Document:

Exhibit 10.A

EXHIBIT
10.A

 

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 of shares 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 be from shares held in the Company’s treasury or
issued out of authorized but unissued shares of the Company, or partly out of
each, as shall be determined by the 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
      SecretaryExhibit 10.B

Exhibit
10.B

 

EL PASO
CORPORATION

 

2005
OMNIBUS INCENTIVE COMPENSATION PLAN

 

 

TABLE OF
CONTENTS

 

	
      SECTION
      1
	 	
      PURPOSES
	
      1

	 	 	 	 
	
      SECTION
      2
	 	
      DEFINITIONS
	
      1

	
      2.1
	 	
      Award
	
      1

	
      2.2
	 	
      Award
      Agreement
	
      1

	
      2.3
	 	
      Beneficiary
	
      1

	
      2.4
	 	
      Board of
      Directors
	
      2

	
      2.5
	 	
      Cash
      Awards
	
      2

	
      2.6
	 	
      Cause
	
      2

	
      2.7
	 	
      Change in
      Capitalization
	
      2

	
      2.8
	 	
      Change in
      Control
	
      2

	
      2.9
	 	
      Code
	
      5

	
      2.10
	 	
      Common
      Stock
	
      5

	
      2.11
	 	
      Covered
      Employee
	
      5

	
      2.12
	 	
      Effective
      Date
	
      5

	
      2.13
	 	
      Employer
	
      5

	
      2.14
	 	
      Exchange
      Act
	
      5

	
      2.15
	 	
      Fair Market
      Value
	
      5

	
      2.16
	 	
      Good
      Reason
	
      6

	
      2.17
	 	
      Incentive
      Award
	
      6

	
      2.18
	 	
      Incentive
      Stock Option
	
      7

	
      2.19
	 	
      Management
      Committee
	
      7

	
      2.20
	 	
      Maximum
      Annual Employee Grant
	
      7

	
      2.21
	 	
      Nonqualified
      Option
	
      7

	
      2.22
	 	
      Option
      Price
	
      7

	
      2.23
	 	
      Other
      Stock-Based Awards
	
      7

	
      2.24
	 	
      Participant
	
      7

	
      2.25
	 	
      Performance
      Goals
	
      7

	
      2.26
	 	
      Performance
      Period
	
      9

	
      2.27
	 	
      Performance
      Shares
	
      10

	
      2.28
	 	
      Performance
      Units
	
      10

	
      2.29
	 	
      Plan
      Administrator
	
      10

	
      2.30
	 	
      Prior
      Plans
	
      10

	
      2.31
	 	
      Restricted
      Stock
	
      10

	
      2.32
	 	
      Restricted
      Stock Units
	
      10

	
      2.33
	 	
      Restriction
      Period
	
      10

	
      2.34
	 	
      Rule
      16b-3
	
      10

	
      2.35
	 	
      Section 16
      Insider
	
      11

	
      2.36
	 	
      Section
      162(m)
	
      11

	
      2.37
	 	
      Subsidiary
	
      11

	 	 	 	 
	
      SECTION
      3
	 	
      ADMINISTRATION
	
      11

	
      3.1
	 	
      Plan
      Administrator
	
      11

	
      3.2
	 	
      Authority of
      Plan Administrator
	
      12

	
      3.3
	 	
      Indemnification
      of Plan Administrator
	
      13

	
      3.4
	 	
      Delegation to
      Management Committee
	
      13

	 	 	 	 
	
      SECTION
      4
	 	
      ELIGIBILITY
	
      13

	 	 	 	 
	
      SECTION
      5
	 	
      SHARES
      AVAILABLE FOR THE PLAN
	
      13

	
      5.1
	 	
      Aggregate
      Shares
	
      13

	
      5.2
	 	
      Limitations
	
      14

	
      5.35.4
	 	
      Adjustments
      in Authorized Shares
	
      15

	 	 	
      Effect of
      Certain Transactions
	
      15

	 	 	 	 
	
      SECTION
      6
	 	
      STOCK
      OPTIONS
	
      16

	
      6.1
	 	
      Grant of
      Options
	
      16

	
      6.2
	 	
      Special
      Provisions Applicable to Incentive Stock Options
	
      17

	
      6.3
	 	
      Terms of
      Options
	
      18

	 	 	 	 
	
      SECTION
      7
	 	
      STOCK
      APPRECIATION RIGHTS
	
      21

	
      7.1
	 	
      Grant of
      Stock Appreciation Rights
	
      21

	
      7.2
	 	
      Exercise of
      Stock Appreciation Rights
	
      22

	
      7.3
	 	
      Special
      Provisions Applicable to Stock Appreciation Rights
	
      22

	 	 	 	 
	
      SECTION
      8
	 	
      PERFORMANCE
      SHARES AND PERFORMANCE UNITS
	
      23

	
      8.1
	 	
      Grant of
      Performance Shares and Performance Units
	
      23

	
      8.2
	 	
      Value of
      Performance Shares and Performance Units
	
      23

	
      8.3
	 	
      Payment of
      Performance Shares and Performance Units
	
      23

	
      8.4
	 	
      Form and
      Timing of Payment
	
      24

	
      8.5
	 	
      Nontransferabilty
      of Performance Shares and Performance Units
	
      24

	 	 	 	 
	
      SECTION
      9
	 	
      RESTRICTED
      STOCK
	
      24

	
      9.1
	 	
      Grant of
      Restricted Stock
	
      24

	
      9.2
	 	
      Restriction
      Period
	
      24

	
      9.3
	 	
      Other
      Restrictions
	
      25

	
      9.4
	 	
      Voting
      Rights; Dividends and Other Distributions
	
      25

	
      9.5
	 	
      Issuance of
      Shares; Settlement of Awards
	
      25

	 	 	 	 
	
      SECTION
      10
	 	
      RESTRICTED
      STOCK UNITS
	
      26

	
      10.1
	 	
      Grant of
      Restricted Stock Units
	
      26

	
      10.2
	 	
      Restriction
      Period
	
      26

	
      10.3
	 	
      Other
      Restrictions
	
      26

	
      10.4
	 	
      Dividend
      Equivalents
	
      26

	
      10.5
	 	
      Issuance of
      Shares; Settlement of Awards
	
      27

	 	 	 	 
	
      SECTION
      11
	 	
      INCENTIVE
      AWARDS
	
      27

	
      11.1
	 	
      Incentive
      Awards
	
      27

	
      11.2
	 	
      Performance
      Goal Certification
	
      27

	
      11.3
	 	
      Discretion to
      Reduce Awards; Participant’s Performance
	
      27

	
      11.4
	 	
      Required
      Payment of Incentive Awards
	
      28

	
      11.5
	 	
      Restricted
      Stock Election
	
      28

	
      11.6
	 	
      Nontransferability
      of Incentive Awards
	
      29

	 	 	 	 
	
      SECTION
      12
	 	
      CASH AWARDS
      AND OTHER STOCK-BASED AWARDS
	
      29

	
      12.1
	 	
      Grant of Cash
      Awards
	
      29

	
      12.2
	 	
      Other
      Stock-Based Awards
	
      29

	
      12.3
	 	
      Value of Cash
      Awards and Other Stock-Based Awards
	
      29

	
      12.4
	 	
      Payment of
      Cash Awards and Other Stock-Based Awards
	
      29

	
      12.5
	 	
      Transferability
      of Cash Awards and Other Stock-Based Awards
	
      30

	 	 	 	 
	
      SECTION
      13
	 	
      TERMINATION
      OF EMPLOYMENT
	
      30

	 	 	 	 
	
      SECTION
      14
	 	
      EFFECT OF A
      CHANGE IN CONTROL
	
      30

	 	 	 	 
	
      SECTION
      15
	 	
      REGULATORY
      APPROVALS AND LISTING
	
      31

	 	 	 	 
	
      SECTION
      16
	 	
      ESTABLISHMENT
      AND TERM OF PLAN
	
      32

	 	 	 	 
	
      SECTION
      17
	 	
      GENERAL
      PROVISIONS
	
      32

	
      17.1
	 	
      Forfeiture
      Events
	
      32

	
      17.2
	 	
      No Individual
      Rights
	
      33

	
      17.3
	 	
      Other
      Compensation
	
      33

	
      17.4
	 	
      Nontransferabilty
	
      33

	
      17.5
	 	
      Leaves of
      Absence
	
      33

	
      17.6
	 	
      Transfers
	
      33

	
      17.7
	 	
      Unfunded
      Obligations
	
      34

	
      17.8
	 	
      Beneficiaries
	
      34

	
      17.9
	 	
      Governing
      Law
	
      34

	
      17.10
	 	
      Satisfaction
      of Tax Obligations
	
      34

	
      17.11
	 	
      Participants
      in Foreign Jurisdictions
	
      35

	 	 	 	 
	
      SECTION
      18
	 	
      COMPLIANCE
      WITH RULE 16b-3 AND SECTION 162(m)
	
      35

	 	 	 	 
	
      SECTION
      19
	 	
      AMENDMENT,
      TERMINATION OR DISCONTINUANCE OF THE PLAN
	
      36

	
      19.1
	 	
      Amendment of
      Plan
	
      36

	
      19.2
	 	
      Termination
      or Suspension of Plan
	
      36

	 	 	 	 
	
      SECTION
      20
	 	
      DEFERRAL
      ELECTIONS
	
      36

 

 

 

EL PASO
CORPORATION

 

2005
OMNIBUS INCENTIVE COMPENSATION PLAN

 

 

 

SECTION
1 PURPOSES

 

The purposes of the
El Paso Corporation 2005 Omnibus Incentive Compensation Plan (the “Plan”) are to
promote the interests of El Paso Corporation (the “Company”) and its
stockholders by strengthening its ability to attract and retain salaried
employees of the Company and its Subsidiaries (as defined below) by furnishing
suitable recognition of their ability and industry, to align their interests and
efforts to the long-term interests of the Company’s stockholders, and to provide
them with a direct incentive to achieve the Company’s strategic and financial
goals. In furtherance of these purposes, the Plan provides for the grant of
stock options, stock appreciation rights, Restricted Stock, Restricted Stock
Units, Performance Shares, Performance Units, Incentive Awards, Cash Awards, and
Other Stock-Based Awards to Participants in accordance with the terms and
conditions set forth below. 

 

 

SECTION
2 DEFINITIONS

 

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

 

2.1 Award

 

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

 

2.2 Award
Agreement

 

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

 

2.3 Beneficiary

 

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

 

2.4 Board of
Directors

 

The Board of
Directors of the Company.

 

2.5 Cash
Awards

 

As defined in
Section 12.1.

 

2.6 Cause

 

A termination of a
Participant by his or her Employer shall be for “Cause” if the Plan
Administrator determines that the Participant has (i) willfully and continually
failed to substantially perform his or her duties with his or her Employer
(other than a failure resulting from the Participant’s incapacity due to
physical or mental illness) which failure continued for a period of at least
thirty (30) days after a written notice of demand for substantial performance
has been delivered to the Participant specifying the manner in which the
Participant has failed to substantially perform, (ii) willfully engaged in
conduct which is demonstrably and materially injurious to the Company or any of
its affiliates, monetarily or otherwise, or (iii) willfully engaged in conduct
in violation of the Company’s Code of Business Conduct; provided, however, that, as to any
Participant who is an officer of the Company or any of its Subsidiaries or
affiliates, (I) no termination of the Participant’s employment shall be for
Cause as set forth in clauses (ii) or (iii) above until (A) there shall have
been delivered to the Participant a copy of a written notice setting forth that
the Participant was guilty of the conduct set forth in clause (ii) or (iii) and
specifying the particulars thereof in detail, and (B) the Participant shall have
been provided an opportunity to be heard by the Plan Administrator (with the
assistance of the Participant’s counsel if the Participant so desires), and (II)
no act, nor failure to act, on the Participant’s part 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 or any of its affiliates. 

 

2.7 Change in
Capitalization

 

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

 

2.8 Change in Control

 

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

 

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

 

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

 

(c) The consummation
of:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2.9  Code

 

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

 

2.10  Common
Stock

 

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

 

2.11 Covered
Employee

 

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

 

2.12  Effective
Date

 

The “Effective
Date” of this Plan is the date the Plan is approved by the stockholders of the
Company.

 

2.13 Employer

 

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

 

2.14  Exchange
Act

 

The Securities
Exchange Act of 1934, as amended.

 

2.15  Fair Market
Value

 

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

 

2.16  Good
Reason

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2.17  Incentive
Award

 

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

 

2.18  Incentive Stock
Option

 

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

 

2.19 Management
Committee

 

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

 

2.20  Maximum Annual
Employee Grant

 

The Maximum Annual
Employee Grant set forth in Section 5.2.

 

2.21  Nonqualified
Option

 

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

 

2.22 Option
Price

 

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

 

2.23. Other Stock-Based
Award

 

As defined in
Section 12.2.

 

2.24  Participant

 

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

 

2.25 Performance
Goals

 

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

 

Financial
Goals

·       earnings;

·       earnings
per share; 

·       net
income; 

·       revenues;

·       operating
cash
flow;

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

·       debt level;

·       equity
ratios;

·       expenses;

·      
cost
reduction targets;

·       capital
expended;

·       working
capital;

·       weighted average
cost of capital;

·       operating or profit
margins;

·       interest-sensitivity
gap levels; 

·       return
on assets; 

·       return
on equity or capital employed; 

Production and
Non-Regulated Business Unit Goals

·       amount
of the oil and gas reserves;

·       oil
and gas reserve additions;

·       oil
and gas reserve replacement ratios;

·       costs
of finding oil and gas reserves;

·       daily natural gas and/or
oil production

Regulated
Business Unit Goals

·       contracted capacity
on pipelines;

·       throughput levels on
pipelines;

Corporate and
Other

·       total
shareholder return;

·       market
share; 

·       charge-offs;

·       assets;

·       non-performing
assets; 

·       asset sale
targets;

·       asset
quality levels; 

·       value
of assets; 

·       Fair Market Value of the
Common Stock; 

·       employee
retention/attrition rates;

·       investments;

·       regulatory
compliance; 

·       satisfactory
internal or external audits; 

·       improvement
of financial ratings; 

·       safety
targets;

·       economic
value added; or 

·       achievement
of balance sheet or income statement objectives.  

 

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

 

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

 

2.26 Performance
Period

 

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

 

2.27 Performance
Shares

 

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

 

2.28 Performance
Units

 

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

 

2.29  Plan
Administrator

 

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

 

2.30 Prior
Plans

 

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

 

2.31 Restricted
Stock

 

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

 

2.32 Restricted Stock
Units

 

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

 

2.33 Restriction
Period

 

As defined in
Section 9.2.

 

2.34 Rule
16b-3

 

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

 

2.35 Section 16
Insider

 

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

 

2.36 Section
162(m)

 

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

 

2.37 Subsidiary

 

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

 

 

SECTION
3 ADMINISTRATION

 

3.1 Plan
Administrator

 

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

 

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

 

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

 

3.2 Authority of Plan
Administrator

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3.3 Indemnification of
Plan Administrator

 

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

 

3.4 Delegation to
Management Committee

 

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

 

 

SECTION
4 ELIGIBILITY

 

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

 

 

SECTION 5 SHARES
AVAILABLE FOR THE PLAN

 

5.1  Aggregate
Shares

 

Subject to
adjustment as provided in Section 5.3, the maximum number of shares of Common
Stock that may be issued upon the exercise or settlement of Awards granted under
the Plan is 35,000,000 shares of Common Stock. 

 

Shares of Common
Stock subject to an Award shall only be counted as used to the extent they are
actually issued. Any shares of Common Stock subject to an Award which is granted
under this Plan and which terminates by expiration, forfeiture, cancellation or
otherwise shall be available for grants of Awards under the Plan. Upon
settlement of a stock appreciation right, the excess of the number of shares
covered by the stock appreciation right over the number of shares issued in
settlement of the stock appreciation right may again be the subject of Awards
granted under the Plan. In addition, any shares of Common Stock subject to a
Restricted Stock Unit, Performance Share, Performance Unit or Other Stock-Based
Award which is granted under this Plan and which is settled in cash in lieu of
the issuance of shares may again be available for grants of Awards under the
Plan. 

 

For purposes of
this Section 5.1, the aggregate number of shares of Common Stock issued
under this Plan at any time shall equal only the number of shares actually
issued upon exercise or settlement of Awards and not returned to the Company
upon cancellation, expiration or forfeiture of any such Award; provided, that while a
stock option, stock appreciation right, Restricted Stock Unit, Performance Unit
or Other Stock-Based Award is outstanding, but prior to the issuance of shares
of Common Stock relating thereto, the number of shares of Common Stock available
for Awards under the Plan shall be reduced by the number of shares of Common
Stock subject to such Award. Notwithstanding any other provision in this Section
5.1, the grant of any Award that cannot by its terms be settled in shares of
Common Stock shall not result in the reduction of the number of shares of Common
Stock available for Awards under the Plan.

 

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

 

5.2 Limitations

 

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

 

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

 

(b) The number of
shares of Common Stock issued under this Plan with respect to Restricted Stock,
Restricted Stock Units, Performance Shares, Performance Units and Other
Stock-Based Awards may not exceed 17,500,000 shares of Common Stock.

 

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

 

5.3 Adjustments in
Authorized Shares

 

(a) In the event of a
Change in Capitalization, the Plan Administrator shall conclusively determine
the appropriate adjustments, if any, to (a) the maximum number and class of
shares of Common Stock or other stock or securities with respect to which Awards
may be granted under the Plan, (b) the maximum number and class of shares of
Common Stock or other stock or securities that may be issued upon exercise of
Nonqualified Options and Incentive Stock Options, (c) the Maximum Annual
Employee Grants, (d) the number and class of shares of Common Stock or other
stock or securities which are subject to outstanding Awards granted under the
Plan and the Option Price or exercise price therefor, if applicable and (e) the
Performance Goals.

 

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

 

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

 

5.4 Effect of Certain
Transactions

 

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

 

 

SECTION 6 STOCK
OPTIONS

 

6.1 Grant of
Options

 

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

 

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

 

6.2 Special Provisions
Applicable to Incentive Stock Options

 

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

 

(a) Ten Percent
(10%) Stockholders

 

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

 

(b) Annual
Limitation

 

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

 

(c) Additional
Terms

 

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

 

(d) Notice of
Disqualifying Disposition

 

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

 

6.3 Terms of Options

 

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

 

(a) Option
Price

 

The Option Price
shall be determined by the Plan Administrator in any reasonable manner, but
shall not be less than the Fair Market Value of the Common Stock on the date the
option is granted.

 

(b) Duration of
Options

 

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

 

(c) Exercise of
Options

 

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

 

(d) Payment

 

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

 

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

 

(e) Restrictions

 

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

 

(f) Nontransferability
of Options

 

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

 

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

 

(g) Purchase for
Investment

 

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

 

(h) No
Repricing

 

The Plan
Administrator shall have no authority to make any adjustment (other than in
connection with a Change in Capitalization in which an adjustment is permitted
or required under the terms of the Plan) or amendment, and no such adjustment or
amendment shall be made, that reduces or would have the effect of reducing the
exercise price of a stock option previously granted under the Plan, whether
through amendment, cancellation or replacement grants, or other means, unless
the Company’s shareholders shall have approved such adjustment or
amendment.

 

 

SECTION 7 STOCK
APPRECIATION RIGHTS

 

7.1 Grant of Stock
Appreciation Rights

 

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

 

7.2 Exercise of Stock
Appreciation Rights

 

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

 

7.3 Special Provisions
Applicable to Stock Appreciation Rights

 

Stock appreciation
rights are subject to the following restrictions:

 

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

 

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

 

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

 

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

 

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

 

 

SECTION 8
PERFORMANCE SHARES AND PERFORMANCE UNITS

 

8.1 Grant of
Performance Shares and Performance Units

 

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

 

8.2 Value of
Performance Shares and Performance Units 

 

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

 

8.3 Payment of
Performance Shares and Performance Units 

 

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

 

8.4 Form and Timing of
Payment 

 

The payment
described in Section 8.3 shall be made in shares of Common Stock, or in cash, or
partly in shares of Common Stock and partly in cash, at the discretion of the
Plan Administrator and set forth in the Award Agreement. The value of any
fractional shares shall be paid in cash. Payment shall be made in a lump sum or
installments as prescribed by the Plan Administrator and set forth in the Award
Agreement. If a number of shares of Common Stock is to be converted into an
amount of cash on any date, or if an amount of cash is to be converted into a
number of shares of Common Stock on any date, such conversion shall be done at
the then-current Fair Market Value of the Common Stock on such
date.

 

8.5 Nontransferability
of Performance Shares and Performance Units

 

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

 

 

SECTION 9
RESTRICTED STOCK 

 

9.1 Grant of Restricted
Stock

 

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

 

9.2 Restriction
Period

 

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

 

9.3 Other
Restrictions

 

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

 

9.4 Voting Rights;
Dividends and Other Distributions

 

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

 

9.5 Issuance of Shares;
Settlement of Awards

 

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

 

 

SECTION 10
RESTRICTED STOCK UNITS

 

10.1 Grant of Restricted
Stock Units

 

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

 

10.2 Restriction
Period

 

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

 

10.3 Other
Restrictions

 

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

 

10.4 Dividend
Equivalents

 

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

 

10.5 Issuance of Shares;
Settlement of Awards

 

When the
restrictions imposed by Section 10.2 expire or otherwise lapse with respect to
one or more Restricted Stock Units, Restricted Stock Units shall be settled
(i) in cash or (ii) by the delivery to the Participant of the number of
shares of Common Stock equal to the number of the Participant’s Restricted Stock
Units that are vested, or any combination thereof, as the Plan Administrator
shall determine. The delivery of shares pursuant to this Section 10.5 shall be
subject to any required share withholding to satisfy tax withholding obligations
pursuant to Section 17.10. Any fractional shares subject to such Restricted
Stock Units shall be paid to the Participant in cash. 

 

 

SECTION 11
INCENTIVE AWARDS

 

11.1 Incentive
Awards

 

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

 

11.2 Performance Goal
Certification

 

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

 

11.3 Discretion to
Reduce Awards; Participant’s Performance

 

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

 

11.4 Required Payment of
Incentive Awards

 

The Plan
Administrator shall make a determination within thirty (30) days after the
information that is necessary to make such a determination is available for a
particular Performance Period whether the Performance Goals or other performance
measures for the Performance Period have been achieved and the amount of the
Incentive Award for each Participant. The Plan Administrator shall certify the
foregoing determinations in writing. In the absence of an election by the
Participant pursuant to Section 11.5, the Incentive Award shall be paid as
follows. 

 

(a) Participants shall
receive their Incentive Awards in any combination of cash and/or other Awards
under the Plan as determined by the Plan Administrator.

 

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

 

11.5 Restricted Stock
Election 

 

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

 

11.6 Nontransferability
of Incentive Awards

 

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

 

SECTION 12 CASH
AWARDS AND OTHER
STOCK-BASED AWARDS

 

12.1 Grant of Cash
Awards

 

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

 

12.2 Other Stock-Based
Awards

 

The Plan
Administrator may grant other types of equity-based or equity-related Awards not
otherwise described by the terms of this Plan (including the grant or offer for
sale of unrestricted shares of Common Stock) in such amounts and subject to such
terms and conditions, as the Plan Administrator shall determine (each, an “Other
Stock-Based Award”). Such Other Stock-Based Awards may involve the transfer of
actual shares of Common Stock to Participants, or payment in cash or otherwise
of amounts based on the value of shares of Common Stock.

 

12.3 Value of Cash
Awards and Other Stock-Based Awards

 

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

 

12.4 Payment of Cash
Awards and Other Stock-Based Awards 

 

Payment, if any,
with respect to a Cash Award or an Other Stock-Based Award shall be made in
accordance with the terms of the Award, in cash or shares of Common Stock as the
Plan Administrator determines. The value of any fractional shares shall be paid
in cash. 

 

12.5 Transferability of
Cash Awards and Other Stock-Based Awards 

 

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

 

 

SECTION 13
TERMINATION OF EMPLOYMENT

 

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

 

 

SECTION 14 EFFECT
OF A CHANGE IN CONTROL

 

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

 

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

 

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

 

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

 

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

 

 

SECTION 15
REGULATORY APPROVALS AND LISTING

 

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

 

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

 

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

 

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

 

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

 

 

SECTION 16
ESTABLISHMENT AND TERM OF PLAN

 

The Plan was
adopted by the Board of Directors on February 18, 2005, and is subject to
approval by the Company’s stockholders. If approved by the stockholders, this
Plan will replace the Prior Plans, and no further Awards will be made under the
Prior Plans. This Plan shall become effective on the Effective Date, and shall
remain in effect, subject to the right of the Board of Directors to terminate
the Plan at any time pursuant to Section 19, until all shares of Common Stock
subject to it shall have been purchased or acquired according to the provisions
herein. However, in no event may an Award be granted under the Plan on or after
the tenth (10th) anniversary of
the Effective Date. After this Plan is terminated, no future Awards may be
granted pursuant to the Plan, but Awards previously granted shall remain
outstanding in accordance with their applicable terms and conditions and this
Plan’s terms and conditions.

 

 

SECTION 17 GENERAL
PROVISIONS

 

17.1 Forfeiture
Events

 

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

 

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

 

17.2 No Individual
Rights

 

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

 

17.3 Other
Compensation

 

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

 

17.4 Nontransferability 

 

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

 

17.5 Leaves of
Absence

 

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

 

17.6 Transfers

 

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

 

17.7 Unfunded
Obligations 

 

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

 

17.8 Beneficiaries 

 

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

 

17.9 Governing
Law

 

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

 

17.10 Satisfaction of Tax
Obligations 

 

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

 

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

 

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

 

17.11 Participants in
Foreign Jurisdictions

 

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

 

 

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

 

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

 

 

SECTION 19
AMENDMENT, TERMINATION OR DISCONTINUANCE OF
THE PLAN

 

19.1 Amendment of
Plan

 

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

 

19.2 Termination or
Suspension of Plan

 

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

 

 

SECTION 20 DEFFERAL
ELECTIONS

 

The Plan
Administrator may, to the extent permitted by applicable law, permit
Participants to defer Awards under the Plan. Any such deferrals shall be subject
to such terms, conditions and procedures that the Plan Administrator may
establish from time to time in its sole discretion.

 

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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