockholders, this Plan will replace
      the 1995 Compensation Plan for Non-Employee Directors Amended and Restated
      as of
      December 4, 2003, and no further awards will be made under that plan. This
      Plan
      shall become effective on the date it is approved by the Company’s stockholders
      (the “Effective Date”), and shall remain in effect, subject to the right of
      the Board to terminate the Plan at any time pursuant to Section 10.7,
      until
      the date immediately preceding the tenth (10th)
      anniversary of
      the Effective Date of the Plan. No awards shall be granted under this Plan
      after
      such date.  

     

    10.10 Compliance
      With Section 16(b) of the Exchange Act

     

    The
      Company’s
      intention is that, so long as any of the Company’s equity securities are
      registered pursuant to Section 12(b) or 12(g) of the Exchange Act, with respect
      to awards of Common Stock, the Plan shall comply in all respects with any
      exemption pursuant to Section 16(b) promulgated under Section 16 of the Exchange
      Act. If any Plan provision is later found not to be in compliance with such
      exemptions available pursuant to Section 16(b) of the Exchange Act, that
      provision shall be deemed modified as necessary to meet the requirements of
      Section 16(b).

     

    10.11 Impact
      of
      Future Legislation or Regulations

     

    This
      Plan is intended to be operated in
      compliance with Section 409A of the Code. The terms of this Plan should be
      interpreted to comport with Section 409A and any guidance issued by the
      Secretary of the Treasury or the Internal Revenue Service interpreting Section
      409A. If necessary, the terms of this Plan shall be amended to comply with
      such
      future guidance.

     

    
      
        
          IN
            WITNESS WHEREOF, the Company has caused the
            Plan to be executed effective as of May 26, 2005.

        

      

    

    
 

    
      	
               

            	
               

            	
               

            
	
               

            	
              EL
                PASO CORPORATION

            
	
               

               

            	
               

               By

            	
               

               

               

               /s/ Susan
                B. Ortenstone

            
	 	
               

            	
              Susan
                B.
                Ortenstone

            
	
               

            	
              Its
                Senior
                Vice President, Human Resources

            

    

    
    

     

            

     

                                                                  
      

    ATTEST:

     

     

     

    
      	
              By

            	
              /s/
                David
                L. Siddall

            
	 	
              David
                L.
                Siddall

            
	 	
              Corporate
                Secretary

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