def14a
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:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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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):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Fee paid previously with preliminary materials. |
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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
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Dear El Paso Stockholder:
We cordially invite you to attend our 2011 Annual Meeting of
Stockholders. The Annual Meeting will be held on Tuesday,
May 17, 2011, beginning at 9:00 a.m., CDT at the
Hilton Americas-Houston, 1600 Lamar Street, Houston, Texas 77010.
At this years Annual Meeting, you will be asked to elect
all 12 members of our Board of Directors, each for a term of one
year, to vote on an advisory proposal on the compensation of our
named executive officers (say on pay), to vote on an advisory
proposal on the frequency of holding subsequent say on pay
votes, and to ratify the appointment of Ernst & Young
LLP as our independent registered public accounting firm for
2011.
We are pleased to again be using the U.S. Securities and
Exchange Commission rule allowing companies to furnish proxy
materials to stockholders over the Internet. We believe that
this process expedites our stockholders receipt of proxy
materials, lowers the costs of distribution and reduces the
environmental impact of printing and distributing proxy
materials.
In accordance with this rule, 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 2010 Annual Report on
Form 10-K
and our 2010 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 2010 Annual Report on
Form 10-K
and our 2010 Summary Report. All stockholders who do not receive
a Notice will receive a paper copy of the proxy materials by
mail.
Your vote is very important. Whether or not you plan to attend
the Annual Meeting, we urge you to read the proxy statement and
vote your proxy as soon as you can.
Sincerely,
Douglas L. Foshee
Chairman, President and Chief Executive Officer
Houston, Texas
April 5, 2011
EL PASO
CORPORATION
1001 Louisiana Street
Houston, Texas 77002
NOTICE OF 2011 ANNUAL MEETING
OF STOCKHOLDERS
May 17, 2011
On May 17, 2011, El Paso Corporation will hold its
2011 Annual Meeting of Stockholders at the Hilton
Americas-Houston, 1600 Lamar Street, Houston, Texas 77010. The
Annual Meeting will begin at 9:00 a.m., CDT.
Only El Paso stockholders who owned shares of our common
stock at the close of business on March 22, 2011, 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 the following items of business will be
considered:
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1.
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The election of 12 directors, each to hold office for a
term of one year;
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2.
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An advisory vote on executive compensation;
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3.
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An advisory vote on the frequency of holding an advisory vote on
executive compensation; and
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4.
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Ratification of the appointment of Ernst & Young LLP
as our independent registered public accounting firm for the
fiscal year ending December 31, 2011.
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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
Marguerite N. Woung-Chapman
Corporate Secretary
Houston, Texas
April 5, 2011
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE 2011 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 17,
2011
Our proxy statement for the 2011 Annual Meeting, our Annual
Report on
Form 10-K
for the fiscal year ended
December 31, 2010 and our 2010 Summary Report are available
at www.proxyvote.com.
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., CDT, 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 Hilton Americas-Houston and at other public
parking garages around the Hilton Americas-Houston.
MEETING
LOCATION AND DIRECTIONS
Hilton Americas-Houston
1600 Lamar Street
Houston, TX 77010
From Bush
Intercontinental Airport (IAH)
Exit Bush Intercontinental Airport and follow the directional
signs to the I-45/Beltway 8 exit. Proceed onto Beltway
8 West, and then exit onto I-45 South. Follow I-45 South to
downtown. Exit McKinney Street (on the left) and follow McKinney
Street to LaBranch Street. Turn right on LaBranch Street. Go
down two blocks to Dallas Street and turn left on Dallas Street.
Go two blocks and the hotel will be on the right.
From
William P. Hobby Airport (HOU)
Exit Hobby Airport and follow the directional signs to I-45
North. Take I-45 North to the Downtown/Scott Street split. Exit
onto Pease Street. Continue on Pease Street to Austin Street and
turn right. Then turn right on Dallas Street and continue on
Dallas for three blocks. The hotel will be on the right.
From
Highway 59 South
Take Highway 59 North into Houston. Take the Polk Street
exit and turn left. Turn right on Avenida de las Americas. Turn
left on Lamar Street. The hotel will be on the left.
From I-10
East
Take
I-10 West,
exit US-59
South via Exit 770A on the left towards downtown. Take the
Hamilton Street exit (Downtown Destinations) and continue
straight on North Hamilton Street. Turn right on Capitol. Take
the first left onto Avenida de las Americas. Turn right on Lamar
Street. The hotel will be on the left.
From
I-10 West
Take
I-10 East
and merge onto
I-45 South
via Exit 768B on the left towards Galveston. Take the
McKinney Street exit (47C) on the left. Continue on McKinney
Street. Turn right on LaBranch Street. Turn left on Dallas
Street. Take the first left on Crawford Street. The hotel will
be on the right.
EL PASO
CORPORATION
PROXY STATEMENT
TABLE
OF CONTENTS
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EL PASO
CORPORATION
1001 Louisiana Street
Houston, Texas 77002
PROXY
STATEMENT
2011 ANNUAL MEETING OF STOCKHOLDERS May 17,
2011
Our Board of Directors is furnishing you with this proxy
statement to solicit proxies on its behalf to be voted at the
2011 Annual Meeting of Stockholders of El Paso Corporation.
The Annual Meeting will be held at the Hilton Americas-Houston,
1600 Lamar Street, Houston, Texas 77010, on Tuesday,
May 17, 2011, at 9:00 a.m., CDT. 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 5, 2011, 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
Stockholders holding shares of El Pasos common stock,
par value $3.00 per share, as of the close of business on the
record date, March 22, 2011, 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.
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2.
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What is
the record date and what does it mean?
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The record date for the Annual Meeting is March 22, 2011.
The record date was established by the Board of Directors as
required by our By-laws and Delaware law. Owners of record of
El Pasos common stock at the close of business on the
record date are entitled to:
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Receive notice of the Annual Meeting; and
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Vote at the Annual Meeting, and any adjournments or
postponements of the Annual Meeting.
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3.
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How many
shares of El Paso common stock were outstanding on the
record date?
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There were 765,481,274 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.
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4.
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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?
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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 stockholders election to receive proxy
materials by mail or
e-mail will
remain in effect until the stockholder terminates the election.
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5.
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Why
didnt I receive a Notice in the mail regarding the
Internet availability of proxy materials?
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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 receive 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.
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6.
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Can I
vote my shares by filling out and returning the
Notice?
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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.
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7.
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How can I
access the proxy materials over the Internet?
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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.
You are voting on the following:
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the election of 12 directors;
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an advisory vote on executive compensation;
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an advisory vote on the frequency of holding an advisory vote on
executive compensation; and
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the ratification of the appointment of Ernst & Young
LLP as our independent registered public accounting firm for the
fiscal year ending December 31, 2011.
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9.
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How does
the Board recommend that I vote?
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The Board recommends that you vote:
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FOR each of the nominees for director;
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FOR the proposal regarding an advisory vote on executive
compensation;
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EVERY YEAR for the proposal regarding the frequency of
holding an advisory vote on executive compensation; and
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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, 2011.
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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. Unless you provide voting instructions to any
broker holding shares on your behalf, your broker may no longer
use discretionary authority to vote your shares on any of the
matters to be considered at the Annual Meeting other than the
ratification of the appointment of our independent registered
public accounting firm. 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.
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You may vote by any of the following methods:
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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.
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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.
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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.
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12.
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If I vote
by telephone or Internet and received a proxy card in the mail,
do I need to return my proxy card?
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No.
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13.
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Can I
change my vote?
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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:
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voting at a later time by telephone or Internet;
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writing our Corporate Secretary, Marguerite N. Woung-Chapman,
El Paso Corporation, P.O. Box 2511, Houston,
Texas
77252-2511; or
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giving notice of revocation to the Inspector of Election at the
Annual Meeting.
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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 entitys procedures.
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14.
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What
happens if I do not specify a choice for a proposal when
returning a proxy?
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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, on the advisory vote on executive compensation or on
the frequency of holding an advisory vote on executive
compensation. Without your voting instructions on these
proposals, a broker non-vote will occur, which means
your vote will not be counted.
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What
happens if other matters come up at the Annual
Meeting?
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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.
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16.
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Who will
count the votes?
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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.
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.
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18.
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Who can
attend the Annual Meeting?
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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 22, 2011 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 22, 2011, then you must bring a valid form of
government-issued personal identification (such as a
drivers 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 22, 2011, then you must bring:
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Valid government-issued personal identification (such as a
drivers license or passport); and
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Proof that you owned shares of El Paso common stock on
March 22, 2011.
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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 22, 2011; (2) a
brokerage account statement indicating that you owned
El Paso common stock on March 22, 2011; or
(3) the voting instruction form provided by your broker
indicating that you owned El Paso common stock on
March 22, 2011.
If you are a proxy holder for a stockholder of El Paso,
then you must bring:
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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 22, 2011; and
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Valid government-issued personal identification (such as a
drivers license or passport); and
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If the stockholder whose proxy you hold was not a record holder
of El Paso common stock on March 22, 2011, proof of
the stockholders ownership of shares of El Paso
common stock on March 22, 2011, 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 22, 2011.
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You may not use cameras, recording equipment or other electronic
devices during the Annual Meeting.
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19.
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How many
votes must each proposal receive to be approved?
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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 nominees
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election must exceed the number of votes cast
against such nominees election in order for
him or her to be elected to the Board of Directors. Abstentions
and broker non-votes do not count as votes cast for
or against the directors election and
therefore will have no effect on the outcome of such election.
See Corporate Governance Voting Standard to
Elect Directors on page 10 of this proxy statement
for additional information.
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With respect to the advisory vote on executive compensation, the
proposal must receive the affirmative vote of a majority of the
shares present in person or represented by proxy at the Annual
Meeting to be considered approved. Abstentions have the same
effect as a vote against the advisory resolution.
Broker non-votes will have no effect on the outcome of the
advisory vote. While the vote is advisory and non-binding in
nature, the Compensation Committee will take into account the
outcome of the vote when considering future executive
compensation matters.
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With respect to the advisory vote on the frequency of holding
future advisory votes on executive compensation, the frequency
receiving the greatest number of votes (every one, two or three
years) will be considered the frequency recommended by
stockholders. Broker non-votes and abstentions will have no
effect on the outcome of the frequency vote.
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With respect to the ratification of Ernst & Young LLP
as our independent registered public accounting firm for the
fiscal year ending December 31, 2011, the proposal must
receive the affirmative vote of a majority of the shares present
in person or represented by proxy at the Annual Meeting to be
considered approved. Abstentions will have the same effect as a
vote against the proposal.
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20.
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How are
votes counted?
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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.
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21.
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How can I
view the stockholder list?
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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 Pasos
offices at 1001 Louisiana Street, Houston, Texas 77002 during
ordinary business hours for a period of ten days before the
Annual Meeting.
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22.
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Who pays
for the proxy solicitation related to the Annual
Meeting?
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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.
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23.
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If I want
to submit a stockholder proposal for the 2012 Annual Meeting,
when is it due?
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If you want to submit a proposal for possible inclusion in next
years 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 7, 2011. 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 2012 Annual Meeting that is not included in
the 2012 Proxy Statement, the stockholders written notice
must be received not less than 90 days
5
nor more than 120 days prior to the first anniversary of
the 2011 Annual Meeting. Under this criterion, stockholders must
provide us with a notice of a matter to be brought before the
2012 Annual Meeting during the period from January 18, 2012
to February 17, 2012.
If the 2012 Annual Meeting is held more than 30 days before
or 60 days after May 17, 2012, for a stockholder
seeking to bring any matter before the 2012 Annual Meeting, the
stockholders written notice must be received not less than
90 days nor more than 120 days before the date of the
2012 Annual Meeting or by the tenth day after we publicly
announce the date of the 2012 Annual Meeting, if that would
result in a later deadline.
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How can I
obtain a copy of the Annual Report on
Form 10-K?
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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 directors commercial and charitable
relationships as well as any potential related party
transactions and determined that none of these relationships or
transactions affect the independence of the individual
directors. Thus, 11 of the 12 nominees for the El Paso
Board are independent. Further, our Audit, Compensation,
Governance & Nominating, Finance and Health,
Safety & Environmental Committees are composed
entirely of independent directors.
6
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 Directors has affirmatively determined
that Messrs. Hix (chairman of our Audit Committee), Goldman
and Shapiro are audit committee financial experts.
Board Leadership Structure. Douglas L. 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 companys short-term and long-term
strategies necessary for the challenging marketplace in which
the company competes. The Board reviews this leadership
structure each year to assess whether it remains the most
effective structure and whether any other changes are required
to maintain the highest standard of corporate governance and
accountability of the CEO to the Board.
In making this assessment this year, the Board believes that
El Paso has in place sound counter-balancing mechanisms to
ensure that the company maintains these standards. These
counter-balancing mechanisms include:
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A super-majority of independent directors on the Board.
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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 Ltd.
Mr. Talbert has been a strong and influential addition to
the Board and played an integral role in promoting and
facilitating the Boards execution of its responsibilities.
As detailed below in how the roles interact,
Mr. Talberts responsibilities as Lead Director and
advisory role to Mr. Foshee complement
Mr. Foshees role as Chairman/CEO while providing the
necessary checks and balances to hold both the Board and the
Chairman/CEO accountable in their respective roles.
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Each of the Boards 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.
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Review and determination of Mr. Foshees compensation
and performance remains within the purview of the Compensation
Committee.
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The independent directors continue to meet in regular executive
sessions without management present to discuss the effectiveness
of the companys management, the quality of the Board
meetings and any other issues and concerns.
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The Board provides continued oversight of succession planning.
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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
Below is a summary of the respective responsibilities of the
Chairman/CEO and the Lead Director.
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Chairman/CEO
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Lead Director
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Calls meetings of the Board and the stockholders
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Calls meetings of the Board or executive sessions with the
independent directors
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Chairs meetings of the Board and the annual meeting of
stockholders
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Chairs meetings of the Board and the annual meeting of
stockholders when the Chairman is unavailable
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Chairs meetings of the Board when there is a potential conflict
of interest with the Chairman on issues to be considered
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Chairs executive sessions of the independent directors
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Establishes Board meeting schedules and agendas
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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
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Establishes agendas for executive sessions
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Ensures that information provided to the Board is sufficient for
the Board to fulfill its primary responsibilities
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Provides input to the Chairman on the scope, quality, quantity
and timeliness of the information provided to the Board
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Communicates with all directors on key issues and concerns
outside of Board meetings
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Serves as a non-exclusive conduit to the Chairman of views and
concerns of the independent directors
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With Lead Director, jointly recommends Committee Chair positions
to full Board and the Governance & Nominating Committee
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With Chairman, jointly recommends Committee Chair positions to
full Board and the Governance & Nominating Committee
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In conjunction with the Governance & Nominating
Committee, ensures that the Board is balanced in composition and
structure and leads Board recruitment efforts
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Collaborates with the Chairman and the Governance Committee in
monitoring the composition and structure of the Board and
assists in Board recruitment efforts
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Oversees compliance with the companys governance principles
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Collaborates with the Governance & Nominating Committee on
questions of possible conflicts of interest or breaches of the
companys governance principles by other directors,
including the Chairman
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Represents the company to and interacts with external
stakeholders and employees
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Is available for consultation and direct communication with
stockholders and interested parties
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Chairman/CEO
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Lead Director
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Leads the Board review of management succession and development
plans
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Leads the executive sessions of the independent directors on
management succession and development plans and provides
feedback to the Chairman/CEO
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Oversees the process of hiring or firing a CEO including any
compensation arrangements
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Recommends to the Board the retention of outside advisors who
report directly to the Board
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Participates with the Compensation Committee Chair in
communicating performance feedback and compensation decisions to
the CEO
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Boards 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 companys 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 companys 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 companys significant risk exposures
(whether financial, operating or otherwise). In providing such
oversight, the Audit Committee may also discuss such processes
and controls with the companys 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 Boards 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, who serves as chair of the committee, our Chief
Financial Officer (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. The ROC
coordinates with internal audit and financial controls and
ensures that the company identifies all potential material risks
and implements appropriate mitigation measures. The ROC has
direct access to company leadership, provides an annual update
on the risk assessment process to the Audit Committee and
presents an annual risk assessment to 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
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 2010, non-management members of the Board met in
executive session six 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 2010, each director participated in
a self-assessment of the Board and its committees. The Board and
the respective committees 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 companys 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 on any date (a measuring date)
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 that measuring 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 measuring
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, 2010. 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 nominees election must exceed
the number of votes cast against such nominees 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 irrevocably agree to resign if they fail to
receive the required majority vote in uncontested elections. In
the event a
10
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 stockholders 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 persons 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 Conduct, that
applies to all of our directors and employees, including our
CEO, CFO and senior financial and accounting officers. Our Code
of 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 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 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 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
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
Conduct. We believe our Code of 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 Pasos 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.
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In determining whether to approve a related person transaction,
the CEO, general counsel or Governance & Nominating
Committee will consider whether:
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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;
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there are business reasons to enter into the transaction;
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the transaction would impair the independence of an outside
director;
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the transaction would present an improper conflict of interest
for any director or executive officer; and
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the transaction is material.
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The policy for approval of related person transactions can be
found on our website at www.elpaso.com.
During 2010, our pipeline business unit made payments to certain
subsidiaries of NRG Energy, Inc. in the amount of $197,498. Our
director David W. Crane currently serves as President and Chief
Executive Officer of NRG Energy, Inc. Due to the relatively
small amounts involved, the purchases were not done on a
competitive bid basis.
Also during 2010, our exploration and production and pipeline
business units made payments to certain subsidiaries of
Halliburton Company in the amount of $146,328,516. Our director
Timothy J. Probert currently serves as President, Strategy and
Corporate Development of Halliburton. The majority of these
payments (approximately 90 percent of the total spend) were
made by our exploration and production business unit on a
competitive bid basis and related to services and supplies that
were 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 Boards standing committee
charters, our Corporate Governance Guidelines, our Code of
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. 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 2010 Annual Meeting attended our 2010 Annual Meeting of
Stockholders, with the exception of Mr. Probert who was
unable to attend due to an unexpected commitment.
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INFORMATION
ABOUT THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held seven meetings during 2010. 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
2010 and their principal responsibilities below.
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Governance &
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Health, Safety &
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Board
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Audit
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Compensation
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Nominating
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Finance
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Environmental
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Juan Carlos Braniff
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Member
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Member
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Member
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David W. Crane
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Member
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Member
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Member
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Douglas L. Foshee
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Chairman
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Robert W. Goldman
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Member
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Member
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Chair
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Anthony W. Hall, Jr.
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Member
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Member
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Member
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Thomas R. Hix
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Member
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Chair
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Member
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Ferrell P. McClean
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Member
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Member
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Member
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Timothy J. Probert
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Member
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Member
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Steven J. Shapiro
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Member
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Member
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Chair
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J. Michael Talbert
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Lead
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Chair
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Robert F. Vagt
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Member
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Member
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Member
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John L. Whitmire
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Member
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Member
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Chair
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Number of 2010 Meetings
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7
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9
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4
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5
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5
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4
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Audit
Committee
The Audit Committee held nine meetings during 2010. 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 Committees duties, which are discussed in detail in
its charter, include, among other duties:
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Assisting the Board of Directors in fulfilling its
responsibilities with respect to the oversight of:
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-
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the integrity of our financial statements, including
recommending to the Board the filing of our audited financial
statements;
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-
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our disclosure controls and procedures and internal control over
financial reporting;
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-
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our independent auditors and any independent petroleum reserves
engineer;
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the performance of our internal audit function;
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-
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the performance of our ethics and compliance functions,
including our compliance with legal and regulatory requirements
and our Code of Business Conduct; and
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13
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-
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the processes and controls, including guidelines and policies,
established by the company to assess, monitor, manage and
mitigate the companys significant risk exposures.
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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 and any independent petroleum reserves
engineer engaged for the purpose of reviewing, preparing or
auditing an estimate of our oil and natural gas reserves.
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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.
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The resolution of any disagreement between management and our
independent auditor regarding financial reporting or audit
matters.
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The review of procedures for the receipt, retention and
treatment of complaints received by us regarding any accounting,
internal controls over financial reporting or auditing matters.
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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 2010, 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 pre-approved limit on fees for each of these
categories. The Audit Committees 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 auditors 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 77 of this proxy statement for the aggregate fees paid
to Ernst & Young LLP for the years ended
December 31, 2010 and 2009.
Compensation
Committee
The Compensation Committee held four meetings during 2010. 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 Committees functions, which are discussed
in detail in its charter, include, among other functions,
responsibility to:
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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
CEOs performance in light of those goals and objectives,
and determine and approve the CEOs compensation level
based on this evaluation.
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14
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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.
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Review appropriate criteria for establishing performance targets
and approve annual corporate and executive performance ratings.
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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.
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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.
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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.
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Select, retain, evaluate, and, where appropriate, replace the
independent executive compensation consulting firm, and review
all related fees.
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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 executives
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 35 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. Deloittes
fees for executive compensation consulting to the Compensation
Committee in 2010 were $403,857.
During 2010, certain Deloitte affiliates were also engaged by
El Paso to provide limited non-executive compensation
related services. These affiliates were retained by management
in the normal course of business. The aggregate fees paid for
those other services were $124,501, which primarily related to
carbon management consulting and limited tax and tax-related
services. While the Compensation Committee does not approve
non-executive compensation services provided to the company by
Deloitte affiliates, the Compensation Committee does review 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, to ensure the compensation consultants
independence. During 2010, the Compensation Committee discussed
the payments and services with
15
its independent compensation consultant and confirmed that the
consultants 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 the
executive-compensation consulting advice it receives from
Deloitte is objective and not influenced by Deloittes or
its affiliates other relationships with the company.
Compensation
Committee Interlocks and Insider Participation
The Compensation Committee has neither interlocks nor insider
participation.
Governance &
Nominating Committee
The Governance & Nominating Committee met five times
during 2010. The Governance & Nominating Committee
currently consists of four 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 Committees
functions, which are discussed in detail in its charter,
include, among other functions, responsibility to:
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Develop and recommend to the Board corporate governance
principles and review and make recommendations regarding the
Corporate Governance Guidelines.
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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.
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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.
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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.
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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.
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Oversee the process of annual performance evaluations for the
Board, each committee and directors.
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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.
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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).
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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 Boards objectives. We have a comprehensive
process in place to identify and evaluate
16
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 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
were elected by our stockholders last year. Each director
nominee who appears on the ballot has been recommended by the
Governance & Nominating Committee to the full Board.
In February 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 Boards
current composition reflects diversity in business and
professional experience, skills, race and gender.
Stockholders seeking to nominate persons for election as
directors at the 2012 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 2012 Annual Meeting, the stockholders written
notice must be received not less than 90 days nor more than
120 days prior to the first anniversary of the 2011 Annual
Meeting. Under these criteria, stockholders must provide us with
notice of nominations sought to be made at the 2012 Annual
Meeting during the period from January 18, 2012 to
February 17, 2012.
If the 2012 Annual Meeting is held more than 30 days before
or 60 days after May 19, 2012, for a stockholder
seeking to bring any matter before the 2012 Annual Meeting, the
stockholders written notice must be received not less than
90 days nor more than 120 days before the date of the
2012 Annual Meeting or by the tenth day after we publicly
announce the date of the 2012 Annual Meeting, if that would
result in a later deadline.
Finance
Committee
The Finance Committee met five times during 2010. 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 Committees functions, which are discussed in
detail in its charter, include, among other functions,
responsibility to:
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Review and recommend to the Board our long-range financial plan,
including the amount and allocation of capital spending and
financing thereof.
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Review and approve capital projects in excess of
$25 million and up to $75 million.
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Recommend to the Board financial policies that maintain or
improve our financial strength.
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Develop and recommend dividend policies and recommend to the
Board specific dividend payments.
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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.
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17
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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.
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Review with management and report to the Board, on a periodic
basis, the Companys insurance program and coverage.
|
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 2010. The Health, Safety & Environmental
Committee currently consists of four 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 Boards 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 Committees
functions, which are discussed in detail in its charter,
include, among other functions, responsibility to:
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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.
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Advise the Board and make recommendations for the Boards
consideration regarding health, safety and environmental-related
issues.
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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.
18
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 2010, 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, as appropriate, 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 Pasos website at
www.elpaso.com.
Audit
Committee Statement
El Pasos management is responsible for
El Pasos financial reporting process, internal audit
process, the effectiveness of disclosure controls and procedures
and internal control over financial reporting, and the
preparation of El Pasos financial statements.
El Pasos 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 Pasos managements representation that the
financial statements have been prepared in conformity with
U.S. generally accepted accounting principles, and on the
representations of El Pasos independent registered
public accounting firm included in their report on
El Pasos financial statements.
In carrying out our responsibilities as set forth in our
charter, we:
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reviewed and discussed the audited financial statements with
El Paso management;
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discussed the effectiveness of disclosure controls and
procedures and internal control over financial reporting with
El Paso management;
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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
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received written disclosures and the letter from
El Pasos independent registered public accounting
firm regarding the independent registered public accounting
firms 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 Pasos Annual Report on
Form 10-K
for the 2010 fiscal year for filing with the SEC.
Current
Members of the Audit Committee of the Board of
Directors
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Thomas R. Hix
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Juan Carlos Braniff
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Robert W. Goldman
|
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Steven J. Shapiro
|
(Chairman)
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(Member)
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(Member)
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(Member)
|
19
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. All of our 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 29, 2011. The biographies of each of
the nominees below contain information regarding the
persons 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.
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Juan
Carlos Braniff
Age 53
Member Audit Committee
Member Finance Committee
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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
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
Financíero BBVA Bancomer from 1991 to 2003.
Mr. Braniff is currently a member of the board of directors
of Ixe Grupo Financíero S.A. de C.V.
Mr. Braniff brings many years of global business experience
to our Board. As highlighted by his various roles at Grupo
Financíero 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
|
|
|
|
|
|
|
David
W. Crane
Age 52
Member Governance & Nominating
Committee
Member Finance 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. Cranes 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. Cranes 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. Cranes background provides risk
management experience that is important to our Board.
|
|
|
|
|
|
|
Douglas
L. Foshee
Age 51
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 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., general
partner of El Paso Pipeline Partners, L.P.
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 28 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
|
|
|
|
|
|
|
Robert
W. Goldman
Age 68
Chairman Finance Committee
Member Audit Committee
|
|
Director
since 2003
|
Mr. Goldman has served as a director since 2003.
Mr. Goldmans 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, a private equity firm. Mr. Goldman
serves on the board of trustees of Kenyon College, Gambier,
Ohio. Mr. Goldman currently serves on the board of
directors of Parker Drilling Company, Tesoro Corporation and The
Babcock & Wilcox Company. Mr. Goldman previously
served on the board of directors of McDermott International,
Inc. until July 2010.
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.
Age 66
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. Halls 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. Mr. Halls
30 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
|
|
|
|
|
|
|
Thomas
R. Hix
Age 63
Chairman Audit Committee
Member Compensation 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
Age 64
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
|
|
|
|
|
|
|
Timothy
J. Probert
Age 59
Member Health, Safety & Environmental
Committee
|
|
Director
since 2009
|
Mr. Probert has served as a director since December 2009.
Mr. Probert was appointed as President of Halliburton
Companys Strategy and Corporate Development in January
2011. Mr. Probert previously served as President of
Halliburton Companys Global Business Lines and Corporate
Development from January 2010 to December 2010. Mr. Probert
previously served as President of Halliburton Companys
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 Halliburtons Executive Committee and is also the
companys 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 executive officer at a
Fortune 500 company, 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. Proberts
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
Age 59
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 is a trustee of the
Houston Museum of Natural Science. Mr. Shapiro is a member
of the board of directors of Barrick Gold Corporation and a
member of the board of directors of Vallar PLC.
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
|
|
|
|
|
|
|
J.
Michael Talbert
Age 64
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 Ltd. 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 Ltd. 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, and as President of Texas
Oil & Gas Company from 1987 to 1990. Mr. Talbert
is a past Chairman of the National Ocean Industries Association
and a member of the University of Akrons College of
Engineering Advancement Council. Mr. Talbert is a member of
the board of directors of Transocean Ltd. and currently serves
as its non-executive Vice-Chairman.
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 Boards execution of its responsibilities. In
addition, his service on the board of Transocean Ltd., including
as its past chairman, provides valuable experience from which he
can draw as a member of our Board.
|
|
|
|
|
|
|
Robert
F. Vagt
Age 64
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. Vagts 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
|
|
|
|
|
|
|
John
L. Whitmire
Age 70
Chairman Health, Safety & Environmental
Committee
Member Governance & Nominating Committee
|
|
Director
since 2003
|
Mr. Whitmire has served as a director since 2003.
Mr. Whitmire has been Vice-Chairman of CONSOL Energy, Inc.
from June 2010 to the present and previously served as Chairman
from March 1999 to June 2010. 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 previously
served as a member of the board of directors of Transocean Ltd.
until June 2010 and as a member of the board of directors of
GlobalSantaFe Corporation until November 2007.
Mr. Whitmire brings many years of industry experience to
our Board. As a 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
SECURITY
OWNERSHIP OF A CERTAIN BENEFICIAL OWNER AND MANAGEMENT
The following table sets forth information as of March 11,
2011 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)
|
|
|
48,398,787
|
|
|
|
0
|
|
|
|
48,398,787
|
|
|
|
6.33
|
%
|
|
|
40 East 52nd Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Juan Carlos Braniff
|
|
|
131,056
|
(5)
|
|
|
9,000
|
|
|
|
140,056
|
|
|
|
*
|
|
Common Stock
|
|
David W. Crane
|
|
|
17,682
|
|
|
|
0
|
|
|
|
17,682
|
|
|
|
*
|
|
Common Stock
|
|
Robert W. Goldman
|
|
|
119,890
|
|
|
|
8,000
|
|
|
|
127,890
|
|
|
|
*
|
|
Common Stock
|
|
Anthony W. Hall, Jr.
|
|
|
104,433
|
|
|
|
9,000
|
|
|
|
113,433
|
|
|
|
*
|
|
Common Stock
|
|
Thomas R. Hix
|
|
|
99,744
|
|
|
|
0
|
|
|
|
99,744
|
|
|
|
*
|
|
Common Stock
|
|
Ferrell P. McClean
|
|
|
84,923
|
(6)
|
|
|
0
|
|
|
|
84,923
|
|
|
|
*
|
|
Common Stock
|
|
Timothy J. Probert
|
|
|
16,776
|
|
|
|
0
|
|
|
|
16,776
|
|
|
|
*
|
|
Common Stock
|
|
Steven J. Shapiro
|
|
|
82,496
|
|
|
|
0
|
|
|
|
82,496
|
|
|
|
*
|
|
Common Stock
|
|
J. Michael Talbert
|
|
|
81,751
|
|
|
|
8,000
|
|
|
|
89,751
|
|
|
|
*
|
|
Common Stock
|
|
Robert F. Vagt
|
|
|
55,056
|
|
|
|
0
|
|
|
|
55,056
|
|
|
|
*
|
|
Common Stock
|
|
John L. Whitmire
|
|
|
142,821
|
|
|
|
8,000
|
|
|
|
150,821
|
|
|
|
*
|
|
Common Stock
|
|
Douglas L. Foshee
|
|
|
1,238,279
|
|
|
|
3,352,381
|
|
|
|
4,590,660
|
|
|
|
*
|
|
Common Stock
|
|
John R. Sult
|
|
|
116,131
|
|
|
|
209,897
|
|
|
|
326,028
|
|
|
|
*
|
|
Common Stock
|
|
Brent J. Smolik
|
|
|
287,398
|
|
|
|
379,514
|
|
|
|
666,912
|
|
|
|
*
|
|
Common Stock
|
|
James C. Yardley
|
|
|
307,076
|
|
|
|
559,203
|
|
|
|
866,279
|
|
|
|
*
|
|
Common Stock
|
|
D. Mark Leland
|
|
|
338,955
|
|
|
|
621,582
|
|
|
|
960,537
|
|
|
|
*
|
|
Common Stock
|
|
Directors and executive officers as a group (20 persons
total), including those individuals listed above
|
|
|
3,940,384
|
|
|
|
6,576,810
|
|
|
|
10,517,194
|
|
|
|
1.38
|
%
|
|
|
|
* |
|
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 11, 2011) as a result of deferral elections made
by our non-employee directors in accordance with our 2005
Compensation Plan for Non-Employee Directors. 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 11, 2011, through the exercise of
stock options. 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 764,159,443 shares outstanding as of
March 11, 2011. |
|
(4) |
|
According to a Schedule 13G/A filed on February 2,
2011, as of December 31, 2010, BlackRock, Inc. was deemed
to beneficially own 48,398,787 shares of common stock. |
27
|
|
|
(5) |
|
Mr. Braniffs beneficial ownership excludes
3,500 shares owned by his wife. Mr. Braniff disclaims
any beneficial ownership in those shares. |
|
(6) |
|
Ms. McCleans beneficial ownership includes
1,500 shares held by her husbands IRA and
7,475 shares held in a revocable trust. |
The following table sets forth, as of March 11, 2011, 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
|
|
Robert W. Goldman
|
|
|
5,534
|
(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
|
|
Brent J. Smolik
|
|
|
12,500
|
|
|
|
*
|
|
Common Units
|
|
James C. Yardley
|
|
|
10,000
|
|
|
|
*
|
|
Common Units
|
|
D. Mark Leland
|
|
|
13,200
|
|
|
|
*
|
|
|
|
Directors and executive officers as a group (20 persons
total), including those individuals listed above
|
|
|
138,907
|
|
|
|
*
|
|
|
|
|
* |
|
Less than one percent |
|
(1) |
|
Based on 177,167,863 common units outstanding as of
March 11, 2011. |
|
(2) |
|
Mr. Goldmans beneficial ownership excludes
100 units owned by his son. Mr. Goldman disclaims any
beneficial ownership in those units. |
|
(3) |
|
Ms. McCleans beneficial ownership includes
1,000 units held by her husband. |
28
INDIVIDUAL
EXECUTIVE PROFILES
The following are individual executive profiles that summarize
the compensation earned or paid in 2010 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 2010 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 54 of this proxy statement. Please consult
those tables and the accompanying footnotes for an explanation
of how the compensation information is calculated.
29
Douglas
L.
Foshee:
Individual Executive Profile
Chairman, President and
Chief Executive Officer
Age: 51
Tenure with El Paso:
8 years
Tenure in Industry: 28 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 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., general partner of
El Paso Pipeline Partners, L.P.
2010
Compensation1
|
|
|
|
|
Salary
|
|
|
|
|
Base Salary
|
|
$
|
1,068,756
|
|
Performance-Based Cash Bonus
|
|
$
|
2,100,000
|
|
Perquisites and Personal Benefits
|
|
$
|
68,217
|
|
|
|
|
|
|
Annual Long-Term
Incentive Award
|
|
|
|
|
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock
|
|
$
|
2,489,145
|
|
Stock Options
|
|
$
|
2,320,752
|
|
Restricted Stock Dividends
|
|
$
|
16,702
|
|
|
|
|
|
|
Retirement
Benefits
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual increase in accumulated pension benefit
|
|
$
|
272,796
|
|
Retirement Savings Plan (RSP)
|
|
|
|
|
Company matching contribution to RSP
|
|
$
|
11,025
|
|
Supplemental RSP benefit
|
|
$
|
118,069
|
|
Annual earnings on supplemental RSP benefit
|
|
$
|
32,443
|
|
2010
Total Compensation
Stock
Ownership Requirements
Mr. Foshees 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,
2010)
|
|
|
|
|
Voluntary Termination
|
|
$
|
13,999,320
|
|
Involuntary Termination without Cause
|
|
$
|
3,421,646
|
2
|
Retirement
|
|
$
|
0
|
2
|
Death
|
|
$
|
13,224,714
|
2
|
Disability
|
|
$
|
7,019,126
|
2
|
Termination with Cause
|
|
$
|
0
|
2
|
Change in Control of El Paso
|
|
$
|
18,959,442
|
2
|
|
|
1
|
2010 Compensation includes all amounts reported in the Summary
Compensation Table as well as dividends paid on restricted stock
and annual earnings on the executives supplemental RSP
benefit.
|
|
2
|
Reflects incremental value of enhanced benefits above amounts
Mr. Foshee is entitled to as a result of voluntary
termination. Value of equity reflects $13.76, the closing price
of our common stock on December 31, 2010.
|
30
John R.
Sult:
Individual Executive Profile
Executive Vice President
and Chief Financial Officer
Age: 51
Tenure with El Paso:
6 years
Tenure in Industry: 30 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 Executive Vice President and
Chief Financial Officer of El Paso Pipeline GP Company,
L.L.C. since July 2010, Senior Vice President and Chief
Financial Officer from November 2009 to July 2010 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 Pasos 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., general partner of
El Paso Pipeline Partners, L.P.
2010
Compensation1
|
|
|
|
|
Salary
|
|
|
|
|
Base Salary
|
|
$
|
441,253
|
|
Performance-Based Cash Bonus
|
|
$
|
500,000
|
|
Perquisites and Personal Benefits
|
|
$
|
0
|
|
|
|
|
|
|
Annual Long-Term
Incentive Award
|
|
|
|
|
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock
|
|
$
|
401,476
|
|
Stock Options
|
|
$
|
400,128
|
|
Restricted Stock Dividends
|
|
$
|
2,061
|
|
|
|
|
|
|
Retirement
Benefits
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual increase in accumulated pension benefit
|
|
$
|
61,847
|
|
Retirement Savings Plan (RSP)
|
|
|
|
|
Company matching contribution to RSP
|
|
$
|
11,025
|
|
Supplemental RSP benefit
|
|
$
|
22,331
|
|
Annual earnings on supplemental RSP benefit
|
|
$
|
3,492
|
|
2010
Total Compensation
Stock
Ownership Requirements
Mr. Sults 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,
2010)
|
|
|
|
|
Voluntary Termination
|
|
$
|
743,786
|
|
Involuntary Termination without Cause
|
|
$
|
721,249
|
2
|
Retirement
|
|
$
|
0
|
2
|
Death
|
|
$
|
2,451,118
|
2
|
Disability
|
|
$
|
1,009,442
|
2
|
Termination with Cause
|
|
$
|
0
|
2
|
Change in Control of El Paso
|
|
$
|
3,063,244
|
2
|
|
|
1
|
2010 Compensation includes all amounts reported in the Summary
Compensation Table as well as dividends paid on restricted stock
and annual earnings on the executives supplemental RSP
benefit.
|
|
2
|
Reflects incremental value of enhanced benefits above amounts
Mr. Sult is entitled to as a result of voluntary
termination. Value of equity reflects $13.76, the closing price
of our common stock on December 31, 2010.
|
31
Brent
J. Smolik:
Individual Executive Profile
Executive Vice President and
President of El Paso Exploration
& Production Company
Age: 49
Tenure with El Paso:
5 years
Tenure in Industry: 27 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, including the
Chief Engineering role from 2000 to 2004. He was a member of the
Burlington Resources Executive Committee from 2001 to 2006.
Mr. Smolik also serves on the Boards of the American
Exploration and Production Council, Americas Natural Gas
Alliance and the Independent Petroleum Association of America.
2010
Compensation1
|
|
|
|
|
Salary
|
|
|
|
|
Base Salary
|
|
$
|
576,636
|
|
Performance-Based Cash Bonus
|
|
$
|
1,000,000
|
|
Perquisites and Personal Benefits
|
|
$
|
1,100
|
|
|
|
|
|
|
Annual Long-Term
Incentive Award
|
|
|
|
|
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock
|
|
$
|
722,650
|
|
Stock Options
|
|
$
|
666,883
|
|
Restricted Stock Dividends
|
|
$
|
4,627
|
|
|
|
|
|
|
Retirement
Benefits
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual increase in accumulated pension benefit
|
|
$
|
117,938
|
|
Retirement Savings Plan (RSP)
|
|
|
|
|
Company matching contribution to RSP
|
|
$
|
11,025
|
|
Supplemental RSP benefit
|
|
$
|
59,924
|
|
Annual earnings on supplemental RSP benefit
|
|
$
|
2,763
|
|
2010
Total Compensation
Stock
Ownership Requirements
Mr. Smoliks 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,
2010)
|
|
|
|
|
Voluntary Termination
|
|
$
|
1,022,772
|
|
Involuntary Termination without Cause
|
|
$
|
1,244,517
|
2
|
Retirement
|
|
$
|
0
|
2
|
Death
|
|
$
|
4,445,629
|
2
|
Disability
|
|
$
|
2,218,496
|
2
|
Termination with Cause
|
|
$
|
0
|
2
|
Change in Control of El Paso
|
|
$
|
5,748,792
|
2
|
|
|
1
|
2010 Compensation includes all amounts reported in the Summary
Compensation Table as well as dividends paid on restricted stock
and annual earnings on the executives supplemental RSP
benefit.
|
|
2
|
Reflects incremental value of enhanced benefits above amounts
Mr. Smolik is entitled to as a result of voluntary
termination. Value of equity reflects $13.76, the closing price
of our common stock on December 31, 2010.
|
32
James C.
Yardley:
Individual Executive Profile
Executive Vice President,
Pipeline Group
Age: 59
Tenure with El Paso:
33 years
Tenure in Industry: 33 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 Chairman of
the Board of Tennessee Gas Pipeline Company since February 2007
and served as its President from August 2006 to August 2010.
Mr. Yardley has been Chairman of El Paso Natural Gas
Company since August 2006 and served as President of Southern
Natural Gas Company from May 1998 to August 2010.
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. He also serves on the Board of Interstate Natural
Gas Association of America and previously served as its
Chairman. Mr. Yardley serves as Director, President and
Chief Executive Officer of El Paso Pipeline GP Company,
L.L.C., general partner of El Paso Pipeline Partners, L.P.
2010
Compensation1
|
|
|
|
|
Salary
|
|
|
|
|
Base Salary
|
|
$
|
526,257
|
|
Performance-Based Cash Bonus
|
|
$
|
500,000
|
|
Perquisites and Personal Benefits
|
|
$
|
12,635
|
|
|
|
|
|
|
Annual Long-Term
Incentive Award
|
|
|
|
|
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock
|
|
$
|
508,534
|
|
Stock Options
|
|
$
|
666,883
|
|
Restricted Stock Dividends
|
|
$
|
4,864
|
|
|
|
|
|
|
Retirement
Benefits
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual increase in accumulated pension benefit
|
|
$
|
339,095
|
|
Retirement Savings Plan (RSP)
|
|
|
|
|
Company matching contribution to RSP
|
|
$
|
11,025
|
|
Supplemental RSP benefit
|
|
$
|
35,157
|
|
Annual earnings on supplemental RSP benefit
|
|
$
|
8,926
|
|
2010
Total Compensation
Stock
Ownership Requirements
Mr. Yardleys 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,
2010)
|
|
|
|
|
Voluntary Termination
|
|
$
|
5,971,733
|
|
Involuntary Termination without Cause
|
|
$
|
530,004
|
2
|
Retirement
|
|
$
|
0
|
2,3
|
Death
|
|
$
|
3,550,991
|
2
|
Disability
|
|
$
|
1,522,358
|
2
|
Termination with Cause
|
|
$
|
0
|
2
|
Change in Control of El Paso
|
|
$
|
4,496,376
|
2
|
|
|
1
|
2010 Compensation includes all amounts reported in the Summary
Compensation Table as well as dividends paid on restricted stock
and annual earnings on the executives supplemental RSP
benefit.
|
|
2
|
Reflects incremental value of enhanced benefits above amounts
Mr. Yardley is entitled to as a result of voluntary termination.
Value of equity reflects $13.76, the closing price of our common
stock on December 31, 2010.
|
|
3
|
Mr. Yardley is eligible for retirement. The value of his
retirement benefits are reflected under Voluntary Termination.
|
33
D. Mark
Leland:
Individual Executive Profile
Executive Vice President and
President of Midstream
Age: 49
Tenure with El Paso:
25 years
Tenure in Industry: 25 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 Pasos 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, and as
Senior Vice President and Controller from July 2000 to January
2003. Mr. Leland also serves on the board of directors of
El Paso Pipeline GP Company, L.L.C., general partner of
El Paso Pipeline Partners, L.P.
2010
Compensation1
|
|
|
|
|
Salary
|
|
|
|
|
Base Salary
|
|
$
|
527,442
|
|
Performance-Based Cash Bonus
|
|
$
|
500,000
|
|
Perquisites and Personal Benefits
|
|
$
|
11,000
|
|
|
|
|
|
|
Annual Long-Term
Incentive Award
|
|
|
|
|
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock
|
|
$
|
615,592
|
|
Stock Options
|
|
$
|
666,883
|
|
Restricted Stock Dividends
|
|
$
|
4,783
|
|
|
|
|
|
|
Retirement
Benefits
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual increase in accumulated pension benefit
|
|
$
|
133,855
|
|
Retirement Savings Plan (RSP)
|
|
|
|
|
Company matching contribution to RSP
|
|
$
|
11,025
|
|
Supplemental RSP benefit
|
|
$
|
35,210
|
|
Annual earnings on supplemental RSP benefit
|
|
$
|
9,666
|
|
2010
Total Compensation
Stock
Ownership Requirements
Mr. Lelands 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,
2010)
|
|
|
|
|
Voluntary Termination
|
|
$
|
2,499,956
|
|
Involuntary Termination without Cause
|
|
$
|
1,179,254
|
2
|
Retirement
|
|
$
|
0
|
2
|
Death
|
|
$
|
4,228,396
|
2
|
Disability
|
|
$
|
2,168,239
|
2
|
Termination with Cause
|
|
$
|
0
|
2
|
Change in Control of El Paso
|
|
$
|
4,944,537
|
2
|
|
|
1
|
2010 Compensation includes all amounts reported in the Summary
Compensation Table as well as dividends paid on restricted stock
and annual earnings on the executives supplemental RSP
benefit.
|
|
2
|
Reflects incremental value of enhanced benefits above amounts
Mr. Leland is entitled to as a result of voluntary termination.
Value of equity reflects $13.76, the closing price of our common
stock on December 31, 2010.
|
34
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 Chief Executive Officer, our
Chief Financial Officer and our three other most highly
compensated executive officers (the named executive
officers). This section also describes the actions and
decisions of the Compensation Committee of our Board of
Directors as it relates to 2010 compensation decisions. The
discussion is divided into the following sections:
|
|
|
|
I.
|
Executive Summary
|
|
|
II.
|
Role of Compensation Committee, Compensation Consultant and
Management
|
|
|
III.
|
Elements of Total Compensation
|
|
|
IV.
|
Factors Considered When Determining Total Compensation
|
|
|
V.
|
2010 Compensation Decisions
|
|
|
VI.
|
2011 Changes to Compensation Program
|
|
|
VII.
|
Other Compensation and Tax Matters
|
Compensation Program Philosophy and
Design. The core of our executive compensation
program continues to be pay for performance. A significant
portion of each executives total annual compensation is at
risk and dependent upon our companys 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 rewards long-term stock
performance. The framework of our executive compensation
program, which incorporates what we believe to be top
compensation and governance practices, is set forth below:
|
|
|
|
|
we 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 incentives;
|
|
|
|
our cash-based annual incentives are tied to specific
pre-established financial, operational and safety performance
goals;
|
|
|
|
restricted stock award grants are contingent upon the collective
achievement of our annual overall corporate financial goals and
El Pasos one-year relative total shareholder return
(TSR);
|
|
|
|
restricted stock awards have a minimum three-year vesting
requirement;
|
|
|
|
we cap maximum cash-based incentives and the equity funding pool;
|
|
|
|
we do not have employment agreements or guaranteed bonus
arrangements with our executives;
|
|
|
|
we do not provide tax
gross-ups on
executive perquisites (other than in limited circumstances
involving spousal travel to business-events);
|
|
|
|
the Compensation Committee, which is comprised solely of
independent directors, reviews and approves all elements of
named executive officer compensation;
|
|
|
|
the Compensation Committee retains an independent compensation
consultant to advise on executive compensation matters and best
practices;
|
|
|
|
the Compensation Committee uses a variety of analytical tools as
part of its annual executive compensation review, including
tally sheets, walk away analysis, as well as a review of
internal pay equity (ratio of CEO to executive and non-executive
pay);
|
35
|
|
|
|
|
our executives officers are subject to stock ownership
requirements;
|
|
|
|
while we do not have a formal post-vesting holding requirement
for equity awards granted to our executive officers, our named
executive officers routinely hold shares acquired upon vesting
of restricted stock for a significant period of time
post-vesting for example, over the past five years
our named executive officers have held all shares acquired upon
vesting of restricted stock;
|
|
|
|
executives and non-employee directors are prohibited from
hedging their ownership of company stock;
|
|
|
|
the Compensation Committee reviews our compensation program to
ensure that it does not incentivize excessive risk-taking;
|
|
|
|
we have a compensation recoupment (clawback) policy
that applies to all employees, including our named executive
officers;
|
|
|
|
we do not offer excessive severance arrangements;
|
|
|
|
our change in control severance plan is double trigger, meaning
both a change in control and an involuntary/good reason
termination of employment must occur; and
|
|
|
|
performance shares that vest solely upon the achievement of
multi-year TSR results will be incorporated into our equity
program commencing in 2011, with no dividends payable on
unvested performance shares.
|
El Pasos 2010
Performance. El Paso had strong stock
performance during 2010 in both absolute and relative terms,
with a 40.4% TSR for the year, exceeding both the average annual
TSR of the S&P 500 (15.1%) and our peer group (23.63%).
This strong stock performance was triggered off of a successful
year in 2010, during which we generated significant earnings in
both our pipeline and exploration and production businesses and
continued to focus on executing on our business plan, including
delivering on our backlog of pipeline expansion projects and
continuing to achieve operational success in our exploration and
production business. During 2010, in our pipeline business, we
placed approximately $1 billion of pipeline expansion
projects into service, all on time and in total approximately
$100 million under budget. We also continued to advance on
the Ruby pipeline project, our largest pipeline expansion
project, expected to go into service in July 2011. In our
exploration and production business, we have continued executing
our strategy, with increased production volumes and inventory
growth, lower per unit cash operating costs, improved reserve
metrics and increased oil and liquids based revenues. We have
also expanded our 2011 and 2012 hedging programs designed to
support our balance sheet and cash flows. The Compensation
Committee considered these accomplishments, together with the
satisfaction of our 2010 performance goals, in authorizing the
payouts of cash incentives and equity awards for 2010
performance, as described below and in detail later in this
CD&A.
Cash Incentives for 2010 Performance. For
2010, payments under our annual incentive award program reflect
our companys performance and the achievement of our 2010
performance goals. As discussed further under the heading
Annual Cash Incentive Awards for 2010 Performance
beginning on page 43 of this proxy statement, we achieved
our corporate financial goals for 2010, 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 $0.95, which was above the target goal
of $0.83; EBITDA was $3,070 million, which was above the
target goal of $2,960 million; return on total capital was
7.8%, which was above the target goal of 7.5%; and our
outstanding debt (net of cash) was $13,549 million, which
was approximately $551 million lower than the maximum
target (with maximum target representing the lowest amount in
the range of 2010 debt goals). After considering the results of
our performance-goals, as well as the Companys overall
performance during 2010, the Compensation Committee approved
above-target cash bonuses for our named executive officers.
Equity Grants for 2010 Performance. We
achieved our corporate financial goals for 2010 at above-target
levels, and El Pasos one-year TSR relative to its
peer group of companies was in the top quartile
(87th percentile). As discussed further under the heading
Long-Term Incentive Awards on page 48 of this
proxy statement, the grant of our annual restricted stock grants
is contingent upon the collective achievement of our annual
overall corporate financial goals and El Pasos
one-year relative TSR. Our above-target achievement of our
corporate financial goals, together with our top quartile TSR
performance resulted in restricted share grants to our named
executive officers for 2010 performance at above target levels.
Options are granted at target levels in accordance with our
program design.
36
2011 Compensation Program Changes. In December
2010, the Compensation Committee approved certain changes to our
equity program commencing with the 2011 performance year to
further link pay to performance. Commencing in 2011, the
Compensation Committee has elected to incorporate performance
shares into our equity program, the vesting of which will depend
entirely upon El Pasos multi-year relative TSR
results. This change is being done to incentivize superior stock
performance over an extended period and to further align the
interests of our named executive officers with our shareholders.
See 2011 Changes to Compensation Program on
page 50 of this proxy statement for additional information
regarding this prospective change to our equity program
including the transition during 2011 to performance shares.
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II.
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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, (v) compensation risk-management, and
(vi) updates on best-practices and trends in executive and
director compensation. Deloitte attends meetings of the
Compensation Committee and participates in the Committees
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 and ensures that
Deloitte is providing independent advice that is not influenced
by fees or revenues generated by the provision of non-executive
compensation services. In addition, the Compensation Committee
reviews, on an annual basis, Deloittes 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 Committees engagement of Deloitte as its
compensation consultant, as well as amounts paid to Deloitte and
its affiliates during 2010 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
Committees 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.
37
III.
Elements of Total Compensation
The table below summarizes the elements of our compensation
program during 2010.
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Compensation Element
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Objective
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Key Features
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Base Salary
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To provide a minimum, fixed level cash compensation
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Reviewed annually with adjustments made based on individual
performance, anticipated inflation, pay relative to market, and
internal equity considerations
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Performance-Based Annual Cash Incentive Awards
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To motivate and reward executive officers contributions to
achievement of pre-established financial and operational
performance goals, as well as individual performance
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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 officers performance relative to pre-established performance goals
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Long-Term Equity Awards (stock options and
performance-granted restricted stock)
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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
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Target value is allocated approximately 50% in restricted stock
and 50% in stock options
Stock options:
granted at target levels (not adjusted
for corporate or individual performance)
value of stock options is realized upon
option exercise only if stock price increases
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 Awards vest in
three equal annual installments
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38
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Compensation Element
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Objective
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Key Features
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Retirement Plans
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To provide retirement savings in a tax-efficient manner
To provide a fixed level of retirement income and encourage retention
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Retirement benefits are provided under the following plans:
Retirement Savings Plan
401(k) plan covering all
employees
company contributes an amount equal to
75% of each participants 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
provides benefits in excess of amounts
payable under the Retirement Savings Plan and Pension Plan due
to tax code limitations
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Health & Welfare Benefits
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To provide reasonable health and welfare benefits to executives
and their dependents and promote healthy living
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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
officers death
amount of survivor benefit is
21/2X
the executive officers annual salary
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39
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Compensation Element
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Objective
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Key Features
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Severance
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To provide a measure of financial security in the event an executives employment is terminated without cause
To encourage retention and ensure continued dedication by named executive officers in the event of a change in control
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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 participants
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
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Employee Stock Purchase Plan
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To encourage stock ownership and align interests of executives
with stockholders
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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
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Perquisites
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Limited perquisites provided to assist executives in carrying
out duties and increase productivity
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Include financial planning assistance, limited accompaniment of
family members with executives traveling for business purposes
and subsidized annual physical examinations
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IV.
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Factors
Considered When Determining Total Compensation
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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.
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:
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the level of achievement of our pre-established performance
goals;
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individual performance;
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scope of job responsibilities;
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40
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competitive pressures for that position within the industry;
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internal equity considerations; and
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the executives industry experience and tenure.
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In 2009, 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
54th percentile when compared to peer group proxy data. In
2010, total annual compensation targets for our named executive
officers fell at the 67th percentile when compared to peer
group proxy data (based on the most recently available
information disclosed in the peer companies 2010 proxy
statements). The change in our market positioning between the
two years is due, in part, to the removal of certain peer
companies from our benchmarking group. Our peer group is
described below.
El Pasos Peer Group. Each year, the
Compensation Committee reviews El Pasos 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. As part of this
process, in late 2009 the committee 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 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 table below sets forth our 2010
peer group.
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Anadarko Petroleum Corp.
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National Fuel Gas Co.
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Questar Corporation
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CenterPoint Energy, Inc.
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Newfield Exploration Co.
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Sempra Energy
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Dominion Resources, Inc.
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NiSource, Inc.
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Southern Union Co.
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Enbridge Inc.
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Noble Energy, Inc.
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Spectra Energy Corp.
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Energen Corp.
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ONEOK, Inc.
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TransCanada Corp.
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EQT Corporation
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Pioneer Natural Resources
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Williams Companies
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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 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 2010, the Compensation Committee reviewed a comparison of
CEO and other named executive officer pay (total compensation)
to non-management employee pay for the period 1999 to 2009. 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 2009. The
Compensation Committee also reviewed trends in pay equity from
2008 to 2009 and noted a 25 percent reduction in the
disparity between average named executive officer to
non-management total compensation during such time period. The
review noted that the major contributing factor to the shrinking
disparity between 2008 and 2009 pay was lower equity grants in
2009 at the named executive officer level (due, primarily, to
our lower TSR performance relative to our peer group in 2009).
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 officers
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
estimated total compensation that would be payable to the named
executive officers in various termination scenarios. 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.
41
In its most recent review of tally sheets in December 2010,
which included estimated year-end 2010 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 64
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 officers accumulated equity grants over
the subsequent five-year period based upon various stock
appreciation scenarios. This analysis is prepared 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 future
wealth accumulation. To date, the amount of the named executive
officers past compensation has generally not been a
significant factor in the Compensation Committees
determinations.
Compensation Risk Assessment. During 2010, the
Compensation Committee requested Deloitte perform a risk
assessment of our companys incentive compensation
arrangements. In its review, Deloitte noted that our
compensation arrangements incorporate a significant amount of
rigor, internal oversight and risk mitigating factors. Deloitte
also found that our companys culture and the design of the
incentive compensation arrangements reduce the likelihood of
participants taking excessive risks, manipulating financial
results, or focusing on short-term results at the expense of
long-term value creation. Based on the analysis performed, the
Compensation Committee 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 70 of this proxy statement for
additional detail regarding our compensation programs and risk.
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V.
|
2010
Compensation Decisions
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2010
Annual Base Salaries and 2010 Target Bonus
Opportunities
After a two-year base salary freeze, the Compensation Committee
elected to increase base salary levels for all of our named
executive officers effective as of April 1, 2010. Salary
increases were generally between 2%-3%, with the exception of
Mr. Sult who received a more significant increase in
recognition of his appointment as an executive vice president in
March 2010. In each situation, the salary increases were made to
align with market competitive levels. No adjustments were made
to the named executive officers 2010 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.
Mr. Sults bonus target increase was made in
recognition of his increased responsibilities as our CFO, to
position his bonus target competitive with market levels, and
for internal consistency. These target bonus opportunities were
derived in part from peer group and competitive survey
benchmarking data and in part by the Compensation
Committees judgment on the internal equity of the
positions, scope of job responsibilities and the
executives industry
42
experience and tenure. The following tables set forth the base
salaries and annual target bonus opportunities for the named
executive officers.
Annual
Base Salaries
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2010
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2009
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Base Salary
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2009-2010
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Base Salary
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effective 4/1/10
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Percentage
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Name
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($)
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($)
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Increase
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Douglas L. Foshee
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$
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1,050,000
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$
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1,075,008
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2.4
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%
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John R. Sult
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$
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408,012
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$
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450,000
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10.3
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%
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Brent J. Smolik
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$
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566,520
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$
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580,008
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2.4
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%
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James C. Yardley
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$
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515,016
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$
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530,004
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2.9
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%
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D. Mark Leland
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$
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519,756
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$
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530,004
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2.0
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%
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Target
Bonus Opportunities
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2009 Target
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2010 Target
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Bonus
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Bonus
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2009-2010
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Opportunity
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Opportunity
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Percentage
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Name
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(% of salary)
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(% of
salary)
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|
Increase
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Douglas L. Foshee
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120
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%
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120
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%
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0
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%
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John R. Sult
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50
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%
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60
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%
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20
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%
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Brent J. Smolik
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90
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%
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90
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%
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0
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%
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James C. Yardley
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75
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%
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75
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%
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0
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%
|
D. Mark Leland
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60
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%
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60
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%
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0
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%
|
Annual
Cash Incentive Awards for 2010 Performance
Performance Goals. At the beginning of 2010,
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 46). The Compensation
Committee also approved corporate and business unit financial
and non-financial performance goals.
Our 2010 corporate financial goals, which are the primary goals
used in determining the annual incentive bonuses for our named
executive officers, are set forth below, including adjusted
year-end results.
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2010 Goals
|
Corporate Financial
Goals
|
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Threshold
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Target
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Maximum
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2010 Results
|
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Weighting
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Earnings Per Share
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$0.71
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$0.83
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$1.03
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$0.95
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35
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%
|
EBITDA
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|
$2,835 MM
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$2,960 MM
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$3,175 MM
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$3,070 MM
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|
35
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%
|
Return on Total Capital
|
|
7.1%
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|
7.5%
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|
8.2%
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|
7.8%
|
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|
15
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%
|
Debt (net of cash)
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|
$15,100 MM
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|
$14,500 MM
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|
$14,100 MM
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|
$13,549 MM
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|
15
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%
|
The 2010 corporate financial goals and weightings are consistent
with our 2009 goals. Earnings per share and EBITDA weighting of
35% reflected our organizational focus on profitability,
execution, and efficiency. The ROTC weighting of 15% is
consistent with our goal to be the top execution focused company
in the energy industry, ultimately delivering superior returns
to stockholders. The weighting of debt (net of cash) of 15% was
set to ensure organizational focus of maintaining financial
flexibility through cost efficiencies, successful financial and
capital management in a year of significant capital investments.
The corporate financial goals were set in alignment with our
2010 strategic plan. 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
43
business units in 2010. The threshold levels represent
reasonably achievable goals, whereas the maximum levels
represent a significant stretch and would require exceptional
performance.
In addition, the Compensation Committee approved additional
performance goals for our corporate shared services business
unit and our pipeline and exploration and production business
units. For corporate shared services, the 2010 financial goals
included the corporate goals listed above, plus an additional
goal relating to shared services costs. For our pipeline
business unit, the 2010 financial goals were based on value
creation, which is a measure of the cash value created in excess
of the cost of invested capital, as well as execution on value
added projects (VAP Execution), with particular
focus on placing major capital projects in-service on time and
on budget. For our exploration and production
(E&P) business unit, the 2010 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, expense savings, present
value ratio, reserve replacement cost and net risked
year-to-year
inventory growth. Non-financial goals, including pipeline
integrity and safety goals, were also approved for the
respective business units. While the Compensation Committee
reviews these
business-unit
goals, such goals do not materially affect 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, as set forth below.
Performance
Weights for Named Executive Officers
Annual Incentive Awards
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|
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|
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Corporate
|
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Shared Services
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|
Exploration &
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|
Named Executive
Officer
|
|
Corporate Goals
|
|
Goals
|
|
Production Goals
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|
Pipeline Goals
|
|
Douglas L. Foshee
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|
|
75
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%
|
|
|
25
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%
|
|
|
|
|
|
|
|
|
John R. Sult
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|
|
75
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%
|
|
|
25
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%
|
|
|
|
|
|
|
|
|
Brent J. Smolik
|
|
|
75
|
%
|
|
|
|
|
|
|
25
|
%
|
|
|
|
|
James C. Yardley
|
|
|
75
|
%
|
|
|
|
|
|
|
|
|
|
|
25
|
%
|
D. Mark Leland
|
|
|
75
|
%
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
Annual Incentive Awards Negative
Discretion. The Compensation Committee uses
negative discretion in setting payouts under our
annual incentive award program. For purposes 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). 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 51
of this proxy statement.
44
After the 2010 financial results became available, the
Compensation Committee determined the appropriate funding of the
2010 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 Bonus 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 bonus 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. 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 officers 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 2010 included living our core
values of stewardship, integrity, safety, accountability, and
excellence, financing our 2010 capital plan, strengthening the
companys liquidity position, executing 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 with increased oil exposure,
increasing our inventory of low-risk, repeatable drilling
operations, pursuing midstream opportunities compatible with our
business units, reducing costs, improving our execution
capability, 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 to each executive. The
Compensation Committee then uses the individual performance
factor (ranging from 0%-150%) to adjust the executives
actual annual cash incentive award.
45
The maximum bonus opportunity under the annual incentive program
is 225% of the target bonus, which is calculated by taking 150%
of the maximum annual incentive bonus based on financial results
times 150% of the maximum individual performance adjustment
factor. The range of annual cash incentive bonuses 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 Bonuses as a Percentage of Base Salary for
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
|
|
|
|
|
|
Threshold
|
|
|
|
|
|
|
|
|
Not Met
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Douglas L. Foshee
|
|
|
0
|
%
|
|
|
60
|
%
|
|
|
120
|
%
|
|
|
270
|
%
|
John R. Sult
|
|
|
0
|
%
|
|
|
30
|
%
|
|
|
60
|
%
|
|
|
135
|
%
|
Brent J. Smolik
|
|
|
0
|
%
|
|
|
45
|
%
|
|
|
90
|
%
|
|
|
202.50
|
%
|
James C. Yardley
|
|
|
0
|
%
|
|
|
37.50
|
%
|
|
|
75
|
%
|
|
|
168.75
|
%
|
D. Mark Leland
|
|
|
0
|
%
|
|
|
30
|
%
|
|
|
60
|
%
|
|
|
135
|
%
|
The potential range of values of the annual cash incentive
awards for 2010 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 56 of this proxy
statement.
El Paso Performance. In February 2011,
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 performance relative to the corporate
financial goals, the Compensation Committee excluded the impacts
of certain items under pre-approved adjustment categories,
including: commodity price fluctuations in the E&P business
unit, which resulted in an unfavorable adjustment to EBITDA and
outstanding debt (net of cash), costs related to debt
repurchases, unbudgeted gains on asset sales activity, including
the sale of our pipeline assets in Mexico and the sale of a
50 percent interest in our Altamont processing assets in
connection with the formation of our new midstream joint
venture, and actions taken to resolve legacy issues. 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 for compensation-related purposes and collectively these
adjustments reduced the actual year end results used in
calculating annual incentives. Based on these adjustments, the
Compensation Committee determined that El Paso achieved the
following adjusted results:
|
|
|
|
|
earnings per share of $0.95, which is above the target goal of
$0.83,
|
|
|
|
EBITDA of $3,070 million, which is above the target goal of
$2,960 million,
|
|
|
|
return on total capital of 7.8%, which is above the target
percentage of 7.5%, and
|
|
|
|
outstanding debt (net of cash) of $13,549 million, which
was approximately $551 million lower than the maximum
target (with the maximum target representing the lowest amount
in the range of 2010 debt goals),
|
which collectively resulted in a corporate achievement level of
130%. The Compensation Committee elected, however, to use its
negative discretion to reduce the corporate achievement level by
an additional 5% based on the overall safety performance of our
pipeline and E&P business units. Although these safety
goals were not part of the corporate financial goals, the
Compensation Committee and management felt it appropriate that
the achievement level be reduced to reflect safety performance.
Based on the achievement of the performance goals and after
considering these qualitative factors, the Compensation
Committee approved a corporate funding level of 125% 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 45 of this
proxy statement. The Compensation Committee then combined the
achievement of each of
46
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 44 of this proxy
statement. The Compensation Committee then reduced the corporate
achievement level by 5% to reflect the overall safety
performance of our pipeline and E&P business units. This
collectively resulted in the approval by the Compensation
Committee of the corporate funding level set forth above.
In addition, the Compensation Committee determined that our
corporate shared services, pipeline, and E&P business units
each achieved their respective financial goals and many of their
non-financial goals (with funding levels of 125%, 100% and 130%,
respectively). The funding levels for our pipeline and E&P
business units likewise reflect a 5% reduction relating to
safety performance.
Individual Performance. In February 2011, 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 led El Paso to a successful year in which
we generated significant earnings in our pipeline and E&P
business units, as well as a 40% annual total shareholder
return, significantly exceeding the total shareholder return of
the S&P 500 and placing us in the top quartile of our
peers. Under Mr. Foshees leadership, our pipeline
business unit made significant progress in completing its
original $8 billion expansion backlog and our E&P
business unit had a strong year, with increased production and
inventory growth, lower cash operating costs and improved
reserve metrics. In addition, Mr. Foshees
communication skills and motivational efforts were instrumental
in our continued efforts to become the top execution-focused
company in energy.
Other
Named Executive Officers
John R. Sult. Mr. Sults leadership as CFO
was critical in strengthening the companys liquidity
position and completing a $1.5 billion project financing on
our Ruby pipeline expansion project. In addition, Mr. Sult
was instrumental in the continued strong performance and growth
of our master limited partnership, El Paso Pipeline
Partners, L.P. (EPB), including spearheading the
acquisition by EPB during 2010 of Southern LNG Company, L.L.C.,
Elba Express Company, L.L.C., as well as an additional
35 percent interest in Southern Natural Gas Company.
Brent J. Smolik. Mr. Smolik led our E&P
business unit to another year of high-end performance in the
face of significant headwinds, including challenging natural gas
prices and cost increases from service providers. Under his
leadership, our E&P business unit successfully managed its
capital program, replicated our Haynesville Shale success in the
Eagle Ford Shale, acquired 123,000 net acres in the
Wolfcamp Shale, and ended the year with a larger, more
repeatable, and more valuable inventory with increased oil/gas
optionality.
James C. Yardley. Under Mr. Yardleys
leadership, our pipeline business unit made significant progress
on our backlog of remaining expansion projects, completing five
expansions on time and approximately $100 million under
budget, and making significant progress on the Ruby pipeline
project, including receiving final approval from the Federal
Energy Regulatory Commission. Mr. Yardley also led efforts
in both the field and office to further improve service and do
so efficiently.
D. Mark Leland. As president of our newly formed
midstream business unit, Mr. Leland led strategic efforts
to pursue midstream opportunities compatible with our pipeline
and/or
E&P business units. In particular, Mr. Lelands
leadership was critical in the creation of our newly-formed
midstream joint venture, which closed in December 2010, and
under which we and our partner expect to each invest up to
approximately $500 million in future midstream projects.
47
2010 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 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
officers annual cash incentive for 2010 performance.
Annual
Cash Incentives
for 2010 Performance
|
|
|
|
|
|
|
Actual
|
|
|
Incentive Award (1)
|
|
Douglas L. Foshee
|
|
$
|
2,100,000
|
|
John R. Sult
|
|
$
|
500,000
|
|
Brent J. Smolik
|
|
$
|
1,000,000
|
|
James C. Yardley
|
|
$
|
500,000
|
|
D. Mark Leland
|
|
$
|
500,000
|
|
|
|
|
(1) |
|
Cash incentive awards for 2010 performance were paid in March
2011. |
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 Committees
action) when the awards will be granted. The Compensation
Committees 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 ensures a base level of equity awards with long-term
focus. Restricted stock awards are performance-granted and are
adjusted at the time of grant for both company and individual
performance, as described below. The target equity opportunities
for the 2009 performance year and for the 2010 performance year,
including both the option and restricted stock components are
included below. These target long-term equity opportunities were
derived from peer group and competitive survey benchmarking data
and from the Compensation Committees judgment on the
internal equity of the positions and scope of job
responsibilities. As noted below, no adjustments were made to
targets for the 2010 performance year.
48
Target
Long-Term Equity Opportunities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
2009 Performance
|
|
Performance Year
|
|
2009-2010
|
|
|
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
|
|
$
|
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
|
%
|
D. Mark Leland
|
|
$
|
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 ten 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. |
Our restricted stock awards are performance-granted and will
only be granted to the extent we satisfy specific performance
goals. Once granted, the shares time vest over three years. The
performance goals approved by the Compensation Committee for
purposes of determining the number of restricted stock awards
granted to our named executive officers include (i) our
annual corporate financial goals (weighted at 50%) and
(ii) El Pasos one-year relative TSR compared to
its peer group of companies (weighted at 50%). The Compensation
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 restricted stock pool that is funded based on
El Pasos TSR compared to its peer group of companies
is determined as follows:
Funding
of Restricted Stock
Based on Total Shareholder Return
|
|
|
Total Shareholder
Return
|
|
Equity Pool Funding (% of
target)
|
|
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. |
The funding percentage based on TSR results is then averaged
with the corporate funding percentage approved by the
Compensation Committee relating to the achievement of our annual
corporate financial goals to determine the appropriate funding
percentage for restricted stock awards. The Compensation
Committee then applies the individual performance factors
described on page 44 as an adjustment performance factor to
determine the executive officers actual restricted stock
award.
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 were granted to the named
executive officers on April 1, 2010 and are discussed in
greater detail in our 2010 proxy statement. 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 equity pool at 140%. However,
49
during 2009, El Pasos TSR relative to our peer group
of companies was in the 3rd quartile
(27th 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 only be at 27%. Accordingly, the restricted stock
grants that were granted to the named executive officers in
April 2010 were funded at 83.5% of overall target (50% ×
[140% based on corporate financial performance + 27% based on
TSR performance] = 83.5%) 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.
The number of shares and grant date fair value of the restricted
stock and stock options awarded in April 2010 to each named
executive officer is reflected in the Grants of Plan-Based
Awards table on pages 56 and 57 of this proxy
statement.
Annual
Grant based on 2010 Performance
In February 2011, the Compensation Committee approved the 2011
annual grant of long-term incentive awards in the form of
restricted stock and stock options based on 2010 performance.
These long-term incentive awards are expected to be granted to
the named executive officers on April 1, 2011. During 2010,
we achieved above-target performance of our overall corporate
financial performance goals, resulting in the funding of
one-half of the restricted stock pool at 125%. In addition,
during 2010 El Pasos TSR relative to our peer group
of companies was in the top quartile (87th percentile),
resulting in the funding of one-half of the restricted stock
portion of the equity pool at 150%. Accordingly, restricted
stock grants that will occur in April 2011 based upon 2010
performance will be funded at 137.5% of overall target (50%
× [125% based on corporate financial performance + 150%
based on TSR performance] = 137.5%), with the value of each
named executive officers 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 2011 to each named executive officer
based on 2010 performance are set forth in the table below and
will be reported in next years Grants of Plan-Based Awards
table in accordance with SEC reporting requirements.
Annual
Grant of
Long-Term Incentive Awards
Based on 2010 Performance
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
Restricted Stock
|
Name
|
|
(#)
|
|
(#)
|
|
Douglas L. Foshee
|
|
|
377,604
|
|
|
|
216,413
|
|
John R. Sult
|
|
|
108,507
|
|
|
|
46,399
|
|
Brent J. Smolik
|
|
|
108,507
|
|
|
|
66,828
|
|
James C. Yardley
|
|
|
108,507
|
|
|
|
60,249
|
|
D. Mark Leland
|
|
|
108,507
|
|
|
|
63,712
|
|
|
|
VI.
|
2011
Changes to Compensation Program
|
During 2010, the Compensation Committee reviewed our
compensation program design with an emphasis on ensuring that
our long-term incentives are directly tied to long-term
performance and the creation of stockholder value. As part of
this review, the Compensation Committee considered incorporating
into our equity program multi-year performance measures as well
as performance-based vesting. Based on this review and with
input from Deloitte and management, in December 2010 the
Compensation Committee approved certain prospective changes to
our equity program that will commence with the 2011 performance
year. Specifically, the Compensation Committee intends to
incorporate performance shares into our equity program, along
with traditional stock options and time-vested restricted stock.
The performance shares will vest solely on the basis of
El Pasos multi-year
50
relative TSR results, will be settled in stock, and no dividends
will be paid on unvested performance shares. With 2011 as a
transition year, the performance share grant will utilize two
performance periods, with half of the target grant vesting on
El Pasos TSR results over a two year period
(2011-2012),
and half on TSR results over a three year period
(2011-2013).
For grants in 2012 and beyond, the performance shares will vest
entirely on three-year relative TSR performance. Vesting will
occur in accordance with the following schedule, with the
vesting percentage interpolated for TSR results between the
25th and
50th
percentile and the
50th and
75th
percentile.
|
|
|
|
|
El Paso TSR
Results
|
|
Vesting
|
|
<25th
percentile
|
|
|
0
|
%
|
25th
percentile
|
|
|
25
|
%
|
50th
percentile
|
|
|
100
|
%
|
75th
percentile and above
|
|
|
200
|
%
|
The committee believes the addition of performance shares to our
equity program is appropriate to ensure that our compensation
program is aligned with best practices in compensation and
governance, to incentivize superior stock performance over a
multi-year period and to further align the interests of our
named executive officers with our stockholders.
In contrast to our current equity program which is comprised of
an approximate
50/50
combination of stock options and performance-granted restricted
stock, our new equity program will be comprised of an
approximate
30/30/40
split among options, restricted stock and performance shares,
respectively. As indicated above, these changes to our equity
program will commence in 2011.
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 Sections 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 may 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 2010 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. 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, 2010, 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.
51
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 executives consent or knowledge. This
prohibition also applies to our non-employee directors.
Compensation
Recovery
We adopted a clawback policy in 2005 in connection with the
adoption of our omnibus plan. Under our omnibus plan, which
provides for grants of annual cash incentive awards and
long-term incentive awards, if it is determined that a
participant 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
participant 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.
In addition, the Dodd-Frank Wall Street Reform and Consumer
Protection Act, which was signed into law on July 21, 2010,
imposes a number of new executive compensation related
requirements on public companies, including a requirement to
adopt a clawback policy in conformance with the act (the
Dodd-Frank Clawback). The SEC is currently in the
process of preparing regulations on the Dodd-Frank Clawback, and
once such regulations are finalized, we will comply accordingly.
The implementation of the Dodd-Frank Clawback may require us to
amend or modify our current clawback policy.
52
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 Pasos Corporate Governance Guidelines.
The Compensation Committee currently consists of
Messrs. Shapiro, Hix and Vagt 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 Pasos 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
|
|
Thomas R. Hix
|
|
Ferrell P. McClean
|
|
Robert F. Vagt
|
(Chairman)
|
|
(Member)
|
|
(Member)
|
|
(Member)
|
53
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
|
|
|
2010
|
|
|
$
|
1,068,756
|
|
|
$
|
0
|
|
|
$
|
2,489,145
|
|
|
$
|
2,320,752
|
|
|
$
|
2,100,000
|
|
|
$
|
277,670
|
|
|
$
|
197,311
|
|
|
$
|
8,453,634
|
|
Chairman, President &
|
|
|
2009
|
|
|
$
|
1,050,000
|
|
|
$
|
0
|
|
|
$
|
1,441,998
|
|
|
$
|
1,748,180
|
|
|
$
|
1,800,000
|
|
|
$
|
191,521
|
|
|
$
|
75,203
|
|
|
$
|
6,306,902
|
|
Chief Executive Officer
|
|
|
2008
|
|
|
$
|
1,037,502
|
|
|
$
|
0
|
|
|
$
|
2,323,916
|
|
|
$
|
2,164,560
|
|
|
$
|
593,220
|
|
|
$
|
139,878
|
|
|
$
|
118,212
|
|
|
$
|
6,377,288
|
|
John R. Sult
|
|
|
2010
|
|
|
$
|
441,253
|
|
|
$
|
0
|
|
|
$
|
401,476
|
|
|
$
|
400,128
|
|
|
$
|
500,000
|
|
|
$
|
62,373
|
|
|
$
|
33,356
|
|
|
$
|
1,838,586
|
|
Executive Vice President &
|
|
|
2009
|
|
|
$
|
345,675
|
|
|
$
|
0
|
|
|
$
|
158,508
|
|
|
$
|
162,762
|
|
|
$
|
300,000
|
|
|
$
|
46,755
|
|
|
$
|
26,270
|
|
|
$
|
1,039,970
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brent J. Smolik
|
|
|
2010
|
|
|
$
|
576,636
|
|
|
$
|
0
|
|
|
$
|
722,650
|
|
|
$
|
666,883
|
|
|
$
|
1,000,000
|
|
|
$
|
118,356
|
|
|
$
|
72,049
|
|
|
$
|
3,156,574
|
|
Executive Vice President &
|
|
|
2009
|
|
|
$
|
566,520
|
|
|
$
|
0
|
|
|
$
|
385,023
|
|
|
$
|
502,351
|
|
|
$
|
1,000,000
|
|
|
$
|
57,136
|
|
|
$
|
34,724
|
|
|
$
|
2,545,754
|
|
President of Exploration &
|
|
|
2008
|
|
|
$
|
562,392
|
|
|
$
|
0
|
|
|
$
|
667,799
|
|
|
$
|
622,000
|
|
|
$
|
172,500
|
|
|
$
|
46,011
|
|
|
$
|
26,950
|
|
|
$
|
2,097,652
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James C. Yardley
|
|
|
2010
|
|
|
$
|
526,257
|
|
|
$
|
0
|
|
|
$
|
508,534
|
|
|
$
|
666,883
|
|
|
$
|
500,000
|
|
|
$
|
340,436
|
|
|
$
|
58,817
|
|
|
$
|
2,600,927
|
|
Executive Vice President,
|
|
|
2009
|
|
|
$
|
515,016
|
|
|
$
|
0
|
|
|
$
|
490,443
|
|
|
$
|
502,351
|
|
|
$
|
500,000
|
|
|
$
|
487,692
|
|
|
$
|
34,279
|
|
|
$
|
2,529,781
|
|
Pipeline Group
|
|
|
2008
|
|
|
$
|
511,263
|
|
|
$
|
0
|
|
|
$
|
607,076
|
|
|
$
|
622,000
|
|
|
$
|
195,000
|
|
|
$
|
57,869
|
|
|
$
|
48,395
|
|
|
$
|
2,041,603
|
|
D. Mark Leland
|
|
|
2010
|
|
|
$
|
527,442
|
|
|
$
|
0
|
|
|
$
|
615,592
|
|
|
$
|
666,883
|
|
|
$
|
500,000
|
|
|
$
|
135,307
|
|
|
$
|
57,235
|
|
|
$
|
2,502,459
|
|
Executive Vice President &
|
|
|
2009
|
|
|
$
|
519,756
|
|
|
$
|
0
|
|
|
$
|
405,877
|
|
|
$
|
502,351
|
|
|
$
|
500,000
|
|
|
$
|
134,549
|
|
|
$
|
31,829
|
|
|
$
|
2,094,362
|
|
President of Midstream
|
|
|
2008
|
|
|
$
|
519,756
|
|
|
$
|
0
|
|
|
$
|
728,505
|
|
|
$
|
622,000
|
|
|
$
|
162,000
|
|
|
$
|
13,116
|
|
|
$
|
43,905
|
|
|
$
|
2,089,282
|
|
|
|
|
(1) |
|
Amounts in this column reflect the aggregate grant date fair
value of stock awards or option awards, as applicable, granted
to each named executive officer under the Companys 2005
Omnibus Incentive Compensation Plan computed in accordance with
Financial Accounting Standards Board Accounting Standards
Codification Topic 718, Compensation Stock
Compensation (FASB ASC Topic 718). The
grant date fair value used to calculate these amounts is the
same as that used for our stock-based compensation disclosure in
Note 15 to our financial statements included in our 2010
Annual Report on
Form 10-K
filed with the SEC on March 1, 2011. |
|
(2) |
|
The amount in this column for 2010 reflects each named executive
officers annual cash incentive bonus earned for 2010
performance. Annual cash incentive bonuses are performance-based
and driven by company and individual performance. Amounts for
2010 were paid to the named executive officers in March 2011.
See the discussion under Annual Cash Incentive Awards for
2010 Performance in the Compensation Discussion and
Analysis for additional information. |
|
(3) |
|
The amount in this column for 2010 reflects the annual change in
the actuarial present value of each named executive
officers 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. Foshees,
Sults, Smoliks, Yardleys and Lelands
accumulated pension and supplemental pension benefits for 2010
is $272,796, $61,847, $117,938, $339,095 and $133,855,
respectively. |
|
(4) |
|
The amount in this column for 2010 also reflects above-market
interest credited to the named executive officers
supplemental Retirement Savings Plan account balances. During
2010, interest was credited to the balance of each executive
officers supplemental Retirement Savings Plan account
balance on a monthly basis at a rate equal to the average of
Moodys Seasoned Aaa Corporate Bond Rate and Moodys
Seasoned Baa Corporate Bond Rate, as published by Moodys
Investors Services, Inc. It was determined that the rate of
interest exceeded 120% of the applicable federal long-term rate
for each month during 2010. The total amount of the above-market
interest credited to Messrs. Foshees, Sults,
Smoliks, Yardleys and Lelands supplemental
Retirement Savings Plan account balance during 2010 was $4,874,
$526, $418, $1,341 and |
54
|
|
|
|
|
$1,452, respectively. See the Nonqualified Deferred Compensation
table and narrative description on pages 63 and 64 of this
proxy statement for a description of the named executive
officers supplemental Retirement Savings Plan benefits. |
|
(5) |
|
The compensation reflected in the All Other
Compensation column for 2010 for each of the named
executive officers includes company matching contributions to
our Retirement Savings Plan, supplemental company matching
contributions for the Retirement Savings Plan accrued under our
2005 Supplemental Benefits Plan, the incremental cost to
El Paso of personal use of aircraft, annual executive
physicals, financial planning assistance and limited tax
reimbursements, which are listed in the table immediately below. |
All Other
Compensation included in the Summary Compensation Table for
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
Supplemental
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matching
|
|
Company Matching
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
Contributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to the
|
|
under the
|
|
Personal
|
|
Annual
|
|
|
|
|
|
|
|
|
|
|
Retirement
|
|
2005 Supplemental
|
|
Use of
|
|
Executive
|
|
Financial
|
|
Tax
|
|
|
|
|
|
|
Savings Plan
|
|
Benefits Plan
|
|
Aircraft
|
|
Physicals
|
|
Planning
|
|
Reimbursements
|
|
Total
|
|
|
Name
|
|
($)
|
|
($) (A)
|
|
($) (B)
|
|
($) (C)
|
|
($) (D)
|
|
($) (E)
|
|
($)
|
|
|
|
Douglas L. Foshee
|
|
$
|
11,025
|
|
|
$
|
118,069
|
|
|
$
|
53,984
|
|
|
$
|
2,767
|
|
|
$
|
10,000
|
|
|
$
|
1,466
|
|
|
$
|
197,311
|
|
|
|
|
|
John R. Sult
|
|
$
|
11,025
|
|
|
$
|
22,331
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
33,356
|
|
|
|
|
|
Brent J. Smolik
|
|
$
|
11,025
|
|
|
$
|
59,924
|
|
|
$
|
0
|
|
|
$
|
1,100
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
72,049
|
|
|
|
|
|
James C. Yardley
|
|
$
|
11,025
|
|
|
$
|
35,157
|
|
|
$
|
993
|
|
|
$
|
1,285
|
|
|
$
|
10,000
|
|
|
$
|
357
|
|
|
$
|
58,817
|
|
|
|
|
|
D. Mark Leland
|
|
$
|
11,025
|
|
|
$
|
35,210
|
|
|
$
|
0
|
|
|
$
|
1,000
|
|
|
$
|
10,000
|
|
|
$
|
0
|
|
|
$
|
57,235
|
|
|
|
|
|
|
|
|
(A) |
|
The compensation reflected in this column for each of the named
executive officers for 2010 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 63 of this proxy statement. |
|
(B) |
|
The amount shown in this column for Mr. Foshee for 2010
reflects the incremental cost to El Paso for occasional
personal use of private aircraft leased by El Paso,
including certain occasions when his spouse or professional
guests accompanied him on business-related flights. 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 officers use of leased
aircraft does not meet the IRSs 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. No tax
gross-ups
are made for flights that are not business-related. Any tax
reimbursements with respect to the imputed income for
business-related travel are reflected in the Tax
Reimbursements column of this table. |
|
(C) |
|
The amounts in this column for 2010 reflect the cost to
El Paso for executive officer annual physicals. |
|
(D) |
|
The amounts in this column for 2010 reflect the cost to
El Paso for financial and tax planning assistance provided
to the executive officers. This amount is imputed as income and
no tax-gross
up is provided. Messrs. Sult and Smolik elected not to
receive the financial planning services during 2010. |
|
(E) |
|
The amounts in this column for 2010 reflect tax reimbursements
associated with imputed income for occasions when the
executives spouse accompanied him on a business-related
flight. |
55
Grants of
Plan-Based Awards Table
The following table sets forth the range of potential annual
cash incentive bonuses for 2010 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 2010 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 2010, 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 2010. 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, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
$
|
645,005
|
|
|
$
|
1,290,010
|
|
|
$
|
2,902,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
4/1/2010
|
|
|
|
2/23/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
511,765
|
|
|
$
|
11.07
|
|
|
$
|
11.18
|
|
|
$
|
2,320,752
|
|
Restricted Stock
|
|
|
4/1/2010
|
|
|
|
2/23/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
224,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,489,145
|
|
John R. Sult
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Incentive
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
0
|
|
|
$
|
135,000
|
|
|
$
|
270,000
|
|
|
$
|
607,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
4/1/2010
|
|
|
|
2/23/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88,235
|
|
|
$
|
11.07
|
|
|
$
|
11.18
|
|
|
$
|
400,128
|
|
Restrictive Stock
|
|
|
4/1/2010
|
|
|
|
2/23/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
401,476
|
|
Brent J. Smolik
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Incentive
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
0
|
|
|
$
|
261,004
|
|
|
$
|
522,007
|
|
|
$
|
1,174,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
4/1/2010
|
|
|
|
2/23/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147,059
|
|
|
$
|
11.07
|
|
|
$
|
11.18
|
|
|
$
|
666,883
|
|
Restricted Stock
|
|
|
4/1/2010
|
|
|
|
2/23/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
722,650
|
|
James C. Yardley
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Incentive
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
0
|
|
|
$
|
198,752
|
|
|
$
|
397,503
|
|
|
$
|
894,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
4/1/2010
|
|
|
|
2/23/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147,059
|
|
|
$
|
11.07
|
|
|
$
|
11.18
|
|
|
$
|
666,883
|
|
Restricted Stock
|
|
|
4/1/2010
|
|
|
|
2/23/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
508,534
|
|
D. Mark Leland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Incentive
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
0
|
|
|
$
|
159,001
|
|
|
$
|
318,002
|
|
|
$
|
715,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
4/1/2010
|
|
|
|
2/23/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147,059
|
|
|
$
|
11.07
|
|
|
$
|
11.18
|
|
|
$
|
666,883
|
|
Restricted Stock
|
|
|
4/1/2010
|
|
|
|
2/23/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
615,592
|
|
|
|
|
(1) |
|
These columns show the potential value of the payout of the
annual cash incentive bonuses for 2010 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 actual amount of the annual cash incentive
bonuses paid for 2010 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,
Smolik, Yardley and Leland for 2010 performance was capped at
2.25 times the executive officers target bonus opportunity
for the year. |
|
(3) |
|
This column shows the number of shares of restricted stock
granted in 2010 to the named executive officers. The shares vest
in three equal annual installments beginning one year from the
date of grant. |
|
(4) |
|
This column shows the number of stock options granted in 2010 to
the named executive officers. The stock options vest in three
equal annual installments beginning one year from the date of
grant. |
56
|
|
|
(5) |
|
This column shows the exercise price for the stock options
granted during 2010, 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 2010. 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, 2010. The equity awards were granted
under our 2005 Omnibus Incentive Compensation Plan. The stock
options and restricted stock awards approved on
February 23, 2010 and granted on April 1, 2010 were
made as part of our 2010 annual grant of long-term incentive
awards based on 2009 performance. See Annual Grant based
on 2009 Performance on page 49 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, 2010 was $11.07. The grant date fair
value per option for the stock options granted on April 1,
2010 was $4.53, computed using a Black-Scholes option-pricing
model based on several assumptions. These assumptions are based
on managements best estimate at the time of grant and are
listed below, as follows:
|
|
|
|
|
|
|
Grant Date
|
|
|
04/01/2010
|
|
Expected Term in Years
|
|
|
6.0
|
|
Expected Volatility
|
|
|
40
|
%
|
Expected Dividends
|
|
|
0.5
|
%
|
Risk-Free Interest Rate
|
|
|
2.95
|
%
|
Restricted stock carries voting and dividend
rights. Dividends are paid on restricted stock
directly to the holder of the restricted stock and at the same
rate as other holders of our common stock. Dividends are not
paid on unexercised stock options. The amount of dividends
received during 2010 on shares of unvested restricted stock
granted to the named executive officers is factored into the
grant date fair value per share and is not required to be
included in the Summary Compensation Table or Grants of
Plan-Based Awards table but is reflected in the table below.
|
|
|
|
|
|
|
Dividends Received
|
|
|
during 2010 on
|
|
|
Restricted Stock
|
Name
|
|
($)
|
|
Douglas L. Foshee
|
|
$
|
16,702
|
|
John R. Sult
|
|
$
|
2,061
|
|
Brent J. Smolik
|
|
$
|
4,627
|
|
James C. Yardley
|
|
$
|
4,864
|
|
D. Mark Leland
|
|
$
|
4,783
|
|
Restricted shares are subject to forfeiture in the event of a
termination of employment. The restrictions will lapse on any
unvested shares of restricted stock and any unvested stock
options become fully exercisable in the event of an
executives 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. 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.
57
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, 2010. The table also provides
the exercise price and date of expiration of each unexercised
stock option.
Outstanding
Equity Awards
at December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
46,372
|
(6)
|
|
$
|
638,079
|
|
|
|
|
375,000
|
|
|
|
0
|
|
|
$
|
7.090
|
|
|
|
4/01/2014
|
|
|
|
102,190
|
(7)
|
|
$
|
1,406,134
|
|
|
|
|
403,950
|
|
|
|
0
|
|
|
$
|
10.685
|
|
|
|
4/01/2015
|
|
|
|
74,338
|
(8)
|
|
$
|
1,022,891
|
|
|
|
|
252,722
|
|
|
|
0
|
|
|
$
|
12.155
|
|
|
|
4/03/2016
|
|
|
|
224,855
|
(9)
|
|
$
|
3,094,005
|
|
|
|
|
369,270
|
|
|
|
0
|
|
|
$
|
14.580
|
|
|
|
4/02/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
251,300
|
|
|
|
125,650
|
(3)
|
|
$
|
16.705
|
|
|
|
4/01/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
201,950
|
|
|
|
403,900
|
(4)
|
|
$
|
6.335
|
|
|
|
4/01/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
511,765
|
(5)
|
|
$
|
11.070
|
|
|
|
4/01/2020
|
|
|
|
|
|
|
|
|
|
John R. Sult
|
|
|
53,667
|
|
|
|
0
|
|
|
$
|
11.620
|
|
|
|
10/24/2015
|
|
|
|
5,887
|
(6)
|
|
$
|
81,005
|
|
|
|
|
19,738
|
|
|
|
0
|
|
|
$
|
12.155
|
|
|
|
4/03/2016
|
|
|
|
16,680
|
(7)
|
|
$
|
229,517
|
|
|
|
|
34,380
|
|
|
|
0
|
|
|
$
|
14.580
|
|
|
|
4/02/2017
|
|
|
|
36,267
|
(9)
|
|
$
|
499,034
|
|
|
|
|
23,397
|
|
|
|
11,698
|
(3)
|
|
$
|
16.705
|
|
|
|
4/01/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
18,803
|
|
|
|
37,604
|
(4)
|
|
$
|
6.335
|
|
|
|
4/01/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
88,235
|
(5)
|
|
$
|
11.070
|
|
|
|
4/01/2020
|
|
|
|
|
|
|
|
|
|
Brent J. Smolik
|
|
|
106,112
|
|
|
|
0
|
|
|
$
|
14.580
|
|
|
|
4/02/2017
|
|
|
|
13,325
|
(6)
|
|
$
|
183,352
|
|
|
|
|
72,213
|
|
|
|
36,106
|
(3)
|
|
$
|
16.705
|
|
|
|
4/01/2018
|
|
|
|
26,106
|
(7)
|
|
$
|
359,219
|
|
|
|
|
58,032
|
|
|
|
116,063
|
(4)
|
|
$
|
6.335
|
|
|
|
4/01/2019
|
|
|
|
21,617
|
(8)
|
|
$
|
297,450
|
|
|
|
|
0
|
|
|
|
147,059
|
(5)
|
|
$
|
11.070
|
|
|
|
4/01/2020
|
|
|
|
65,280
|
(9)
|
|
$
|
898,253
|
|
James C. Yardley
|
|
|
55,000
|
|
|
|
0
|
|
|
$
|
62.975
|
|
|
|
1/29/2011
|
|
|
|
12,114
|
(6)
|
|
$
|
166,689
|
|
|
|
|
6,375
|
|
|
|
0
|
|
|
$
|
62.975
|
|
|
|
1/29/2011
|
|
|
|
35,321
|
(7)
|
|
$
|
486,017
|
|
|
|
|
40,000
|
|
|
|
0
|
|
|
$
|
46.275
|
|
|
|
8/13/2011
|
|
|
|
24,436
|
(8)
|
|
$
|
336,239
|
|
|
|
|
48,875
|
|
|
|
0
|
|
|
$
|
7.090
|
|
|
|
4/01/2014
|
|
|
|
45,938
|
(9)
|
|
$
|
632,107
|
|
|
|
|
45,462
|
|
|
|
0
|
|
|
$
|
10.685
|
|
|
|
4/01/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
25,352
|
|
|
|
0
|
|
|
$
|
12.155
|
|
|
|
4/03/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
0
|
|
|
$
|
14.275
|
|
|
|
8/16/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
106,112
|
|
|
|
0
|
|
|
$
|
14.580
|
|
|
|
4/02/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
72,213
|
|
|
|
36,106
|
(3)
|
|
$
|
16.705
|
|
|
|
4/01/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
58,032
|
|
|
|
116,063
|
(4)
|
|
$
|
6.335
|
|
|
|
4/01/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
147,059
|
(5)
|
|
$
|
11.070
|
|
|
|
4/01/2020
|
|
|
|
|
|
|
|
|
|
D. Mark Leland
|
|
|
55,000
|
|
|
|
0
|
|
|
$
|
62.975
|
|
|
|
1/29/2011
|
|
|
|
14,537
|
(6)
|
|
$
|
200,029
|
|
|
|
|
6,375
|
|
|
|
0
|
|
|
$
|
62.975
|
|
|
|
1/29/2011
|
|
|
|
29,178
|
(7)
|
|
$
|
401,489
|
|
|
|
|
20,000
|
|
|
|
0
|
|
|
$
|
46.275
|
|
|
|
8/13/2011
|
|
|
|
20,301
|
(8)
|
|
$
|
279,342
|
|
|
|
|
53,125
|
|
|
|
0
|
|
|
$
|
7.090
|
|
|
|
4/01/2014
|
|
|
|
55,609
|
(9)
|
|
$
|
765,180
|
|
|
|
|
49,080
|
|
|
|
0
|
|
|
$
|
10.685
|
|
|
|
4/01/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
0
|
|
|
$
|
11.990
|
|
|
|
8/10/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
69,863
|
|
|
|
0
|
|
|
$
|
12.155
|
|
|
|
4/03/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
106,112
|
|
|
|
0
|
|
|
$
|
14.580
|
|
|
|
4/02/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
72,213
|
|
|
|
36,106
|
(3)
|
|
$
|
16.705
|
|
|
|
4/01/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
58,032
|
|
|
|
116,063
|
(4)
|
|
$
|
6.335
|
|
|
|
4/01/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
147,059
|
(5)
|
|
$
|
11.070
|
|
|
|
4/01/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 $13.76, the closing price of our common stock on
December 31, 2010 by the number of shares of stock. |
58
|
|
|
(3) |
|
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 date on April 1, 2011. |
|
(4) |
|
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 the remaining vesting dates on April 1, 2011
and April 1, 2012. |
|
(5) |
|
These are stock options that were granted as part of the 2010
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, 2011,
April 1, 2012 and April 1, 2013. |
|
(6) |
|
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 date on
April 1, 2011. |
|
(7) |
|
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 the remaining vesting dates on
April 1, 2011 and April 1, 2012. |
|
(8) |
|
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. |
|
(9) |
|
These are shares of restricted stock that were granted as part
of the 2010 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, 2011,
April 1, 2012 and April 1, 2013. |
59
Option
Exercises and Stock Vested Table
The following table sets forth information concerning stock
option exercises and vesting of restricted stock during 2010 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 2010.
Option
Exercises and Stock Vested
During Fiscal Year 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
164,466
|
|
|
$
|
1,820,639
|
|
John R. Sult
|
|
|
0
|
|
|
$
|
0
|
|
|
|
21,633
|
|
|
$
|
239,477
|
|
Brent J. Smolik
|
|
|
0
|
|
|
$
|
0
|
|
|
|
43,959
|
|
|
$
|
486,626
|
|
James C. Yardley
|
|
|
0
|
|
|
$
|
0
|
|
|
|
53,507
|
|
|
$
|
592,322
|
|
D. Mark Leland
|
|
|
0
|
|
|
$
|
0
|
|
|
|
55,496
|
|
|
$
|
614,341
|
|
|
|
|
(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. |
60
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 officers 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 2010. No pension benefits were paid to the
named executive officers during 2010.
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
|
|
|
7
|
|
|
$
|
108,575
|
|
|
$
|
0
|
|
|
|
Supplemental Benefits Plan
|
|
|
1
|
|
|
$
|
75,128
|
|
|
$
|
0
|
|
|
|
2005 Supplemental Benefits Plan
|
|
|
6
|
|
|
$
|
821,497
|
|
|
$
|
0
|
|
John R. Sult
|
|
Pension Plan
|
|
|
5
|
|
|
$
|
75,354
|
|
|
$
|
0
|
|
|
|
Supplemental Benefits Plan
|
|
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
2005 Supplemental Benefits Plan
|
|
|
5
|
|
|
$
|
111,261
|
|
|
$
|
0
|
|
Brent J. Smolik
|
|
Pension Plan
|
|
|
4
|
|
|
$
|
59,923
|
|
|
$
|
0
|
|
|
|
Supplemental Benefits Plan
|
|
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
2005 Supplemental Benefits Plan
|
|
|
4
|
|
|
$
|
199,731
|
|
|
$
|
0
|
|
James C. Yardley
|
|
Pension Plan
|
|
|
33
|
|
|
$
|
1,243,038
|
|
|
$
|
0
|
|
|
|
Supplemental Benefits Plan
|
|
|
27
|
|
|
$
|
1,657,662
|
|
|
$
|
0
|
|
|
|
2005 Supplemental Benefits Plan
|
|
|
6
|
|
|
$
|
0
|
|
|
$
|
0
|
|
D. Mark Leland
|
|
Pension Plan
|
|
|
25
|
|
|
$
|
306,814
|
|
|
$
|
0
|
|
|
|
Supplemental Benefits Plan
|
|
|
19
|
|
|
$
|
321,021
|
|
|
$
|
0
|
|
|
|
2005 Supplemental Benefits Plan
|
|
|
6
|
|
|
$
|
35,299
|
|
|
$
|
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). |
|
(2) |
|
The present value of the named executive officers
accumulated pension benefits in this column reflects a
5.01 percent discount rate and December 31, 2010
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
interest credit of 4 percent per year, plus a pay credit
equal to a percentage of salary and bonus. The pay credit
61
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 officers accumulated
benefits are calculated as of December 31, 2010 using the
same assumptions that are used for our pension liability
disclosure in Note 13 to our financial statements included
in our 2010 Annual Report on
Form 10-K
filed with the SEC on March 1, 2011. 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 and Smolik, 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 2010 was $195,000. For 2010,
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 Plans 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
termination of employment. The supplemental Retirement Savings
Plan benefits under the plan include a credit
62
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 participants death, supplemental pension
benefits become fully vested and nonforfeitable.
Named Executive Officers Eligible for Early
Retirement. Because Mr. Yardley is
age 59, 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, 2010 and commenced his benefits as of
January 1, 2011, the present value of his accumulated
benefits would have been $1,350,000 for the Pension Plan and
$1,800,000 for the Supplemental Benefits Plan (based on the same
assumptions used above). Note that these amounts exceed those
shown in the Pension Benefits table for Mr. Yardley because
the value of the early retirement benefits is greater at his
current age.
Nonqualified
Defined Contribution and
Other Nonqualified Deferred Compensation Plans
The following table sets forth information with respect to
nonqualified defined contribution plans for each of the named
executive officers as of December 31, 2010. We sponsor a
supplemental benefits plan that provides for the crediting of
matching contributions that could not be paid under the
Retirement Savings Plan due to Code limitations. We do not
sponsor a traditional nonqualified deferred compensation plan
that provides for deferrals of base salary and bonuses for
executive officers. None of the named executive officers had
withdrawals or distributions of supplemental Retirement Savings
Plan benefits during 2010.
Nonqualified
Deferred Compensation
as of December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registrant
|
|
Aggregate
|
|
Aggregate
|
|
|
Contributions in
|
|
Earnings in
|
|
Balance at Last
|
|
|
Last Fiscal Year
|
|
Last Fiscal Year
|
|
Fiscal Year End
|
Name
|
|
($) (1)
|
|
($) (2)
|
|
($) (3)
|
|
Douglas L. Foshee
|
|
$
|
118,069
|
|
|
$
|
32,443
|
|
|
$
|
737,618
|
|
John R. Sult
|
|
$
|
22,331
|
|
|
$
|
3,492
|
|
|
$
|
90,537
|
|
Brent J. Smolik
|
|
$
|
59,924
|
|
|
$
|
2,763
|
|
|
$
|
115,723
|
|
James C. Yardley
|
|
$
|
35,157
|
|
|
$
|
8,926
|
|
|
$
|
206,258
|
|
D. Mark Leland
|
|
$
|
35,210
|
|
|
$
|
9,666
|
|
|
$
|
219,965
|
|
|
|
|
(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 55
of this proxy statement. |
|
(2) |
|
Of the amounts in this column, $4,874 for Mr. Foshee, $526
for Mr. Sult, $418 for Mr. Smolik, $1,341 for
Mr. Yardley and $1,452 for Mr. Leland 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 pages 54 and 55 of this proxy
statement. |
|
(3) |
|
Of the totals in this column, $616,301 for Mr. Foshee,
$37,576 for Mr. Sult, $109,676 for Mr. Smolik,
$145,256 for Mr. Yardley and $169,684 for Mr. Leland
were 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 registrants 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 2010, these excess
benefits were credited to each
63
executives 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 2010, interest was credited
to the balance of each executives supplemental Retirement
Savings Plan account balance on a monthly basis at a rate equal
to the average of Moodys Seasoned Aaa Corporate Bond Rate
and Moodys Seasoned Baa Corporate Bond Rate, as published
by Moodys Investors Services, Inc. The balance of each
executives 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 62 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, 2010, 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 officers
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, 2010
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 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
|
|
$
|
107,623
|
|
|
$
|
888,765
|
|
|
$
|
201,820
|
|
|
$
|
737,618
|
|
|
$
|
0
|
|
|
$
|
12,063,494
|
|
|
$
|
13,999,320
|
|
John R. Sult
|
|
$
|
75,024
|
|
|
$
|
110,774
|
|
|
$
|
181,312
|
|
|
$
|
90,537
|
|
|
$
|
0
|
|
|
$
|
286,139
|
|
|
$
|
743,786
|
|
Brent J. Smolik
|
|
$
|
59,280
|
|
|
$
|
197,590
|
|
|
$
|
219,291
|
|
|
$
|
115,723
|
|
|
$
|
0
|
|
|
$
|
430,888
|
|
|
$
|
1,022,772
|
|
James C. Yardley
|
|
$
|
1,348,077
|
|
|
$
|
1,799,469
|
|
|
$
|
1,025,053
|
|
|
$
|
206,258
|
|
|
$
|
3,090
|
|
|
$
|
1,589,786
|
|
|
$
|
5,971,733
|
|
D. Mark Leland
|
|
$
|
262,736
|
|
|
$
|
391,675
|
|
|
$
|
488,798
|
|
|
$
|
219,965
|
|
|
$
|
0
|
|
|
$
|
1,136,782
|
|
|
$
|
2,499,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,237,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amounts in this column reflect a lump sum payment. |
64
|
|
|
(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 $13.76, the closing
price of our common stock on December 31, 2010, and the
applicable exercise price for each stock option.
Mr. Yardley is age 59 and eligible for early
retirement. Therefore, for Mr. Yardley, this column also
shows the value of shares of restricted stock that could vest on
a pro-rata basis in the event of retirement calculated using
$13.76, the closing price of our common stock on
December 31, 2010. |
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 that the executive officer would be
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 participants position, or (2) a termination as
a result of a reduction in force. The amount of severance pay is
based on the individuals years of service and his or her
compensation level. The maximum amount of severance pay is 1
times the participants annual base salary. Severance pay
is paid in a 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 and unvested
stock options are forfeited in the event of an involuntary
termination without cause. Unless they 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
|
|
$
|
1,075,008
|
|
|
$
|
3,117
|
|
|
$
|
2,343,521
|
|
|
|
$3,421,646
|
|
John R. Sult
|
|
$
|
450,000
|
|
|
$
|
3,369
|
|
|
$
|
267,880
|
|
|
|
$ 721,249
|
|
Brent J. Smolik
|
|
$
|
580,008
|
|
|
$
|
3,369
|
|
|
$
|
661,140
|
|
|
|
$1,244,517
|
|
James C. Yardley
|
|
$
|
530,004
|
|
|
$
|
0
|
(2)
|
|
$
|
0
|
|
|
|
$ 530,004
|
|
D. Mark Leland
|
|
$
|
530,004
|
|
|
$
|
3,369
|
|
|
$
|
645,881
|
|
|
|
$1,179,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$7,096,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
For Messrs. Foshee, Sult, Smolik and Leland, 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 $13.76, the closing price of our
common stock on December 31, 2010. The value of
Mr. Yardleys 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. Yardleys continued medical benefits
is included in the voluntary termination table. |
65
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 59 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, 2010, is reflected in the voluntary
termination table above. The commencement of pension benefits
before age 65 may result in a participants 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 61 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 officers 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
officers annual salary. Under our equity compensation
plan, outstanding stock options become fully vested and
exercisable and the restriction periods applicable to shares of
restricted stock immediately lapse in the event of death. Unless
stock options expire by their own terms, the executive
officers 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
|
|
$
|
2,688,000
|
|
|
$
|
4,375,605
|
|
|
$
|
6,161,109
|
|
|
$
|
13,224,714
|
|
John R. Sult
|
|
$
|
1,125,000
|
|
|
$
|
516,562
|
|
|
$
|
809,556
|
|
|
$
|
2,451,118
|
|
Brent J. Smolik
|
|
$
|
1,450,000
|
|
|
$
|
1,257,356
|
|
|
$
|
1,738,273
|
|
|
$
|
4,445,629
|
|
James C. Yardley(3)
|
|
$
|
1,325,000
|
|
|
$
|
1,257,356
|
|
|
$
|
968,635
|
|
|
$
|
3,550,991
|
|
D. Mark Leland
|
|
$
|
1,325,000
|
|
|
$
|
1,257,356
|
|
|
$
|
1,646,040
|
|
|
$
|
4,228,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,900,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 $13.76, the closing price of
our common stock on December 31, 2010. |
|
(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 $13.76, the closing price of
our common stock on December 31, 2010. |
|
(3) |
|
The Pension Benefits and Supplemental Pension Benefits payable
to Mr. Yardleys 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. Yardleys death, his
beneficiary would receive $621,606 in Pension Benefits and
$723,419 in Supplemental Pension Benefits in lieu of the Pension
Benefits and Supplemental Benefits amounts disclosed under the
Payments made upon the voluntary termination table on
page 64 of this proxy statement. |
66
Incremental
Payments made upon Disability
The following table reflects the incremental value of enhanced
benefits the named executive officers would receive in the event
of permanent disability above the compensation and benefits the
executive officers are entitled to as a result of a voluntary
termination, which include disability benefits, the value of
unvested stock options that become fully vested and the value of
restricted stock that vests on a pro-rata basis. The named
executive officers may elect to receive the disability benefits
that are generally available to all eligible employees under our
health and welfare benefits plan. In the event of a named
executive officers permanent disability, disability income
would be payable on a monthly basis as long as the executive
officer qualifies as permanently disabled. For purposes of this
table, we have assumed the executive officer is disabled for a
period of one year. The restrictions on outstanding shares of
restricted stock lapse on a prorated basis and all stock options
become fully vested and exercisable in the event an executive
officer becomes permanently disabled. Unless stock options
expire by their own terms, vested stock options may be exercised
for a period of three years following permanent disability.
Incremental
Payments made upon Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Awards
|
|
|
|
|
|
|
Disability
|
|
|
Stock
|
|
|
Restricted
|
|
|
|
|
|
|
Income
|
|
|
Options
|
|
|
Stock
|
|
|
Total
|
|
Name
|
|
($) (1)
|
|
|
($) (2)
|
|
|
($) (3)
|
|
|
($)
|
|
|
Douglas L. Foshee
|
|
$
|
300,000
|
|
|
$
|
4,375,605
|
|
|
$
|
2,343,521
|
|
|
$
|
7,019,126
|
|
John R. Sult
|
|
$
|
225,000
|
|
|
$
|
516,562
|
|
|
$
|
267,880
|
|
|
$
|
1,009,442
|
|
Brent J. Smolik
|
|
$
|
300,000
|
|
|
$
|
1,257,356
|
|
|
$
|
661,140
|
|
|
$
|
2,218,496
|
|
James C. Yardley
|
|
$
|
265,002
|
|
|
$
|
1,257,356
|
|
|
$
|
0
|
|
|
$
|
1,522,358
|
|
D. Mark Leland
|
|
$
|
265,002
|
|
|
$
|
1,257,356
|
|
|
$
|
645,881
|
|
|
$
|
2,168,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,937,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In the event of a named executive officers 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 $13.76, the closing price of
our common stock on December 31, 2010. |
|
(3) |
|
For Messrs. Foshee, Sult, Smolik and Leland, this column
shows the value of shares of restricted stock that vest on a
pro-rata basis in the event of disability calculated using
$13.76, the closing price of our common stock on
December 31, 2010. The value of Mr. Yardleys
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
67
our 2004 Key Executive Severance Protection Plan and the value
of stock options and restricted stock that become fully vested.
The plan provides severance benefits following an
involuntary/good reason 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, Smolik, Yardley and
Leland; (2) a pro-rated portion of the executives
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, Smolik,
Yardley and Leland; (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 would not be
entitled to a
gross-up
payment and payments to the executive would be reduced to the
extent necessary so that the payments would 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 plan, in the event
of an involuntary/good reason termination of employment within
two years of a change in control of El Paso, 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
|
|
$
|
7,095,053
|
|
|
$
|
1,290,010
|
|
|
$
|
37,665
|
|
|
$
|
4,375,605
|
|
|
$
|
6,161,109
|
|
|
$
|
18,959,442
|
|
John R. Sult
|
|
$
|
1,440,000
|
|
|
$
|
270,000
|
|
|
$
|
27,126
|
|
|
$
|
516,562
|
|
|
$
|
809,556
|
|
|
$
|
3,063,244
|
|
Brent J. Smolik
|
|
$
|
2,204,030
|
|
|
$
|
522,007
|
|
|
$
|
27,126
|
|
|
$
|
1,257,356
|
|
|
$
|
1,738,273
|
|
|
$
|
5,748,792
|
|
James C. Yardley
|
|
$
|
1,855,014
|
|
|
$
|
397,503
|
|
|
$
|
17,868
|
|
|
$
|
1,257,356
|
|
|
$
|
968,635
|
|
|
$
|
4,496,376
|
|
D. Mark Leland
|
|
$
|
1,696,013
|
|
|
$
|
318,002
|
|
|
$
|
27,126
|
|
|
$
|
1,257,356
|
|
|
$
|
1,646,040
|
|
|
$
|
4,944,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
37,212,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
This column shows the value of stock options that become fully
vested and exercisable in the event of a change in control of
El Paso calculated using $13.76, the closing price of our
common stock on December 31, 2010. |
|
(2) |
|
This column shows the value of shares of restricted stock that
become fully vested in the event of a change in control of
El Paso calculated using $13.76, the closing price of our
common stock on December 31, 2010. |
|
(3) |
|
The named executive officers did not exceed their respective
Code Section 280G safe harbor amounts and therefore no
gross-up
payment for federal excise taxes would have been owed in the
event their employment was terminated on December 31, 2010
following a change in control of El Paso. |
Benefits are payable for any termination of employment of an
executive who participates in the 2004 Key Executive Severance
Protection Plan within two years following the date of a change
in control, except where termination is by reason of death,
disability, for cause or instituted by the executive other than
for good reason. Good reason means, as to any
executive, the occurrence of any of the following events or
conditions following a change in control: (a) a reduction
in the executives status, title, position or
responsibilities, (b) a reduction in the executives
annual base salary, (c) the requirement that the
executives principal place of employment be outside a
50 mile radius of his or her principal place of employment
immediately prior to the change in control; (d) the
68
termination of any material compensation and benefits provided
to the executive immediately prior to the change in control,
(e) any material breaches of any provision of the plan and
(f) any termination of the executives employment for
cause which does not comply with the plan. Benefits are not
payable for any termination of employment following a change in
control if (i) the termination occurs in connection with
the sale, divestiture or other disposition of our designated
subsidiaries, (ii) the purchaser or entity subject to the
transaction agrees to provide severance benefits at least equal
to the benefits available under the plan, and (iii) the
executive is offered, or accepts, employment with the purchaser
or entity subject to the transaction. A change in
control generally occurs if: (i) any person or entity
becomes the beneficial owner of more than 20 percent of our
common stock; (ii) a majority of the current members of our
Board of Directors or their approved successors cease to be our
directors (or, in the event of a merger, the ultimate parent
following the merger); or (iii) a merger, consolidation, or
reorganization, our complete liquidation or dissolution, or the
sale or disposition of all or substantially all of our and our
subsidiaries assets (other than a transaction in which the
same stockholders before the transaction own 50 percent of
the outstanding common stock after the transaction is complete).
The 2004 Key Executive Severance Protection Plan generally may
be amended or terminated at any time prior to a change in
control, provided that any amendment or termination that would
adversely affect the benefits or protections of any executive
under the plan would be null and void as it relates to that
executive if a change in control occurs within one year of the
amendment or termination. In addition, any amendment or
termination of the plan in connection with, or in anticipation
of, a change in control which actually occurs would be null and
void. From and after a change in control, the plan may not be
amended in any manner that would adversely affect the benefits
or protections provided to any executive under the plan.
69
Compensation
Policies and Practices as they Relate to Risk
Management
With the help of its compensation consultant Deloitte, during
2010 the Compensation Committee reviewed our compensation
policies and practices for all employees, including the named
executive officers, and determined that our compensation
policies and practices, taking into account our internal
controls related to compensation and the mitigating features
incorporated into our compensation programs, do not encourage
inappropriate risk-taking.
Specifically, the Compensation Committee noted a number of
design features of our cash incentive and equity programs that
mitigate these risks, including:
|
|
|
|
|
total direct compensation for our executive officers is heavily
weighted in equity, which may reduce the risk of our executive
officers making decisions that benefit the short-term at the
expense of the companys long-term performance;
|
|
|
|
performance measures utilized in the incentive compensation
arrangements for all employees have both short-and long-term
performance implications, thus discouraging participants from
manipulating short-term performance at the expense of long-term
performance;
|
|
|
|
the design of annual incentives for all employees includes an
annual cap on the amount of short-term compensation that may be
earned;
|
|
|
|
each business units incentive plan is based on a blend of
financial and non-financial performance metrics that, when
combined, discourages excessive risk taking and the manipulation
of performance;
|
|
|
|
financial metrics focus on growth, profitability and balance
sheet improvement, while the non-financial metrics focus on
operational excellence and safety;
|
|
|
|
due to the mix of financial and non-financial performance
metrics, participants cannot unduly benefit by focusing on a
single performance measure;
|
|
|
|
business unit goals are established using a rigorous process and
are tied to the companys annual budget;
|
|
|
|
incentive plan metrics and goals are approved by the
Compensation Committee in February of each year and goals are
not altered during the performance cycle;
|
|
|
|
the company has a rigorous verification and review process to
calculate the attainment of performance goals under each
incentive plan;
|
|
|
|
the company has a compensation recovery policy that applies to
all employees receiving annual incentive or equity awards,
including our named executive officers, that allows the company
to clawback awards if an employee knowingly engages
in, or was grossly negligent to, misconduct that causes us to
prepare an accounting restatement due to material noncompliance
with any financial reporting requirement; and
|
|
|
|
executive officers are subject to stock ownership requirements.
|
70
DIRECTOR
COMPENSATION
Our non-employee directors are compensated for their services on
the Board under the 2005 Compensation Plan for Non-Employee
Directors, which is designed to attract and retain highly
qualified individuals to serve as members of our Board. All
members of the Board are reimbursed for their reasonable
expenses for attending Board functions. As an employee director,
Mr. Foshee does not receive any additional compensation for
serving on the Board of Directors.
Pursuant to our 2005 Compensation Plan for Non-Employee
Directors, non-employee directors receive an annual retainer of
$80,000, $20,000 of which is required to be paid in deferred
shares of our common stock and the remaining $60,000 of which is
paid at the election of the director in any combination of cash,
deferred cash or deferred shares of common stock. For any
compensation received in deferred shares rather than cash, he or
she is credited with deferred shares with a value representing a
25 percent premium to the cash retainer he or she would
otherwise have received. For example, an individual director
could receive $60,000 in cash and $25,000 ($20,000, plus a
$5,000 premium) in mandatory deferred common stock assuming he
or she elects not to take additional deferred common stock or
could receive $100,000 in deferred common stock assuming he or
she elects to take the entire retainer in deferred common stock.
Each non-employee director who chairs a Committee of the Board
of Directors receives an additional retainer of $15,000 per
year, except for the Chairman of the Audit Committee who
receives an additional retainer of $20,000 per year, which may
be paid in the same manner as the annual retainer (with a total
up to $18,750, or $25,000 in the case of the Audit Committee
Chairman, if he or she elects to take the entire retainer in
deferred common stock). Each member of the Audit Committee,
other than the Audit Committee Chairman, receives an additional
amount of $5,000 per year to compensate him or her for the
additional meetings required by the Audit Committee, which
amount may be paid in the same manner as the annual retainer
(with a total of up to $6,250 if he or she elects to take the
entire amount in deferred common stock).
Each non-employee director also receives an annual long-term
equity credit in the form of deferred shares of our common stock
(without any premium) equal to the amount of the annual retainer
(currently $80,000). Directors are not entitled to receive their
deferred amounts until they cease to be a director of
El Paso.
The Compensation Committee, in consultation with its independent
compensation consultant, periodically reviews non-employee
director compensation and recommends changes (if appropriate) to
the full Board of Directors based upon competitive market
practices. The Compensation Committee did not recommend any
increases to our non-employee director compensation program
during 2010.
Lead
Director
Mr. Talbert receives the same compensation as other
non-employee directors for his service on the Board, plus an
additional retainer of $30,000 per year, which may be paid in
the same manner as the annual retainer, to compensate him for
the additional time spent on Board matters as Lead Director.
Director
Charitable Award Plan Terminated
The Director Charitable Award Plan was adopted in January 1992
to provide for each eligible director to designate up to four
charitable organizations to receive a maximum of $1,000,000 in
the aggregate upon the death of each director participant. A
director was eligible to participate after two consecutive years
of service on the Board of Directors. The Director Charitable
Award Plan was terminated on December 4, 2003, with respect
to any new participants, including current directors that had
not served on the Board for at least two years as of the date
the plan was terminated. Messrs. Braniff and Hall (and
thirteen former directors) participate in this plan. The reserve
for the Director Charitable Award Plan is combined with the
total reserves maintained by our insurance captive and has
historically been funded with a combination of investment income
and annual premium payments. Directors derive no financial
benefit from this program since all charitable deductions accrue
solely to El Paso. No premium payments were made to the
plan in 2010, and we do not expect that any premium payments
will need to be made in future years.
71
Educational
Matching Gift Program
Non-employee directors may participate in our Educational
Matching Gift Program, which is a broad-based charitable program
available to all full-time employees, as well as Board members.
Under the program, we match contributions to eligible colleges,
universities and primary and secondary schools up to an annual
maximum of $5,000 per employee or director. No non-employee
directors participated in this program dur