def14a
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o   Preliminary Proxy Statement
o   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ   Definitive Proxy Statement
o   Definitive Additional Materials
o   Soliciting Material Pursuant to §240.14a-12
 
El Paso Corporation
 
(Name of Registrant as Specified In Its Charter)
 
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ   No fee required.
o   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)   Title of each class of securities to which transaction applies:
 
     
     
 
 
  (2)   Aggregate number of securities to which transaction applies:
 
     
     
 
 
  (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
     
     
 
 
  (4)   Proposed maximum aggregate value of transaction:
 
     
     
 
 
  (5)   Total fee paid:
 
     
     
 
o   Fee paid previously with preliminary materials.
 
o   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)   Amount Previously Paid:
 
     
     
 
 
  (2)   Form, Schedule or Registration Statement No.:
 
     
     
 
 
  (3)   Filing Party:
 
     
     
 
 
  (4)   Date Filed:
 
     
     
 


Table of Contents

(EL PASO LOGO)
 
Dear El Paso Stockholder:
 
We cordially invite you to attend our 2010 Annual Meeting of Stockholders. The Annual Meeting will be held on Wednesday, May 19, 2010, beginning at 9:00 a.m. (local/Central time) at the Four Seasons Hotel Houston, 1300 Lamar Street, Houston, Texas 77010.
 
At this year’s Annual Meeting, you will be asked to vote on the election of 12 directors, an amendment and restatement of our 2005 Omnibus Incentive Compensation Plan and the ratification of Ernst & Young LLP’s appointment as our independent registered public accounting firm for 2010.
 
Board member James L. Dunlap will be retiring from our Board of Directors at this Annual Meeting pursuant to our mandatory retirement age policy. We thank him for his dedicated service to El Paso and wish him well. In addition, we are pleased to welcome David W. Crane and Timothy J. Probert as members of our Board of Directors. Messrs. Crane and Probert joined our Board of Directors in December 2009 and will be standing for re-election, along with all other director nominees, at this Annual Meeting.
 
Pursuant to rules promulgated by the U.S. Securities and Exchange Commission, we are providing access to our proxy materials over the Internet. As a result, we are mailing to most of our stockholders an Important Notice Regarding the Availability of Proxy Materials (“Notice”) instead of a paper copy of this proxy statement, our 2009 Annual Report on Form 10-K and our 2009 Summary Report. The Notice contains instructions on how to access those documents over the Internet. The Notice also contains instructions on how to request a paper copy of our proxy materials, including this proxy statement and a form of proxy card, our 2009 Annual Report on Form 10-K and our 2009 Summary Report. All stockholders who do not receive a Notice will receive a paper copy of the proxy materials by mail. We believe that this process allows us to provide our stockholders with the information they need in an efficient, cost-effective manner, while reducing the environmental impact of printing and distributing proxy materials.
 
Your vote is very important. I hope you will be able to attend the Annual Meeting, but if you cannot, please vote your proxy as soon as you can.
 
Sincerely,
 
-s- Douglas L. Foshee
Douglas L. Foshee
Chairman, President and Chief Executive Officer
 
Houston, Texas
April 9, 2010


Table of Contents

EL PASO CORPORATION
1001 Louisiana Street
Houston, Texas 77002
 
NOTICE OF 2010 ANNUAL MEETING OF STOCKHOLDERS
May 19, 2010
 
On May 19, 2010, El Paso Corporation will hold its 2010 Annual Meeting of Stockholders at the Four Seasons Hotel Houston, 1300 Lamar Street, Houston, Texas 77010. The Annual Meeting will begin at 9:00 a.m. (local/Central time).
 
Only El Paso stockholders who owned shares of our common stock at the close of business on March 24, 2010, are entitled to notice of, and can vote at, this Annual Meeting or any adjournments or postponements that may take place. At the Annual Meeting, you will be asked to:
 
  1.  elect 12 directors, each to hold office for a term of one year;
 
  2.  approve the El Paso Corporation 2005 Omnibus Incentive Compensation Plan, as amended and restated, to increase the number of shares available for issuance by 7.0 million; and
 
  3.  ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2010.
 
These proposals are described in the attached proxy statement. We will also attend to any other business properly presented at the Annual Meeting.
 
By Order of the Board of Directors
 
-s- Marguerite N. Woung Chapman
Marguerite N. Woung-Chapman
Corporate Secretary
 
Houston, Texas
April 9, 2010
 
 
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE 2010 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 19, 2010
 
Our proxy statement for the 2010 Annual Meeting, our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and our 2009 Summary Report are available at www.proxyvote.com.
 


Table of Contents

 
ATTENDING THE MEETING
 
If you plan to attend the Annual Meeting in person and are a stockholder of record, bring with you a form of government-issued personal identification to the Annual Meeting. If you own stock through a bank, broker or other nominee, you will need proof of ownership as of the record date to attend the Annual Meeting. If you are an authorized proxy holder, you must present the proper documentation. Please see page 4 for more information on what documents you will need for admission to the Annual Meeting. Registration will begin at 8:00 a.m. (local/Central time), and seating will be on a “first come, first served” basis. No cameras, recording equipment or other electronic devices will be allowed in the meeting room. If you do not provide photo identification or comply with the other procedures outlined above upon request, you may not be admitted to the Annual Meeting. In addition, please note parking is not provided for the Annual Meeting. There is parking generally available at the Four Seasons Hotel Houston and at other public parking garages around the Four Seasons Hotel Houston.
 
MEETING LOCATION AND DIRECTIONS
 
Four Seasons Hotel Houston
1300 Lamar Street
Houston, TX 77010
 
From Bush Intercontinental Airport (IAH)
 
Heading out of the airport, merge on to Beltway 8 West following the signs to I-45 South to the McKinney Street left exit. Continue on McKinney for about ten blocks and turn right onto La Branch Street. Go one block and turn right onto Lamar Street. Continue on Lamar Street for two blocks. The Hotel is on the left.
 
From William P. Hobby Airport (HOU)
 
Take 1-45 North to the downtown/Scott Street split. Exit onto Pease Street. Follow Pease Street to Austin Street. Turn right onto Austin Street. Turn left onto Lamar Street. The Hotel is on the left.
 
From Highway 59 South
 
Take Highway 59 North into Houston. Exit onto the Polk Street/Downtown Destinations exit. Turn left at the light and go under the freeway on Polk Street. Turn right at Austin. Go two blocks to Lamar Street and turn left. The Hotel is on the left.
 
From I-10 East
 
Take I-10 to 59 South. Exit Downtown Destinations/Hamilton Street. Follow the exit ramp to the stadium and turn right on Congress Street. Follow Congress Street three blocks and turn left on La Branch Street. Go eight blocks on La Branch Street and turn right on Lamar Street. The Hotel is on the left.
 
From I-10 West
 
Take I-10 East into Houston. Exit onto Smith Street toward downtown. Follow Smith Street nine blocks to Dallas Street. Turn left onto Dallas Street. Go eight blocks and turn left onto Austin Street. Go one block and turn left on Lamar Street. The Hotel is on the left.


 

 
EL PASO CORPORATION
 
PROXY STATEMENT
 
TABLE OF CONTENTS
 
         
    Page
    Number
 
    1  
    6  
    13  
    18  
    20  
    27  
    29  
    36  
    36  
    54  
    55  
    58  
    61  
    63  
    64  
    66  
    67  
    73  
    74  
    77  
    78  
    87  
    88  
       
    A-1  


Table of Contents

EL PASO CORPORATION
1001 Louisiana Street
Houston, Texas 77002

PROXY STATEMENT

2010 ANNUAL MEETING OF STOCKHOLDERS — May 19, 2010
 
Our Board of Directors is furnishing you with this proxy statement to solicit proxies on its behalf to be voted at the 2010 Annual Meeting of Stockholders of El Paso Corporation. The Annual Meeting will be held at the Four Seasons Hotel Houston, 1300 Lamar Street, Houston, Texas 77010, on Wednesday, May 19, 2010, at 9:00 a.m. (local/Central time). The proxies also may be voted at any adjournments or postponements of the Annual Meeting.
 
In accordance with the “Notice and Access” rules adopted by the U.S. Securities and Exchange Commission (“SEC”), we have elected to provide access to our proxy materials to our stockholders by providing access to such documents on the Internet. Accordingly, on or about April 9, 2010, an Important Notice Regarding the Availability of Proxy Materials (“Notice”) will be mailed to our stockholders of record. Stockholders will have the ability to access the proxy materials on a website referred to in the Notice or request a printed set of the proxy materials be sent to them, by following the instructions on the Notice.
 
Unless stated otherwise or the context otherwise requires, all references in this proxy statement to “us,” “we,” “our,” “company” or “El Paso” are to El Paso Corporation.
 
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
 
1.     Who may vote?
 
Stockholders holding shares of El Paso’s common stock, par value $3.00 per share, as of the close of business on the record date, March 24, 2010, and present in person or represented by a properly executed proxy are entitled to vote at the Annual Meeting, or any adjournments or postponements of the Annual Meeting. You have one vote for each share of common stock held as of the record date, which may be voted on each proposal presented at the Annual Meeting.
 
2.     What is the record date and what does it mean?
 
The record date for the Annual Meeting is March 24, 2010. The record date was established by the Board of Directors as required by our By-laws and Delaware law. Owners of record of El Paso’s common stock at the close of business on the record date are entitled to:
 
  •  Receive notice of the Annual Meeting; and
 
  •  Vote at the Annual Meeting, and any adjournments or postponements of the Annual Meeting.
 
3.     How many shares of El Paso common stock were outstanding on the record date?
 
There were 702,590,535 shares of common stock outstanding and entitled to vote at the Annual Meeting at the close of business on the record date. Common stock is the only class of stock entitled to vote.
 
4.     Why did I receive a Notice in the mail regarding the Internet availability of proxy materials this year instead of a full set of proxy materials?
 
This year, in connection with SEC rules that allow companies to furnish their proxy materials over the Internet, we have sent to most of our stockholders an Important Notice Regarding the Availability of Proxy Materials instead of a paper copy of the proxy materials. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found in the Notice. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically by e-mail on an ongoing basis. A stockholder’s election to receive proxy materials by mail or e-mail will remain in effect until the stockholder terminates the election.


1


Table of Contents

5.     Why didn’t I receive a Notice in the mail regarding the Internet availability of proxy materials?
 
We are providing stockholders who have previously requested to receive paper copies of the proxy materials with paper copies of the proxy materials instead of a Notice. If you would like to reduce the costs incurred by us in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions provided in your Notice, or if you received a printed version of the proxy materials by mail, by following the instructions provided with your proxy materials and on your proxy card or voting instruction card to vote using the Internet. When prompted, indicate that you agree to receive or access stockholder communications electronically in the future.
 
6.     Can I vote my shares by filling out and returning the Notice?
 
No. The Notice will, however, provide instructions on how to vote by Internet, by requesting and returning a paper proxy card, or by submitting a ballot in person at the Annual Meeting.
 
7.     How can I access the proxy materials over the Internet?
 
You can view the proxy materials for the Annual Meeting on the Internet at www.proxyvote.com. Please have your 12 digit control number available. Your 12 digit control number can be found on your Notice. If you received a paper copy of your proxy materials, your 12 digit control number can be found on your proxy card or voting instruction form.
 
Our proxy materials are also available on our website at www.elpaso.com.
 
8.     What am I voting on?
 
You are voting on the following:
 
  •  the election of 12 directors;
 
  •  the approval of the El Paso Corporation 2005 Omnibus Incentive Compensation Plan, as amended and restated; and
 
  •  the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2010.
 
9.     How does the Board recommend that I vote?
 
The Board recommends that you vote:
 
  •  FOR each of the nominees for director;
 
  •  FOR the approval of the El Paso Corporation 2005 Omnibus Incentive Compensation Plan, as amended and restated; and
 
  •  FOR the approval of the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2010.
 
10.   Why should I vote?
 
Your vote is very important regardless of the number of shares you hold. The Board strongly encourages you to exercise your right to vote as a stockholder of the company. Please note that the rules that determine how your broker can vote your shares have changed. Brokers may no longer vote your shares on the election of directors in the absence of your specific instructions as to how to vote. Please provide your broker with voting instructions so that your vote can be counted. See question, 14, “What happens if I do not specify a choice for a proposal when returning a proxy?” below for additional information.


2


Table of Contents

11.   How do I vote?
 
You may vote by any of the following methods:
 
  •  By Telephone or Internet — If you have telephone or Internet access, you may submit your proxy vote by following the instructions provided in the Notice or on your proxy card or voting instruction form.
 
  •  By Mail — You may submit your proxy vote by mail by signing a proxy card if your shares are registered or, for shares held beneficially in street name, by following the voting instructions included by your broker, trustee or nominee, and mailing it in the enclosed envelope. If you provide specific voting instructions, your shares will be voted as you have instructed.
 
  •  In Person at the Annual Meeting — If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares, the stockholder of record. As the stockholder of record, you have the right to vote in person at the Annual Meeting. If your shares are held in a brokerage account or by another nominee or trustee, you are considered the beneficial owner of shares held in street name. As the beneficial owner, you are also invited to attend the Annual Meeting. Since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from your broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting. See question 18, “Who can attend the Annual Meeting?” below for additional information.
 
12.   If I vote by telephone or Internet and received a proxy card in the mail, do I need to return my proxy card?
 
No.
 
13.   Can I change my vote?
 
If you are a stockholder of record, you may revoke your proxy at any time before the voting polls are closed at the Annual Meeting, by the following methods:
 
  •  voting at a later time by telephone or Internet;
 
  •  writing our Corporate Secretary, Marguerite N. Woung-Chapman, El Paso Corporation, P.O. Box 2511, Houston, Texas 77252-2511; or
 
  •  giving notice of revocation to the Inspector of Election at the Annual Meeting.
 
If you are a street name stockholder and you vote by proxy, you may later revoke your proxy by informing the holder of record in accordance with that entity’s procedures.
 
14.   What happens if I do not specify a choice for a proposal when returning a proxy?
 
You should specify your choice for each proposal on your proxy card or voting instruction form. Shares represented by proxies will be voted in accordance with the instructions given by the stockholders. If you are a registered stockholder and your proxy card is signed and returned without voting instructions, it will be voted according to the recommendation of the Board of Directors. If you are a beneficial stockholder and fail to provide voting instructions, your broker, bank or other holder of record is permitted to vote your shares on the ratification of Ernst & Young LLP as our independent registered public accounting firm. However, absent instructions from you, the record holder may not vote on the election of directors or the approval of our amended and restated 2005 Omnibus Incentive Compensation Plan. Without your voting instructions on these proposals, a “broker non-vote” will occur, which means your vote will not be counted.
 
15.   What happens if other matters come up at the Annual Meeting?
 
The matters described in the notice of Annual Meeting are the only matters we know of which will be voted on at the Annual Meeting. If other matters are properly presented at the Annual Meeting, the persons named in the enclosed proxy card or voting instruction form will vote your shares according to their best judgment.


3


Table of Contents

16.   Who will count the votes?
 
A representative of Broadridge, an independent tabulator appointed by the Board of Directors, will count the votes and act as the Inspector of Election. The Inspector of Election shall have the authority to receive, inspect, electronically tally and determine the validity of the proxies received.
 
17.   What is a “quorum?”
 
To transact any business at the Annual Meeting, a “quorum” must be present. A “quorum” is a majority of the aggregate voting power of our outstanding shares of common stock that are entitled to vote and are present in person at the Annual Meeting or represented by proxy. If you submit a properly executed proxy, you will be considered part of the quorum even if you abstain from voting. Broker non-votes are treated as present for the purpose of determining a quorum.
 
18.   Who can attend the Annual Meeting?
 
Admission to the Annual Meeting is limited to stockholders of El Paso, persons holding validly executed proxies from stockholders who held El Paso common stock on March 24, 2010, and invited guests of El Paso.
 
If you are a stockholder of El Paso, you must bring certain documents with you in order to be admitted to the Annual Meeting. The purpose of this requirement is to help us verify that you are actually a stockholder of El Paso. Please read the following rules carefully because they specify the documents that you must bring with you to the Annual Meeting in order to be admitted. The items that you must bring with you differ depending upon whether you are a record holder or hold your stock in “street name” through your broker or other nominee.
 
Proof of ownership of El Paso stock must be shown at the door. Failure to provide adequate proof that you were a stockholder on the record date may prevent you from being admitted to the Annual Meeting.
 
If you were a record holder of El Paso common stock on March 24, 2010, then you must bring a valid government-issued personal identification (such as a driver’s license or passport).
 
If a broker, bank, trustee or other nominee was the record holder of your shares of El Paso common stock on March 24, 2010, then you must bring:
 
  •  Valid government-issued personal identification (such as a driver’s license or passport); and
 
  •  Proof that you owned shares of El Paso common stock on March 24, 2010.
 
Examples of proof of ownership include the following: (1) a letter from your bank or broker stating that you owned El Paso common stock on March 24, 2010; (2) a brokerage account statement indicating that you owned El Paso common stock on March 24, 2010; or (3) the voting instruction form provided by your broker indicating that you owned El Paso common stock on March 24, 2010.
 
If you are a proxy holder for a stockholder of El Paso, then you must bring:
 
  •  The validly executed proxy naming you as the proxy holder, signed by a stockholder of El Paso who owned shares of El Paso common stock on March 24, 2010, and
 
  •  Valid government-issued personal identification (such as a driver’s license or passport), and
 
  •  If the stockholder whose proxy you hold was not a record holder of El Paso common stock on March 24, 2010, proof of the stockholder’s ownership of shares of El Paso common stock on March 24, 2010, in the form of a letter or statement from a bank, broker or other nominee indicating that the stockholder owned El Paso common stock on March 24, 2010.
 
You may not use cameras, recording equipment or other electronic devices during the Annual Meeting.
 
19.   How many votes must each proposal receive to be adopted?
 
  •  With respect to the election of directors, our By-laws provide for the election of directors by the majority vote of stockholders in uncontested elections. This means the number of votes cast “for” a nominee’s


4


Table of Contents

  election must exceed the number of votes cast “against” such nominee’s election in order for him or her to be elected to the Board of Directors. Broker non-votes do not count as votes cast “for” or “against” the director’s election. See “Corporate Governance — Voting Standard to Elect Directors” on page 10 of this proxy statement for additional information.
 
  •  With respect to the approval of the amendment and restatement of our 2005 Omnibus Incentive Compensation Plan, in order to satisfy the listing standards of the New York Stock Exchange (“NYSE”) the total vote cast with respect to the proposal concerning the omnibus plan must represent more than 50% of the total number of shares entitled to vote on the proposal, and the proposal must receive the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting. In determining whether the number of votes cast represents more than 50% of the total number of shares entitled to vote, abstentions will count as votes cast. Broker non-votes do not count as votes cast “for” or “against” the proposal.
 
  •  With respect to the ratification of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2010, the proposal must receive the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting. Abstentions will count as votes “against” the proposal.
 
20.   How are votes counted?
 
Votes are counted in accordance with our By-laws and Delaware law. Shares will not be voted at the Annual Meeting if a properly executed proxy card covering those shares has not been returned and the holder does not cast votes in respect of those shares in person at the Annual Meeting.
 
21.   How can I view the stockholder list?
 
A complete list of the registered stockholders entitled to vote at the Annual Meeting will be available to view during the Annual Meeting. You may access this list at El Paso’s offices at 1001 Louisiana Street, Houston, Texas 77002 during ordinary business hours for a period of ten days before the Annual Meeting.
 
22.   Who pays for the proxy solicitation related to the Annual Meeting?
 
We do. In addition to sending you or making available to you these materials, some of our directors and officers as well as management and non-management employees may contact you by telephone, mail, e-mail or in person. You may also be solicited by means of press releases issued by El Paso, postings on our website, www.elpaso.com, and advertisements in periodicals. None of our officers or employees will receive any extra compensation for soliciting you. We have retained Georgeson Inc. to assist us in soliciting your proxy for an estimated fee of $17,500, plus reasonable out-of-pocket expenses. Georgeson will ask brokers and other custodians and nominees whether other persons are beneficial owners of El Paso common stock. If so, we will supply them with the Notice or proxy materials for distribution to the beneficial owners. We will also reimburse banks, nominees, fiduciaries, brokers and other custodians for their costs of sending the Notice or proxy materials to the beneficial owners of El Paso common stock.
 
23.   If I want to submit a stockholder proposal for the 2011 Annual Meeting, when is it due?
 
If you want to submit a proposal for possible inclusion in next year’s proxy statement, you must submit it in writing to the Corporate Secretary, El Paso Corporation, P.O. Box 2511, Houston, Texas 77252-2511, telephone (713) 420-4018 and facsimile (713) 420-4099. El Paso must receive your proposal on or before December 10, 2010. El Paso will consider only proposals meeting the requirements of the applicable rules of the SEC.
 
Additionally, under our By-laws, for a stockholder to bring any matter before the 2011 Annual Meeting that is not included in the 2011 Proxy Statement, the stockholder’s written notice must be received not less than 90 days nor more than 120 days prior to the first anniversary of the 2010 Annual Meeting. Under this criterion, stockholders must provide us with a notice of a matter to be brought before the 2011 Annual Meeting during the period from January 19, 2011 to February 18, 2011.


5


Table of Contents

If the 2011 Annual Meeting is held more than 30 days before or 60 days after May 19, 2011, for a stockholder seeking to bring any matter before the 2011 Annual Meeting, the stockholder’s written notice must be received not less than 90 days nor more than 120 days before the date of the 2011 Annual Meeting or by the tenth day after we publicly announce the date of the 2011 Annual Meeting, if that would result in a later deadline.
 
24.   How can I obtain a copy of the Annual Report on Form 10-K?
 
As set forth on the Notice, you may receive a hard copy of proxy materials, including the Annual Report on Form 10-K, by following the directions set forth on the Notice. The Annual Report on Form 10-K is also available on our website at www.elpaso.com.
 
CORPORATE GOVERNANCE
 
We are committed to maintaining the highest standards of corporate governance. We believe that strong corporate governance is critical to achieving our performance goals, and to maintaining the trust and confidence of investors, employees, suppliers, business partners, customers, communities in which we operate, regulatory agencies and other stakeholders.
 
Corporate Governance Guidelines.  Our Corporate Governance Guidelines, together with the Board committee charters, provide the framework for the effective governance of El Paso. The Board of Directors has adopted our Corporate Governance Guidelines to address matters including qualifications for directors, standards for independence of directors, election of directors, responsibilities of directors, mandatory retirement for directors, limitation on serving on other boards/committees, the composition and responsibility of committees, conduct and minimum frequency of Board and committee meetings, management succession, director access to management and outside advisors, director compensation, stock ownership requirements, prohibition on hedging company stock, director orientation and continuing education, annual self-evaluation of the Board, its committees and directors and our policy on poison pills. The Board of Directors recognizes that effective corporate governance is an on-going process, and the Board, either directly or through the Governance & Nominating Committee, will review and revise as necessary our Corporate Governance Guidelines annually, or more frequently if deemed necessary. Our Corporate Governance Guidelines may be found on our website at www.elpaso.com.
 
Independence of Board Members.  Our Corporate Governance Guidelines require that a majority of our Board of Directors meet the “independence” requirements of the NYSE listing requirements and at least 75 percent of our Board of Directors must not be from current management. The Board of Directors observes and complies with all criteria for independence established by the NYSE listing requirements and other governing laws and regulations. The Board of Directors makes its determination of the independence of its members based on categorical standards it has adopted to assist in its assessment of the independence of each director. The categorical standards adopted by the Board of Directors are consistent with the NYSE listing requirements and provide that a director, in order to be considered independent, must not have a direct or indirect material relationship with us or our management other than as a director. The standards of independence adopted by the Board are contained in our Corporate Governance Guidelines, which may be found on our website at www.elpaso.com.
 
The Board has affirmatively determined that each of our directors, with the exception of our Chairman, President and Chief Executive Officer (“CEO”) Douglas L. Foshee, meet the standards of independence adopted by the Board and are “independent.” In reaching this determination, the Board reviewed each director’s commercial and charitable relationships and determined that none of these relationships affect the independence of the individual directors. Thus, 12 of our 13 current directors, and 11 of our 12 director nominees, are independent. Further, our Audit, Compensation, Governance & Nominating, Finance and Health, Safety & Environmental Committees are composed entirely of independent directors.
 
Audit Committee Financial Expert.  The Audit Committee plays an important role in promoting effective accounting, financial reporting, risk management and compliance procedures and controls. All members of our Audit Committee meet the financial literacy standard required by the NYSE rules and at least one member qualifies as having accounting or related financial management expertise under the NYSE rules. In addition, the Board of


6


Table of Contents

Directors has affirmatively determined that Messrs. Hix (chairman of our Audit Committee), Goldman and Shapiro are “audit committee financial experts.”
 
Board Leadership Structure.  Douglas Foshee serves as both Chairman of the Board and our President and CEO. Mr. Foshee has served as our President and CEO since September 2003 and was subsequently named Chairman in May 2009, when the Board elected to combine the positions of Chairman and CEO. The Board believes this is the most effective Board leadership structure at the present time and believes that Mr. Foshee, in his role as Chairman/CEO, has the ability to execute on both the company’s short-term and long-term strategies necessary for the challenging marketplace in which the company competes.
 
The Board believes that El Paso has in place sound counter-balancing mechanisms to ensure that the company maintains the highest standards of corporate governance and continued accountability of the CEO to the Board. These counter-balancing mechanisms include:
 
  •  A super-majority of independent directors on the Board.
 
  •  An independent Lead Director, J. Michael Talbert, who was designated Lead Director in May 2009. Mr. Talbert has been a member of our Board since 2003 and until 2007 served as non-executive Chairman of the Board of Transocean Inc. Mr. Talbert has been a strong and influential addition to the Board and played an integral role in promoting robustness and confidence in the Board’s execution of its responsibilities. As detailed below in how the roles interact, Mr. Talbert’s responsibilities as Lead Director and advisory role to Mr. Foshee complement Mr. Foshee’s role as Chairman and CEO while providing the necessary checks and balances to hold both the Board and the Chairman/CEO accountable in their respective roles.
 
  •  Each of the Board’s standing committees, including the Audit, Compensation, Governance & Nominating, Finance and Health, Safety & Environmental Committees, are comprised of and chaired solely by non-employee directors who meet the independence requirements under the NYSE listing standards and other governing laws and regulations.
 
  •  Review and determination of Mr. Foshee’s compensation and performance remains within the purview of the Compensation Committee.
 
  •  The independent directors continue to meet in regular executive sessions without management present to discuss the effectiveness of the company’s management, the quality of the Board meetings and any other issues and concerns.
 
  •  The Board provides continued oversight of succession planning.
 
As stated in our Corporate Governance Guidelines, the Board does not have a policy as to whether the role of the CEO and the Chairman should be separate, or whether the Chairman should be a management or non-management director. Thus, while the Board has determined that Mr. Foshee should serve in the combined role of Chairman and CEO, the Board has the right to separate those roles if in the future it determines that such a separation would be in the best interests of the company and its stockholders.


7


Table of Contents

Below is a summary of the respective responsibilities of the Chairman/CEO and the Lead Director.
 
           
           
Chairman/CEO
    Lead Director
 
         
           
•   Calls meetings of the Board and the stockholders
    •   Calls meetings of the Board or executive sessions with the independent directors    
           
•   Chairs meetings of the Board and the annual meeting of stockholders
    •   Chairs meetings of the Board and the annual meeting of stockholders when the Chairman is unavailable

•   Chairs meetings of the Board when there is a potential conflict of interest with the Chairman on issues to be considered

•   Chairs executive sessions of the independent directors
   
           
•   Establishes Board meeting schedules and agendas
    •   Coordinates with the Chairman to ensure that meeting schedules allow sufficient time for discussion of all agenda items and agendas cover all items necessary for the Board to discharge its responsibilities

•   Establishes agendas for executive sessions
   
           
•   Ensures that information provided to the Board is sufficient for the Board to fulfill its primary responsibilities
    •   Provides input to the Chairman on the scope, quality, quantity and timeliness of the information provided to the Board    
           
•   Communicates with all directors on key issues and concerns outside of Board meetings
    •   Serves as a non-exclusive conduit to the Chairman of views and concerns of the independent directors    
           
•   With Lead Director, jointly recommends Committee Chair positions to full Board and the Governance Committee
    •   With Chairman, jointly recommends Committee Chair positions to full Board and the Governance Committee    
           
•   In conjunction with the Governance & Nominating Committee, ensures that the Board is balanced in composition and structure and leads Board recruitment efforts
    •   Collaborates with the Chairman and the Governance Committee in monitoring the composition and structure of the Board and assists in Board recruitment efforts    
           
•   Oversees compliance with the company’s governance principles
    •   Collaborates with the Governance & Nominating Committee on questions of possible conflicts of interest or breaches of the company’s governance principles by other directors, including the Chairman    
           
•   Represents the company to and interacts with external stakeholders and employees
    •   Is available for consultation and direct communication with stockholders and interested parties    
           
 


8


Table of Contents

           
           
Chairman/CEO
    Lead Director
 
         
           
•   Leads the Board review of management succession and development plans
    •   Leads the executive sessions of the independent directors on management succession and development plans and provides feedback to the Chairman/CEO

•   Oversees the process of hiring or firing a CEO including any compensation arrangements

•   Recommends to the Board the retention of outside advisors who report directly to the Board

•   Participates with the Compensation Committee Chair in communicating performance feedback and compensation decisions to the CEO
   
           
 
Board’s Role in Risk Oversight.  The Board has oversight responsibility with regard to assessment of the major risks inherent in the business of the company and measures to address and mitigate such risks. The Board is actively involved in overseeing risk management and reviews, at least annually, the company’s system of enterprise risk management.
 
While the Board is ultimately responsible for risk oversight at our company, the committees of the Board assist the Board in fulfilling its oversight responsibilities by considering the risks within their respective areas of expertise. For example, the Audit Committee assists the Board in fulfilling its risk oversight responsibilities relating to the company’s risk management policies and procedures. As part of this process, the Audit Committee meets periodically with management to review, discuss and provide oversight with respect to the processes and controls established by the company to assess, monitor, manage and mitigate the company’s significant risk exposures (whether financial, operating or otherwise). In providing such oversight, the Audit Committee may also discuss such processes and controls with the company’s internal and independent auditors. The Finance Committee assists the Board in fulfilling its risk oversight responsibilities relating to financial risks by reviewing with management on an annual basis the financial risk management policies, strategies and positions of the company. The Compensation Committee likewise assists the Board in fulfilling its risk oversight responsibilities with respect to the management of risks associated with compensation-program design by reviewing whether there are risks arising from our compensation programs and practices that are reasonably likely to have a material adverse effect on the company. The Governance & Nominating Committee assists the Board in fulfilling its risk oversight responsibilities relating to the management of risks associated with corporate governance, board organization and membership, and policies governing conflicts of interest. Finally, the Health, Safety & Environmental Committee assists the Board in fulfilling its risk oversight responsibilities relating to health, safety and environmental-related matters, including environmental regulations, health and safety initiatives and accountabilities, and crisis response.
 
As mentioned above, the Board’s role in risk management is one of oversight. Company management is responsible for day-to-day management of risks the company faces. The company has established a comprehensive enterprise risk management program overseen by a Risk Oversight Committee (“ROC”). The ROC is not a committee of the Board and is comprised of senior management, including our SVP, Strategy and Enterprise Business Development, our CFO, our General Counsel, our Controller, as well as the head of each of the following functions: Pipeline Controller, Corporate Treasury, Business Excellence, Internal Audit and Financial Controls, Strategy and Market Analysis, and Enterprise Risk Management and Portfolio Analysis. The ROC ensures that the company identifies all potential material risks and implements appropriate mitigation measures. The ROC has direct access to company leadership, coordinates with internal audit and financial controls and presents an annual risk assessment to the Audit Committee and the full Board.
 
Communications with Lead Director.  Interested parties may communicate directly with Mr. Talbert by writing to Lead Director of the Board, c/o Corporate Secretary, El Paso Corporation, P.O. Box 2511, Houston, Texas 77252-2511, facsimile (713) 420-4099.

9


Table of Contents

Executive Sessions of the Board of Directors.  The Board of Directors holds regular executive sessions in which non-management Board members meet without any members of management present. Currently, Mr. Talbert presides over the executive sessions of the Board. During 2009, non-management members of the Board met in executive session five times and several Committees of the Board met in executive session without members of management present. The purpose of these executive sessions is to promote open and candid discussion among the non-management directors.
 
Committees of the Board of Directors.  The Board of Directors has adopted charters for the Audit Committee, the Compensation Committee and the Governance & Nominating Committee that comply with the corporate governance rules adopted by the SEC pursuant to the Sarbanes-Oxley Act of 2002 and the NYSE listing standards. The Audit Committee, the Compensation Committee, the Governance & Nominating Committee, the Finance Committee and the Health, Safety & Environmental Committee charters may be found on our website at www.elpaso.com.
 
Board/Committee/Director Evaluations.  Each year the Board of Directors and each Board committee participates in a self-assessment or evaluation of the effectiveness of the Board and its committees. At least once every three years, the Board conducts an evaluation of each individual director. During 2009, each director participated in a self-assessment of the Board and its committees and each director was asked to evaluate each of the other directors. The Board, the respective committees, and individual directors as the case may be, discussed the results of these assessments and, as necessary, any action resulting from these assessments.
 
Management Succession.  The Board periodically reviews with the CEO the management succession and development plan which includes the succession of the CEO in the event of an emergency or retirement, as well as the succession of other employees critical to our company’s continued operations and success.
 
Director Education.  We encourage and facilitate director participation in seminars and conferences and other opportunities for continuing director education. All of our directors are required to attend, at least once every two years, a continuing educational program, seminar or conference designed for board members. In addition, each of our directors is a member of the National Association of Corporate Directors. Each of our directors has met the continuing director education requirements specified above.
 
Stock Ownership Requirements.  Our Board of Directors is committed to director and senior management stock ownership. Directors are required to own shares of our common stock with a value of five times the annual cash retainer paid to non-employee directors within a five-year time period following initial election to the Board. The Board also requires that our CEO own shares of our common stock with a value of at least five times his or her annual base salary, and that other executive officers own shares of our common stock with a value of at least two times their base salary within a five-year time period following initial election to that position. Each share of common stock owned by a director or executive officer is deemed to have a value equal to the greater of (i) the trading price of our common stock as of the date the applicable share was acquired by the director or executive officer or (ii) the trading price of the share of common stock as of the measurement date. Shares of restricted stock, deferred shares and shares in our retirement savings plan or other similar plans are counted towards meeting these requirements. Additionally, a director or executive officer is deemed to own shares of common stock with a value equal to the in-the-money value, if any, of any vested or unvested stock option, stock appreciation right, or similar equity-linked grant that is held by the director or executive officer on any given measurement date. Each of our executive officers and non-employee directors, with the exceptions of Messrs. Crane and Probert who joined the Board in December 2009, met the stock ownership requirements as of December 31, 2009. Messrs. Crane and Probert will be expected to be in compliance with the stock ownership requirements within five years from their appointment.
 
Voting Standard to Elect Directors.  Our By-laws provide for the election of directors by the majority vote of stockholders in uncontested elections. This means the number of votes cast for a nominee’s election must exceed the number of votes cast against such nominee’s election in order for him or her to be elected to the Board of Directors. Our By-laws provide for the election of directors by the plurality of votes cast in contested elections. This means that in elections where the number of nominees exceeds the number of directors to be elected, the nominees who receive the highest number of votes will be elected to the Board of Directors. In addition, our Corporate Governance Guidelines provide that the Board will nominate for election or appoint to Board vacancies only candidates who


10


Table of Contents

irrevocably agree to resign if they fail to receive the required majority vote in uncontested elections. In the event a director fails to receive a majority of votes cast and the Board accepts the resignation tendered, then that director would cease to be a director of El Paso. In accordance with our Corporate Governance Guidelines, our By-laws require as a part of a stockholder’s written notice in connection with the nomination of a director, a statement whether the nominated individual intends to tender an irrevocable resignation effective upon such person’s failure to receive the required vote for re-election at the next meeting at which such person would face re-election. Each of our directors has submitted an irrevocable letter of resignation that becomes effective in the event he or she does not receive a majority of votes cast for his or her election.
 
Policy on Poison Pill Plans.  Our Corporate Governance Guidelines include a policy on poison pills, or stockholder rights plans. We do not currently have in place a stockholders rights plan, and the Board currently has no plans to adopt such a plan. However, if the Board is presented with a set of facts and circumstances which leads it to conclude that adopting a stockholder rights plan would be in the best interests of stockholders, the Board will seek prior stockholder approval unless the Board, in exercising its fiduciary responsibilities under the circumstances, determines by vote of a majority of the independent directors that such submission would not be in the best interests of our stockholders in the circumstances. If the Board were ever to adopt a stockholder rights plan without prior stockholder approval, the Board would present such plan to the stockholders for ratification within one year or cause it to expire within one year, without being renewed or replaced. Further, if the Board adopts a stockholder rights plan and our stockholders do not approve such plan, it will terminate.
 
Code of Ethics.  We have adopted a code of ethics, referred to as our “Code of Business Conduct,” that applies to all of our directors and employees, including our CEO, Chief Financial Officer (“CFO”) and senior financial and accounting officers. Our Code of Business Conduct is a value-based code that is built on our five core values: stewardship, integrity, safety, accountability and excellence. In addition to other matters, our Code of Business Conduct establishes policies to deter wrongdoing and to promote honest and ethical conduct, including ethical handling of actual or apparent conflicts of interest, compliance with applicable laws, rules and regulations, full, fair, accurate, timely and understandable disclosure in public communications and prompt internal reporting of violations of our Code of Business Conduct. We also have an Ethics & Compliance Office and Ethics & Compliance Committee, which is composed of members of senior management, that administers our ethics and compliance program and reports to the Audit Committee of our Board of Directors. A copy of our Code of Business Conduct is available on our website at www.elpaso.com. We will post on our internet website all waivers to or amendments of our Code of Business Conduct, which are required to be disclosed by applicable law and the NYSE listing standards. Currently, we do not have nor do we anticipate any waivers of or amendments to our Code of Business Conduct. We believe our Code of Business Conduct exceeds the requirements set forth in the applicable SEC regulations and the corporate governance rules of the NYSE.
 
Transactions with Related Persons.  Our Board has adopted a written related person transactions policy. The policy defines a related person transaction as one in which El Paso is a participant, the amount involved equals or exceeds $120,000, and a related person has a direct or indirect material interest. The policy defines a related person as any executive officer, director or director nominee, person known to be the beneficial owner of 5 percent or more of El Paso’s voting securities, immediate family member of any of the foregoing persons, or firm or corporation in which any of the foregoing persons is employed as an officer, a partner or greater than 10 percent owner.
 
The policy includes procedures to review and approve, as necessary, any related person transactions prior to the transaction being entered into, or ratify any related person transactions that have not been previously approved. Other than certain pre-approved transactions specifically set forth in the policy, any related person transaction involving executive officers or their immediate family members other than the CEO or the general counsel are referred to the CEO and general counsel for approval. If the CEO and the general counsel cannot agree on the approval or non-approval of the related person transaction, the transaction will be referred to the Governance & Nominating Committee for approval. Any related person transaction involving the general counsel and his or her immediate family members will be referred to the CEO for approval. Any related person transaction involving 5 percent stockholders, directors, director nominees or the CEO and their immediate family members will be referred to the Governance & Nominating Committee for approval. All determinations made by the CEO and the general counsel are reported to the Governance & Nominating Committee at its next regularly scheduled meeting.


11


Table of Contents

In determining whether to approve a related person transaction, the CEO, general counsel or Governance & Nominating Committee will consider whether:
 
  •  the terms of the transaction are fair to El Paso and would be on the same basis if the transaction did not involve a related person;
 
  •  there are business reasons to enter into the transaction;
 
  •  the transaction would impair the independence of an outside director;
 
  •  the transaction would present an improper conflict of interest for any director or executive officer; and
 
  •  the transaction is material.
 
The policy for approval of related person transactions can be found on our website at www.elpaso.com.
 
During 2009, our pipeline business unit made payments to certain subsidiaries of NRG Energy, Inc. in the amount of $263,217. Our director David W. Crane, who joined El Paso’s Board of Directors in December 2009, currently serves as President and Chief Executive Officer of NRG Energy. Due to the relatively small amounts involved, the purchases were not done on a competitive bid basis and primarily relate to services provided prior to Mr. Crane’s appointment as a member of El Paso’s Board.
 
Also during 2009, our exploration and production and pipeline business units made payments to certain subsidiaries of Halliburton Company in the amount of $110,001,281. Our director Timothy J. Probert, who likewise joined El Paso’s Board of Directors in December 2009, currently serves as President of Halliburton’s Global Business Lines. The majority of these payments were made by our exploration and production business unit on a competitive bid basis prior to Mr. Probert’s appointment as a member of El Paso’s Board and relate to services and supplies provided by Halliburton in relation to our drilling operations.
 
Special Stockholder Meetings.  Our By-laws permit stockholders who own at least 25 percent of our outstanding shares to call a special meeting of stockholders.
 
Web Access.  We provide access through our website to current information relating to corporate governance, including a copy of each of the Board’s standing committee charters, our Corporate Governance Guidelines, our Code of Business Conduct, our Restated Certificate of Incorporation and By-laws, our policy for approval of related person transactions, biographical information concerning each director, and other matters regarding our corporate governance principles. We also provide access through our website to all filings submitted by El Paso to the SEC. Our website is www.elpaso.com, and access to this information is free of any charge to the user (except for any internet provider or telephone charges). Information contained on our website is not part of this proxy statement.
 
Process for Communication with the Board.  Our Board has established a process for interested parties to communicate with the Board. Such communications should be in writing, addressed to the Board or an individual director, c/o Ms. Marguerite N. Woung-Chapman, Corporate Secretary, El Paso Corporation, P.O. Box 2511, Houston, Texas 77252-2511. The Corporate Secretary will forward all communications to the addressee.
 
Director Attendance at Annual Meeting.  The Board encourages all director nominees standing for election to attend the Annual Meeting in accordance with our Corporate Governance Guidelines. All incumbent directors who were elected at our 2009 Annual Meeting attended our 2009 Annual Meeting of Stockholders, with the exceptions of Messrs. Braniff and Goldman. Mr. Braniff was unable to attend due to travel restriction advisories put in place for travel in and out of Mexico City in light of the H1N1 influenza outbreak at that time, and Mr. Goldman was unable to attend due to a long-standing prior commitment.


12


Table of Contents

 
INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES
 
The Board of Directors held nine meetings during 2009. Each director attended at least 75 percent of his or her board and committee meetings.
 
The Board of Directors has established five standing committees to assist the Board in carrying out its duties: the Audit Committee, the Compensation Committee, the Governance & Nominating Committee, the Finance Committee and the Health, Safety & Environmental Committee. We describe the committees, their membership during 2009 and their principal responsibilities below.
 
                 
        Governance &
      Health, Safety &
Audit   Compensation   Nominating   Finance   Environmental
 
Thomas R. Hix
  Steven J. Shapiro   J. Michael Talbert   Robert W. Goldman   John L. Whitmire
(Chairman)
  (Chairman)   (Chairman)   (Chairman)   (Chairman)
Juan Carlos Braniff
  Ferrell P. McClean   David W. Crane   Juan Carlos Braniff   James L. Dunlap
Robert W. Goldman
  Robert F. Vagt   James L. Dunlap   Thomas R. Hix   Anthony W. Hall, Jr.
Steven J. Shapiro
  John L. Whitmire   Anthony W. Hall, Jr.   Ferrell P. McClean   Timothy J. Probert
        John L. Whitmire       Robert F. Vagt
 
Audit Committee
 
The Audit Committee held nine meetings during 2009. The Audit Committee currently consists of four non-employee directors, each of whom the Board has determined is “independent” as such term is defined in Section 10A of the Exchange Act, the SEC rules thereunder, the NYSE listing standards and our Corporate Governance Guidelines. The Board of Directors has determined that each member of the Audit Committee possesses the necessary level of financial literacy required to enable him or her to serve effectively as an Audit Committee member. No Audit Committee member serves on more than three audit committees of public companies, including our Audit Committee. We maintain an Internal Audit Department to provide management and the Audit Committee with ongoing assessments of our risk management processes and system of internal controls. In addition, we maintain a Financial Controls Group to manage our internal control over financial reporting compliance activities. The Audit Committee’s duties, which are discussed in detail in its charter, include, among other duties:
 
  •  Assisting the Board of Directors in fulfilling its responsibilities with respect to the oversight of:
 
  the integrity of our financial statements, including recommending to the Board the filing of our audited financial statements;
 
  our disclosure controls and procedures and internal control over financial reporting;
 
  the evaluation and retention, including a review of the qualifications, independence and performance, of independent auditors and any independent petroleum reserves engineer;
 
  the performance of our internal audit function;
 
  the performance of our ethics and compliance functions, including our compliance with legal and regulatory requirements and our Code of Business Conduct; and
 
  the processes and controls, including guidelines and policies, established by the company to assess, monitor, manage and mitigate the company’s significant risk exposures.
 
  •  The appointment, compensation, retention, oversight and dismissal of our independent auditor or any other accounting firm engaged for the purpose of preparing or issuing an audit report or related work, or performing other audit, review or attestation services.
 
  •  The pre-approval of all auditing services and fees and, for our principal auditor, allowable non-audit (including tax) services and fees provided to us.


13


Table of Contents

 
  •  The resolution of any disagreement between management and our independent auditor regarding financial reporting or audit matters.
 
  •  The appointment, compensation, retention, oversight and dismissal of any independent petroleum reserves engineer engaged for the purpose of reviewing, preparing or auditing an estimate of our natural gas and oil reserves.
 
  •  The review of procedures for the receipt, retention and treatment of complaints received by us regarding any accounting, internal accounting controls or auditing matters.
 
Our principal independent auditor, Ernst & Young LLP, reports directly to the Audit Committee. In addition, the Audit Committee provides an open avenue of communication between the internal auditors, the independent auditor and the Board. Interested parties may contact the Audit Committee members by following the process outlined in the Corporate Governance section of this proxy statement.
 
The Audit Committee Charter can be found on our website at www.elpaso.com.
 
Policy for Approval of Audit and Non-Audit Services
 
During 2009, the Audit Committee approved all the types of audit and permitted non-audit services which our independent auditors were to perform during the year, as required under applicable law, and the cap on fees for each of these categories. The Audit Committee’s current practice is to consider for pre-approval annually all categories of audit and permitted non-audit services proposed to be provided by our independent auditors for a fiscal year. Pre-approval of tax services requires that the principal independent auditor provide the Audit Committee with written documentation of the scope and fee structure of the proposed tax services and discuss with the Audit Committee the potential effects, if any, of providing such services on the independent auditor’s independence. The Audit Committee will also consider for pre-approval annually the maximum amount of fees and the manner in which the fees are determined for each type of pre-approved audit and non-audit services proposed to be provided by our independent auditors for the fiscal year. The Audit Committee must separately pre-approve any service that is not included in the approved list of services or any proposed services exceeding pre-approved cost levels. The Audit Committee has delegated pre-approval authority to the Chairman of the Audit Committee for services that need to be addressed between Audit Committee meetings. The Audit Committee is then informed of these pre-approval decisions, if any, at the next meeting of the Audit Committee. See “Principal Accountant Fees and Services” on page 87 of this proxy statement for the aggregate fees paid to Ernst & Young LLP for the years ended December 31, 2009 and 2008.
 
Compensation Committee
 
The Compensation Committee held four meetings during 2009. The Compensation Committee currently consists of four non-employee directors, each of whom the Board has determined is “independent” under (a) the NYSE listing standards, (b) the non-employee director standards of Rule 16b-3 of the Exchange Act, (c) the outside director requirements of Section 162(m) of the Internal Revenue Code (the “Code”) and (d) our Corporate Governance Guidelines.
 
The Compensation Committee’s functions, which are discussed in detail in its charter, include, among other functions, responsibility to:
 
  •  Review and approve annually the individual elements of total compensation for the CEO, review and approve the corporate goals and objectives relevant to CEO compensation, evaluate the CEO’s performance in light of those goals and objectives, and determine and approve the CEO’s compensation level based on this evaluation.
 
  •  Review and approve annually the individual elements of total compensation for all executive officers, which includes all officers who are subject to Section 16(a) of the Exchange Act.
 
  •  Review appropriate criteria for establishing performance targets and determining annual corporate and executive performance ratings.


14


Table of Contents

 
  •  Ensure that our executive long-term and short-term incentive compensation programs are administered in accordance with our stated compensation objectives, periodically review whether there are risks arising from our compensation programs that are reasonably likely to have a material adverse effect on the company and make recommendations with respect to such programs, where appropriate, for full Board approval.
 
  •  Review our employee benefit and compensation programs (including all new equity-based compensation programs) and consider management recommendations subject, where appropriate, to stockholder or full Board approval.
 
  •  Review and approve goals and objectives relevant to director compensation, including annual retainer and meeting fees, and terms and awards of equity compensation, and recommend changes, where appropriate, for full Board approval.
 
  •  Select, retain, evaluate, and, where appropriate, replace the independent executive compensation consulting firm, and review all related fees.
 
The Compensation Committee Charter can be found on our website at www.elpaso.com.
 
At the beginning of each calendar year, the Compensation Committee approves our corporate and business unit financial and non-financial performance goals for our annual incentive compensation arrangements. The Compensation Committee also establishes the annual base salaries and minimum, target, and maximum annual cash incentive bonus levels for each of the executive officers. After the financial and non-financial results are available for the year, the Compensation Committee determines the appropriate achievement level of the performance goals for purposes of determining annual cash incentive bonuses and long-term incentive award grants. The Compensation Committee also takes into account the executives’ individual performances to determine the amount of each executive’s annual cash incentive bonus and the value of his or her long-term incentive awards. The Compensation Committee also considers recommendations from our CEO regarding the compensation levels for those executives reporting directly to him. During the year, the Compensation Committee generally meets at least four times and reviews, among other things, our compensation programs and recommended changes, our peer group, proxy and survey benchmarking data, internal pay disparity trends, wealth accumulation, total compensation profiles for our CEO and other executive officers, CEO accountabilities and the general compensation landscape.
 
See the Compensation Discussion and Analysis beginning on page 36 of this proxy statement for a further discussion of our procedures for determining and establishing executive compensation.
 
Compensation Consultant Payments
 
The Compensation Committee has retained Deloitte Consulting LLP (“Deloitte”) as its independent compensation consultant. The compensation consultant is directly accountable to the Compensation Committee and the committee reviews all fees paid to the consultant for executive compensation advice. In addition, the Compensation Committee reviews, on an annual basis, the performance of the compensation consultant and provides the consultant with direct feedback. During 2009, we paid Deloitte $254,161 in fees for compensation consulting services provided to the Committee.
 
Certain Deloitte affiliates are also engaged by El Paso to provide certain non-executive compensation related services. These affiliates were retained by management in the normal course of business. During 2009, we paid Deloitte affiliates $5,180,946 in fees for such non-executive compensation related services, which primarily related to system integration and process optimization consulting and implementation, as well as limited tax and tax-related services. The Compensation Committee reviews on an annual basis the payments made to the Deloitte affiliates for non-executive compensation related services, as well as the specific services the Deloitte affiliates performed for El Paso. During 2009, the Compensation Committee discussed the payments and services with its independent compensation consultant and confirmed that the consultant’s compensation is not tied to the level of other services provided by Deloitte to El Paso. Based on its review, the Compensation Committee believes that each of these relationships is separate and independent and does not impair Deloitte’s ability to provide independent compensation advice to the Committee.


15


Table of Contents

Compensation Committee Interlocks and Insider Participation
 
During 2009, the following independent directors served on our Compensation Committee: Messrs. Shapiro, Vagt, Whitmire and Ms. McClean. The Compensation Committee has neither interlocks nor insider participation.
 
Governance & Nominating Committee
 
The Governance & Nominating Committee met five times during 2009. The Governance & Nominating Committee currently consists of five non-employee directors, each of whom the Board has determined is “independent” as such term is defined in the NYSE listing standards and our Corporate Governance Guidelines. The Board has delegated to the Governance & Nominating Committee its oversight responsibilities relating to corporate governance and the establishment of criteria for Board selection (including an initial determination regarding director independence).
 
The Governance & Nominating Committee’s functions, which are discussed in detail in its charter, include, among other functions, responsibility to:
 
  •  Develop and recommend to the Board corporate governance principles and review and make recommendations regarding the Corporate Governance Guidelines.
 
  •  Identify and review the qualifications of candidates for Board membership, screen possible candidates for Board membership and communicate with members of the Board regarding Board meeting format and procedures.
 
  •  Determine desired qualifications, expertise and characteristics and, to the extent the Governance & Nominating Committee deems necessary, conduct searches for potential candidates for Board membership with such attributes.
 
  •  Ensure that we have an appropriate policy on potential conflicts of interest, including, but not limited to, the policies on (1) related person transactions (including any dealings with directors, officers or employees), and (2) such other transactions that could have the appearance of a potential conflict of interest.
 
  •  Monitor and report to the Board whether there is any current relationship between any director and El Paso that may adversely affect the independent judgment of the director.
 
  •  Oversee the process of annual performance evaluations for the Board, each committee and directors.
 
  •  Act as a nominating committee and consider any nominations properly submitted by the stockholders to the Corporate Secretary in accordance with our Corporate Governance Guidelines, our By-laws and the process set forth in this proxy statement.
 
  •  Review and make recommendations to the Board of Directors as to the chairpersons and members of each committee of the Board (other than the Governance & Nominating Committee).
 
The Governance & Nominating Committee Charter can be found on our website at www.elpaso.com.
 
Director Nomination Process and Board Diversity Considerations
 
The Governance & Nominating Committee will review any nominations from stockholders, other Board members, third party search firms, executives and other such persons. At a minimum, we believe our directors, whether nominated by stockholders or by the Board, should possess the education, experience and skills necessary to assist and provide oversight to our management in the operation of our businesses, as set forth in our Corporate Governance Guidelines. Among other matters, the Board considers education; business, governmental and civic experience; leadership; diversity; communication, interpersonal and other required skills; independence; and other matters relevant to the Board’s objectives. We have a comprehensive process in place to identify and evaluate candidates to be nominated for director. The Governance & Nominating Committee identifies the needs of the Board by asking each director to identify particular skills that will strengthen the Board, and that are in conformity with the goals identified in our Corporate Governance Guidelines. A third party search firm is then retained to help identify, assess qualifications and screen specific candidates. The Governance & Nominating Committee reviews


16


Table of Contents

the qualifications of the candidates presented and interviews the most qualified. The Governance & Nominating Committee recommends potential nominees to the full Board, which interviews the candidates and then makes nominations for election at the Annual Meeting. All of the nominees for director other than Messrs. Crane and Probert were elected by our stockholders last year. Messrs. Crane and Probert were each reviewed as a potential director nominee by our third party search firm, recommended for appointment by the Governance & Nominating Committee and appointed by the Board during 2009. Each director nominee who appears on the ballot has been recommended by the Governance & Nominating Committee to the full Board.
 
On February 24, 2010, the Board, upon the recommendation of the Governance & Nominating Committee, amended our Corporate Governance Guidelines to document our commitment to diversity as a consideration in identifying director nominees. In addition to the criteria set forth above, the Board will seek to achieve a mix of directors that represents a diversity of background and experience, including with respect to age, gender and race. In conducting searches for new directors, the Governance & Nominating Committee will take every reasonable step to ensure that diverse candidates are in the pool from which nominees are chosen. The Governance & Nominating Committee will review this policy annually in connection with its review and recommendation to the Board of director nominees for the next annual meeting. The Board’s current composition reflects diversity in business and professional experience, skills, race and gender.
 
Stockholders seeking to nominate persons for election as directors at the 2011 Annual Meeting must submit, in writing, a timely notice complying with our By-laws to Ms. Marguerite N. Woung-Chapman, Corporate Secretary, El Paso Corporation, P.O. Box 2511, Houston, Texas 77252-2511, telephone (713) 420-4018 and facsimile (713) 420-4099. To be timely for a stockholder seeking to bring any matter before the 2011 Annual Meeting, the stockholder’s written notice must be received not less than 90 days nor more than 120 days prior to the first anniversary of the 2010 Annual Meeting. Under these criteria, stockholders must provide us with notice of nominations sought to be made at the 2011 Annual Meeting during the period from January 19, 2011 to February 18, 2011.
 
If the 2011 Annual Meeting is held more than 30 days before or 60 days after May 19, 2011, for a stockholder seeking to bring any matter before the 2011 Annual Meeting, the stockholder’s written notice must be received not less than 90 days nor more than 120 days before the date of the 2011 Annual Meeting or by the tenth day after we publicly announce the date of the 2011 Annual Meeting, if that would result in a later deadline.
 
Finance Committee
 
The Finance Committee met seven times during 2009. The Finance Committee currently consists of four non-employee directors, each of whom the Board has determined is “independent” under the NYSE listing standards and in accordance with our Corporate Governance Guidelines. The Finance Committee assists the Board in fulfilling its oversight responsibilities by reviewing and recommending appropriate action with respect to our capital structure, source of funds, payment of dividends, liquidity and financial position.
 
The Finance Committee’s functions, which are discussed in detail in its charter, include, among other functions, responsibility to:
 
  •  Review and recommend to the Board our long-range financial plan, including the amount and allocation of capital spending and financing thereof.
 
  •  Review and approve capital projects in excess of $25 million and up to $75 million.
 
  •  Recommend to the Board financial policies that maintain or improve our financial strength.
 
  •  Develop and recommend dividend policies and recommend to the Board specific dividend payments.
 
  •  Review terms and conditions of financing plans, including the issuance of securities, corporate borrowings, off-balance sheet structures and investments, and make recommendations to the Board regarding such financings.
 
  •  Review and make recommendations regarding our interest rate, foreign currency, commodity and other financial liquidity risks, as well as our financial risk management policies, strategies and positions.


17


Table of Contents

 
The Finance Committee Charter can be found on our website at www.elpaso.com.
 
Health, Safety & Environmental Committee
 
The Health, Safety & Environmental Committee met four times during 2009. The Health, Safety & Environmental Committee currently consists of five non-employee directors, each of whom the Board has determined is “independent” under the NYSE listing standards and our Corporate Governance Guidelines. The Health, Safety & Environmental Committee assists the Board in fulfilling its oversight responsibilities with respect to the Board’s and our continuing commitment to improving the environment, ensuring the safety of our employees and ensuring that our businesses and facilities are operated and maintained in a safe and environmentally sound manner.
 
The Health, Safety & Environmental Committee’s functions, which are discussed in detail in its charter, include, among other functions, responsibility to:
 
  •  Review and provide oversight with regard to our policies, standards, accountabilities and programs relative to health, safety and environmental-related matters, including our employee and contractor safety programs, environmental compliance programs, pipeline integrity program and our greenhouse gas emissions inventory.
 
  •  Advise the Board and make recommendations for the Board’s consideration regarding health, safety and environmental-related issues.
 
  •  Review and provide oversight with respect to our safety and readiness to respond to crisis situations.
 
The Health, Safety & Environmental Committee Charter can be found on our website at www.elpaso.com.
 
AUDIT COMMITTEE REPORT
 
Each member of the Audit Committee is “independent,” as that term is defined under Section 10A of the Exchange Act, the SEC rules, the NYSE listing standards and our Corporate Governance Guidelines. Each member of the Audit Committee is also financially literate, as that qualification is interpreted by our Board of Directors in its business judgment. Further, each of Messrs. Goldman, Hix and Shapiro qualifies and is designated as an “audit committee financial expert,” serving on the Audit Committee as such term is defined in rules adopted by the SEC and interpreted by our Board. The Audit Committee currently consists of four members: Messrs. Braniff, Goldman, Hix and Shapiro. During 2009, the Audit Committee met nine times and discussed, among other things, the financial information contained in each quarterly earnings announcement and the Form 10-K and Forms 10-Q with management, our internal auditors and our independent auditor prior to release. In compliance with the requirements of the New York Stock Exchange, we have adopted a charter which may be found on El Paso’s website at www.elpaso.com.
 
Audit Committee Statement
 
El Paso’s management is responsible for El Paso’s financial reporting process, internal audit process, the effectiveness of disclosure controls and procedures and internal control over financial reporting, and the preparation of El Paso’s financial statements. El Paso’s independent registered public accounting firm is responsible for auditing those financial statements and the effectiveness of internal control over financial reporting. We monitor and review these processes but do not conduct auditing or accounting reviews or procedures. We meet with management and the independent registered public accounting firm to discuss the financial statements, and rely on El Paso’s management’s representation that the financial statements have been prepared in conformity with U.S. generally accepted accounting principles, and on the representations of El Paso’s independent registered public accounting firm included in their report on El Paso’s financial statements.
 
In carrying out our responsibilities as set forth in our charter, we:
 
  •  reviewed and discussed the audited financial statements with El Paso management;
 
  •  discussed the effectiveness of disclosure controls and procedures and internal control over financial reporting with El Paso management;


18


Table of Contents

 
  •  discussed with our independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; and
 
  •  received written disclosures and the letter from El Paso’s independent registered public accounting firm regarding the independent registered public accounting firm’s communications with us concerning independence as required by applicable requirements of the Public Company Accounting Oversight Board, and have discussed with our independent registered public accounting firm their independence, as well as their internal quality control procedures.
 
Based on the review and discussions described above, we have recommended to the Board of Directors that the audited financial statements be included in El Paso’s Annual Report on Form 10-K for the 2009 fiscal year for filing with the SEC.
 
Current Members of the Audit Committee of the Board of Directors
 
             
Thomas R. Hix
  Juan Carlos Braniff   Robert W. Goldman   Steven J. Shapiro
(Chairman)
  (Member)   (Member)   (Member)


19


Table of Contents

 
PROPOSAL NO. 1 — Election of Directors
 
The Board.  You will have the opportunity to elect our entire Board of Directors, consisting of 12 members, at the Annual Meeting. Mr. Dunlap will not stand for re-election and will be retiring from the Board as of the close of the Annual Meeting pursuant to our mandatory retirement age policy. All of our other incumbent directors are standing for re-election. All directors are elected annually and serve a one-year term or until his or her successor has been duly elected and shall qualify.
 
Nominations.  At the Annual Meeting, we will nominate the 12 persons named in this proxy statement as directors.
 
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES NAMED BELOW.
 
General Information about the Nominees for Election, as of March 30, 2010.  The biographies of each of the nominees below contain information regarding the person’s service as a director, business experience, director positions held currently or at any time during the last five years, information regarding involvement in certain legal or administrative proceedings, if applicable, and the experiences, qualifications, attributes or skills that caused the Governance & Nominating Committee and the Board to determine that the person should serve as a director for the company. Each of the nominees has agreed to be named in this proxy statement and to serve as a director if elected.
 
         
(JUAN CARLOS BRANIFF PHOTO)  
Juan Carlos Braniff
Age — 52

Member — Audit Committee
Member — Finance Committee
 
Director since 1997
 
Mr. Braniff has served as a director since 1997. Mr. Braniff has been Chairman of Capital I Ltd. Partners and a partner in Alpha Patrimonial S.A. de C.V. in Mexico City since August 2005. Mr. Braniff was a business consultant from January 2004 to August 2005. Mr. Braniff served Grupo Financíero BBVA Bancomer as Vice Chairman from October 1999 to January 2004, as Deputy Chief Executive Officer of Retail Banking from September 1994 to October 1999 and as Executive Vice President of Capital Investments, Mortgage Banking and Tourism from December 1991 to September 1994. Mr. Braniff is currently a member of the board of directors of Ixe Grupo Financiero S.A. de C.V. Mr. Braniff previously served as a director of Fomento Economico Mexicano (FEMSA, NYSE: FMX) from 1988 to 2003, as a director of Coca-Cola FEMSA (NYSE: KOF) from 1991 to 2003 and as a director of Grupo Financiero BBVA Bancomer from 1991 to 2003. He also served as an alternate director of Grupo Industrial Maseca, S.A.B. de C.V. from 2007 to 2009, and as an alternate director of Gruma, S.A.B. de C.V. from 2007 to 2009.
 
Mr. Braniff brings many years of global business experience to our Board. As highlighted by his various roles at Grupo Financiero BBVA Bancomer, Mr. Braniff has substantial knowledge and experience with complex financial transactions, capital management, credit and financial risk management. As our sole Hispanic board member, Mr. Braniff also provides a diversity of perspective that is welcomed by our Board.
 


20


Table of Contents

         
(DAVID W. CRANE PHOTO)  
David W. Crane
Age — 51

Member — Governance & Nominating Committee
 
Director since 2009
 
Mr. Crane has served as a director since December 2009. Mr. Crane has been President, Chief Executive Officer and a director of NRG Energy, Inc. since December 2003. Prior to joining NRG, Mr. Crane served as Chief Executive Officer of International Power plc, a UK-domiciled wholesale power generation company, from January 2003 to November 2003, and as Chief Operating Officer from March 2000 through December 2002. Mr. Crane was Senior Vice President — Global Power New York at Lehman Brothers Inc. from January 1999 to February 2000, and was Senior Vice President — Global Power Group, Asia (Hong Kong) at Lehman Brothers from June 1996 to January 1999.
 
Mr. Crane’s proven success as the sitting chief executive officer of a Fortune 500 company demonstrates his leadership capability and extensive knowledge of the complex financial and operational issues that public companies face. Mr. Crane’s executive management experience provides the Board with valuable insight on public company governance practices, as well as insight from a customer perspective. In addition, Mr. Crane’s background provides risk management experience that is important to our Board.
 
         
(DOUGLAS L. FOSHEE PHOTO)  
Douglas L. Foshee
Age — 50

Chairman, President and Chief Executive Officer
El Paso Corporation
 
Director since 2003
 
Mr. Foshee has been Chairman of the Board of Directors of El Paso Corporation since May 2009 and President, Chief Executive Officer and a director of El Paso since September 2003. Prior to joining El Paso, Mr. Foshee served as Executive Vice President and Chief Operating Officer of Halliburton Company having joined that company in 2001 as Executive Vice President and Chief Financial Officer. Several subsidiaries of Halliburton, including DII Industries and Kellogg Brown & Root, commenced prepackaged Chapter 11 proceedings to discharge current and future asbestos and silica personal injury claims in December 2003 and an order confirming a plan of reorganization became final effective December 31, 2004. Prior to assuming his position at Halliburton, Mr. Foshee served as President, Chief Executive Officer and Chairman of the Board of Nuevo Energy Company and Chief Executive Officer and Chief Operating Officer of Torch Energy Advisors Inc. Mr. Foshee presently serves as a director of Cameron International Corporation, and from January 2009 until February 2010 served as a trustee of AIG Credit Facility Trust. Mr. Foshee serves as Chairman of the Federal Reserve Bank of Dallas, Houston Branch. Mr. Foshee also serves on the Board of Trustees of Rice University and serves as a member of the Council of Overseers for the Jesse H. Jones Graduate School of Management. He is a member of various other civic and community organizations. Mr. Foshee also serves on the board of directors of El Paso Pipeline GP Company, L.L.C.
 
As President and Chief Executive Officer of El Paso Corporation, Mr. Foshee is the only officer of the company to sit on our Board. With over 27 years of energy industry experience, Mr. Foshee has a comprehensive knowledge and understanding of our business, provides superb leadership to our management team, and provides the Board with essential insight and guidance from an inside perspective on the day-to-day operations of our company.
 

21


Table of Contents

         
(ROBERT W. GOLDMAN PHOTO)  
Robert W. Goldman
Age — 67

Chairman — Finance Committee
Member — Audit Committee
 
Director since 2003
 
Mr. Goldman has served as a director since 2003. Mr. Goldman’s primary occupation has been as a financial consultant since October 2002. Prior to that time, Mr. Goldman served as Senior Vice President, Finance and Chief Financial Officer of Conoco, Inc. from 1998 to 2002 and Vice President, Finance from 1991 to 1998. For more than five years prior to that date, Mr. Goldman held various executive positions with Conoco, Inc. and E.I. Du Pont de Nemours & Co., Inc. From 2002 until July 2008, Mr. Goldman served as the elected Vice President, Finance of the World Petroleum Council. He is a member of the Financial Executives Institute and the Outside Advisory Council of Global Infrastructure Partners. Mr. Goldman serves on the board of trustees of Kenyon College, Gambier, Ohio. Mr. Goldman currently serves on the board of directors of McDermott International, Inc., Parker Drilling Company and Tesoro Corporation.
 
As former chief financial officer of a large, publicly-traded energy company, Mr. Goldman brings significant financial and operations experience to our Board. Mr. Goldman has extensive knowledge of the energy industry, financial risk management and an understanding of capital markets. His experience on the board of directors of other publicly-traded energy companies further augments his knowledge and experience.
 
         
(ANTHONY W. HALL, JR. PHOTO)  
Anthony W. Hall, Jr.
Age — 65

Member — Governance & Nominating Committee
Member — Health, Safety & Environmental Committee
 
Director since 2001
 
Mr. Hall has served as a director since 2001. Mr. Hall has been engaged in the private practice of law since February 2010. He previously served as Chief Administrative Officer of the City of Houston from January 2004 to February 2010. Mr. Hall served as the City Attorney for the City of Houston from March 1998 to January 2004. Prior to March 1998, Mr. Hall was a partner in the Houston law firm of Jackson Walker, LLP. Mr. Hall is Chairman of the Houston Endowment Inc. and Chairman of the Boulé Foundation.
 
Mr. Hall’s extensive experience in both the public and private sectors, and his affiliations with many different business and philanthropic organizations provides our Board with important insight from many perspectives. As evidenced by his years of service on our Governance & Nominating Committee, including as its former chairman, Mr. Hall’s 29 years of legal experience provides the Board with valuable guidance on governance issues and initiatives. As an African American, Mr. Hall also brings a diversity of experience and perspective that is welcomed by our Board.
 

22


Table of Contents

         
(THOMAS R. HIX PHOTO)  
Thomas R. Hix
Age — 62

Chairman — Audit Committee
Member — Finance Committee
 
Director since 2004
 
Mr. Hix has served as a director since 2004. Mr. Hix has been a business consultant since January 2003. He served as Senior Vice President of Finance and Chief Financial Officer of Cooper Cameron Corporation from January 1995 to January 2003. From September 1993 to April 1995, Mr. Hix served as Senior Vice President of Finance, Treasurer and Chief Financial Officer of The Western Company of North America. Mr. Hix serves on the board of directors of Health Care Service Corporation and Rowan Companies, Inc. Mr. Hix previously served as a member of the board of directors of The Offshore Drilling Company from May 2004 to July 2007.
 
Mr. Hix brings many years of financial business experience to our Board. As a former chief financial officer of a large, publicly-traded energy company, Mr. Hix has significant expertise in finance and accounting, as well as experience in mergers and acquisitions. Mr. Hix also provides the Board with valuable public company operating and management experience.
 
         
(FERRELL P. MCCLEAN PHOTO)  
Ferrell P. McClean
Age — 63

Member — Compensation Committee
Member — Finance Committee
 
Director since 2006
 
Ms. McClean has served as a director since 2006. Ms. McClean has been a business consultant since 2002. Ms. McClean served as Managing Director and Senior Advisor of J.P. Morgan Chase & Co.’s energy/power investment banking group from 2000 to 2002. From 1991 until 2000, Ms. McClean served as Managing Director and headed the investment banking and global energy group at J.P.Morgan & Co. Prior to 1991, Ms. McClean held various positions with J.P. Morgan & Co. Ms. McClean served as a member of the board of directors of Unocal Corporation until 2005 and is currently on the board of directors of GrafTech International Ltd. (formerly UCAR International, Inc.).
 
Ms. McClean brings to the Board extensive experience in investment banking and capital markets, as highlighted by her years of service at J.P. Morgan Chase & Co. Her current and prior service on the boards of other publicly-traded companies further augments her range of knowledge, providing valuable experience from which she can draw while serving on our Board. As our only female director, Ms. McClean also provides a diversity of perspective that is important to our Board.
 

23


Table of Contents

         
(TIMOTHY J. PROBERT PHOTO)  
Timothy J. Probert
Age — 58

Member — Health, Safety & Environmental Committee
 
Director since 2009
 
Mr. Probert has served as a director since December 2009. Mr. Probert has been President of Halliburton Company’s Global Business Lines and Corporate Development since January 2010. Mr. Probert previously served as President of Halliburton Company’s Drilling and Evaluation Division and Corporate Development from March 2009 to December 2009. Mr. Probert served as Executive Vice President of Strategy and Corporate Development for Halliburton from January 2008 to March 2009, as Senior Vice President, Drilling and Evaluation from July 2007 to December 2007, and as Senior Vice President, Drilling and Evaluation and Digital Solutions from May 2006 to July 2007. He also served as Vice President, Drilling and Formation Evaluation for Halliburton from January 2003 to May 2006. Mr. Probert is a member of Halliburton’s Executive Committee and is also the company’s Chief Health, Safety and Environment Officer. Before joining Halliburton in 2003, Mr. Probert was President and Chief Executive Officer of Input/Output Inc. He also served as President of Baker Hughes INTEQ, Eastman Teleco and Milpark Drilling Fluids and was Vice President of Marketing for Baker Sand Control.
 
With his years of experience as an officer at Halliburton, Mr. Probert brings substantial management and operations expertise to our Board. Mr. Probert has a comprehensive background in oilfield service and equipment, as well as technical expertise in the upstream oil sector. In addition, Mr. Probert’s background in geology and experience as the Chief Health, Safety and Environment Officer for Halliburton provides our Board with valuable experience in health, safety and environmental-related issues.
 
         
(STEVEN J. SHAPIRO PHOTO)  
Steven J. Shapiro
Age — 58

Chairman — Compensation Committee
Member — Audit Committee
 
Director since 2006
 
Mr. Shapiro has served as a director since 2006. Mr. Shapiro served as Executive Vice President and Chief Financial Officer of Burlington Resources Inc. from October 2000 to April 2006. During his five-year tenure at Burlington Resources, Inc., Mr. Shapiro served as a member of the Board of Directors and the office of the Chairman. Prior to that time, he served as Senior Vice President, Chief Financial Officer and Director at Vastar Resources, Inc. and spent 16 years in various roles of increasing responsibility with Atlantic Richfield Company. Mr. Shapiro recently served as Chairman of the Executive Committee of the American Petroleum Institute’s General Committee on Finance and is a trustee of the Houston Museum of Natural Science. Mr. Shapiro is a member of the board of directors of Barrick Gold Corporation.
 
Mr. Shapiro brings extensive industry experience to our Board. As the former chief financial officer of Burlington Resources, Mr. Shapiro has significant operating experience and knowledge of the complex financial issues companies face. He has extensive knowledge of the energy industry and an understanding of capital markets. Mr. Shapiro also provides our Board with valuable strategic insight. His experience on the board of directors of other publicly-traded companies further augments his knowledge and experience.
 


24


Table of Contents

         
(J. MICHAEL TALBERT PHOTO)  
J. Michael Talbert
Age — 63

Lead Director
Chairman — Governance & Nominating Committee
 
Director since 2003
 
Mr. Talbert has been Lead Director of the Board of Directors of El Paso since May 2009 and a director since 2003. Mr. Talbert served as Executive Chairman of the Board of Transocean Inc. from October 2002 to October 2004 and as non-executive Chairman from October 2004 to November 2007. Previously, Mr. Talbert served as Chief Executive Officer of Transocean, Inc. and its predecessor companies from August 1994 until October 2002, Chairman of the Board from August 1994 to September 1999, and as President from December 1999 to December 2001. Mr. Talbert served as Chairman of the Board of The Offshore Drilling Company from February 2004 to October 2005. He served as President and Chief Executive Officer of Lone Star Gas Company from 1990 to 1994. Mr. Talbert served as President of Texas Oil & Gas Company from 1987 to 1990, and served in various positions at Shell Oil Company from 1970 to 1982. Mr. Talbert is a past Chairman of the National Ocean Industries Association and a member of the University of Akron’s College of Engineering Advancement Council. Mr. Talbert is a member of the board of directors of Transocean Inc.
 
Mr. Talbert is an experienced business leader with the skills necessary to be our Lead Director. As a former chief executive officer of a large, publicly-traded energy company, Mr. Talbert has extensive industry expertise, as well as knowledge of the complex operational and governance issues that public companies face. Since joining the Board in 2003, he has played an integral role in promoting robustness and confidence in the Board’s execution of its responsibilities. In addition, his service on the board of Transocean Inc., including as its past chairman, provides valuable experience from which he can draw as a member of our Board.
 
         
(ROBERT F. VAGT PHOTO)  
Robert F. Vagt
Age — 63

Member — Compensation Committee
Member — Health, Safety & Environmental Committee
 
Director since 2005
 
Mr. Vagt has served as a director since 2005. Mr. Vagt has served as President of The Heinz Endowments since January 2008. Prior to that time, he served as President of Davidson College from July 1997 to August 2007. Mr. Vagt served as President and Chief Operating Officer of Seagull Energy Corporation from 1996 to 1997. From 1992 to 1996, he served as President, Chairman and Chief Executive Officer of Global Natural Resources. Mr. Vagt served as President and Chief Operating Officer of Adobe Resources Corporation from 1989 to 1992. Prior to 1989, he served in various positions with Adobe Resources Corporation and its predecessor entities. Mr Vagt previously served as a member of the board of directors of Cornell Companies until 2005.
 
Mr. Vagt’s professional background in both the public and private sectors make him an important advisor and member of our Board. Mr. Vagt brings to the Board operations and management expertise in both the public and private sectors. In addition, Mr. Vagt provides the Board with a welcomed diversity of perspective gained from service as President of the Heinz Endowments, as well as from service as the president of an independent liberal arts college.
 

25


Table of Contents

         
(JOHN L. WHITMIRE PHOTO)  
John L. Whitmire
Age — 69

Chairman — Health, Safety & Environmental Committee
Member — Compensation Committee
Member — Governance & Nominating Committee
 
Director since 2003
 
Mr. Whitmire has served as a director since 2003. Mr. Whitmire has been Chairman of CONSOL Energy, Inc. since 1999. He served as Chairman and Chief Executive Officer of Union Texas Petroleum Holdings, Inc. from 1996 to 1998, and spent over 30 years serving Phillips Petroleum Company in various positions including Executive Vice President of Worldwide Exploration and Production from 1992 to 1996 and Vice President of North American Exploration and Production from 1988 to 1992. Mr. Whitmire is currently a member of the board of directors of Transocean Inc. Mr. Whitmire previously served as a member of the board of directors of GlobalSantaFe Corporation from March 1998 to November 2007.
 
Mr. Whitmire brings many years of industry experience to our Board. As former chief executive officer of a large, publicly-traded energy company, Mr. Whitmire has extensive operating and management experience, as well as industry knowledge and experience with competitive energy sources. In addition, his current and prior service on the boards of other publicly-traded companies in our industry provides valuable experience and insight.

26


Table of Contents

 
SECURITY OWNERSHIP OF A CERTAIN BENEFICIAL OWNER AND MANAGEMENT
 
The following table sets forth information as of March 12, 2010 regarding beneficial ownership of our common stock by each director, our CEO, our CFO and our other named executive officers in the last fiscal year, our directors and executive officers as a group and each person or entity known by us to own beneficially more than 5 percent of our outstanding shares of common stock. No family relationship exists between any of our directors or executive officers.
 
                                 
        Beneficial Ownership
  Stock
      Percent
Title of Class
 
Name of Beneficial Owner
  (Excluding Options) (1)   Options (2)   Total   of Class (3)
 
Common Stock
  BlackRock Inc.(4)     62,854,114       0       62,854,114     8.96%
    40 East 52nd Street
New York, NY 10022
                           
Common Stock
  FMR LLC(5)     38,529,435       0       38,529,435     5.49%
    82 Devonshire Street
Boston, MA 02109
                           
Common Stock
  Juan Carlos Braniff     121,881 (6)     11,000       132,881     *
Common Stock
  David W. Crane     2,644       0       2,644     *
Common Stock
  James L. Dunlap     97,257       8,000       105,257     *
Common Stock
  Robert W. Goldman     106,592       8,000       114,592     *
Common Stock
  Anthony W. Hall, Jr.     95,380       12,000       107,380     *
Common Stock
  Thomas R. Hix     90,673       0       90,673     *
Common Stock
  Ferrell P. McClean     69,691 (7)     0       69,691     *
Common Stock
  Timothy J. Probert     2,644       0       2,644     *
Common Stock
  Steven J. Shapiro     65,195       0       65,195     *
Common Stock
  J. Michael Talbert     72,757       8,000       80,757     *
Common Stock
  Robert F. Vagt     46,144       0       46,144     *
Common Stock
  John L. Whitmire     131,450       8,000       139,450     *
Common Stock
  Douglas L. Foshee     1,073,374       2,854,192       3,927,566     *
Common Stock
  John R. Sult     85,588       149,985       235,573     *
Common Stock
  D. Mark Leland     299,007       539,800       838,807     *
Common Stock
  Brent J. Smolik     238,069       236,357       474,426     *
Common Stock
  James C. Yardley     274,385       477,421       751,806     *
Common Stock
  Robert W. Baker     316,512       670,141       986,653     *
Common Stock
  Directors and executive officers as a group (21 persons total), including those individuals listed above     3,503,146       5,630,252       9,133,398     1.29%
 
 
Less than one percent
 
(1) The directors and executive officers named in the table have sole voting and investment power with respect to shares of our common stock beneficially owned, except that Mr. Talbert shares with one or more other individuals voting and investment power with respect to 5,000 shares of common stock. This column also includes shares of common stock held in the El Paso Corporation Benefits Protection Trust (as of March 12, 2010) as a result of deferral elections made in accordance with our benefit plans. These individuals share voting power with the trustee under that plan and receive dividend equivalents on such shares, but do not have the power to dispose of, or direct the disposition of, such shares until such shares are distributed. In addition, some shares of common stock reflected in this column for certain individuals are subject to restrictions. None of the shares of common stock reflected in this column have been pledged as security.
 
(2) The directors and executive officers have the right to acquire the shares of common stock reflected in this column within 60 days of March 12, 2010, through the exercise of stock options. As of March 12, 2010, certain individuals listed in the table have vested stock options that have an exercise price of $40 or higher, which options are included in the table above. It is not likely that our stock price will reach $40 during the remaining


27


Table of Contents

terms of these stock options, thus it is not likely the stock options will be in-the-money before they expire by their own terms. The number of stock options at or above a $40 exercise price for Messrs. Braniff, Hall, Leland, Baker and Yardley is 5,000, 6,000, 81,375, 116,709 and 101,375 stock options, respectively. Stock options granted under our plans are not subject to execution, attachment or similar process and cannot be transferred, assigned, pledged or hypothecated in any manner other than by will or by the applicable laws of descent and distribution.
 
(3) Based on 701,329,067 shares outstanding as of March 12, 2010.
 
(4) According to a Schedule 13G/A filed on January 29, 2010, as of December 31, 2009, BlackRock, Inc. was deemed to beneficially own 62,854,114 shares of common stock.
 
(5) According to a Schedule 13G/A filed on February 16, 2010, as of December 31, 2009, FMR LLC was deemed to beneficially own 38,529,435 shares of common stock.
 
(6) Mr. Braniff’s beneficial ownership excludes 3,500 shares owned by his wife. Mr. Braniff disclaims any beneficial ownership in those shares.
 
(7) Ms. McClean’s beneficial ownership includes 1,500 shares held by her husband’s IRA and 7,475 shares held in a revocable trust.
 
The following table sets forth, as of March 12, 2010, the number of common units of our master limited partnership, El Paso Pipeline Partners, L.P., owned by each of our executive officers and directors and all of our executive officers and directors as a group.
 
                     
            Percentage of
        Common Units
  Common Units
Title of Class
 
Name of Beneficial Owner
  Beneficially Owned   Beneficially Owned (1)
 
Common Units
  Juan Carlos Braniff     0       *  
Common Units
  David W. Crane     0       *  
Common Units
  James L. Dunlap     7,500       *  
Common Units
  Robert W. Goldman     5,000 (2)     *  
Common Units
  Anthony W. Hall, Jr.     0       *  
Common Units
  Thomas R. Hix     10,000       *  
Common Units
  Ferrell P. McClean     9,000 (3)     *  
Common Units
  Timothy J. Probert     0       *  
Common Units
  Steven J. Shapiro     6,000       *  
Common Units
  J. Michael Talbert     0       *  
Common Units
  Robert F. Vagt     0       *  
Common Units
  John L. Whitmire     25,000       *  
Common Units
  Douglas L. Foshee     25,000       *  
Common Units
  John R. Sult     10,000       *  
Common Units
  D. Mark Leland     13,200       *  
Common Units
  Brent J. Smolik     12,500       *  
Common Units
  James C. Yardley     10,000       *  
Common Units
  Robert W. Baker     5,000       *  
    Directors and executive officers as a group (21 persons total), including those individuals listed above     145,673       *  
 
 
Less than one percent
 
(1) Based on 107,484,747 common units outstanding as of March 12, 2010.
 
(2) Mr. Goldman’s beneficial ownership excludes 100 units owned by his son. Mr. Goldman disclaims any beneficial ownership in those units.
 
(3) Ms. McClean’s beneficial ownership includes 1,000 units held by her husband.


28


Table of Contents

 
INDIVIDUAL EXECUTIVE PROFILES
 
The following are individual executive profiles that summarize the compensation earned or paid in 2009 to our CEO and our other named executive officers. The individual executive profiles provide biographical information and summarize the compensation disclosures that are provided in the Compensation Discussion and Analysis and executive compensation tables in this proxy statement. These profiles are supplemental and are being provided in addition to the detailed compensation tables required by the SEC that follow the Compensation Discussion and Analysis. We believe these profiles provide stockholders with a concise and easy to understand summary of 2009 compensation. The compensation information presented in the following executive profiles is calculated in accordance with the SEC regulations and is derived from the more detailed compensation tables that begin on page 55 of this proxy statement. Please consult those tables and the accompanying footnotes for an explanation of how the compensation information is calculated.


29


Table of Contents

Douglas L. Foshee: Individual Executive Profile
 

  (DOUGLAS L. FOSHEE PHOTO)
Chairman, President and
Chief Executive Officer
 
Age: 50
Tenure with El Paso: 7 years
Tenure in Industry: Over 27 years
 
MBA, Jesse H. Jones Graduate School of Management, Rice University
Graduate of Southwestern Graduate School of Banking, Southern Methodist University
BBA, Southwest Texas State University
 
Mr. Foshee has been Chairman of the Board of Directors of El Paso since May 2009 and President, Chief Executive Officer and a director of El Paso since September 2003. Prior to joining El Paso, Mr. Foshee served as Executive Vice President and Chief Operating Officer of Halliburton Company having joined that company in 2001 as Executive Vice President and Chief Financial Officer. Prior to assuming his position at Halliburton, Mr. Foshee served as President, Chief Executive Officer and Chairman of the Board of Nuevo Energy Company and Chief Executive Officer and Chief Operating Officer of Torch Energy Advisors, Inc. Mr. Foshee presently serves as a director of Cameron International Corporation, and from January 2009 until February 2010 served as a trustee of AIG Credit Facility Trust. Mr. Foshee serves as Chairman of the Federal Reserve Bank of Dallas, Houston Branch. Mr. Foshee also serves on the Board of Trustees of Rice University and serves as a member of the Council of Overseers for the Jesse H. Jones Graduate School of Management. He is a member of various other civic and community organizations. Mr. Foshee also serves on the board of directors of El Paso Pipeline GP Company, L.L.C.
 
2009 Compensation1
 
         
   Salary
       
Base Salary
  $ 1,050,000  
Performance-Based Cash Bonus
  $ 1,800,000  
Perquisites and Personal Benefits
  $ 1,258  
         
   Annual Long-Term Incentive Award
       
(Grant Date Fair Value)
       
Restricted Stock
  $ 1,441,998  
Stock Options
  $ 1,748,180  
Restricted Stock Dividends
  $ 70,215  
         
   Retirement Benefits
       
Pension Plan
       
Annual increase in accumulated pension benefit
  $ 182,648  
Retirement Savings Plan (RSP)
       
Company matching contribution to RSP
  $ 11,025  
Supplemental RSP benefit
  $ 62,920  
Annual earnings on supplemental RSP benefit
  $ 32,235  
 
 
2009 Total Compensation
 
GRAPH
 
 
Stock Ownership Requirements
Mr. Foshee’s ownership in our common stock exceeds the required ownership thresholds of five times base salary, as discussed elsewhere in this proxy statement.
 
Payment Upon Termination
(As of December 31, 2009)
 
         
Voluntary Termination
  $ 5,065,095  
Involuntary Termination without Cause
  $ 2,427,241  2
Retirement
  $ 0  2
Death
  $ 8,550,254  2
Disability
  $ 3,791,759  2
Termination with Cause
  $ 0  2
Change in Control of El Paso
  $ 14,150,651  2
 
1   Please note total 2009 Compensation does not tie directly to the Summary Compensation Table.
 
2   Reflects incremental value of enhanced benefits above amounts Mr. Foshee is entitled to as a result of voluntary termination. Value of equity reflects $9.83, the closing price of our common stock on December 31, 2009.
 


 


30


Table of Contents

John R. Sult: Individual Executive Profile
 

  (JOHN R. SUIT PHOTO)
Executive Vice President and
Chief Financial Officer
 
Age: 50
Tenure with El Paso: 5 years
Tenure in Industry: 29 years
 
BS, with special attainments in Commerce,
Washington and Lee University
Certified Public Accountant
 
 
Mr. Sult has been Executive Vice President and Chief Financial Officer of El Paso since March 2010 and Senior Vice President and Chief Financial Officer from November 2009 to March 2010. Mr. Sult previously served as Senior Vice President and Controller of El Paso from November 2005 to November 2009. He has served as Senior Vice President and Chief Financial Officer of El Paso Pipeline GP Company, L.L.C. since November 2009 and Senior Vice President, Chief Financial Officer and Controller from August 2007 to November 2009. Mr. Sult served as Senior Vice President, Chief Financial Officer and Controller of El Paso’s Pipeline Group from November 2005 to November 2009. Mr. Sult was Vice President and Controller for Halliburton Energy Services from August 2004 to October 2005. Mr. Sult also serves on the board of directors of El Paso Pipeline GP Company, L.L.C.
 
2009 Compensation1
 
         
   Salary
       
Base Salary
  $ 345,675  
Performance-Based Cash Bonus
  $ 300,000  
Perquisites and Personal Benefits
  $ 0  
         
   Annual Long-Term Incentive Award
       
(Grant Date Fair Value)
       
Restricted Stock
  $ 158,508  
Stock Options
  $ 162,762  
Restricted Stock Dividends
  $ 7,993  
         
   Retirement Benefits
       
Pension Plan
       
Annual increase in accumulated pension benefit
  $ 45,919  
Retirement Savings Plan (RSP)
       
Company matching contribution to RSP
  $ 11,025  
Supplemental RSP benefit
  $ 15,245  
Annual earnings on supplemental RSP benefit
  $ 3,036  
 
 
2009 Total Compensation
 
GRAPH
 
 
Stock Ownership Requirements
 
Mr. Sult’s ownership in our common stock exceeds the required ownership thresholds of two times base salary, as discussed elsewhere in this proxy statement.
 
 
Payment Upon Termination
(As of December 31, 2009)
 
         
Voluntary Termination
  $ 328,449  
Involuntary Termination without Cause
  $ 568,098  2
Retirement
  $ 0  2
Death
  $ 1,652,628  2
Disability
  $ 558,267  2
Termination with Cause
  $ 0  2
Change in Control of El Paso
  $ 2,083,628  2
 
1   Please note total 2009 Compensation does not tie directly to the Summary Compensation Table.
 
2   Reflects incremental value of enhanced benefits above amounts Mr. Sult is entitled to as a result of voluntary termination. Value of equity reflects $9.83, the closing price of our common stock on December 31, 2009.


 
 


31


Table of Contents

D. Mark Leland: Individual Executive Profile
 

  (D. MARK LELAND PHOTO)
Executive Vice President and
President of Midstream
 
Age: 48
Tenure with El Paso: 24 years
Tenure in Industry: 24 years
 
 
BBA, University of Puget Sound
Certified Management Accountant
Certified Internal Auditor
 
Mr. Leland has been Executive Vice President of El Paso and President of El Paso’s Midstream business unit since October 2009. Mr. Leland previously served as Executive Vice President and Chief Financial Officer of El Paso from August 2005 to November 2009. He served as Executive Vice President of El Paso Exploration & Production Company from January 2004 to August 2005, and as Chief Financial Officer and a director from April 2004 to August 2005. Mr. Leland served as Senior Vice President and Chief Operating Officer of GulfTerra Energy Partners, L.P. and its general partner from January 2003 to December 2003, as Senior Vice President and Controller from July 2000 to January 2003, and as Vice President from August 1998 to July 2000. Mr. Leland also serves on the board of directors of El Paso Pipeline GP Company, L.L.C.
 
2009 Compensation1
 
         
   Salary
       
Base Salary
  $ 519,756  
Performance-Based Cash Bonus
  $ 500,000  
Perquisites and Personal Benefits
  $ 1,150  
         
   Annual Long-Term Incentive Award
       
(Grant Date Fair Value)
       
Restricted Stock
  $ 405,877  
Stock Options
  $ 502,351  
Restricted Stock Dividends
  $ 22,738  
         
   Retirement Benefits
       
Pension Plan
       
Annual increase in accumulated pension benefit
  $ 131,891  
Retirement Savings Plan (RSP)
       
Company matching contribution to RSP
  $ 11,025  
Supplemental RSP benefit
  $ 19,654  
Annual earnings on supplemental RSP benefit
  $ 9,651  
 
 
2009 Total Compensation
 
GRAPH
 
 
Stock Ownership Requirements
 
Mr. Leland’s ownership in our common stock exceeds the required ownership thresholds of two times base salary, as discussed elsewhere in this proxy statement.
 
 
Payment Upon Termination
(As of December 31, 2009)
 
         
Voluntary Termination
  $ 1,271,341  
Involuntary Termination without Cause
  $ 974,791  2
Retirement
  $ 0  2
Death
  $ 3,083,265  2
Disability
  $ 1,320,402  2
Termination with Cause
  $ 0  2
Change in Control of El Paso
  $ 3,782,296  2
 
1   Please note total 2009 Compensation does not tie directly to the Summary Compensation Table.
 
2   Reflects incremental value of enhanced benefits above amounts Mr. Leland is entitled to as a result of voluntary termination. Value of equity reflects $9.83, the closing price of our common stock on December 31, 2009.


 


32


Table of Contents

Brent J. Smolik: Individual Executive Profile
 

  (BRENT J. SMOLIK PHOTO)
Executive Vice President and
President of El Paso Exploration
& Production Company
 
Age: 48
Tenure with El Paso: 4 years
Tenure in Industry: 26 years
 
 
BS, Petroleum Engineering, Texas A&M University
 
 
Mr. Smolik has been Executive Vice President of El Paso and President of El Paso Exploration & Production Company since November 2006. Mr. Smolik was President of ConocoPhillips Canada from April 2006 to October 2006. Prior to the Burlington Resources merger with ConocoPhillips, he was President of Burlington Resources Canada from September 2004 to March 2006. From 1990 to 2004, Mr. Smolik worked in various engineering and asset management capacities for Burlington Resources Inc., including the Chief Engineering role from 2000 to 2004. He was a member of the Burlington Executive Committee from 2001 to 2006. Mr. Smolik also serves on the Boards of the American Exploration and Production Council, America’s Natural Gas Alliance and the Independent Petroleum Association of America.
 
2009 Compensation1
 
         
   Salary
       
Base Salary
  $ 566,520  
Performance-Based Cash Bonus
  $ 1,000,000  
Perquisites and Personal Benefits
  $ 1,468  
         
   Annual Long-Term Incentive Award
       
(Grant Date Fair Value)
       
Restricted Stock
  $ 385,023  
Stock Options
  $ 502,351  
Restricted Stock Dividends
  $ 18,014  
         
   Retirement Benefits
       
Pension Plan
       
Annual increase in accumulated pension benefit
  $ 56,619  
Retirement Savings Plan (RSP)
       
Company matching contribution to RSP
  $ 11,025  
Supplemental RSP benefit
  $ 22,231  
Annual earnings on supplemental RSP benefit
  $ 1,878  
 
 
2009 Total Compensation
 
GRAPH
 
 
Stock Ownership Requirements
 
Mr. Smolik’s ownership in our common stock exceeds the required ownership thresholds of two times base salary, as discussed elsewhere in this proxy statement.
 
 
Payment Upon Termination
(As of December 31, 2009)
 
         
Voluntary Termination
  $ 349,151  
Involuntary Termination without Cause
  $ 941,077  2
Retirement
  $ 0  2
Death
  $ 3,057,681  2
Disability
  $ 1,280,046  2
Termination with Cause
  $ 0  2
Change in Control of El Paso
  $ 4,327,283  2
 
Please note total 2009 Compensation does not tie directly to the Summary Compensation Table.
 
Reflects incremental value of enhanced benefits above amounts Mr. Smolik is entitled to as a result of voluntary termination. Value of equity reflects $9.83, the closing price of our common stock on December 31, 2009.
 


 


33


Table of Contents

James C. Yardley: Individual Executive Profile
 

  (DOUGLAS L. FOSHEE PHOTO)
Executive Vice President,
Pipeline Group
 
Age: 58
Tenure with El Paso: 32 years
Tenure in Industry: 32 years
 
MBA, Harvard Business School
BA, Economics, Duke University
 
 
Mr. Yardley has been Executive Vice President of El Paso with responsibility for the regulated pipeline business unit since August 2006. He has served as President of Tennessee Gas Pipeline since February 2007 and Chairman of the Board since August 2006. Mr. Yardley has been Chairman of El Paso Natural Gas Company since August 2006 and has served as President of Southern Natural Gas Company since May 1998. Mr. Yardley has been a member of the Management Committees of both Colorado Interstate Gas Company and Southern Natural Gas Company since their conversion to general partnerships in November 2007. Mr. Yardley is currently a member of the board of directors of Scorpion Offshore Ltd. He also serves on the Board of Interstate Natural Gas Association of America and previously served as its Chairman. Mr. Yardley also serves as Director, President and Chief Executive Officer of El Paso Pipeline GP Company, L.L.C.
 
2009 Compensation1
 
         
   Salary
       
Base Salary
  $ 515,016  
Performance-Based Cash Bonus
  $ 500,000  
Perquisites and Personal Benefits
  $ 2,328  
         
   Annual Long-Term Incentive Award
       
(Grant Date Fair Value)
       
Restricted Stock
  $ 490,443  
Stock Options
  $ 502,351  
Restricted Stock Dividends
  $ 21,836  
         
   Retirement Benefits
       
Pension Plan
       
Annual increase in accumulated pension benefit
  $ 485,323  
Retirement Savings Plan (RSP)
       
Company matching contribution to RSP
  $ 11,025  
Supplemental RSP benefit
  $ 20,926  
Annual earnings on supplemental RSP benefit
  $ 8,611  
 
 
2009 Total Compensation
 
GRAPH
 
 
Stock Ownership Requirements
 
Mr. Yardley’s ownership in our common stock exceeds the required ownership thresholds of two times base salary, as discussed elsewhere in this proxy statement.
 
 
Payment Upon Termination
(As of December 31, 2009)
 
         
Voluntary Termination
  $ 4,578,257  
Involuntary Termination without Cause
  $ 515,016  2
Retirement
  $ 0  2,3
Death
  $ 2,681,240  2
Disability
  $ 865,970  2
Termination with Cause
  $ 0  2
Change in Control of El Paso
  $ 3,596,038  2
 
Please note total 2009 Compensation does not tie directly to the Summary Compensation Table.
 
Reflects incremental value of enhanced benefits above amounts Mr. Yardley is entitled to as a result of voluntary termination. Value of equity reflects $9.83, the closing price of our common stock on December 31, 2009.
 
Mr. Yardley is eligible for early retirement. The value of his retirement benefits are reflected under Voluntary Termination.
 


 


34


Table of Contents

Robert W. Baker: Individual Executive Profile
 

  (ROBERT W. BAKER PHOTO)
Executive Vice President and
General Counsel
 
Age: 53
Tenure with El Paso: 27 years
Tenure in Industry: 29 years
 
 
JD, The University of Texas Law School
BA and BS, Business, Economics and  Accounting, University of Delaware
Licensed to practice law in Texas and Louisiana
 
 
Mr. Baker has been Executive Vice President and General Counsel of El Paso since January 2004. From February 2003 to December 2003, he served as Executive Vice President of El Paso and President of El Paso Merchant Energy. Mr. Baker previously served as Senior Vice President and Deputy General Counsel of El Paso from January 2002 to February 2003. Prior to that time, he held various legal positions with El Paso and its subsidiaries, including managing the legal matters associated with telecommunication services, domestic power plant development, and the international energy infrastructure projects. Mr. Baker also serves as Executive Vice President and General Counsel of El Paso Pipeline GP Company, L.L.C.
 
2009 Compensation1
 
         
   Salary
       
Base Salary
  $ 456,696  
Performance-Based Cash Bonus
  $ 350,000  
Perquisites and Personal Benefits
  $ 1,183  
         
   Annual Long-Term Incentive Award
       
(Grant Date Fair Value)
       
Restricted Stock
  $ 314,159  
Stock Options
  $ 502,351  
Restricted Stock Dividends
  $ 19,321  
         
   Retirement Benefits
       
Pension Plan
       
Annual increase in accumulated pension benefit
  $ 99,290  
Retirement Savings Plan (RSP)
       
Company matching contribution to RSP
  $ 11,025  
Supplemental RSP benefit
  $ 14,926  
Annual earnings on supplemental RSP benefit
  $ 9,465  
 
 
2009 Total Compensation
 
GRAPH
 
 
Stock Ownership Requirements
 
Mr. Baker’s ownership in our common stock exceeds the required ownership thresholds of two times base salary, as discussed elsewhere in this proxy statement.
 
 
Payment Upon Termination
(As of December 31, 2009)
 
         
Voluntary Termination
  $ 1,850,481  
Involuntary Termination without Cause
  $ 846,218  2
Retirement
  $ 0  2
Death
  $ 2,718,029  2
Disability
  $ 1,223,404  2
Termination with Cause
  $ 0  2
Change in Control of El Paso
  $ 3,335,072  2
 
1   Please note total 2009 Compensation does not tie directly to the Summary Compensation Table.
 
2   Reflects incremental value of enhanced benefits above amounts Mr. Baker is entitled to as a result of voluntary termination. Value of equity reflects $9.83, the closing price of our common stock on December 31, 2009.


 


35


Table of Contents

EXECUTIVE COMPENSATION
 
Compensation Discussion and Analysis
 
The compensation discussion and analysis set forth below provides an explanation of our compensation programs, including the objectives of such programs and the rationale for each element of compensation, for our named executive officers. They include our Chief Executive Officer, Mr. Douglas L. Foshee, our Chief Financial Officer, Mr. John R. Sult, our former Chief Financial Officer and current President of El Paso’s Midstream business unit, D. Mark Leland, and our other three most highly compensated executive officers, Mr. Brent J. Smolik, Mr. James C. Yardley, and Mr. Robert W. Baker. This section also describes the actions and decisions of the Compensation Committee of our Board of Directors as it relates to 2009 compensation decisions. The discussion is divided into the following sections:
 
I. Executive Summary
 
II. Compensation Objectives
 
III. Role of Compensation Committee, Compensation Consultant and Management
 
IV. Elements of Total Compensation
 
V. Factors Considered When Determining Total Compensation
 
VI. 2009 Compensation Decisions
 
VII. Other Compensation and Tax Matters
 
I.   Executive Summary
 
The objectives and major elements of our executive compensation program did not materially change from 2008 to 2009. While we regularly review and fine-tune our compensation programs, we believe consistency in our compensation program and philosophy is important to effectively motivate and reward top-level management performance and for the creation of stockholder value. We continue to provide our named executive officers with total annual compensation that includes three principal elements: base salary, performance-based annual cash incentive awards, and long-term equity-based incentive awards. We also provide our executives with retirement, severance, and health and welfare benefits. Our compensation program continues to be performance-based, and a significant portion of each executive’s total annual compensation is at risk and dependent upon our company’s achievement of specific, measurable performance goals. Our performance-based pay is designed to align our executive officers’ interests with those of our stockholders and to promote the creation of stockholder value, without encouraging excessive risk-taking. In addition, our equity program, combined with our executive share ownership requirements, reward long-term stock performance.
 
Our named executive officers did not receive base salary increases during 2009, with the exception of Mr. Sult, who received a base salary increase in December 2009 in connection with his appointment as our new Chief Financial Officer. In early 2009, the Compensation Committee decided to freeze base salaries at 2008 levels for all employees, including our named executive officers. The Compensation Committee felt this action was appropriate to reflect the company’s ongoing efforts to contain costs in light of the financial crisis and the weakened global economy and to better position the company for long-term success.
 
Payments under our annual incentive award program for 2009 reflect our company’s performance and the achievement of our 2009 performance goals. As discussed further under the heading “Annual Cash Incentive Awards for 2009 Performance” beginning on page 44 of this proxy statement, we achieved our corporate financial goals for 2009, including our goals relating to earnings per share, EBITDA, return on total capital, and debt (net of cash). Specifically, after applying certain pre-approved adjustments described later in this discussion, earnings per share were $1.20, which was above the target goal of $1.08; EBITDA was $3,479 million, which was above the target goal of $3,350 million; return on total capital was 8.57%, which was above the target goal of 7.9%; and our outstanding debt was $13,328 million, which was approximately $600 million lower than the maximum target (with maximum target representing the lowest amount in the range of 2009 debt goals).


36


Table of Contents

In evaluating company performance, the Compensation Committee also considered several actions critical to the company’s success in 2009. Specifically, the Compensation Committee noted that the company had successfully secured a partner for our Ruby Pipeline Project and had successfully executed our 2009 financing plan which provided sufficient financial flexibility throughout 2009. The Compensation Committee also considered the success of our commodity risk management activities which provided valuable support in the low commodity price environment generating more than $1 billion in excess cash. In addition, the Compensation Committee considered steps the company took in 2009 to reduce operating and administrative costs and to become a more efficient and execution-focused enterprise. Finally, the Compensation Committee considered the continued strong performance of our master limited partnership, El Paso Pipeline Partners, L.P. After considering the results of our corporate financial goals, together with the specific accomplishments noted above, the Compensation Committee approved above-target cash bonuses for our named executive officers for 2009.
 
Although we achieved our corporate financial goals for 2009, El Paso’s total shareholder return (“TSR”) relative to our peer group of companies was in the 3rd quartile (27th percentile). As discussed further under the heading “Long-Term Incentive Awards” on page 49 of this proxy statement, our annual restricted stock grants are performance-based as the amount of restricted shares granted to our named executive officers is contingent upon the collective achievement of our annual overall corporate financial goals and El Paso’s one-year relative TSR. Despite above-target achievement of our corporate financial goals, our below-median TSR performance resulted in restricted share grants to our named executive officers for 2009 performance that were generally below target levels. Options were granted at target levels in accordance with our program design.
 
II.   Compensation Objectives
 
At El Paso, stewardship and accountability are two of our core values. As active stewards, we strive to serve our stockholders by consistently building long-term value. In addition, accountability measures are a component of the metrics we use to judge the performance of our company and the performance of our executive officers. These principles of stewardship and accountability play an integral role in our compensation programs.
 
Our compensation programs, which reflect our core values of stewardship and accountability, have two primary and straight-forward objectives:
 
  •  attract, retain and motivate high-performing executive talent, and
 
  •  align the interests of our executive officers with both the short-term and long-term interests of our stockholders.
 
We believe these objectives are accomplished by providing our executives with a competitive mix of short-term and long-term compensation, by rewarding superior performance, and by linking a significant portion of each officer’s pay to specific, measurable performance goals.
 
III. Role of Compensation Committee, Compensation Consultant and Management
 
Compensation Committee
 
The Compensation Committee of the Board of Directors has primary responsibility for determining and approving, on an annual basis, the total compensation level of our CEO and other senior officers who are subject to Section 16(a) of the Exchange Act. The Compensation Committee receives information and advice from its compensation consultant as well as from our human resources department and management to assist in compensation determinations.
 
Compensation Consultant
 
The Compensation Committee has retained Deloitte as its independent compensation consultant. Deloitte advises the Compensation Committee on an ongoing basis with regard to the general competitive landscape and trends in compensation and executive and director compensation matters, including (i) competitive benchmarking, (ii) incentive plan design, (iii) performance metrics testing, (iv) peer group selection, and (v) updates on best-practices and trends in executive and director compensation. Deloitte attends meetings of the Compensation


37


Table of Contents

Committee and participates in the Committee’s executive sessions, as well. Deloitte is directly accountable to the Compensation Committee and the Committee reviews all fees paid to Deloitte for such compensation advice. In addition, the Compensation Committee reviews, on an annual basis, Deloitte’s performance and provides Deloitte with direct feedback on its performance.
 
See “Compensation Consultant Payments” on page 15 of this proxy statement for additional information regarding the Compensation Committee’s engagement of Deloitte as its compensation consultant, as well as amounts paid to Deloitte and its affiliates during 2009 for executive compensation and non-executive compensation consulting services.
 
Role of Management and CEO in Determining Executive Compensation
 
While the Compensation Committee has the responsibility to approve and monitor all compensation for our named executive officers, we, as management, play an important role in determining executive compensation. At the Compensation Committee’s request, we recommend appropriate company-wide and business unit financial and non-financial performance goals. Under the direction of the Compensation Committee, we work with the compensation consultant to analyze competitive market data and to recommend base salary levels, annual incentive awards and long-term incentive awards for our executive officers. We also work with the Compensation Committee to establish the agenda and prepare meeting information for each Compensation Committee meeting. Our CEO likewise assists the Compensation Committee by providing his evaluation of the performance of the executive officers who report directly to him, and recommends compensation levels for such officers. The Compensation Committee also has a process for soliciting from the CEO a candid and critical self-assessment of his own performance, which, in addition to the assessment by Board members, is used to assist the Compensation Committee and the Board in their evaluation of the CEO’s performance.


38


Table of Contents

IV.   Elements of Total Compensation
 
The table below summarizes the elements of our total compensation program.
 
                 
Compensation Element
   
Objective
   
Key Features
Base Salary
    To provide a level of assured cash compensation sufficient, together with performance-based incentives, to motivate executives to perform at a consistently high level     Reviewed annually with adjustments made based on individual performance, anticipated inflation, pay relative to market, and internal equity considerations    
                 
Performance-Based Annual Cash Incentive Awards
    To motivate and reward executive officers’ contributions to achievement of pre-established financial and operational performance goals, as well as individual performance    
Compensation Committee establishes annual cash incentive bonus opportunity for each named executive officer at beginning of year

Paid after year end once the Compensation Committee has determined company performance and each named executive officer’s performance relative to pre-established performance goals
   
                 
Long-Term Equity Awards (stock options and performance-granted restricted stock)
   
To reward stock price appreciation and encourage retention

To motivate and reward achievement of pre-established corporate financial goals and relative TSR, as well as individual performance
    Target value is allocated approximately 50% in restricted stock and 50% in stock options

Options and restricted stock vest in three equal annual installments; awards are forfeited if executive voluntarily terminates employment prior to vesting (except for retirement, in which restricted stock awards vest pro-rata) or is terminated for cause

Stock options:

•   granted at target levels (not adjusted for corporate or individual performance)

•   value of stock options is realized upon option exercise and only if stock price increases, thereby aligning the value for both employees and stockholders

Restricted stock:

•   performance-granted with target levels adjusted at time of grant for corporate, TSR and individual performance

•   amount granted is based on the achievement of pre-established performance goals: 50% on achievement of annual overall corporate financial goals and 50% on our relative TSR compared to our peer group of companies, and is adjusted for individual performance

•   designed to reward executives for achievement of performance goals, as well as to provide an incentive to create additional stockholder value
   
                 


39


Table of Contents

                 
Compensation Element
   
Objective
   
Key Features
Retirement Plans
   
To provide retirement savings in a tax-efficient manner

To provide a fixed level of retirement income and encourage retention
    Retirement benefits are provided under the following plans:

Retirement Savings Plan

•   401(k) plan covering all employees, which provides for immediate vesting of benefits for both participant contributions and company matching contributions

•   company contributes an amount equal to 75% of each participant’s voluntary contributions under the plan, up to a maximum of 6% of eligible compensation

Pension Plan

•   defined benefit plan covering all employees, which provides pension benefits under a cash balance formula

•   participants fully vest in pension benefits upon the earlier of completion of three years of service or attainment of age 65

Supplemental Benefits Plan

•   plan covering key management employees, including named executive officers

•   non-contributory plan which provides benefits in excess of amounts payable under the Retirement Savings Plan and Pension Plan due to tax code limitations
   
                 
Health & Welfare Benefits
    To provide reasonable health and welfare benefits to executives and their dependents and promote healthy living     Health and welfare benefits available to all employees, including medical, dental, vision and disability coverage

Named executive officers also participate in our Senior Executive Survivor Benefits Plan

Senior Executive Survivor Benefits Plan:

•   provides senior officers, including named executive officers, with survivor benefit coverage in lieu of the coverage provided generally to employees under our group life insurance plan in the event of a named executive officer’s death

•   amount of survivor benefit is 21/2X the executive officer’s annual salary
   
                 

40


Table of Contents

                 
Compensation Element
   
Objective
   
Key Features
Severance
   
To provide a measure of financial security in the event an executive’s employment is terminated without cause

To encourage retention and ensure continued dedication by named executive officers in the event of a change in control
    Severance benefits are provided under the following plans:

Severance Pay Plan:

•   severance plan available to all employees which provides benefits following an involuntary termination without cause

•   maximum payout is 1X annual salary

Key Executive Severance Protection Plan:

•   plan covering key executive personnel, including named executive officers, which provides for payment of severance benefits in the event of a participant’s involuntary termination of employment or termination for good reason within two years following a change in control

•   provides benefits only upon a double trigger event, meaning both a change in control and an involuntary/good reason termination of employment must occur

•   benefits include 3X annual salary + target bonus for CEO; 2X annual salary + target bonus for other named executive officers
   
                 
Employee Stock Purchase Plan
    To encourage stock ownership and align interests of executives with stockholders     Plan under which employees, including executive officers, can contribute up to $23,750 each year through payroll deduction to purchase El Paso stock at a 5% discount    
                 
Perquisites
    Limited perquisites provided to assist executives in carrying out duties and increase productivity     Include limited accompaniment of family members with executives traveling for business purposes and subsidized annual physical examinations    
                 
 
At the request of the Compensation Committee, Deloitte performed a risk assessment of our company’s incentive compensation arrangements. Based on the analysis performed, we have concluded that our compensation programs represent an appropriate balance of short-term and long-term compensation and that our incentive compensation programs do not encourage management to take unnecessary or excessive risks. See “Compensation Policies and Practices as they Relate to Risk Management” on page 73 of this proxy statement for additional detail regarding our compensation programs and risk.
 
Employment Agreements
 
We do not have employment agreements with our named executive officers.
 
V.   Factors Considered When Determining Total Compensation
 
Competitive Benchmark Data — the Starting Point.  When making compensation decisions, we review the compensation paid to our CEO and other named executive officers relative to the compensation paid to similarly-situated executives at our peer companies. This practice is often referred to as “benchmarking.” We also utilize survey data representing the market of companies in which we compete for executive talent as an additional means of benchmarking. We believe benchmarks are helpful and provide an initial point of reference. Therefore, although

41


Table of Contents

we also use the other factors set forth below in reviewing compensation, competitive benchmarking is a starting point in our evaluation of total executive compensation.
 
The Compensation Committee is provided benchmarking market data compiled by its independent compensation consultant and our human resources department. This comparative information provides a basis for the evaluation of the compensation paid to our named executive officers. The Compensation Committee then reviews the benchmarking data together with each officer’s job responsibilities and individual performance, internal pay equity, and performance against pre-established targets in making compensation decisions. The Compensation Committee also reviews tally sheets and an analysis of wealth accumulation as part of its compensation decision-making process, as described below.
 
The Compensation Committee generally sets total compensation targets for our executives, including base salary, performance-based annual incentives, and long-term equity awards, near the market median of our peer comparables. However, because comparative data is just one of several analytic tools that are used in determining executive officer compensation, pay may vary from the median of comparative compensation based on various factors, including:
 
  •  the level of achievement of our pre-established performance goals,
 
  •  our performance against our peer group,
 
  •  individual performance,
 
  •  scope of job responsibilities,
 
  •  competitive pressures for that position within the industry,
 
  •  internal equity considerations, and
 
  •  the executive’s industry experience and tenure.
 
For example, the 2008 total annual compensation (base salary, annual cash incentive, and long-term incentive awards) for our named executive officers, excluding Mr. Sult who did not become a named executive officer until November 2009, fell at the 40th percentile when compared to peer group proxy data. Our peer group is described below. In addition, the 2009 total annual compensation targets for our named executive officers, excluding Mr. Sult, fell at the 47th percentile when compared to peer group proxy data (based on the most recently available information disclosed in the peer companies’ 2009 proxy statements).
 
El Paso’s Peer Group.  Each year, the Compensation Committee reviews El Paso’s peer group to ensure that the companies selected are appropriate. The peer group is used to review executive officer compensation and to compare TSR relative to our performance. The table below presents the peer group used by the Compensation Committee for pay comparisons and for evaluating El Paso’s relative TSR for the calendar year 2009. The peer group consisted of 22 companies, comprising a proportional mix of pipeline/distribution companies, exploration and production companies, and diversified energy companies.
 
         
Anadarko Petroleum Corp. 
  EQT Corporation   Sempra Energy
Apache Corporation
  National Fuel Gas Co.   Southern Union Co.
CenterPoint Energy, Inc. 
  Newfield Exploration Co.   Spectra Energy Corp.
Chesapeake Energy Corp. 
  NiSource, Inc.   TransCanada Corp.
Devon Energy Corp. 
  Noble Energy, Inc.   Williams Companies
Dominion Resources, Inc. 
  ONEOK, Inc.   XTO Energy Inc.
Enbridge Inc. 
  Pioneer Natural Resources    
EOG Resources, Inc. 
  Questar Corporation    
 
See “2010 Peer Group Changes” on page 53 of this proxy statement for an explanation of certain changes the Compensation Committee elected to make to the peer group for purposes benchmarking and evaluating El Paso’s relative TSR for the calendar year 2010.
 
Internal Pay Equity.  We also believe that our executive compensation program must be internally consistent in order to motivate our employees as a whole to create stockholder value. We are committed to internal pay equity


42


Table of Contents

and our Compensation Committee monitors, on an annual basis, the relationship between the compensation of our named executive officers and the compensation of our non-managerial employees.
 
In May 2009, the Compensation Committee reviewed a comparison of CEO and other named executive officer pay (salary, bonus and total compensation) to non-management employee pay for the period 1999 to 2008. The results showed a shrinking disparity in pay between our named executive officers and non-management employees on all elements of pay, including total compensation, from 1999 to 2008. The Compensation Committee also reviewed trends in pay equity from 2007 to 2008 and noted a 20% reduction in the disparity between average NEO to non-management total compensation during such time period. The review noted that a contributing factor to the shrinking disparity between 2007 and 2008 was base salary increases in 2008 that, as a percentage of salary, were greater at the non-management level than at the executive officer level. In addition, 2008 equity grants and cash incentive awards were lower at the NEO level when compared to 2007 grant levels (due, in part, to our lower TSR performance relative to our peer group in 2008). The Compensation Committee will continue to periodically conduct these analyses to monitor and avoid any unjustified widening of compensation differentials.
 
Tally Sheets.  Annually, and prior to making compensation decisions, the Compensation Committee reviews tally sheets prepared for each of our named executive officers. The tally sheets quantify the elements of each named executive’s total compensation, including base salary, annual incentive bonus, and long-term equity grants, including both vested and unvested equity awards. The tally sheets also summarize the benefits we are required to provide under various termination scenarios. These termination scenarios include voluntary termination, involuntary termination without cause, termination with cause, retirement, death, disability and termination within two years following a change in control. Based upon certain assumptions related to the timing of these events, the tally sheets provide the total remuneration that would be payable to the named executive officers, including all aspects of each named executive officer’s compensation and benefits under our plans, and are used to ensure that there are no surprises or questions about compensation items in the event of the various termination events. The Compensation Committee does not assign a weighting to tally sheets in the overall decision making process, but rather uses the tally sheets as a tool to view the overall impact of each element of compensation and to ensure our program design is not resulting in unintended outcomes.
 
In its most recent review of tally sheets in December 2009, which included year-end 2009 compensation information, the Compensation Committee discovered no unintended consequences of the compensation program design. Consequently, no material changes were made or deemed necessary to the executive compensation program or the individual elements of our executive officers’ compensation as a result of this review.
 
See the section entitled “Potential Payments upon Termination or Change in Control” beginning on page 67 of this proxy statement for the total amount of compensation and benefits each named executive officer could receive as a result of the various termination events.
 
Wealth Accumulation.  The Compensation Committee reviews annually all of the elements of total compensation paid to each named executive officer during the prior five-year period, including base salaries, annual cash incentive bonuses, the value of long-term incentive awards and any special payments made to an individual executive. The Compensation Committee also reviews the projected value of each named executive officer’s accumulated equity grants over the subsequent five-year period based upon various stock appreciation scenarios. This is done to more effectively analyze not only the amount of compensation each named executive officer has accumulated to date, but also to better understand how current equity grants may affect the amount of wealth the named executive officers accumulate in the future. In addition, due to the continued volatility in the stock market, the Compensation Committee reviewed an analysis of the change in total equity values for outstanding equity awards held by our named executive officers from 12/31/07 to 12/31/09. At the CEO level, this analysis reflected a loss of approximately 50% of the equity value of his awards currently outstanding. While the Compensation Committee reviews a wealth accumulation analysis each year, to date, the amount of the named executive officers’ past compensation has generally not been a significant factor in the Compensation Committee’s determinations.


43


Table of Contents

VI.   2009 Compensation Decisions
 
2009 Annual Base Salaries and 2009 Target Bonus Opportunities
 
At its February 2009 meeting, the Compensation Committee determined it would be appropriate to freeze base salaries at 2008 levels for our named executive officers. The Compensation Committee felt this action would be appropriate to reflect the company’s ongoing efforts to contain costs due to the financial crisis and the weakened global economy and to better position the company for long-term success. As such, our named executive officers did not receive annual base salary increases in 2009, with the exception of Mr. Sult, who received a base salary increase in December 2009 following his appointment as our CFO. In addition, no adjustments were made to the named executive officers’ 2009 target bonus opportunities, with the exception of the change noted below for Mr. Sult, which the Compensation Committee believes continue to be appropriate and commensurate with the responsibilities of the respective executives. These target bonus opportunities were derived in part from peer group and competitive survey benchmarking data and in part by the Compensation Committee’s judgment on the internal equity of the positions, scope of job responsibilities and the executives’ industry experience and tenure. The following table sets forth the base salaries and annual target bonus opportunities for the named executive officers.
 
Annual Base Salaries and
Target Bonus Opportunities
 
                 
    2009
  2009 Target
    Base Salary
  Bonus Opportunity
Name
  ($)   (% of salary)
 
Douglas L. Foshee
  $ 1,050,000       120 %
John R. Sult
  $ 408,012 (1)     50 %(2)
D. Mark Leland
  $ 519,756       60 %
Brent J. Smolik
  $ 566,520       90 %
James C. Yardley
  $ 515,016       75 %
Robert W. Baker
  $ 456,696       60 %
 
 
(1) Prior to his appointment as our CFO, Mr. Sult’s 2009 annual base salary was $340,008.
 
(2) Mr. Sult’s target bonus opportunity for 2008 was 45%.
 
Annual Cash Incentive Awards for 2009 Performance
 
In February 2010, the Compensation Committee approved the amount of the named executive officers’ annual cash incentive awards for 2009 performance. The following discussion sets forth the process the Compensation Committee followed in determining the amount of each named executive officer’s annual cash incentive award for 2009 performance. The annual cash incentive awards for 2009 performance were paid in March 2010.
 
Performance Goals.  At the beginning of 2009, the Compensation Committee established a threshold, target and maximum annual cash incentive bonus level for each of the named executive officers (see the range of cash incentive bonuses as a percentage of base salary on page 47). The Compensation Committee also approved corporate and business unit financial and non-financial performance goals.


44


Table of Contents

Our 2009 corporate financial goals, which are the primary goals used in determining the annual incentive bonuses for our named executive officers, were as follows:
 
 
                                 
    2009 Goals
Corporate Financial Goals
  Threshold   Target   Maximum   Weighting
 
Earnings Per Share (EPS)
  $ 0.83     $ 1.08     $ 1.22       35 %
EBITDA
  $ 3,145 MM     $ 3,350 MM     $ 3,490 MM       35 %
Return on Total Capital
    6.9 %     7.9 %     8.9 %     15 %
Debt (net of cash)
  $ 14,900 MM     $ 14,100 MM     $ 13,900 MM       15 %
 
In addition, the Compensation Committee approved additional performance goals for our corporate shared services group and our pipeline and exploration and production business units. For our corporate shared services group, the 2009 financial goals included the corporate goals listed above, plus additional goals relating to corporate and legacy costs. For our pipeline business unit, the 2009 financial goals were based on value creation, which is a measure of the cash value created in excess of the cost of invested capital. For our exploration and production (“E&P”) business unit, the 2009 financial goals included EBITDA, cash costs, average daily production rates measured in million cubic feet of natural gas equivalent per day (“MMcfe/d”), capital savings, present value ratio, reserve replacement cost and net risked year-to-year inventory growth.
 
Our corporate financial goals were set in alignment with our 2009 strategic plan. Thresholds, targets and maximums were set at somewhat wider ranges than in previous years to reflect the economic uncertainly in early 2009 and the need for our organization to be flexible to effectively react to changes in the business environment. For example, the threshold 2009 EPS goal was $.17 lower than in 2008, but the 2009 target and maximum EPS goals were $.05 and $.12 higher than in 2008. In making the determination of the threshold, target and maximum levels, the Compensation Committee considered the specific circumstances expected to be faced by our company and its business units in 2009. The threshold levels represent reasonably achievable goals, whereas the maximum levels represent a significant stretch and would require exceptional performance.
 
The Compensation Committee also approved certain non-financial goals for our corporate shared services group and business units, including certification of compliance with our Code of Business Conduct by 100 percent of our employees, no material weakness in our internal controls over financial reporting, and safety goals relating to recordable injuries and days away. The 2009 non-financial goals also included a goal relating to the successful in-line inspection of our pipelines as part of our pipeline integrity program. While the Compensation Committee reviews these non-financial goals, they do not materially impact the incentive awards payable to our named executive officers, which awards are primarily weighted towards the achievement of our corporate financial goals, set forth above.
 
Weighting of Corporate and Business Unit Goals.  The annual cash incentive awards for our named executive officers are primarily weighted towards the achievement of our corporate financial goals. Below is a chart summarizing the weighting of the corporate and business-unit goals for purposes of determining each officer’s annual incentive award.
 
Performance Weights for Named Executive Officers
Annual Incentive Awards
 
                                 
        Corporate
       
        Shared Services
  Exploration &
   
Named Executive Officer
  Corporate Goals   Goals   Production Goals   Pipeline Goals
 
Douglas L. Foshee
    75 %     25 %                
John R. Sult
    75 %     25 %                
D. Mark Leland
    75 %     25 %                
Brent J. Smolik
    75 %             25 %        
James C. Yardley
    75 %                     25 %
Robert W. Baker
    75 %     25 %                


45


Table of Contents

Annual Incentive Awards — Negative Discretion.  The Compensation Committee uses “negative discretion” in setting payouts under our annual incentive award program. For purpose of Section 162(m) of the Code, the annual incentives are payable at maximum to the extent any of the corporate or business unit financial or non-financial goals are achieved at threshold performance. The Compensation Committee then exercises its negative discretion to reduce the payout of incentive awards to reflect actual corporate, business unit and individual performance. By setting a high amount which can then be reduced, we believe our annual incentive payments qualify for full deductibility under Section 162(m) of the Code. This reduction is not a negative reflection on the performance of our company or our named executive officers, but rather is done to ensure maximum flexibility with respect to the payment of performance-based bonuses. If the Compensation Committee were to have instead funded incentive awards at a minimum threshold and used discretion to increase the amounts to reflect company and individual performance, actual payouts would not qualify for the Section 162(m) tax deduction. The Compensation Committee uses a similar “negative discretion” approach in determining the number of shares of restricted stock to be granted to our Section 162(m) covered executives, which grants are described later in this discussion. For further information on Section 162(m), see the description of “Regulatory Considerations” beginning on page 52 of this proxy statement.
 
After the 2009 financial results became available, the Compensation Committee determined the appropriate funding of the 2009 annual incentive bonus pool based on the achievement of the pre-established financial and non-financial performance goals for the year. The following table sets forth the percentage that the annual incentive bonus pool is funded based on the level of performance relative to the performance goals that were established for the year.
 
Funding of the
Annual Incentive Pool
 
         
Performance
 
Pool Funding
 
Maximum Goals Met
    150%(1)  
Target Goals Met
    100%(2)  
Threshold Goals Met
    50%(3)  
Threshold Not Met
    0%        
 
 
(1) The maximum funding of the annual incentive pool is 150% for performance at or above the maximum performance level.
 
(2) For performance above target but below maximum, actual funding is between 100%-150%, as determined by the Compensation Committee.
 
(3) For performance above threshold but below target, actual funding is between 50%-100%, as determined by the Compensation Committee.
 
Individual Performance Adjustment.  As mentioned above, accountability plays an important role in our compensation programs, and individual performance is an important factor in determining annual incentives. In addition, individual performance goals support our vision of being the place to work, the neighbor to have, and the company to own. Each year, our named executive officers receive an individual performance rating based on an evaluation of the executive officer’s individual contribution and performance against his or her individual performance goals for the year and determined through our performance management program. Individual performance goals for 2009 included living our core values of stewardship, integrity, safety, accountability, and excellence, strengthening the company’s liquidity position, maintaining the investment grade ratings of our pipelines, continuing to execute on the construction of our backlog of pipeline projects and placing pipeline growth projects in service on time and on budget, improving our exploration and production cost structure and delivering significant reserve growth, increasing our inventory of low-risk, repeatable drilling operations, reducing costs, improving our execution capability and consolidating and standardizing shared service functions, continuing to grow our master limited partnership, leadership training and development initiatives and supporting volunteer efforts in the communities in which we work. Based on the individual performance rating, an individual performance factor ranging between 0% and 150%, as approved by the Compensation Committee, is assigned


46


Table of Contents

to each executive. The Compensation Committee then uses the individual performance factor (ranging from 0%-150%) to apply discretion and adjust the executive’s actual annual cash incentive award.
 
Under this formula, the maximum bonus opportunity is 225% of the target bonus, which is calculated by taking 150% of the maximum annual incentive bonus pool times 150% of the maximum individual performance adjustment factor. The range of annual cash incentive bonuses, based on the level of company performance (and, where appropriate, the performance of our business units) and the individual executive, is illustrated as a percentage of base salary for each named executive officer in the following table. The actual percentage of cash incentive bonuses could be at any level between the minimum and maximum percentages (0%-225%) based on company and individual performance.
 
Range of Cash Incentive Awards as a Percentage of Base Salary for 2009
 
                                 
    Minimum
           
    Threshold
           
    Not Met   Threshold   Target   Maximum
 
Douglas L. Foshee
    0 %     60 %     120 %     270 %
John R. Sult
    0 %     25 %     50 %     112.50 %
D. Mark Leland
    0 %     30 %     60 %     135 %
Brent J. Smolik
    0 %     45 %     90 %     202.50 %
James C. Yardley
    0 %     37.50 %     75 %     168.75 %
Robert W. Baker
    0 %     30 %     60 %     135 %
 
The potential range of values of the annual cash incentive awards for 2009 performance for each of the named executive officers is reflected in the Grants of Plan-Based Awards table in the “Estimated Possible Payouts under Non-Equity Incentive Plan Awards” column on page 58 of this proxy statement.
 
El Paso Performance.  In February 2010, the Compensation Committee reviewed the actual performance of our company and its business units relative to the corporate and business unit performance goals that were established for the year. In reviewing our actual performance relative to the corporate financial goals, the Compensation Committee excluded the impacts of certain items under pre-approved adjustment categories, including: changes in commodity prices in the oil and gas industry (which are likewise excluded in years in which commodity prices materially increase), which resulted in ceiling test charges during the year, an unbudgeted loss on the sale of our Porto Velho power assets in Brazil, actions taken to resolve legacy issues, and certain unbudgeted or strategic items, including a tax benefit associated with the liquidation of certain foreign entities, severance costs associated with reorganizations, an impairment of certain E&P inventory and other assets and an adjustment for the reduction in E&P capital in response to lower commodity prices coupled with high service costs. The Compensation Committee determined that these items were not related to the ongoing operation of El Paso in a manner consistent with the way the performance goals and ranges were set. Based on these adjustments, the Compensation Committee determined that El Paso achieved the following adjusted results:
 
  •  earnings per share of $1.20, which is above the target goal of $1.08 and slightly below the maximum goal of $1.22;
 
  •  EBITDA of $3,479 million, which is above the target goal of $3,350 million and slightly below the maximum goal of $3,490 million;
 
  •  return on total capital of 8.57%, which is above the target percentage of 7.9%; and
 
  •  outstanding debt (net of cash) of $13,328 million, which was approximately $600 million lower than the maximum target (with maximum target representing the lowest amount in the range of 2009 debt goals).
 
The Compensation Committee also considered certain qualitative factors critical to the company’s success in 2009. Specifically, the Compensation Committee noted that the company had successfully secured a partner for our Ruby Pipeline Project and had successfully executed our 2009 financing plan which provided sufficient financial flexibility throughout 2009. In addition, our commodity risk management activities provided valuable support in


47


Table of Contents

the low commodity price environment generating more than $1 billion in excess cash. In addition, the Compensation Committee considered steps the company took in 2009 to reduce operating and administrative costs and to become a more efficient and execution-focused enterprise. Finally, the Compensation Committee considered the continued strong performance of our master limited partnership, El Paso Pipeline Partners, L.P. Based on the achievement levels noted above and after considering these qualitative factors, the Compensation Committee approved a corporate funding level of 140% for cash incentive awards.
 
The Compensation Committee reached this determination by assigning each corporate financial goal an achievement percentage (from 0-150%), in accordance with the Funding of the Annual Incentive Pool chart set forth on page 46 of this proxy statement. The Compensation Committee then combined the achievement of each of the corporate financial goals into a single weighted average corporate achievement level based on the weightings of the designated goals, as set forth on page 45 of this proxy statement. The Compensation Committee then considered the qualitative factors noted above. This collectively resulted in the approval by the Compensation Committee of a corporate funding level which, while above target, was slightly less than the funding level that would have resulted if the Committee had followed a strictly formulaic approach.
 
In addition, the Compensation Committee determined that our corporate shared services group, pipeline business unit, and E&P business unit each achieved their respective financial goals and many of the non-financial performance goals (with funding levels of 125%, 124% and 150%, respectively).
 
Individual Performance.  In February 2010, the Compensation Committee also reviewed the individual performance of each of our named executive officers, as noted below, and based on such review, assigned each executive an individual performance factor.
 
Chief Executive Officer
 
Douglas L. Foshee.  As Chairman, President and CEO, Mr. Foshee’s leadership over the past year was critical in guiding the company through an extraordinarily difficult economic environment. Despite a global economic recession, low commodity prices and tight credit markets, Mr. Foshee led El Paso to one of the best operating years in our company’s history. Mr. Foshee’s leadership was instrumental in implementing and executing a comprehensive strategy designed to help our company improve its credit profile, raise funds to expand our natural gas pipeline business and take advantage of unconventional natural gas drilling opportunities. In addition, his communication skills and motivational efforts were particularly evident throughout our organizational realignment.
 
Other Named Executive Officers
 
John R. Sult.  As our Controller for most of 2009, Mr. Sult successfully led a cross-functional, cross-company team to re-implement and upgrade our PeopleSoft Financial system and to consolidate and streamline our chart of accounts. In addition, Mr. Sult played a critical role in the continued strong performance of our master limited partnership, El Paso Pipeline Partners, L.P. (“EPB”), including spearheading the acquisition by EPB of an additional 18% interest in Colorado Interstate Gas Company and raising additional capital for EPB through a successful equity offering.
 
D. Mark Leland.  In a challenging economic environment, Mr. Leland’s leadership as CFO was critical in significantly strengthening the company’s liquidity position in 2009 and maintaining the investment grade ratings of our pipelines. In addition, following his appointment as President of our midstream business unit in late 2009, Mr. Leland has led strategic efforts to pursue midstream opportunities compatible with our business units.
 
Brent J. Smolik.  Mr. Smolik led our exploration and production business to an exceptionally strong performance in 2009. Under his leadership, our exploration and production unit reduced its cost structure, delivered excellent reserve growth and reserve replacement metrics, generated significant cash flow, and substantially increased our inventory of low-risk, repeatable drilling opportunities.
 
James C. Yardley.  Under Mr. Yardley’s leadership, our pipeline business unit had another strong year in 2009, delivering double-digit earnings growth, while continuing to execute on the construction of our backlog of pipeline


48


Table of Contents

and LNG projects. Mr. Yardley also showed strong execution on capital spending, placing four growth projects in service on time and on budget.
 
Robert W. Baker.  Mr. Baker made significant progress in addressing regulatory and litigation matters and provided excellent guidance and solutions. His effective management of our legal costs and liabilities resulted in significant improvement to our cost structure. He was instrumental in executing on our organization realignment efforts, particularly in the areas of consolidation and standardization of shared service functions.
 
2009 Annual Incentives.  Based on the policies described above, the Compensation Committee approved annual incentive bonuses for our named executive officers. The amount was calculated by starting with the maximum bonus amount payable for Code Section 162(m) purposes, which was then reduced to reflect the following formula:
 
target bonus X corporate/business unit funding percentage X individual performance factor = annual incentive award
 
The following table sets forth each named executive officer’s annual cash incentive for 2009 performance.
 
Annual Incentive Awards
Paid for 2009 Performance
 
         
    Actual
    Incentive Award (1)
 
Douglas L. Foshee
  $ 1,800,000  
John R. Sult
  $ 300,000  
D. Mark Leland
  $ 500,000  
Brent J. Smolik
  $ 1,000,000  
James C. Yardley
  $ 500,000  
Robert W. Baker
  $ 350,000  
 
 
(1) Annual cash incentive awards for 2009 performance were paid in March 2010.
 
Long-Term Incentive Awards
 
We use our stockholder approved 2005 Omnibus Incentive Compensation Plan, or omnibus plan, for long-term incentive awards. Under the omnibus plan, the Compensation Committee is the plan administrator with respect to employees subject to Section 162(m) and Section 16 of the Exchange Act, which includes our named executive officers. The Compensation Committee determines the timing of when the annual grants of restricted stock and stock options to such executives will occur as well as the terms and restrictions applicable to such grants.
 
The Compensation Committee approves the annual grant to our executive officers after the financial results are available for the prior fiscal year and selects a future grant date (usually several weeks subsequent to the Compensation Committee’s action) when the awards will be granted. The Compensation Committee’s standard practice is to select the first trading day of the quarter following the filing of the Annual Report on Form 10-K as the grant date for long-term incentive awards, which historically has been the first trading day of April. Stock options are granted with an exercise price based upon the average between the high and low selling prices at which our common stock traded on the grant date.
 
As described earlier, annual long-term incentives are comprised of an approximate 50/50 combination of stock options and restricted stock. Options are granted at target levels and are not adjusted for company or individual performance. This practice is in place to mitigate the effect of short term performance on a long-term incentive. Restricted stock awards are performance-based and are adjusted at the time of grant for both company and individual performance, as described below. The target equity opportunities for the 2008 performance year and for the 2009 performance year, including both the option and restricted stock components are included below. These


49


Table of Contents

target long-term equity opportunities were derived from peer group and competitive survey benchmarking data and from the Compensation Committee’s judgment on the internal equity of the positions and scope of job responsibilities. As noted below, following his appointment as our CFO in November 2009, the Compensation Committee elected to increase Mr. Sult’s 2009 target equity opportunity to reflect his increased responsibilities and bring his target equity opportunity more closely in line with benchmarking data and internal positions. Mr. Sult did not, however, receive a special or out-of-cycle equity grant in connection with his appointment as CFO.
 
Target Long-Term Equity Opportunities
 
                         
        2009
   
    2008 Performance
  Performance Year
  2008-2009
    Year Target Equity
  Target Equity
  Percentage
Name
  Opportunity (1)   Opportunity (1)   Increase
 
Douglas L. Foshee
  $ 4,350,000     $ 4,350,000       0 %
John R. Sult
  $ 405,000     $ 1,250,000 (2)     209 %
D. Mark Leland
  $ 1,250,000     $ 1,250,000       0 %
Brent J. Smolik
  $ 1,250,000     $ 1,250,000       0 %
James C. Yardley
  $ 1,250,000     $ 1,250,000       0 %
Robert W. Baker
  $ 1,250,000     $ 1,250,000       0 %
 
 
(1) We use a Black-Scholes valuation to convert the dollar value of the grant into options, and we use a 10 day average of the closing sales price of our stock in advance of the Compensation Committee meeting in which the awards are approved, which meeting is set pursuant to a pre-established corporate calendar, to convert the dollar value of the grant into restricted stock.
 
(2) The Compensation Committee increased Mr. Sult’s 2009 performance year target equity opportunity following his appointment as our CFO.
 
As mentioned above, our restricted stock awards are performance-based and will only be granted to the extent we satisfy specific performance goals. Once granted, the shares time vest in three equal annual installments. The amount of equity available to fund the equity pool for annual restricted stock grants is based 50% on achievement of the annual overall corporate financial goals and 50% on El Paso’s one-year relative TSR compared to our peer group of companies. The Committee believes these performance goals are appropriate for purposes of determining the amount of restricted stock granted to our named executive officers because they strike an appropriate balance of internal (corporate financial goals) and external (TSR) performance.
 
The portion of the equity pool used for restricted stock grants that is funded based on El Paso’s TSR compared to its peer group of companies is determined as follows:
 
Funding of Portion of Equity Pool
Based on Total Shareholder Return
for Restricted Stock Grants
 
     
Total Shareholder Return
 
Equity Pool Funding
 
1st Quartile (75th to 100th percentile)
  Funded at 150%
2nd Quartile (50th to 74th percentile)
  Funded from 100% to 150% based on actual TSR results
3rd & 4th Quartile (0 to 49th percentile)
  Funded from 0% to 100% (1)
 
 
(1) If our TSR is below the 50th percentile (i.e., third or fourth quartile), at least one of the pre-established corporate or business unit financial or non-financial performance goals must be achieved before any restricted stock grants will be awarded.


50


Table of Contents

 
The portion of the equity pool used for restricted stock grants that is funded based on achievement of the annual overall corporate financial goals is determined using the same corporate funding percentage approved by the Compensation Committee for purposes of cash incentive awards.
 
Following the determination of the funding percentage for the equity pool, the Compensation Committee applies the individual performance factors described on page 46 as an adjustment performance factor to determine the executive officer’s actual restricted stock award.
 
Annual Grant based on 2008 Performance
 
In February 2009, the Compensation Committee approved the 2009 annual grant of long-term incentive awards in the form of restricted stock and stock options based on 2008 performance. These long-term incentive awards were granted to the named executive officers on April 1, 2009. During 2008, we achieved target performance of our overall corporate financial performance goals, resulting in the funding of one-half of the restricted stock portion of the equity pool at 100%. However, during 2008, El Paso’s TSR relative to our peer group of companies was in the fourth quartile (18th percentile), and due to this lower quartile performance, the Compensation Committee determined that the funding of one-half of the restricted stock pool based on TSR results should be at 0%. Accordingly, the restricted stock grants that were granted to the named executive officers in April 2009 were funded at 50% of overall target (50% × [100% based on corporate financial performance + 0% based on TSR performance] = 50%) and were adjusted for individual performance. Stock options were granted at target and were not adjusted for corporate or individual performance. The restricted stock and stock options vest in three equal annual installments beginning one year from the date of grant.
 
Furthermore, as described in last year’s proxy statement, in February 2009, the Compensation Committee determined that one-half of each named executive officer’s approved 2008 performance-based cash bonus would be paid in the form of restricted stock, rather than being paid entirely in cash. This was a change from prior years and was done for two reasons: (i) to continue to motivate the named executive officers to focus on building long-term shareholder value over short-term results, and (ii) to put a significant portion of the bonus at risk and encourage retention and focus. The restricted stock payable as part of the approved 2008 bonuses was granted on April 1, 2009 at the same time our annual equity grants were made; however, unlike our annual restricted stock grants that vest in three equal installments, the shares awarded as part of the 2008 bonus cliff-vest three years from the date of grant.
 
The number of shares and grant date fair value of the restricted stock and stock options awarded in April 2009 to each named executive officer, including the restricted stock that was awarded as part of the 2008 performance-based bonus, is reflected in the Grants of Plan-Based Awards table on pages 58 and 59 of this proxy statement.
 
Annual Grant based on 2009 Performance
 
In February 2010, the Compensation Committee approved the 2010 annual grant of long-term incentive awards in the form of restricted stock and stock options based on 2009 performance. These long-term incentive awards are expected to be granted to the named executive officers on April 1, 2010. During 2009, we achieved above-target performance of our overall corporate financial performance goals, resulting in the funding of one-half of the restricted stock portion of the equity pool at 140%. However, during 2009 El Paso’s TSR relative to our peer group of companies was in the 3rd quartile (27th percentile), and due to this 3rd quartile performance, the Compensation Committee determined that the funding of one-half of the restricted stock pool based on TSR results should only be at 27%. The Compensation Committee believed this action was appropriate to reflect our lower quartile TSR performance. Accordingly, restricted stock grants that will occur in April 2010 based upon 2009 performance will be funded at 83.5% of overall target (50% × [140% based on corporate financial performance + 27% based on TSR performance] = 83.5%), with the value of each named executive officer’s individual grant adjusted for individual performance, as described above. Stock options will be granted at target and will not be adjusted for corporate or individual performance. The restricted stock and stock options will vest in three equal annual installments beginning one year from the date of grant. The number of shares of restricted stock and stock options that will be awarded in April 2010 to each named executive officer based on 2009 performance are set forth in the table below and will be reported in next year’s Grants of Plan-Based Awards table in accordance with SEC reporting requirements.


51


Table of Contents

Annual Grant of
Long-Term Incentive Awards
Based on 2009 Performance
 
                         
    Stock Options
  Restricted Stock
   
Name
  (#)   (#)    
 
Douglas L. Foshee
    511,765       224,855          
John R. Sult(1)
    88,235       36,267          
D. Mark Leland
    147,059       55,609          
Brent J. Smolik
    147,059       65,280          
James C. Yardley
    147,059       45,938          
Robert W. Baker
    147,059       36,267          
 
 
(1) Due to the timing of his appointment as CFO in late 2009, the Compensation Committee elected to use its negative discretion to grant both stock options and restricted stock at below-target levels for Mr. Sult. This decision was not a reflection on Mr. Sult’s performance, but rather reflects that he was serving in the CFO position for only a portion of 2009.
 
VII.  Other Compensation and Tax Matters
 
Regulatory Considerations
 
Section 162(m) imposes a limit of $1,000,000 on the amount that we may deduct for federal income tax purposes in any one year for compensation paid to our CEO and any of our three other highest-paid named executive officers, other than our CFO, who are employed as of the end of the year. However, to the extent compensation is “performance-based” within the meaning of Section 162(m), the Section’s limitations will not apply. Our executive compensation plans, including our omnibus plan, are structured so that awards such as cash incentive awards, stock options and restricted stock qualify as deductible performance-based compensation. While the Compensation Committee strives to make awards under our plans that are intended to qualify as performance-based compensation under Section 162(m), it is possible under certain circumstances that some portion of the compensation paid to our executive officers will not meet the standards of deductibility under Section 162(m). The Compensation Committee reserves the right to award compensation which does not qualify as performance-based under Section 162(m) if it determines that such awards are necessary to provide a competitive compensation package to attract and retain qualified executive talent. The annual cash incentive awards, stock options and performance-based restricted stock that were granted to the named executive officers during 2009 were intended to be performance-based within the meaning of Section 162(m).
 
Stock Ownership
 
Our Corporate Governance Guidelines impose stock ownership requirements on our executive officers. These stock ownership requirements are designed to emphasize stock ownership by our executive officers and to further align their interests with our stockholders — through increases and decreases in stock prices. These requirements are as follows:
 
         
Position
 
Minimum Aggregate Value
 
Chief Executive Officer     5 X base salary  
Other Executive Officers     2 X base salary  
 
Each executive officer is required to meet the ownership threshold within five years of election as an executive officer. As of December 31, 2009, each of our named executive officers’ ownership in our common stock exceeded the required ownership thresholds and did so in the requisite time frames. See page 10 of this proxy statement for further information regarding the stock ownership requirements for our executive officers.


52


Table of Contents

 
Margin Trading Prohibition
 
We have a policy prohibiting executives from hedging their ownership of company stock. Under the policy, executive officers are prohibited from holding El Paso securities in a margin account or otherwise entering into any pledge arrangement that would permit a third party to sell the El Paso securities without the executive’s consent or knowledge. This prohibition also applies to our non-employee directors.
 
Compensation Recovery
 
Under our omnibus plan, which provides for grants of annual cash incentive awards and long-term incentive awards, if it is determined that an executive officer in the plan knowingly engaged in, or was grossly negligent with respect to, misconduct that causes us to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under the securities laws, the executive is required to reimburse us the amount of any payment in settlement of an award earned or accrued during the 12-month period following the first public issuance or filing, whichever first occurred, of the financial document that is required to be restated.
 
2010 Peer Group Changes
 
In late 2009, the Compensation Committee, in consultation with Deloitte, reevaluated our peer group in terms of market competitors, organization size, and industry. The Compensation Committee then reviewed the following financial measures to determine an appropriate peer group fit: market capitalization, enterprise value, total revenues for FY 2008, projected total revenues for FY 2009, and operating income. Based on this analysis, the Compensation Committee elected to make the following revisions to the peer group for use starting with the 2010 performance year to more closely align our peer group with companies that have comparable overall financial metrics as our company: the removal of Apache Corporation, Chesapeake Energy Corporation, Devon Energy Corp., and EOG Resources, Inc., and the addition of Energen Corp. No other changes were made. The tables below include the peer group the committee will use starting with the 2010 performance cycle, as well as the relevant comparison metrics of the new peer group as of October 2009 when the peer group was selected.
 
2010 Peer Group
 
         
Anadarko Petroleum Corp.
  Newfield Exploration Co.   Southern Union Co.
CenterPoint Energy, Inc.
  NiSource, Inc.   Spectra Energy Corp.
Dominion Resources, Inc.
  Noble Energy, Inc.   TransCanada Corp.
Enbridge Inc.
  ONEOK, Inc.   Williams Companies
Energen Corp.
  Pioneer Natural Resources   XTO Energy Inc.
EQT Corporation
  Questar Corporation    
National Fuel Gas Co.
  Sempra Energy    
 
2010 Peer Group Comparison Metrics
 
                         
            Most Recent Revenue
Company
  Market Capitalization   Enterprise Value   FY 2008
    (In millions)   (In millions)   (In millions)
 
25th Percentile
  $ 3,962     $ 7,791     $ 2,735  
Median
  $ 6,426     $ 13,617     $ 7,695  
75th Percentile
  $ 13,994     $ 25,446     $ 11,837  
El Paso Corp. 
  $ 7,377     $ 21,552     $ 5,363  
Percentile Rank
    51st Percentile       70th Percentile       45th Percentile  


53


Table of Contents

 
COMPENSATION COMMITTEE REPORT
 
Each member of the Compensation Committee is “independent,” as that term is defined under (a) the NYSE listing standards, (b) the non-employee director standards of Rule 16b-3 of the Exchange Act, as amended, (c) the outside director requirements of Section 162(m) of the Code and (d) El Paso’s Corporate Governance Guidelines. The Compensation Committee currently consists of Messrs. Shapiro, Vagt and Whitmire and Ms. McClean.
 
Compensation Committee Statement
 
We have prepared this Compensation Committee Report as required by the Securities and Exchange Commission. We have reviewed and discussed with El Paso’s management the Compensation Discussion and Analysis included in this proxy statement, and based on that review and discussion, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
 
Current Members of the Compensation Committee of the Board of Directors
 
             
Steven J. Shapiro
  Ferrell P. McClean   Robert F. Vagt   John L. Whitmire
(Chairman)
  (Member)   (Member)   (Member)


54


Table of Contents

Summary Compensation Table
 
The following table and the narrative text that follows it provide a summary of the compensation earned or paid to our named executive officers according to applicable SEC regulations. The compensation reflected for each individual was for their services provided in all capacities to us and our subsidiaries.
 
Summary Compensation Table
 
                                                                         
                            Change in
       
                            Pension
       
                            Value and
       
                            Nonqualified
       
                        Non-Equity
  Deferred
       
                Stock
  Option
  Incentive Plan
  Compensation
  All Other
   
        Salary
  Bonus
  Awards
  Awards
  Compensation
  Earnings
  Compensation
  Total
Name and Principal Position
  Year   ($)   ($)   ($) (1)   ($) (1)   ($) (2)   ($) (3) (4)   ($) (5)   ($)
 
Douglas L. Foshee
    2009     $ 1,050,000     $ 0     $ 1,441,998     $ 1,748,180     $ 1,800,000     $ 191,521     $ 75,203     $ 6,306,902  
Chairman, President &
    2008     $ 1,037,502     $ 0     $ 2,323,916     $ 2,164,560     $ 593,220     $ 139,878     $ 118,212     $ 6,377,288  
Chief Executive Officer
    2007     $ 987,507     $ 0     $ 2,930,536     $ 2,017,100     $ 1,518,000     $ 109,884     $ 166,399     $ 7,729,426  
John R. Sult (6)
    2009     $ 345,675     $ 0     $ 158,508     $ 162,762     $ 300,000     $ 46,755     $ 26,270     $ 1,039,970  
Executive Vice President &
                                                                       
Chief Financial Officer
                                                                       
D. Mark Leland (7)
    2009     $ 519,756     $ 0     $ 405,877     $ 502,351     $ 500,000     $ 134,549     $ 31,829     $ 2,094,362  
Executive Vice President &
    2008     $ 519,756     $ 0     $ 728,505     $ 622,000     $ 162,000     $ 13,116     $ 43,905     $ 2,089,282  
President of Midstream
    2007     $ 513,567     $ 0     $ 1,153,438     $ 579,626     $ 430,358     $ 223     $ 45,163     $ 2,722,375  
Brent J. Smolik
    2009     $ 566,520     $ 0     $ 385,023     $ 502,351     $ 1,000,000     $ 57,136     $ 34,724     $ 2,545,754  
Executive Vice President &
    2008     $ 562,392     $ 0     $ 667,799     $ 622,000     $ 172,500     $ 46,011     $ 26,950     $ 2,097,652  
President of Exploration &
    2007     $ 550,008     $ 0     $ 768,964     $ 579,626     $ 622,100     $ 27,924     $ 360,113     $ 2,908,735  
Production
                                                                       
James C. Yardley
    2009     $ 515,016     $ 0     $ 490,443     $ 502,351     $ 500,000     $ 487,692     $ 34,279     $ 2,529,781  
Executive Vice President,
    2008     $ 511,263     $ 0     $ 607,076     $ 622,000     $ 195,000     $ 57,869     $ 48,395     $ 2,041,603  
Pipeline Group
    2007     $ 500,004     $ 0     $ 1,038,096     $ 579,626     $ 432,191     $ 189     $ 86,947     $ 2,637,053  
Robert W. Baker
    2009     $ 456,696     $ 0     $ 314,159     $ 502,351     $ 350,000     $ 101,898     $ 27,134     $ 1,752,238  
Executive Vice President &
    2008     $ 456,696     $ 0     $ 607,076     $ 622,000     $ 120,000     $ 66,168     $ 35,882     $ 1,907,822  
General Counsel
    2007     $ 451,257     $ 0     $ 1,076,543     $ 579,626     $ 315,120     $ 43,010     $ 39,143     $ 2,504,699  
 
 
(1) On December 16, 2009, the SEC adopted amendments to the proxy disclosure rules that require disclosure of the aggregate grant date fair market value of stock awards and option awards granted in the fiscal year calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, “Compensation — Stock Compensation” (“FASB ASC Topic 718”), rather than the dollar amount recognized for financial statement purposes for the fiscal year, as previously required. As required by this rule, this column includes the aggregate grant date fair market value of stock awards or option awards, as applicable, granted in 2009, as well as awards in prior years adjusted for this new rule. The grant date fair market value used to calculate these amounts is the same as that used for our stock-based compensation disclosure in Note 16 to our financial statements included in our 2009 Annual Report on Form 10-K filed with the SEC on March 1, 2010.
 
(2) The amount in this column for 2009 reflects each named executive officer’s annual cash incentive bonus earned for 2009 performance. Annual cash incentive bonuses are performance-based and driven by company and individual performance. Amounts for 2009 were paid to the named executive officers in March 2010. See the discussion under “Annual Cash Incentive Awards for 2009 Performance” in the Compensation Discussion and Analysis for additional information.
 
(3) The amount in this column for 2009 reflects the annual change in the actuarial present value of each named executive officer’s accumulated pension and supplemental pension benefits. The change in pension value is generally equal to the difference between the actuarial present value at the end of the year and the beginning of the year. The annual change in the actuarial present value of Messrs. Foshee’s, Sult’s, Leland’s, Smolik’s, Yardley’s and Baker’s accumulated pension and supplemental pension benefits for 2009 is $182,648, $45,919, $131,891, $56,619, $485,323 and $99,290, respectively.


55


Table of Contents

 
(4) The amount in this column for 2009 also reflects above-market interest credited to the named executive officers’ supplemental Retirement Savings Plan account balances. During 2009, interest was credited to the balance of each executive officer’s supplemental Retirement Savings Plan account balance on a monthly basis at a rate equal to the average of Moody’s Seasoned Aaa Corporate Bond Rate and Moody’s Seasoned Baa Corporate Bond Rate, as published by Moody’s Investors Services, Inc. It was determined that the rate of interest exceeded 120 percent of the applicable federal long-term rate for each month during 2009. The total amount of the above-market interest credited to Messrs. Foshee’s, Sult’s, Leland’s, Smolik’s, Yardley’s and Baker’s supplemental Retirement Savings Plan account balance during 2009 was $8,873, $836, $2,658, $517, $2,369 and $2,608, respectively. See the Nonqualified Deferred Compensation table and narrative description on pages 66 and 67 of this proxy statement for a description of the named executive officer’s supplemental Retirement Savings Plan benefits.
 
(5) The compensation reflected in the “All Other Compensation” column for 2009 for each of the named executive officers includes company matching contributions to our Retirement Savings Plan, supplemental company matching contributions for the Retirement Savings Plan accrued under our 2005 Supplemental Benefits Plan, the incremental cost to El Paso of personal use of aircraft, annual executive physicals and tax reimbursements, which are listed in the table titled “All Other Compensation included in the Summary Compensation Table for 2009” immediately following these footnotes.
 
(6) Mr. Sult was appointed Senior Vice President and CFO in November 2009, and became Executive Vice President and CFO in March 2010. Prior to his appointment as our CFO, Mr. Sult served as Senior Vice President and Controller.
 
(7) Mr. Leland was appointed President of El Paso’s Midstream business unit in November 2009. Prior to this appointment, Mr. Leland served as CFO.
 
All Other Compensation included in the Summary Compensation Table for 2009
 
                                                                 
    Company
  Supplemental
                       
    Matching
  Company Matching
                       
    Contributions
  Contributions
                       
    to the
  Accrued under the
  Personal
  Annual
               
    Retirement
  2005 Supplemental
  Use of
  Executive
  Tax
           
    Savings Plan
  Benefits Plan
  Aircraft
  Physicals
  Reimbursements
  Total
       
Name
  ($)   ($) (A)   ($) (B)   ($) (C)   ($) (D)   ($)        
 
Douglas L. Foshee
  $ 11,025     $ 62,920     $ 7     $ 0     $ 1,251     $ 75,203                  
John R. Sult
  $ 11,025     $ 15,245     $ 0     $ 0     $ 0     $ 26,270                  
D. Mark Leland
  $ 11,025     $ 19,654     $ 0     $ 1,150     $ 0     $ 31,829                  
Brent J. Smolik
  $ 11,025     $ 22,231     $ 0     $ 1,468     $ 0     $ 34,724                  
James C. Yardley
  $ 11,025     $ 20,926     $ 798     $ 1,243     $ 287     $ 34,279                  
Robert W. Baker
  $ 11,025     $ 14,926     $ 0     $ 1,183     $ 0     $ 27,134                  
 
 
(A) The compensation reflected in this column for each of the named executive officers for 2009 includes supplemental company matching contributions for the Retirement Savings Plan which were accrued under the 2005 Supplemental Benefits Plan. Supplemental company matching contributions accrued under the 2005 Supplemental Benefits Plan are also disclosed as registrant contributions in the Nonqualified Deferred Compensation table on page 66 of this proxy statement.


56


Table of Contents

 
(B) The amount shown in this column for Mr. Foshee for 2009 reflects the incremental cost to El Paso for an occasion when his spouse accompanied him on a business-related flight on private aircraft leased by El Paso. As Mr. Foshee was using the leased aircraft for business purposes, the only incremental cost to El Paso associated with his spouse’s travel on the flight was a nominal per person segment fee charged by the private carrier to El Paso, which amount is shown above. The amount shown for Mr. Yardley reflects an occasion when his spouse accompanied him on a business-related flight using a commercial carrier. When the executive officer’s use of leased aircraft or a guest’s travel does not meet the IRS’s standard for business use, but nevertheless is determined by the company to be business-related, the cost of that travel is imputed as income to the executive officer and a gross-up payment for taxes is provided. Any tax reimbursements with respect to the imputed income for the travel are reflected in the “Tax Reimbursements” column of this table.
 
(C) The amounts in this column for 2009 reflect the cost to El Paso for the executive officer annual physicals.
 
(D) The amounts in this column for 2009 for Messrs. Foshee and Yardley reflect tax reimbursements associated with imputed income for personal air travel that did not meet the IRS’s standard for business use.


57


Table of Contents

 
Grants of Plan-Based Awards Table
 
The following table sets forth the range of potential annual cash incentive bonuses for 2009 performance as a dollar amount for each of the named executive officers. The table also sets forth the number of shares of restricted stock and the number of securities underlying stock options awarded during 2009 to the named executive officers. In satisfaction of applicable SEC regulations, the table further sets forth the date of grant for each restricted stock and stock option award and the date on which the Compensation Committee took action to approve the grant of such award. The table also sets forth the per-share exercise price of the stock options granted during 2009, the closing market price of our common stock on the date of grant of stock options, and the grant date fair market value of the restricted stock and stock options awarded during 2009. The restricted stock and stock options in this table were granted under our 2005 Omnibus Incentive Compensation Plan, which provides that the average between the high and low selling prices at which our common stock traded on the date of grant is used as the exercise price (or strike price) for stock options.
 
Grants of Plan-Based Awards
During the Year Ended December 31, 2009
 
                                                                                         
                            All Other
  All Other
          Grant Date
                            Stock
  Option
          Fair
            Estimated Possible Payouts
  Awards:
  Awards:
  Exercise
  Closing
  Value
            Under Non-Equity Incentive
  Number of
  Number of
  or Base
  Market Price
  of Stock
        Date of
  Plan Awards (1)   Shares of
  Securities
  Price
  of Underlying
  and
        Compensation
  Threshold
              Stock or
  Underlying
  of Option
  Securities on
  Option
    Grant
  Committee
  Not Met
  Threshold
  Target
  Maximum
  Units
  Options
  Awards
  Grant Date
  Awards
Name
  Date   Action   ($)   ($)   ($)   ($) (2)   (#) (3)   (#) (4)   ($/Sh) (5)   ($/Sh) (6)   ($) (7)
 
Douglas L. Foshee
                                                                                       
Short-Term Incentive
    N/A       N/A     $ 0     $ 630,000     $ 1,260,000     $ 2,835,000                                          
Stock Options
    4/1/2009       2/09/2009                                               605,850     $ 6.335     $ 6.52     $ 1,748,180  
Restricted Stock
    4/1/2009       2/09/2009                                       153,286                             $ 971,067  
Restricted Stock
    4/1/2009       3/10/2009                                       74,338                             $ 470,931  
John R. Sult
                                                                                       
Short-Term Incentive
    N/A       N/A     $ 0     $ 102,003     $ 204,006     $ 459,013                                          
Stock Options
    4/1/2009       2/09/2009                                               56,407     $ 6.335     $ 6.52     $ 162,762  
Restrictive Stock
    4/1/2009       2/09/2009                                       25,021                             $ 158,508  
D. Mark Leland
                                                                                       
Short-Term Incentive
    N/A       N/A     $ 0     $ 155,927     $ 311,854     $ 701,672                                          
Stock Options
    4/1/2009       2/09/2009                                               174,095     $ 6.335     $ 6.52     $ 502,351  
Restricted Stock
    4/1/2009       2/09/2009                                       43,768                             $ 277,270  
Restricted Stock
    4/1/2009       3/10/2009                                       20,301                             $ 128,607  
Brent J. Smolik
                                                                                       
Short-Term Incentive
    N/A       N/A     $ 0     $ 254,934     $ 509,868     $ 1,147,203                                          
Stock Options
    4/1/2009       2/09/2009                                               174,095     $ 6.335     $ 6.52     $ 502,351  
Restricted Stock
    4/1/2009       2/09/2009                                       39,160                             $ 248,079  
Restricted Stock
    4/1/2009       3/10/2009                                       21,617                             $ 136,944  
James C. Yardley
                                                                                       
Short-Term Incentive
    N/A       N/A     $ 0     $ 193,131     $ 386,262     $ 869,090                                          
Stock Options
    4/1/2009       2/09/2009                                               174,095     $ 6.335     $ 6.52     $ 502,351  
Restricted Stock
    4/1/2009       2/09/2009                                       52,982                             $ 335,641  
Restricted Stock
    4/1/2009       3/10/2009                                       24,436                             $ 154,802  
Robert W. Baker
                                                                                       
Short-Term Incentive
    N/A       N/A     $ 0     $ 137,009     $ 274,018     $ 616,541                                          
Stock Options
    4/1/2009       2/09/2009                                               174,095     $ 6.335     $ 6.52     $ 502,351  
Restricted Stock
    4/1/2009       2/09/2009                                       34,553                             $ 218,893  
Restricted Stock
    4/1/2009       3/10/2009                                       15,038                             $ 95,266  
 
 
(1) These columns show the potential value of the payout of the annual cash incentive bonuses for 2009 performance for each named executive officer if the threshold, target and maximum performance levels are achieved. The potential payout is performance-based and driven by company and individual performance. The


58


Table of Contents

actual amount of the annual cash incentive bonuses paid for 2009 performance is shown in the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column.
 
(2) The values in this column reflect that the maximum amount of annual cash incentive bonuses for Messrs. Foshee, Sult, Leland, Smolik, Yardley and Baker for 2009 performance was capped at 2.25 times the executive officer’s target bonus opportunity for the year.
 
(3) This column shows the number of shares of restricted stock granted in 2009 to the named executive officers. The shares of restricted stock approved by the Compensation Committee on February 9, 2009 and granted on April 1, 2009 vest in three equal annual installments beginning one year from the date of grant. The shares of restricted stock approved by the Compensation Committee on March 10, 2009 and granted on April 1, 2009 relate to the 50% portion of the 2008 performance bonus that the Compensation Committee awarded in the form of restricted stock in lieu of cash and cliff-vest three years from the date of grant. See “Annual Grant based on 2008 Performance” on page 51 of this proxy statement for additional information regarding these grants.
 
(4) This column shows the number of stock options granted in 2009 to the named executive officers. The stock options vest in three equal annual installments beginning one year from the date of grant.
 
(5) This column shows the exercise price for the stock options granted during 2009, which was the average between the high and low selling prices at which our common stock traded on the date of grant.
 
(6) This column shows the closing market price of a share of our common stock on the date of grant of the stock options.
 
(7) This column shows the grant date fair value of restricted stock computed in accordance with FASB ASC Topic 718 and the grant date fair value of stock options computed in accordance with FASB ASC Topic 718 granted to the named executive officers during 2009. Generally, the grant date fair value is the amount expensed in our financial statements over the vesting schedule of the restricted stock and stock options.
 
The following is a description of material factors necessary to understand the information regarding the stock awards and option awards reflected in the Grants of Plan-Based Awards table. The awards reflected in the Grants of Plan-Based Awards table are shares of restricted stock and non-qualified stock options to purchase shares of our common stock which were approved by the Compensation Committee and granted to the named executive officers on April 1, 2009. The equity awards were granted under our 2005 Omnibus Incentive Compensation Plan. The stock options and restricted stock awards approved on February 9, 2009 and granted on April 1, 2009 were made as part of our 2009 annual grant of long-term incentive awards based on 2008 performance. The restricted stock awards approved on March 10, 2009 and granted on April 1, 2009 relate to the 50% portion of the 2008 performance bonus that the Compensation Committee elected to pay in the form of restricted stock rather than cash. See “Annual Grant based on 2008 Performance” on page 51 of this proxy statement for additional information on these grants. The grant date fair value per share for the restricted stock awards granted on April 1, 2009 was $6.335. The grant date fair value per option for the stock options granted on April 1, 2009 was $2.8855, computed using a Black-Scholes option-pricing model based on several assumptions. These assumptions are based on management’s best estimate at the time of grant and are listed below, as follows:
 
         
    Grant Date
    04/01/2009
 
Expected Term in Years
    6.0  
Expected Volatility
    54 %
Expected Dividends
    1.5 %
Risk-Free Interest Rate
    1.945 %


59


Table of Contents

Restricted stock carries voting and dividend rights.  Dividends are paid on restricted stock directly to the holder of the restricted stock and at the same rate as other holders of our common stock. Dividends are not paid on unexercised stock options. The amount of dividends received during 2009 on shares of unvested restricted stock granted to the named executives is factored into the grant date fair value per share and is not required to be included in the Summary Compensation Table or Grants of Plan-Based Awards table but is reflected in the table below.
 
         
    Dividends Received
    during 2009 on
    Restricted Stock
Name
  ($)
 
Douglas L. Foshee
  $ 70,215  
John R. Sult
  $ 7,993  
D. Mark Leland
  $ 22,738  
Brent J. Smolik
  $ 18,014  
James C. Yardley
  $ 21,836  
Robert W. Baker
  $ 19,321  
 
The restrictions will lapse on any unvested shares of restricted stock and any unvested stock options become fully exercisable in the event of an executive’s termination of employment without cause or by the executive for “good reason,” if applicable, within two years following a “change in control” of El Paso. See pages 78-84 of this proxy statement for a summary of our 2005 Omnibus Incentive Compensation Plan and pages 83 and 84 for the definitions of “good reason” and “change in control.” The total value of restricted stock can be realized only if the executives remain employed by El Paso for the required vesting period. Stock options generally expire ten years from the date of grant. However, stock options are subject to forfeiture and/or time limitations on exercise in the event of a termination of employment.
 
Employment Agreements
 
As indicated in the Compensation Discussion and Analysis, we do not have employment agreements with our named executive officers.


60


Table of Contents

 
Outstanding Equity Awards Table
 
The following table sets forth, on an award-by-award basis, the number of securities underlying unexercised stock options and the total number and aggregate market value of shares of unvested restricted stock held by the named executive officers as of December 31, 2009. The table also provides the exercise price and date of expiration of each unexercised stock option.
 
Outstanding Equity Awards
at December 31, 2009
 
                                                 
                    Stock Awards
                    Number of
  Market Value
    Option Awards   Shares or
  of Shares or
    Number of Securities
          Units of
  Units of
    Underlying Unexercised
  Option
      Stock That
  Stock That
    Options at Fiscal Year-End
  Exercise
  Option
  Have Not
  Have Not
    (#)   Price
  Expiration
  Vested
  Vested
Name
  Exercisable   Unexercisable   ($) (1)   Date   (#)   ($) (2)
 
Douglas L. Foshee
    1,000,000       0     $ 7.345       9/02/2013       66,999 (6)   $ 658,600  
      375,000       0     $ 7.090       4/01/2014       92,743 (7)   $ 911,664  
      403,950       0     $ 10.685       4/01/2015       153,286 (8)   $ 1,506,801  
      252,722       0     $ 12.155       4/03/2016       74,338 (9)   $ 730,743  
      246,180       123,090 (3)   $ 14.580       4/02/2017                  
      125,650       251,300 (4)   $ 16.705       4/01/2018                  
      0       605,850 (5)   $ 6.335       4/01/2019                  
John R. Sult
    53,667       0     $ 11.620       10/24/2015       7,405 (6)   $ 72,791  
      19,738       0     $ 12.155       4/03/2016       11,774 (7)   $ 115,738  
      22,920       11,460 (3)   $ 14.580       4/02/2017       25,021 (8)   $ 245,956  
      11,699       23,396 (4)   $ 16.705       4/01/2018                  
      0       56,407 (5)   $ 6.335       4/01/2019                  
D. Mark Leland
    55,000       0     $ 62.975       1/29/2011       26,370 (6)   $ 259,217  
      6,375       0     $ 62.975       1/29/2011       29,073 (7)   $ 285,788  
      20,000       0     $ 46.275       8/13/2011       43,768 (8)   $ 430,239  
      53,125       0     $ 7.090       4/01/2014       20,301 (9)   $ 199,559  
      49,080       0     $ 10.685       4/01/2015                  
      50,000       0     $ 11.990       8/10/2015                  
      69,863       0     $ 12.155       4/03/2016                  
      70,741       35,371 (3)   $ 14.580       4/02/2017                  
      36,107       72,212 (4)   $ 16.705       4/01/2018                  
      0       174,095 (5)   $ 6.335       4/01/2019                  
Brent J. Smolik
    70,741       35,371 (3)   $ 14.580       4/02/2017       17,580 (6)   $ 172,811  
      36,107       72,212 (4)   $ 16.705       4/01/2018       26,650 (7)   $ 261,970  
      0       174,095 (5)   $ 6.335       4/01/2019       39,160 (8)   $ 384,943  
                                      21,617 (9)   $ 212,495  
James C. Yardley
    55,000       0     $ 62.975       1/29/2011       23,733 (6)   $ 233,295  
      6,375       0     $ 62.975       1/29/2011       24,227 (7)   $ 238,151  
      40,000       0     $ 46.275       8/13/2011       52,982 (8)   $ 520,813  
      48,875       0     $ 7.090       4/01/2014       24,436 (9)   $ 240,206  
      45,462       0     $ 10.685       4/01/2015                  
      25,352       0     $ 12.155       4/03/2016                  
      20,000       0     $ 14.275       8/16/2016                  
      70,741       35,371 (3)   $ 14.580       4/02/2017                  
      36,107       72,212 (4)   $ 16.705       4/01/2018                  
      0       174,095 (5)   $ 6.335       4/01/2019                  
Robert W. Baker
    15,334       0     $ 49.468       8/01/2010       24,612 (6)   $ 241,936  
      55,000       0     $ 62.975       1/29/2011       24,227 (7)   $ 238,151  
      6,375       0     $ 62.975       1/29/2011       34,553 (8)   $ 339,656  
      40,000       0     $ 46.275       8/13/2011       15,038 (9)   $ 147,824  
      140,000       0     $ 7.090       4/01/2014                  
      121,185       0     $ 10.685       4/01/2015                  
      55,890       0     $ 12.155       4/03/2016                  
      70,741       35,371 (3)   $ 14.580       4/02/2017                  
      36,107       72,212 (4)   $ 16.705       4/01/2018                  
      0       174,095 (5)   $ 6.335       4/01/2019                  
 


61


Table of Contents

(1) The average between the high and low selling prices at which our common stock traded on the grant date is used as the exercise price (or strike price) for stock options. No cash is realized until the shares received upon exercise of an option are sold.
 
(2) The values represented in this column have been calculated by multiplying $9.83, the closing price of our common stock on December 31, 2009 by the number of shares of stock.
 
(3) These are stock options that were granted as part of the 2007 annual grant of long-term incentive awards and time vest in three equal annual installments beginning one year from the date of grant, with the remaining vesting date on April 2, 2010.
 
(4) These are stock options that were granted as part of the 2008 annual grant of long-term incentive awards and time vest in three equal annual installments beginning one year from the date of grant, with the remaining vesting dates on April 1, 2010 and April 1, 2011.
 
(5) These are stock options that were granted as part of the 2009 annual grant of long-term incentive awards and time vest in three equal annual installments beginning one year from the date of grant, with vesting dates on April 1, 2010, April 1, 2011 and April 1, 2012.
 
(6) These are shares of restricted stock that were granted as part of the 2007 annual grant of long-term incentive awards and time vest in three equal annual installments beginning one year from the date of grant, with the remaining vesting date on April 2, 2010.
 
(7) These are shares of restricted stock that were granted as part of the 2008 annual grant of long-term incentive awards and time vest in three equal annual installments beginning one year from the date of grant, with the remaining vesting dates on April 1, 2010 and April 1, 2011.
 
(8) These are shares of restricted stock that were granted as part of the 2009 annual grant of long-term incentive awards and time vest in three equal annual installments beginning one year from the date of grant, with vesting dates on April 1, 2010, April 1, 2011 and April 1, 2012.
 
(9) These are shares of restricted stock that the Compensation Committee awarded as part of the 2008 performance bonus in lieu of cash and cliff-vest three years from the date of grant, with the vesting date on April 1, 2012.


62


Table of Contents

 
Option Exercises and Stock Vested Table
 
The following table sets forth information concerning stock option exercises and vesting of restricted stock during 2009 for each of the named executive officers. In satisfaction of applicable SEC regulations, the number of securities for which stock options were exercised (if any) and the aggregate dollar value realized upon the exercise of such stock options is reflected in this table. The number of shares of restricted stock that have vested and the aggregate dollar value realized upon the vesting of such restricted stock is also reflected. None of the named executive officers exercised stock options during 2009.
 
Option Exercises and Stock Vested
During Fiscal Year 2009
 
                                 
    Option Awards   Stock Awards
    Number of Shares
  Value Realized
  Number of Shares
  Value Realized
    Acquired on Exercise
  on Exercise
  Acquired on Vesting
  on Vesting
Name
  (#)   ($)   (#)   ($) (1)
 
Douglas L. Foshee
    0     $ 0       155,038     $ 1,031,237  
John R. Sult
    0     $ 0       16,546     $ 109,661  
D. Mark Leland
    0     $ 0       52,425     $ 349,327  
Brent J. Smolik
    0     $ 0       30,906     $ 203,964  
James C. Yardley
    0     $ 0       43,360     $ 299,084  
Robert W. Baker
    0     $ 0       45,941     $ 306,443  
 
 
(1) The values represented in this column for restricted stock have been calculated by multiplying the per share fair market value of the underlying shares on the vesting date by the number of shares of restricted stock that vested.


63


Table of Contents

 
Pension Benefits Table
 
The following table sets forth information with respect to the pension benefits of each of the named executive officers. El Paso sponsors a qualified Pension Plan and supplemental benefits plans in which the named executive officers participate. In satisfaction of applicable SEC regulations, this table provides the number of years of service credited to the named executive officers, the actuarial present value of the named executive officer’s accumulated benefits at the earliest unreduced retirement age and the dollar amount of benefits paid, if any, to a named executive officer under each of the plans during 2009. No pension benefits were paid to the named executive officers during the year.
 
Pension Benefits
 
                             
        Number of Years
  Present Value of
  Payments During
        Credited Service
  Accumulated Benefit
  Last Fiscal Year
Name
  Plan Name   (#) (1)   ($) (2)   ($)
 
Douglas L. Foshee
  Pension Plan     6     $ 82,796     $ 0  
    Supplemental Benefits Plan     1     $ 69,213     $ 0  
    2005 Supplemental Benefits Plan     5     $ 580,395     $ 0  
John R. Sult
  Pension Plan     4     $ 53,416     $ 0  
    Supplemental Benefits Plans     0     $ 0     $ 0  
    2005 Supplemental Benefits Plan     4     $ 71,352     $ 0  
D. Mark Leland
  Pension Plan     24     $ 258,651     $ 0  
    Supplemental Benefits Plan     19     $ 270,628     $ 0  
    2005 Supplemental Benefits Plan     5     $ 0     $ 0  
Brent J. Smolik
  Pension Plan     3     $ 39,305     $ 0  
    Supplemental Benefits Plan     0     $ 0     $ 0  
    2005 Supplemental Benefits Plan     3     $ 102,411     $ 0  
James C. Yardley
  Pension Plan     32     $ 1,098,204     $ 0  
    Supplemental Benefits Plan     27     $ 1,463,401     $ 0  
    2005 Supplemental Benefits Plan     5     $ 0     $ 0  
Robert W. Baker
  Pension Plan     13     $ 206,581     $ 0  
    Supplemental Benefits Plan     8     $ 129,107     $ 0  
    2005 Supplemental Benefits Plan     5     $ 192,875     $ 0  
 
 
(1) Credited service shown for Mr. Leland was 16 years as of December 31, 2001 for his Minimum Benefit (as described below), and for Mr. Yardley was 27 years as of December 31, 2004 for his Sonat Transition Benefit (as described below). Credited service shown for Mr. Baker reflects years of participation since January 1, 1997, when he became eligible to participate in these plans.
 
(2) The present value of the named executive officers’ accumulated pension benefits in this column reflects a 5.61 percent discount rate and December 31, 2009 measurement date. The calculations reflect an age 65 commencement date except for Messrs. Leland and Yardley whose calculations reflect their earliest unreduced retirement age. Mr. Leland has a Minimum Benefit (as described below) and will have 30 years of credited service prior to age 60, and therefore would be eligible for an unreduced early retirement benefit at age 60. Mr. Yardley has a Sonat Transition Benefit (as described below) and would be eligible for an unreduced early retirement benefit at age 62.
 
The following is a description of material factors necessary to understand the information disclosed above in the Pension Benefits table for each of the named executive officers. Effective January 1, 1997, we amended our qualified Pension Plan to provide pension benefits under a cash balance plan formula that defines participants’ accrued benefits in terms of a notional cash account balance. Eligible employees become participants in the Pension Plan immediately upon employment and are fully vested in their benefits upon the earliest of the completion of three years of service or attainment of age 65. At the end of each calendar quarter, participant cash account balances are increased by an interest credit based on the 5-Year U.S. Treasury constant maturity yield, subject to a minimum


64


Table of Contents

interest credit of 4 percent per year, plus a pay credit equal to a percentage of salary and bonus. The pay credit percentage is based on the sum of age plus service at the end of the prior calendar year according to the following schedule:
 
         
Age Plus Service
  Pay Credit Percentage
 
Less than 35
    4 %
35 to 49
    5 %
50 to 64
    6 %
65 and over
    7 %
 
Prior to adopting a cash balance plan on January 1, 1997, we provided pension benefits under a plan that defined monthly benefits based on final average earnings and years of service (the “Prior Plan”). The Pension Plan provides for a special transition benefit for employees who were participants in the Prior Plan on December 31, 1996. These employees continued to accrue benefits under the old plan formula (the “Minimum Benefit”) through December 31, 2001, or termination, if earlier. The Minimum Benefit is based on years of credited service and the average of the highest five consecutive years of compensation out of the last ten years, subject to maximum limitations as defined under the Pension Plan. The initial cash account balance was equal to the present value of the Prior Plan benefit as of December 31, 1996. Upon separation of employment, these participants (including Mr. Leland) will receive the greater of the Minimum Benefit or a benefit based on their cash account balance.
 
The Pension Plan also provides for a special transition benefit for former Sonat Inc. employees who were participants in the Sonat Retirement Plan on December 31, 1999, and who became active participants in the Pension Plan on January 1, 2000. These participants continued to accrue benefits under the Sonat retirement plan formula (the “Sonat Transition Benefit”) through December 31, 2004, or termination, if earlier. The Sonat Transition Benefit is based on years of credited service and the average of the highest five consecutive years of compensation out of the last ten years, subject to maximum limitations as defined under the Pension Plan. The initial cash account balance was equal to the present value of the Sonat Retirement Plan benefit as of December 31, 1999. Upon separation of employment, these participants (including Mr. Yardley) will receive the greater of the Sonat Transition Benefit or a benefit based on their cash account balance. Additionally, active participants in the Pension Plan on January 1, 2000, who had a Sonat cash account benefit on December 31, 1999, will receive this cash balance benefit upon their termination of employment.
 
Amounts in the Pension Benefits table reported as the actuarial present value of each named executive officer’s accumulated benefits are calculated as of December 31, 2009 using the same assumptions that are used for our pension liability disclosure in Note 14 to our financial statements included in our 2009 Annual Report on Form 10-K filed with the SEC on March 1, 2010. However, the amounts in the Pension Benefits table assume no pre-retirement decrements (i.e., that the named executive officers work and survive to retirement age) and reflect an age 65 commencement date for Messrs. Foshee, Sult, Smolik and Baker, an age 60 commencement date for Mr. Leland, and an age 62 commencement date for Mr. Yardley.
 
Under our qualified Pension Plan and applicable Code provisions, compensation in excess of $245,000 cannot be taken into account and the maximum payable benefit in 2009 was $195,000. For 2009, any excess benefits otherwise accruing under our Pension Plan were payable under the 2005 Supplemental Benefits Plan which was adopted effective January 1, 2005 in connection with the implementation of Section 409A of the Code. The 2005 Supplemental Benefits Plan replaced our prior Supplemental Benefits Plan for benefits accruing after 2004. The benefits that accrue under the 2005 Supplemental Benefits Plan are supplemental benefits for officers and key management employees (including all of the named executive officers) who could not be paid under our Pension Plan and/or Retirement Savings Plan due to certain Code limitations. The supplemental pension benefits under the 2005 Supplemental Benefits Plan, when combined with the supplemental pension benefits the executive is entitled to receive under our prior Supplemental Benefits Plan and the amounts a participant is entitled to receive under the qualified Pension Plan, will be the actuarial equivalent of the Pension Plan’s benefit formula had the limitations of the Code not been applied. The named executive officers will receive their supplemental pension benefits upon termination of employment in the form of a lump sum payment, except that supplemental pension benefit payments under the 2005 Supplemental Benefits Plan to certain “specified employees” (including all of the named executive officers), as determined pursuant to Section 409A of the Code, will be delayed until six months after their


65


Table of Contents

termination of employment. The supplemental Retirement Savings Plan benefits under the plan include a credit equal to the amount of the matching contribution to the Retirement Savings Plan that cannot be made due to Code limitations. See the Nonqualified Deferred Compensation table below for additional information regarding the named executive officers’ supplemental Retirement Savings Plan benefits. The management committee of the plans designates who may participate and also administers the plan. In the event of a change in control of El Paso or in the event of a participant’s death, supplemental pension benefits become fully vested and nonforfeitable. A change in control under the plans has the same meaning as under the 2005 Omnibus Incentive Compensation Plan. See the summary of the 2005 Omnibus Incentive Compensation Plan beginning on page 78 of this proxy statement.
 
Named Executive Officers Eligible for Early Retirement.  Since Mr. Yardley is age 58, he is eligible for early retirement benefits payable from the Pension Plan and the Supplemental Benefits Plan. If Mr. Yardley had terminated employment on December 31, 2009 and commenced his benefits as of January 1, 2010, his present value of accumulated benefits would have been $1,279,403 for the Pension Plan and $1,707,588 for the Supplemental Benefits Plan (based on the same assumptions used above). Note that these amounts exceed those shown in the Pension Benefits table for Mr. Yardley because the value of the early retirement benefits is greater at his current age.
 
Nonqualified Defined Contribution and
Other Nonqualified Deferred Compensation Plans
 
The following table sets forth information with respect to nonqualified defined contribution plans for each of the named executive officers as of December 31, 2009. We sponsor a supplemental benefits plan that provides for the crediting of matching contributions that could not be paid under the Retirement Savings Plan due to Code limitations. We do not sponsor a traditional nonqualified deferred compensation plan that provides for deferrals of base salary and bonuses for executive officers. None of the named executive officers had withdrawals or distributions of supplemental Retirement Savings Plan benefits during 2009.
 
Nonqualified Deferred Compensation
as of December 31, 2009
 
                         
    Registrant
  Aggregate
  Aggregate
    Contributions in
  Earnings in
  Balance at Last
    Last Fiscal Year
  Last Fiscal Year
  Fiscal Year End
Name
  ($) (1)   ($) (2)   ($) (3)
 
Douglas L. Foshee
  $ 62,920     $ 32,235     $ 587,106  
John R. Sult
  $ 15,245     $ 3,036     $ 64,714  
D. Mark Leland
  $ 19,654     $ 9,651     $ 175,089  
Brent J. Smolik
  $ 22,231     $ 1,878     $ 53,037  
James C. Yardley
  $ 20,926     $ 8,611     $ 162,175  
Robert W. Baker
  $ 14,926     $ 9,465     $ 166,617  
 
 
(1) The amounts in this column are reported as compensation to the named executive officers in the Summary Compensation Table in the “All Other Compensation” column as supplemental company matching contributions for the Retirement Savings Plan which were accrued under the 2005 Supplemental Benefits Plan. See footnote 5 to the Summary Compensation Table on page 56 of this proxy statement.
 
(2) Of the amounts in this column, $8,873 for Mr. Foshee, $836 for Mr. Sult, $2,658 for Mr. Leland, $517 for Mr. Smolik, $2,369 for Mr. Yardley and $2,608 for Mr. Baker are reported as compensation in the Summary Compensation Table in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column. See footnote 4 to the Summary Compensation Table on page 56 of this proxy statement.
 
(3) Of the totals in this column, $498,232 for Mr. Foshee, $15,245 for Mr. Sult, $134,474 for Mr. Leland, $49,752 for Mr. Smolik, $110,099 for Mr. Yardley and $138,586 for Mr. Baker was reported as compensation in the Summary Compensation Table included in our proxy statement for this year and prior years.
 
The following is a description of material factors necessary to understand the information disclosed above in the Nonqualified Deferred Compensation table for each of the named executive officers. The registrant’s


66


Table of Contents

contributions reflected in this table include supplemental company matching contributions for the Retirement Savings Plan which are accrued under our supplemental benefits plans. The supplemental Retirement Savings Plan benefits are excess benefits in the form of company matching contributions that cannot be made under the Retirement Savings Plan due to Code limitations. During 2009, these excess benefits were credited to each executive’s supplemental Retirement Savings Plan account balance under the 2005 Supplemental Benefits Plan. The plan administrator determines the rate of interest, if any, periodically attributable to the balance of each supplemental Retirement Savings Plan account. For 2009, interest was credited to the balance of each executive’s supplemental Retirement Savings Plan account balance on a monthly basis at a rate equal to the average of Moody’s Seasoned Aaa Corporate Bond Rate and Moody’s Seasoned Baa Corporate Bond Rate, as published by Moody’s Investors Services, Inc. The balance of each executive’s supplemental Retirement Savings Plan account will be paid upon termination of employment in a lump sum payment except that benefit payments under the 2005 Supplemental Benefits Plan to certain “specified employees” (including all of the named executive officers), as determined pursuant to Section 409A of the Code, will be delayed until six months after termination. See the description of our supplemental benefits plans beginning on page 65 of this proxy statement for further information.
 
Potential Payments upon Termination or Change in Control
 
The following tables reflect the incremental value of compensation and benefits each named executive officer would receive in the event of an involuntary termination without cause, retirement, death, disability, termination with cause and a change in control of El Paso relative to a voluntary termination of employment by the executive. All amounts are based upon amounts payable in the event the termination event occurs as of December 31, 2009, and thus include amounts earned through such time. All amounts are estimates of the amounts which would be paid to the executive officers upon their termination. The actual amounts to be paid can only be determined at the time of such executive officer’s termination. The Compensation Committee reviews this information each year as part of its overall analysis and review of executive compensation.
 
Potential Payments upon Termination or Change in Control
Assuming Termination Event Occurs
on December 31, 2009
 
Payments made upon Voluntary Termination
 
The following table reflects the total value of payments the named executive officers would receive in the event of a voluntary termination. In the event a named executive officer voluntarily terminates his or her employment, the executive officer is entitled to his or her vested benefits under our Pension Plan and Retirement Savings Plan (including supplemental benefits). The named executive officer will make an election to commence the qualified component of his or her pension benefit. Supplemental pension and supplemental Retirement Savings Plan benefits are paid in lump sum. Under our equity compensation plans, unvested restricted stock and stock options are


67


Table of Contents

forfeited in the event of a voluntary termination. Unless stock options expire by their own terms, vested stock options may be exercised for a period of three months.
 
Payments made upon Voluntary Termination
 
                                                         
            Retirement
  Supplemental
           
        Supplemental
  Savings
  Retirement
  Continued
       
    Pension
  Pension
  Plan
  Savings Plan
  Medical
  Equity
   
    Benefits
  Benefits
  Benefits
  Benefits
  Benefits
  Awards
  Total
Name
  ($) (1) (2)   ($) (2)   ($)   ($)   ($) (3)   ($) (4)   ($)
 
Douglas L. Foshee             
  $ 89,084     $ 698,947     $ 177,458     $ 587,106     $ 0     $ 3,512,500     $ 5,065,095  
John R. Sult
  $ 57,757     $ 77,151     $ 128,827     $ 64,714     $ 0     $ 0     $ 328,449  
D. Mark Leland
  $ 235,754     $ 322,113     $ 392,822     $ 175,089     $ 0     $ 145,563     $ 1,271,341  
Brent J. Smolik
  $ 42,628     $ 111,067     $ 142,419     $ 53,037     $ 0     $ 0     $ 349,151  
James C. Yardley
  $ 1,279,403     $ 1,707,588     $ 844,515     $ 162,175     $ 2,970     $ 581,606     $ 4,578,257  
Robert W. Baker
  $ 218,040     $ 339,843     $ 742,381     $ 166,617     $ 0     $ 383,600     $ 1,850,481  
                                                         
Total
                                                  $ 13,442,774  
                                                         
 
 
(1) The amounts in this column reflect a lump sum payment.
 
(2) The amounts in these columns may differ from the amounts in the Pension Benefits table due to several factors, including the use of different assumptions and the timing of commencement of payment.
 
(3) For Mr. Yardley, a voluntary termination would be treated as a qualified retirement. Therefore, for Mr. Yardley, this column shows the value of continued medical, dental and vision benefits for a period of three months at no cost.
 
(4) Unvested restricted stock and stock options are forfeited in the event of a voluntary termination. This column shows the value of vested stock options held by the named executive officer calculated using the difference between $9.83, the closing price of our common stock on December 31, 2009 and the applicable exercise price for each stock option. Mr. Yardley is age 58 and eligible for early retirement. Therefore, for Mr. Yardley, this column also shows the value of shares of restricted stock that vest on a pro-rata basis in the event of retirement calculated using $9.83, the closing price of our common stock on December 31, 2009.
 
Incremental Payments made upon Involuntary Termination without Cause
 
The following table reflects the incremental value of enhanced benefits the named executive officers would receive in the event of an involuntary termination without cause above the compensation and benefits the executive officer is entitled to as a result of a voluntary termination, which include a severance payment, continued medical benefits and the value of restricted stock that vests on a pro-rata basis. El Paso sponsors a Severance Pay Plan that provides benefits to the named executive officers following an involuntary termination without cause. The Severance Pay Plan is a broad-based employee plan providing severance benefits following a “qualifying termination” for all of our salaried employees and employees of certain of our subsidiaries, including the named executive officers. A “qualifying termination” is (1) a termination upon the elimination of the participant’s position, or (2) a termination as a result of a reduction in force. The amount of severance pay is based on the individual’s years of service and his or her compensation level. The maximum amount of severance pay is 1X the participant’s annual base salary. Severance pay is paid in lump sum as soon as administratively practicable following termination. Participants are also entitled to receive continued medical and dental coverage for a period of three months following termination. Under our equity compensation plans, restricted stock vests on a pro-rata basis


68


Table of Contents

and unvested stock options are forfeited in the event of an involuntary termination without cause. Unless stock options expire by their own terms, vested stock options may be exercised for a period of one year.
 
Incremental Payments made upon Involuntary Termination without Cause
 
                                 
    El Paso Corporation
       
    Severance Pay Plan        
    Severance
  Continued
  Equity
   
    Payment
  Medical Benefits
  Awards
  Total
Name
  ($)   ($)   ($) (1)   ($)
 
Douglas L. Foshee
  $ 1,050,000     $ 2,928     $ 1,374,313     $ 2,427,241  
John R. Sult
  $ 408,012     $ 2,973     $ 157,113     $ 568,098  
D. Mark Leland
  $ 519,756     $ 2,973     $ 452,062     $ 974,791  
Brent J. Smolik
  $ 566,520     $ 2,973     $ 371,584     $ 941,077  
James C. Yardley
  $ 515,016     $ 0 (2)   $ 0     $ 515,016  
Robert W. Baker
  $ 456,696     $ 2,928     $ 386,594     $ 846,218  
                                 
Total
                          $ 6,272,441  
                                 
 
 
(1) For Messrs. Foshee, Sult, Leland, Smolik and Baker, this column shows the value of shares of restricted stock that vest on a pro-rata basis in the event of an involuntary termination without cause calculated using $9.83, the closing price of our common stock on December 31, 2009. The value of Mr. Yardley’s shares of restricted stock that vest on a pro-rata basis are included in the voluntary termination table. Unvested stock options are forfeited in the event of an involuntary termination without cause.
 
(2) The value of Mr. Yardley’s continued medical benefits is included in the voluntary termination table.
 
Incremental Payments made upon Retirement
 
None of the named executive officers is eligible for retirement except for Mr. Yardley. Participants in our Pension Plan are eligible for early retirement if they are at least age 55 and have ten years of service. Mr. Yardley is age 58 and eligible for early retirement under our Pension Plan. For Mr. Yardley, the value of the early retirement pension benefits he would have received in the event he retired as of December 31, 2009 is reflected in the voluntary termination table above. The commencement of pension benefits before age 65 may result in a participant’s monthly qualified pension benefits being reduced to cover the cost of paying the benefits over a longer period of time. Retirement eligible employees are also entitled to receive continued medical and dental coverage for a period of three months following termination at no cost. In addition, under our equity compensation plans, restricted stock is vested on a pro-rata basis and unvested stock options are forfeited in the event of retirement. Unless stock options expire by their own terms, vested stock options may be exercised for a period of three years following retirement. See page 65 of this proxy statement for a description of our Pension Plan.
 
Incremental Payments made upon Death
 
The following table reflects the incremental value of enhanced benefits the named executive officers would receive in the event of death above the compensation and benefits the executive officers are entitled to as a result of a voluntary termination, which include survivor benefit coverage and the value of unvested stock options and restricted stock that become fully vested. In the event of a named executive officer’s death, our Senior Executive Survivor Benefits Plan provides our named executive officers with survivor benefit coverage in lieu of the coverage provided generally under our group life insurance plan. The amount of benefits provided is 2.5 times the executive officer’s annual salary. Benefits are payable over 30 months beginning within 31 days after the executive’s death, except that the plan administrator may, in its discretion, accelerate payments. Under our equity compensation plans, outstanding stock options become fully vested and exercisable and the restriction periods applicable to shares of


69


Table of Contents

restricted stock immediately lapse in the event of death. Unless stock options expire by their own terms, the executive officer’s beneficiary would have one year to exercise all vested stock options.
 
Incremental Payments made upon Death
 
                                 
    Survivor
    Equity Awards        
    Benefit
    Stock
    Restricted
       
    Coverage
    Options
    Stock
    Total
 
Name
  ($)     ($) (1)     ($) (2)     ($)  
 
Douglas L. Foshee
  $ 2,625,000     $ 2,117,446     $ 3,807,808     $ 8,550,254  
John R. Sult
  $ 1,021,000     $ 197,142     $ 434,486     $ 1,652,628  
D. Mark Leland
  $ 1,300,000     $ 608,462     $ 1,174,803     $ 3,083,265  
Brent J. Smolik
  $ 1,417,000     $ 608,462     $ 1,032,219     $ 3,057,681  
James C. Yardley(3)
  $ 1,288,000     $ 608,462     $ 784,778     $ 2,681,240  
Robert W. Baker
  $ 1,142,000     $ 608,462     $ 967,567     $ 2,718,029  
                                 
Total
                          $ 21,743,097  
                                 
 
 
(1) This column shows the value of stock options that become fully vested and exercisable in the event of the death of a named executive officer calculated using $9.83, the closing price of our common stock on December 31, 2009.
 
(2) This column shows the value of shares of restricted stock that become fully vested in the event of the death of a named executive officer calculated using $9.83, the closing price of our common stock on December 31, 2009.
 
(3) The Pension Benefits and Supplemental Pension Benefits payable to Mr. Yardley’s beneficiary in the event of his death would be less than the amounts payable to him upon a Voluntary Termination. In the event of Mr. Yardley’s death, his beneficiary would receive $580,604 in Pension Benefits and $641,337 in Supplemental Pension Benefits in lieu of the Pension Benefits and Supplemental Benefits amounts disclosed under the Payments made upon Voluntary Termination chart on page 68 of this proxy statement.
 
Incremental Payments made upon Disability
 
The following table reflects the incremental value of enhanced benefits the named executive officers would receive in the event of permanent disability above the compensation and benefits the executive officers are entitled to as a result of a voluntary termination, which include disability benefits, the value of unvested stock options that become fully vested and the value of restricted stock that vests on a pro-rata basis. The named executive officers may elect to receive the disability benefits that are generally available to all eligible employees under our subsidized health and welfare benefits plan. In the event of a named executive officer’s permanent disability, disability income would be payable on a monthly basis as long as the executive officer qualifies as permanently disabled. For purposes of this table, we have assumed the executive officer is disabled for a period of one year. The restrictions on outstanding shares of restricted stock lapse on a prorated basis and all stock options become fully vested and


70


Table of Contents

exercisable in the event an executive officer becomes permanently disabled. Unless stock options expire by their own terms, vested stock options may be exercised for a period of three years following permanent disability.
 
Incremental Payments made upon Disability
 
                                 
          Equity Awards        
    Disability
    Stock
    Restricted
       
    Income
    Options
    Stock
    Total
 
Name
  ($) (1)     ($) (2)     ($) (3)     ($)  
 
Douglas L. Foshee
  $ 300,000     $ 2,117,446     $ 1,374,313     $ 3,791,759  
John R. Sult
  $ 204,012     $ 197,142     $ 157,113     $ 558,267  
D. Mark Leland
  $ 259,878     $ 608,462     $ 452,062     $ 1,320,402  
Brent J. Smolik
  $ 300,000     $ 608,462     $ 371,584     $ 1,280,046  
James C. Yardley
  $ 257,508     $ 608,462     $ 0     $ 865,970  
Robert W. Baker
  $ 228,348     $ 608,462     $ 386,594     $ 1,223,404  
                                 
Total
                          $ 9,039,848  
                                 
 
 
(1) In the event of a named executive officer’s permanent disability, disability income would be payable on a monthly basis as long as the executive officer qualifies as permanently disabled. The amounts in this column assume disability income is paid to the executive officer for a period of one year.
 
(2) This column shows the value of stock options that become fully vested and exercisable in the event of the disability of a named executive officer calculated using $9.83, the closing price of our common stock on December 31, 2009.
 
(3) For Messrs. Foshee, Sult, Leland, Smolik and Baker, this column shows the value of shares of restricted stock that vest on a pro-rata basis in the event of disability calculated using $9.83, the closing price of our common stock on December 31, 2009. The value of Mr. Yardley’s shares of restricted stock that vest on a pro-rata basis are included in the voluntary termination table.
 
Incremental Payments made upon Termination with Cause
 
In the event a named executive officer is terminated with cause, the named executive officer would not receive any benefits above the compensation and benefits he or she is entitled to as a result of a voluntary termination. In the event a named executive officer is terminated with cause, the executive officer is entitled to his or her vested benefits under our Pension Plan and Retirement Savings Plan (including supplemental benefits). The value of these benefits is shown in the voluntary termination table above. Supplemental pension and supplemental Retirement Savings Plan benefits are paid in lump sum. Under our equity compensation plans, unvested restricted stock and vested but unexercised stock options are forfeited in the event of a termination with cause.
 
Incremental Payments made upon a Change in Control of El Paso
 
The following table reflects the incremental value of enhanced benefits the named executive officers would receive in the event of termination of employment following a change in control of El Paso above the compensation and benefits the executive officers are entitled to as a result of a voluntary termination, which include benefits under our 2004 Key Executive Severance Protection Plan and the value of stock options and restricted stock that become fully vested. In March 2004, El Paso adopted the 2004 Key Executive Severance Protection Plan to more closely align our executive severance protection plan with current market arrangements. This plan provides severance benefits following a termination of employment within two years of a change in control of El Paso for our executives and certain executives of our subsidiaries designated by our Board or the Compensation Committee, including all of the named executive officers, and supersedes benefits payable under our Severance Pay Plan (see “Incremental Payments made upon Involuntary Termination without Cause” above). The benefits of the plan include: (1) a cash severance payment in an amount equal to 3 times the annual base salary and target bonus for Mr. Foshee, and 2 times the annual base salary and target bonus for executive vice presidents and senior vice presidents, including Messrs. Sult, Leland, Smolik, Yardley and Baker; (2) a pro-rated portion of the executive’s


71


Table of Contents

target bonus for the year in which the termination of employment occurs; (3) continuation of life and health insurance following termination for a period of 36 months for Mr. Foshee and 24 months for executive vice presidents and senior vice presidents, including Messrs. Sult, Leland, Smolik, Yardley and Baker; (4) a gross-up payment for any federal excise tax imposed on an executive in connection with any payment or distribution made by us or any of our affiliates under the plan or otherwise; provided that in the event a reduction in payments in respect of the executive of 10 percent or less would cause no excise tax to be payable in respect of that executive, then the executive will not be entitled to a gross-up payment and payments to the executive shall be reduced to the extent necessary so that the payments shall not be subject to the excise tax; and (5) payment of legal fees and expenses incurred by the executive to enforce any rights or benefits under the plan. Supplemental pension benefits also become fully vested and payable to the executive in the event of a termination of employment following a change in control of El Paso. Under our equity compensation plans, the restriction periods applicable to shares of restricted stock immediately lapse and all outstanding stock options become fully vested and exercisable.
 
Incremental Payments made upon a Change in Control of El Paso
 
                                                         
    2004 Key Executive
                         
    Severance Protection Plan                          
                Continued
    Equity Awards              
    Severance
    Bonus
    Medical
    Stock
    Restricted
             
    Payment
    Payment
    Benefits
    Options
    Stock
    Total
       
Name
  ($)     ($)     ($)     ($) (1)     ($) (2)     ($) (3)        
 
Douglas L. Foshee
  $ 6,930,000     $ 1,260,000     $ 35,397     $ 2,117,446     $ 3,807,808     $ 14,150,651          
John R. Sult
  $ 1,224,036     $ 204,006     $ 23,958     $ 197,142     $ 434,486     $ 2,083,628          
D. Mark Leland
  $ 1,663,219     $ 311,854     $ 23,958     $ 608,462     $ 1,174,803     $ 3,782,296          
Brent J. Smolik
  $ 2,152,776     $ 509,868     $ 23,958     $ 608,462     $ 1,032,219     $ 4,327,283