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
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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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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)
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Dear El Paso Stockholder:
We cordially invite you to attend our 2008 Annual Meeting of
Stockholders. The Annual Meeting will be held on May 14,
2008, beginning at 9:00 a.m. (local/Central time) at the
Doubletree Hotel Houston Downtown, 400 Dallas Street,
Houston, Texas 77002.
At this years Annual Meeting, you will be asked to vote on
the election of directors, and the ratification of
Ernst & Young LLPs appointment as our
independent registered public accounting firm.
With regard to the election of directors, you should know that
your company is well-governed. Thirteen of our 14 nominee
directors are independent. We have a separate Chairman and CEO
and we do not have a staggered board, so each of our directors
stands for election every year. Our By-laws provide for the
election of directors by the majority vote of stockholders in
uncontested elections. This means the votes cast for a
nominees election must exceed the votes cast against such
nominees election in order for him or her to be elected to
the Board. 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 the event
a director fails to receive a majority of votes cast and the
Board accepts the resignation tendered, then that director would
cease to be a director of El Paso. Our Board has adopted
certain standards of independence to assist the Board in its
assessment of the independence of each director and the
materiality of the directors relationship with
El Paso.
In addition, we do not have a poison pill plan, and all shares
of El Paso common stock available for grant to our
directors, executive officers and employees have been approved
by our stockholders. But as important as any of this, we have an
active and engaged Board with the right mix of leadership,
industry, finance, academic and legal experience that is built
on El Pasos five core values: stewardship, integrity,
safety, accountability and excellence.
We continue to welcome the SECs enhanced disclosure
requirements for director and officer compensation and are
committed to providing transparent and fulsome compensation
disclosures. In addition to required disclosures, we have
included in the accompanying proxy statement individual
executive profiles that summarize the compensation earned or
paid in 2007 to our CEO, our CFO and our three other most highly
compensated executive officers. These individual executive
profiles summarize the compensation disclosures that are
provided in more detail in the Compensation Discussion and
Analysis and executive compensation tables. We believe these
individual executive profiles, which begin on page 22 of
the proxy statement, provide a clear and concise summary that is
easy to understand.
I urge you to vote for your Boards nominees. Your vote is
important. I hope you will be able to attend the meeting, but if
you cannot, please vote your proxy as soon as you can.
Sincerely,
Douglas L. Foshee
President and Chief Executive Officer
Houston, Texas
March 27, 2008
EL PASO
CORPORATION
1001 Louisiana Street
Houston, Texas 77002
NOTICE OF 2008 ANNUAL MEETING
OF STOCKHOLDERS
May 14, 2008
On May 14, 2008, El Paso Corporation will hold its
2008 Annual Meeting of Stockholders at the Doubletree Hotel
Houston Downtown, 400 Dallas Street, Houston, Texas 77002. The
Annual Meeting will begin at 9:00 a.m. (local/Central time).
Only El Paso stockholders who owned shares of our common
stock at the close of business on March 17, 2008, are
entitled to notice of, and can vote at, this Annual Meeting or
any adjournments or postponements that may take place. At the
Annual Meeting, you will be asked to consider and take action
with respect to the election of 14 directors, each to hold
office for a term of one year, and to ratify the appointment of
Ernst & Young LLP as our independent registered public
accounting firm for the fiscal year ending December 31,
2008.
We will also attend to any other business properly presented at
the Annual Meeting. The Board of Directors is not aware of any
other matters to be presented at the Annual Meeting.
By Order of the Board of Directors
Marguerite N. Woung-Chapman
Corporate Secretary
Houston, Texas
March 27, 2008
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
2008 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 14,
2008
Our proxy statement for the 2008 Annual Meeting and our Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2007 are available
on our website at www.elpaso.com under the tab entitled
Investors.
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 pages 2 and 3
for more information on what documents you will need for
admission to the Annual Meeting. Registration will begin at
8:00 a.m. (local/Central time), and seating will be on a
first come first served basis. No cameras, recording
equipment or other electronic devices will be allowed in the
meeting room. If you do not provide photo identification or
comply with the other procedures outlined above upon request,
you may not be admitted to the Annual Meeting. In addition,
please note parking is not provided for the Annual
Meeting. There is parking generally available at the Doubletree
Hotel Houston Downtown and at other public parking garages
around the Doubletree Hotel Houston Downtown.
TABLE OF
CONTENTS
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EL PASO
CORPORATION
1001 Louisiana Street
Houston, Texas 77002
PROXY
STATEMENT
2008
ANNUAL MEETING OF STOCKHOLDERS May 14,
2008
Our Board of Directors is furnishing you with this proxy
statement to solicit proxies on its behalf to be voted at the
2008 Annual Meeting of Stockholders of El Paso Corporation.
The Annual Meeting will be held at the Doubletree Hotel Houston
Downtown, 400 Dallas Street, Houston, Texas 77002, on Thursday,
May 14, 2008, at 9:00 a.m. (local/Central time). The
proxies also may be voted at any adjournments or postponements
of the Annual Meeting.
This proxy statement, the notice of Annual Meeting and the
enclosed proxy card are being mailed to stockholders beginning
on or about March 27, 2008. All properly executed written
proxies that are delivered pursuant to this solicitation will be
voted at the Annual Meeting. Each person who is an El Paso
stockholder of record at the close of business on March 17,
2008, the record date, is entitled to vote at the Annual
Meeting, or at adjournments or postponements of the Annual
Meeting.
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 17, 2008, 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 17, 2008.
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:
A. Receive notice of the Annual Meeting; and
B. 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 702,297,943 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.
You can vote in person at the Annual Meeting or by proxy. For
shares that you hold directly as a registered shareholder, you
have three ways to vote by proxy:
A. Connect to the Internet at
www.investorvote.com/ep;
B. Call
1-800-652-VOTE
(8683); or
C. Complete the proxy card and mail it back to us.
Complete instructions for voting your shares can be found on
your proxy card.
1
If you change your mind on any issue, you may revoke your proxy
at any time before the close of voting at the Annual Meeting.
There are four ways to revoke your proxy:
A. Connect to the Internet at
www.investorvote.com/ep;
B. Call
1-800-652-VOTE
(8683);
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C.
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Write our Corporate Secretary, Marguerite N. Woung-Chapman,
El Paso Corporation, P.O. Box 2511, Houston,
Texas
77252-2511; or
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D. Give notice of revocation to the Inspector of Election
at the Annual Meeting.
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How do I
vote if my shares are held in street name?
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If your shares of common stock are held in the name of your
broker, a bank, or other nominee, only your broker, bank or
other nominee may execute a proxy and vote your shares. Please
sign, date and promptly return the instruction card you received
from your broker, bank or other nominee, in accordance with the
instructions on the card. You may vote by the Internet or
telephone if your bank or broker makes those methods available,
in which case you can follow the instructions on the card. If
you wish to vote your street name shares directly,
you will need to obtain a document known as a legal
proxy from your broker, bank or other nominee. Please
contact your bank, broker or other nominee if you wish to do so.
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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 the proxy
card. Shares represented by proxies will be voted in accordance
with the instructions given by the stockholders. If no
instructions are given, proxy cards that are signed and returned
will be voted FOR the election of all El Paso
director nominees and FOR the proposal to ratify the
appointment of Ernst & Young LLP as our independent
registered public accounting firm.
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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 proxy holders, Douglas L. Foshee,
El Pasos President and Chief Executive Officer, and
Robert W. Baker, El Pasos Executive Vice President
and General Counsel, will vote your shares at their discretion.
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8.
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Who will
count the votes?
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A representative of Computershare Trust Company, N.A., 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.
A quorum is a majority of the aggregate voting power
of the outstanding shares of common stock and is required to
hold the Annual Meeting. A quorum is determined by counting
shares of common stock 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. Shares that brokers do not have the
authority to vote in the absence of timely instructions from the
beneficial owners (broker non-votes) are treated as
present for the purposes of determining a quorum.
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10.
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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 17, 2008, and invited guests of El Paso.
2
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.
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 17, 2008, then you must bring a valid
government-issued personal identification (such as a
drivers license or passport).
If a broker, bank or other nominee was the record holder of
your shares of El Paso common stock on March 17, 2008,
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 17, 2008.
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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 17, 2008; (2) a
brokerage account statement indicating that you owned
El Paso common stock on March 17, 2008; or
(3) the voting instruction card provided by your broker
indicating that you owned El Paso common stock on
March 17, 2008.
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 17, 2008, 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 17, 2008, proof of
the stockholders ownership of shares of El Paso
common stock on March 17, 2008, 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 17, 2008.
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You may not use cameras, recording equipment or other electronic
devices during the Annual Meeting.
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11.
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How many
votes must each proposal receive to be adopted?
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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 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.
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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, 2008, the proposal must
receive the affirmative vote of more than 50 percent in
voting power of the votes cast on the proposal.
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12.
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How are
votes counted?
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Votes are counted in accordance with our By-laws and Delaware
law. A broker non-vote with respect to the election of directors
or any proposal will not be counted in determining the election
of directors or whether the proposal is approved. A broker
non-vote or abstention will be counted towards a quorum. If a
stockholder returns an executed proxy card but does not indicate
how his or her shares are to be voted, the shares covered by
such proxy card will be included in determining if there is a
quorum and will also be counted as votes FOR the
election of all of El Pasos director nominees and
FOR the proposal to ratify the appointment of
Ernst & Young LLP as our independent registered public
accounting firm. 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.
3
No. However, we strongly urge you to vote, regardless of the
amount of your holdings. Your vote is important. You may abstain
from voting or vote FOR or AGAINST all
or some of El Pasos director nominees. You may
abstain from voting or vote FOR or
AGAINST the ratification of Ernst & Young
LLP as our independent registered public accounting firm.
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How can I
view the stockholder list?
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A complete list of 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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15.
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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 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 Shareholder
Communications, Inc. to assist us in soliciting your proxy for
an estimated fee of $16,500, 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
additional copies of the 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 proxy materials to the beneficial owners of
El Paso common stock.
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16.
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If I want
to submit a stockholder proposal for the 2009 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
November 27, 2008. El Paso will consider only
proposals meeting the requirements of the applicable rules of
the Securities and Exchange Commission (SEC).
Additionally, under our By-laws, for a stockholder to bring any
matter before the 2009 Annual Meeting that is not included in
the 2009 Proxy Statement, the stockholders written notice
must be received not less than 90 days nor more than
120 days prior to the first anniversary of the 2008 Annual
Meeting. Under this criterion, stockholders must provide us with
a notice of a matter to be brought before the 2009 Annual
Meeting between January 14, 2009 and February 13, 2009.
If the 2009 Annual Meeting is held more than 30 days before
or 60 days after May 14, 2009, for a stockholder
seeking to bring any matter before the 2009 Annual Meeting, the
stockholders written notice must be received not less than
90 days nor more than 120 days before the date of the
2009 Annual Meeting or by the tenth day after we publicly
announce the date of the 2009 Annual Meeting, if that would
result in a later deadline.
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17.
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How can I
receive the proxy materials electronically?
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If you want to stop receiving paper copies of the proxy
materials, you must consent to electronic delivery. You can give
consent by going to www.econsent.com/ep and following the
instructions. Those of you that hold shares with a broker under
a street name can give consent by going to
www.ICSDelivery.com/ep and following the instructions.
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18.
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How can I
obtain a copy of the Annual Report on
Form 10-K?
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A copy of El Pasos 2007 Annual Report on
Form 10-K
is being mailed with this proxy statement to each stockholder
entitled to vote at the Annual Meeting. If you do not receive a
copy of the Annual Report on
Form 10-K,
you may obtain one free of charge by writing or calling
Ms. Marguerite N. Woung-Chapman, Corporate Secretary,
4
El Paso Corporation, P.O. Box 2511, Houston,
Texas
77252-2511,
telephone
(713) 420-4018
and facsimile
(713) 420-4099.
The Annual Report on
Form 10-K
is also available on our website at www.elpaso.com under
the tab entitled Investors.
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, regulatory agencies and other
stakeholders. A summary of our Corporate Governance Guidelines
is set forth below.
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, 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
New York Stock Exchange (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 President and Chief
Executive Officer Douglas L. Foshee, meet the standards of
independence adopted by the Board and are
independent. Among other things, the Board has
reviewed all of the payments received by Mr. Kuehn during
2007 (as reflected in the Director Compensation table on
page 64 of this proxy statement) and has determined that
none of these payments affects his independence on the Board
because the payments received by him related to either his
service on the Board, or pension and other benefits
Mr. Kuehn is entitled to pursuant to his termination and
consulting agreement that was entered into as part of the merger
with Sonat Inc. in 1999 and which are not dependent upon his
continued service on the Board. The Board also reviewed each
directors commercial and charitable relationships and
determined that, with the exception of Mr. Foshees
service as our President and CEO, none of these relationships
affect the independence of the individual directors. Thus, 13 of
the 14 nominees for the El Paso Board (93 percent) are
independent. Further, our Audit, Compensation,
Governance & Nominating, Finance and Health,
Safety & Environmental Committees are composed
entirely of independent directors.
Audit Committee Financial Expert. The Audit
Committee plays an important role in promoting effective
accounting, financial reporting, risk management and compliance
procedures and controls. All members of our Audit Committee meet
the financial literacy standard required by the NYSE rules and
at least one member qualifies as having accounting or related
financial management expertise under the NYSE rules. In
addition, the Board of Directors has affirmatively determined
that Messrs. Hix (chairman of our Audit Committee), Goldman
and Shapiro are audit committee financial experts.
5
Non-Executive Chairman. Mr. Kuehn
currently serves as the Chairman of our Board of Directors in a
non-executive
capacity. As the Chairman of the Board of Directors,
Mr. Kuehn has a number of responsibilities, which include
setting board meeting agendas in collaboration with the Chief
Executive Officer (CEO), presiding at Board
meetings, executive sessions and the annual stockholders
meeting, assigning tasks to the appropriate committees, and
ensuring that information flows openly between management and
the Board. Stockholders may communicate directly with
Mr. Kuehn by writing to Chairman of the Board,
c/o Corporate
Secretary, El Paso Corporation,
P.O. Box 2511, Houston, Texas
77252-2511,
facsimile
(713) 420-4099.
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. Kuehn presides over the executive sessions of the
Board. During 2007, non-management members of the Board met in
executive session four 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. The individual director evaluations were
last done in 2006. During 2007, each director completed a
written self-assessment of the Board and its committees. The
results of these assessments were compiled and presented to the
Board and the respective committees for discussion and, if
necessary, action.
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, an educational program designed by a nationally
recognized board educational organization. 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.
Mandatory Retirement. Our Corporate Governance
Guidelines provide that directors are subject to a mandatory
retirement age and cannot stand for reelection in the calendar
year following their 72nd birthday. In 2007, our Board of
Directors, upon the recommendation of the Governance &
Nominating Committee, elected to waive the mandatory retirement
provision for one year for Messrs. Joyce, Kuehn and Wyatt,
each of whom would otherwise have been unable to stand for
reelection in 2008. Messrs. Joyce, Kuehn and Wyatt
abstained from the vote. In reaching this decision, the Board
noted that we are in the process of executing and implementing
the final stages of our strategic turnaround plan and felt that
continuity of leadership would benefit our company and its
stockholders. At the same time, the Board affirmed its support
of the mandatory retirement age and reaffirmed all provisions in
the Corporate Governance Guidelines.
Stock Ownership Requirements. Our Board of
Directors is committed to director and senior management stock
ownership. Directors are required to own shares of our common
stock with a value of five times the annual cash retainer paid
to non-employee directors within a five-year time period
following initial election to the Board. The Board also requires
that our CEO own shares of our common stock with a value of at
least five times his or her annual base salary, and that other
executive officers own shares of our common stock with a value
of at least two times their base salary within a five-year time
period following initial election to that position. Each share
of common stock owned by a director or executive officer is
deemed to have a value equal to the greater of (i) the
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trading price of our common stock as of the date the applicable
share was acquired by the director or executive officer or
(ii) the trading price of the share of common stock as of
the measurement date. Shares of restricted stock, deferred
shares, shares in our retirement savings plan or other similar
plans, are counted towards meeting these requirements.
Additionally, a director or executive officer is deemed to own
shares of common stock with a value equal to the in-the-money
value, if any, of any vested or unvested stock option, stock
appreciation right, or similar equity-linked grant that is held
by the director or executive officer on any given measurement
date. Each of our executive officers and non-employee directors
met the stock ownership requirements as of December 31,
2007.
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 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 reelection at the next
meeting at which such person would face reelection. Each of our
directors has submitted an irrevocable letter of resignation
that becomes effective in the event he or she does not receive a
majority of votes cast for his or her election.
Policy on Poison Pill Plans. Our Corporate
Governance Guidelines include a policy on poison pills, or
stockholder rights plans. We do not currently have in place a
stockholders rights plan, and the Board currently has no plans
to adopt such a plan. However, if the Board is presented with a
set of facts and circumstances which leads it to conclude that
adopting a stockholder rights plan would be in the best
interests of stockholders, the Board will seek prior stockholder
approval unless the Board, in exercising its fiduciary
responsibilities under the circumstances, determines by vote of
a majority of the independent directors that such submission
would not be in the best interests of our stockholders in the
circumstances. If the Board were ever to adopt a stockholder
rights plan without prior stockholder approval, the Board would
present such plan to the stockholders for ratification within
one year or cause it to expire within one year, without being
renewed or replaced. Further, if the Board adopts a stockholder
rights plan and our stockholders do not approve such plan, it
will terminate.
Code of Ethics. We have adopted a code of
ethics, referred to as our Code of Business Conduct,
that applies to all of our directors and employees, including
our CEO, Chief Financial Officer (CFO) and senior
financial and accounting officers. Our Code of Business Conduct
is a value-based code that is built on our five core values:
stewardship, integrity, safety, accountability and excellence.
In addition to other matters, our Code of Business Conduct
establishes policies to deter wrongdoing and to promote honest
and ethical conduct, including ethical handling of actual or
apparent conflicts of interest, compliance with applicable laws,
rules and regulations, full, fair, accurate, timely and
understandable disclosure in public communications and prompt
internal reporting of violations of our Code of Business
Conduct. We also have an Ethics & Compliance Office
and Ethics & Compliance Committee, which is composed
of members of senior management that administer our ethics and
compliance program and reports to the Audit Committee of our
Board of Directors. A copy of our Code of Business Conduct is
available on our website at www.elpaso.com. We will post
on our internet website all waivers to or amendments of our Code
of Business Conduct, which are required to be disclosed by
applicable law and the NYSE listing standards. Currently, we do
not have nor do we anticipate any waivers of or amendments to
our Code of Business Conduct. We believe our Code of Business
Conduct exceeds the requirements set forth in the applicable SEC
regulations and the corporate governance rules of the NYSE.
Related Person Transactions Policy. In 2007
our Board 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
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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.
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.
Related Person Transactions in 2007. During
2007, we and certain of our subsidiaries made payments to Nalco
Company, and its subsidiary Nalco Energy Services LP, in the
amount of $2,435,189. The payments relate to the purchase of
maintenance chemicals and lubricants used by our pipeline and
exploration and production business units for certain equipment.
Our director William H. Joyce served as Chairman of the Board
and Chief Executive Officer of Nalco Company during 2007 until
his retirement from Nalco in December 2007. While these
purchases were not done on a competitive bid basis, the amounts
paid for such products are considered fair value, and it would
have cost us substantially more to use a different vendor to
purchase a similar product.
Special Stockholder Meetings. In 2007 our
Board of Directors approved an amendment to our By-laws to
permit stockholders who own at least 25 percent of our
outstanding shares to call a special meeting of stockholders. A
stockholder proposal to permit stockholders to call special
meetings was presented at our 2007 Annual Meeting and received a
vote in favor of 67 percent.
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
Business Conduct, our Restated Certificate of Incorporation and
By-laws, our policy for approval of related person transactions,
biographical information concerning each director, and other
matters regarding our corporate governance principles. We also
provide access through our website to all filings submitted by
El Paso to the SEC. Our website is www.elpaso.com,
and access to this information is free of any charge to the
user (except for any internet provider or telephone charges).
Copies will also be provided to any stockholder upon request.
Information contained on our website is not part of this proxy
statement.
Process for Shareholder 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,
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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 2007 Annual Meeting attended our 2007 Annual Meeting of
Stockholders, with the exception of Ms. McClean, who was
not able to attend due to recent surgery.
INFORMATION
ABOUT THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held seven meetings during
2007. 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
2007 and their principal responsibilities below.
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Governance &
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Health, Safety &
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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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Thomas R. Hix
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Joe B. Wyatt
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Anthony W. Hall, Jr.
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Robert W. Goldman
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John Whitmire
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(Chairman)
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(Chairman)
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(Chairman)
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(Chairman)
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(Chairman)
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Juan Carlos Braniff
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James L. Dunlap
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James L. Dunlap
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Juan Carlos Braniff
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Anthony W. Hall, Jr.
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Robert W. Goldman
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William H. Joyce
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Robert F. Vagt
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Thomas R. Hix
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William H. Joyce
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Steven J. Shapiro
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Ferrell P. McClean
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Joe B. Wyatt
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Ferrell P. McClean
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J. Michael Talbert
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John Whitmire
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Steven J. Shapiro
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Robert F. Vagt
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J. Michael Talbert
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Audit
Committee
The Audit Committee held nine meetings during 2007. The Audit
Committee currently consists of five
non-employee
directors, each of whom the Board has determined is
independent as such term is defined in
Section 10A of the Securities Exchange Act of 1934, as
amended (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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the integrity of our financial statements;
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our disclosure controls and procedures and internal control over
financial reporting;
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the evaluation and retention, including a review of the
qualifications, independence and performance, of independent
auditors and any independent petroleum reserves engineer;
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the performance of our internal audit and ethics and compliance
functions;
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our compliance with legal and regulatory requirements and our
Code of Business Conduct; and
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our risk management policies and procedures.
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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.
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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 appointment, compensation, retention, oversight and
dismissal of any independent petroleum reserves engineer engaged
for the purpose of reviewing, preparing or auditing an estimate
of our natural gas and oil reserves.
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The review of procedures for the receipt, retention and
treatment of complaints received by us regarding any accounting,
internal accounting controls 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 Fees
During 2007, the Audit Committee approved all the types of audit
and permitted non-audit services which our independent auditors
were to perform during the year, as required under applicable
law, and the cap on fees for each of these categories. The Audit
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 beginning
on page 70 of this proxy statement for the aggregate
fees paid to Ernst & Young LLP for the years ended
December 31, 2007 and 2006.
Compensation
Committee
The Compensation Committee held five meetings during 2007. The
Compensation Committee currently consists of six 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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Review and approve annually the individual elements of total
compensation for all of the other senior officers who are
subject to Section 16(a) of the Exchange Act.
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Review appropriate criteria for establishing performance targets
and determining 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 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 approve
all related fees.
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The Compensation Committee Charter can be found on our website
at www.elpaso.com.
The Compensation Committee is responsible 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, based on its evaluation
of company performance and the executives individual
performance relative to
pre-established
performance goals. At the beginning of each calendar year, the
committee approves our corporate and business unit financial and
non-financial performance goals. 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 committee determines the
appropriate funding of the annual cash incentive pool for
payment of annual incentive bonuses and the funding of the
equity pool for grants of long-term incentive awards. The
Compensation Committee then 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 committee meets at least quarterly
and reviews, among other things, our compensation programs and
recommended changes, our peer group, proxy and survey
benchmarking data, internal pay disparity trends, total
compensation profiles for our CEO and other executive officers,
CEO and senior management accountabilities and the general
compensation landscape.
See the Compensation Discussion and Analysis beginning on
page 28 of this proxy statement for a further discussion of
our procedures for determining and establishing executive
compensation, including the Compensation Committees
engagement of an independent executive compensation consultant,
and the role of management in determining executive compensation.
Compensation
Committee Interlocks and Insider Participation
During 2007, the following independent directors served on our
Compensation Committee: Messrs. Dunlap, Joyce, Shapiro,
Talbert and Wyatt and Ms. McClean. The Compensation
Committee has neither interlocks nor insider participation.
Governance &
Nominating Committee
The Governance & Nominating Committee met five times
during 2007. 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
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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
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 should possess the education,
experience and skills necessary to assist and provide oversight
to our management in the operation of our businesses. 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 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. Each director nominee who
appears on the ballot has been recommended by the
Governance & Nominating Committee to the full Board.
Stockholders seeking to nominate persons for election as
directors at the 2009 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 2009 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 2008 Annual
Meeting. Under these criteria, stockholders must provide us with
notice of nominations sought to be made at the 2009 Annual
Meeting between January 14, 2009 and February 13, 2009.
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If the 2009 Annual Meeting is held more than 30 days before
or 60 days after May 14, 2009, for a stockholder
seeking to bring any matter before the 2009 Annual Meeting, the
stockholders written notice must be received not less than
90 days nor more than 120 days before the date of the
2009 Annual Meeting or by the tenth day after we publicly
announce the date of the 2009 Annual Meeting, if that would
result in a later deadline.
Finance
Committee
The Finance Committee met five times during 2007. The Finance
Committee currently consists of five
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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Review and make recommendations regarding our interest rate,
foreign currency, commodity and other financial liquidity risk
management policies, strategies and positions.
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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 2007. 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 pipeline
integrity program and our greenhouse gas emissions inventory and
reduction program.
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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.
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The Health, Safety & Environmental Committee Charter
can be found on our website at www.elpaso.com.
13
PROPOSAL NO. 1
Election of Directors
The Board. You will have the opportunity to
elect our entire Board of Directors, consisting of 14 members,
at the Annual Meeting. All of our incumbent directors are
standing for reelection. 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 14 persons named in this proxy statement as
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. 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 the event
a director fails to receive a majority of votes cast and the
Board accepts the resignation tendered, then that director would
cease to be a director of El Paso. Each of the nominees
named below 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.
OUR BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF EACH OF THE NOMINEES NAMED BELOW.
General Information about the Nominees for Election, as of
March 17, 2008. Each of the following
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 50
Member Audit Committee
Member Finance Committee
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Director
since 1997
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Mr. Braniff has served as a director since 1997.
Mr. Braniff has been Managing Partner 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.
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James
L. Dunlap
Age 70
Member Compensation Committee
Member Governance & Nominating Committee
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Director
since 2003
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Mr. Dunlap has served as a director since 2003.
Mr. Dunlap has primarily been engaged in business
consulting since 1999. Mr. Dunlap previously served as Vice
Chairman, President and Chief Operating Officer of Ocean
Energy/United Meridian Corporation from 1996 to 1999, where he
was responsible for exploration and production and the
development of the international exploration business. For
33 years prior to that date, Mr. Dunlap served Texaco,
Inc. in various positions, including Senior Vice President,
President of Texaco USA, President and Chief Executive Officer
of Texaco Canada Inc. and Vice Chairman of Texaco Ltd., London.
Mr. Dunlap is currently a member of the Advisory Council of
the Nantucket Conservation Foundation, a trustee of the Culver
Educational Foundation and a member of the Corporation of the
Woods Hole Oceanographic.
14
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Douglas
L. Foshee
Age 48
President and Chief Executive Officer,
El Paso Corporation
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Director
since 2003
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Mr. Foshee has been President, Chief Executive Officer and
a director of El Paso since September 2003. Mr. Foshee
became Executive Vice President and Chief Operating Officer of
Halliburton Company in 2003, 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. Under the plan of
reorganization, all current and future asbestos and silica
personal injury claims were channeled into trusts established
for the benefit of asbestos and silica claimants. Prior to
assuming his position at Halliburton, Mr. Foshee was
President, Chief Executive Officer and Chairman of the Board of
Nuevo Energy Company from 1997 to 2001. From 1993 to 1997,
Mr. Foshee served Torch Energy Advisors Inc. in various
capacities, including Chief Executive Officer and Chief
Operating Officer. Mr. Foshee serves on the Federal Reserve
Bank of Dallas, Houston Branch, as a director. Mr. Foshee
serves on the Board of Trustees of Rice University, where he
chairs the Building and Grounds Committee and serves as a member
of the Council of Overseers for the Jesse H. Jones Graduate
School of Management at Rice University. He is a member of the
Greater Houston Partnership Board and Executive Committee and
serves as Chair of the Environment Advisory Committee. In
addition, Mr. Foshee serves on the boards of Central
Houston, Inc., Childrens Museum of Houston, Goodwill
Industries, Small Steps Nurturing Center and the Texas Business
Hall of Fame Foundation. Mr. Foshee serves on the board of
directors of El Paso Pipeline GP Company, L.L.C., the
general partner of El Pasos publicly-traded master
limited partnership, El Paso Pipeline Partners, L.P.
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Robert
W. Goldman
Age 65
Chairman Finance Committee
Member Audit Committee
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Director
since 2003
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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,
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. Mr. Goldman is the elected
Vice President, Finance of the World Petroleum Council, and a
member of the Financial Executives Institute and the Outside
Advisory Council of Global Infrastructure Partners.
Mr. Goldman serves on the board of directors of McDermott
International, Inc., Parker Drilling Company and Tesoro
Corporation. Mr. Goldman also serves on the Board of
Trustees of Kenyon College, Gambier, Ohio.
15
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Anthony
W. Hall, Jr.
Age 63
Chairman Governance & Nominating Committee
Member Health, Safety & Environmental Committee
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Director
since 2001
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Mr. Hall has served as a director since 2001. Mr. Hall
has been Chief Administrative Officer of the City of Houston
since January 2004. Mr. Hall served as the City Attorney
for the City of Houston from March 1998 to January 2004.
Mr. Hall served as a director of The Coastal Corporation
from August 1999 to January 2001. Prior to March 1998,
Mr. Hall was a partner in the Houston law firm of Jackson
Walker, LLP. Mr. Hall is a director of Houston Endowment
Inc. and Chairman of the Boulé Foundation.
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Thomas
R. Hix
Age 60
Chairman Audit Committee
Member Finance Committee
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Director
since 2004
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Mr. Hix has served as a director since 2004. Mr. Hix
has been a business consultant since January 2003. Mr. Hix
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 is a member of the board of directors of Health
Care Service Corporation.
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William
H. Joyce
Age 72
Member Compensation Committee
Member Health, Safety & Environmental Committee
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Director
since 2004
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Dr. Joyce has served as a director since 2004.
Dr. Joyce served as Chairman of the Board and Chief
Executive Officer of Nalco Company from November 2003 to
December 2007. From May 2001 to October 2003, Dr. Joyce
served as Chairman and Chief Executive Officer of Hercules Inc.
From February 2001 to May 2001, Dr. Joyce served as Vice
Chairman of the Board of Dow Chemical Corporation following its
merger with Union Carbide Corporation. Dr. Joyce was named
Chief Executive Officer of Union Carbide Corporation in 1995 and
Chairman of the Board in 1996. Prior to 1995, Dr. Joyce
served in various positions with Union Carbide. Dr. Joyce
is a director of CVS Corporation.
16
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Ronald
L. Kuehn, Jr.
Age 72
Chairman of the Board,
El Paso Corporation
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Director
since 1999
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Mr. Kuehn has served as a director since 1999 and is
currently the Chairman of the El Paso Board of Directors.
Mr. Kuehn was Chairman of the Board and Interim Chief
Executive Officer of El Paso from March 2003 to September
2003. From September 2002 to March 2003, Mr. Kuehn was the
Lead Director of El Paso. From January 2001 to March 2003,
he was a business consultant. Mr. Kuehn served as
non-executive Chairman of the Board of El Paso from
October 25, 1999 to December 31, 2000. Mr. Kuehn
served as President and Chief Executive Officer of Sonat Inc.
from June 1984 until his retirement on October 25, 1999.
Mr. Kuehn was Chairman of the Board of Sonat Inc. from
April 1986 until his retirement. Mr. Kuehn is a director of
Praxair, Inc. and served on the Board of Directors of The
Dun & Bradstreet Corporation until September 30,
2007 and Regions Financial Corporation until April 19,
2007. Mr. Kuehn serves as Chairman of the Board of
El Paso Pipeline GP Company, L.L.C.
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Ferrell
P. McClean
Age 61
Member Compensation Committee
Member Finance Committee
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Director
since 2006
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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 and is currently on the board of directors of
GrafTech International Ltd. (formerly UCAR International, Inc.).
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Steven
J. Shapiro
Age 56
Member Audit Committee
Member Compensation Committee
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Director
since 2006
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Mr. Shapiro has served as a director since 2006. From
October 2000 to April 2006, Mr. Shapiro served as executive
vice president and chief financial officer of Burlington
Resources Inc. During his five-year tenure at Burlington
Resources, Mr. Shapiro served as a member of the board of
directors and the office of the chairman. Before that, 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 (ARCO). Mr. Shapiro recently served as chairman of
the executive committee of the American Petroleum
Institutes general committee on finance and is a trustee
of the Houston Museum of Natural Science. Mr. Shapiro is a
member of the board of directors of Barrick Gold
Corporation.
17
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J.
Michael Talbert
Age 61
Member Compensation Committee
Member Health, Safety & Environmental Committee
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Director
since 2003
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Mr. Talbert has served as a director since 2003.
Mr. Talbert served as executive Chairman of the Board of
Transocean Inc. from October 2002 to October 2004 and as
non-executive Chairman from October 2004 to November 2007.
Previously, Mr. Talbert served as Chief Executive Officer
of Transocean, Inc. and its predecessor companies from August
1994 until October 2002, Chairman of the Board from August 1994
until September 1999, and as President from December 1999 until
December 2001. Mr. Talbert served as Chairman of the Board
of The Offshore Drilling Company (TODCO) from February 2004 to
October 2005. He served as President and Chief Executive Officer
of Lone Star Gas Company from 1990 to 1994. Mr. Talbert
served as President of Texas Oil & Gas Company from
1987 to 1990, and served in various positions at Shell Oil
Company from 1970 to 1982. Mr. Talbert is a past Chairman
of the National Ocean Industries Association and a member of the
University of Akrons College of Engineering Advancement
Council. Mr. Talbert is a member of the board of directors
of Transocean Inc.
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Robert
F. Vagt
Age 61
Member Finance Committee
Member Governance & Nominating Committee
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Director
since 2005
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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.
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John
L. Whitmire
Age 67
Chairman Health, Safety & Environmental
Committee
Member Audit Committee
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Director
since 2003
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Mr. Whitmire has served as a director since 2003.
Mr. Whitmire has been Chairman of CONSOL Energy, Inc. since
1999. He served as Chairman and Chief Executive Officer of Union
Texas Petroleum Holdings, Inc. from 1996 to 1998, and spent over
30 years serving Phillips Petroleum Company in various
positions including Executive Vice President of Worldwide
Exploration and Production from 1992 to 1996 and Vice President
of North American Exploration and Production from 1988 to 1992.
Mr. Whitmire also served as a member of the Phillips
Petroleum Company Board of Directors from 1994 to 1996.
Mr. Whitmire is a member of the board of directors of
Transocean Inc.
18
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Joe
B. Wyatt
Age 72
Chairman Compensation Committee
Member Governance & Nominating Committee
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Director
since 1999
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Mr. Wyatt has served as a director since 1999.
Mr. Wyatt has served as Chancellor Emeritus of Vanderbilt
University since August 2000. For eighteen years prior to that
date, he served as Chancellor, Chief Executive Officer and
Trustee of Vanderbilt University. Prior to joining Vanderbilt
University, Mr. Wyatt was a member of the faculty and Vice
President Administration of Harvard University. From 1984 until
October 1999, Mr. Wyatt was a director of Sonat Inc.
Mr. Wyatt is a principal of the Washington Advisory Group
and Chairman of the Universities Research Association. He is a
director of Ingram Micro, Inc. and Hercules, Inc.
19
SECURITY
OWNERSHIP OF A CERTAIN BENEFICIAL OWNER AND MANAGEMENT
The following table sets forth information as of
February 29, 2008 regarding beneficial ownership of our
common stock by each director, our CEO, our CFO and the other
three most highly compensated 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.
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Beneficial Ownership
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Stock
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Percent
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Title of Class
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Name of Beneficial Owner
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(Excluding Options) (1)
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Options (2)
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Total
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of Class (3)
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Common Stock
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Franklin Resources, Inc.(4)
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56,493,607
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0
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56,493,607
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8.1%
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One Franklin Parkway
San Mateo, CA 94403-1906
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Common Stock
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FMR LLC(5)
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37,109,628
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0
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37,109,628
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5.3%
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82 Devonshire Street
Boston, MA 02109
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Common Stock
|
|
|
J. C. Braniff
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97,646
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(6)
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15,000
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112,646
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*
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Common Stock
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|
J. L. Dunlap
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60,119
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8,000
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68,119
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*
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Common Stock
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R. W. Goldman
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73,096
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8,000
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81,096
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*
|
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Common Stock
|
|
|
A. W. Hall, Jr.
|
|
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72,358
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12,000
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|
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84,358
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*
|
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Common Stock
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T. R. Hix
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55,653
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0
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55,653
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*
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Common Stock
|
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|
W. H. Joyce
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53,872
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0
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53,872
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*
|
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Common Stock
|
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R. L. Kuehn, Jr.
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350,148
|
(7)
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123,600
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473,748
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*
|
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Common Stock
|
|
|
F. P. McClean
|
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33,056
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(8)
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0
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33,056
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*
|
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Common Stock
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J. M. Talbert
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50,315
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8,000
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58,315
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*
|
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Common Stock
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S. J. Shapiro
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24,217
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0
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24,217
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*
|
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Common Stock
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R. F. Vagt
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24,518
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0
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24,518
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*
|
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Common Stock
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|
|
J. L. Whitmire
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88,127
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|
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8,000
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|
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96,127
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*
|
|
Common Stock
|
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|
J. B. Wyatt
|
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94,492
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|
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14,000
|
|
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108,492
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*
|
|
Common Stock
|
|
|
D. L. Foshee
|
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777,593
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|
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|
1,769,533
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2,547,126
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*
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Common Stock
|
|
|
D. M. Leland
|
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221,329
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|
|
|
346,256
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|
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567,585
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|
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*
|
|
Common Stock
|
|
|
B. J. Smolik
|
|
|
176,073
|
|
|
|
35,371
|
|
|
|
211,444
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|
|
*
|
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Common Stock
|
|
|
R. W. Baker
|
|
|
257,783
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|
|
|
475,228
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|
|
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733,011
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|
|
*
|
|
Common Stock
|
|
|
J. C. Yardley
|
|
|
177,818
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|
|
|
332,685
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|
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|
510,503
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|
|
*
|
|
Common Stock
|
|
|
Directors and executive officers as a group
(21 persons total), including those individuals listed above
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|
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3,007,553
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|
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3,917,905
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|
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6,925,458
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|
|
*
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* |
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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
February 29, 2008) as a result of deferral elections
made in accordance with our benefit plans. These individuals
share voting power with the trustee under that plan and receive
dividend equivalents on such shares, but do not have the power
to dispose of, or direct the disposition of, such shares until
such shares are distributed. In addition, some shares of common
stock reflected in this column for certain individuals are
subject to restrictions. None of the shares of common stock
reflected in this column have been pledged as security. |
|
(2) |
|
The directors and executive officers have the right to acquire
the shares of common stock reflected in this column within
60 days of February 29, 2008, through the exercise of
stock options. As of February 29, 2008, |
20
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certain individuals listed in the table have vested stock
options that have an exercise price of $40 or higher, which
options are included in the table above. It is not likely that
our stock price will reach $40 during the remaining terms of
these stock options, thus it is not likely the stock options
will be in-the-money before they expire by their own terms. The
number of stock options at or above a $40 exercise price for
Messrs. Braniff, Hall, Kuehn, Wyatt, Leland, Baker and
Yardley is 5,000, 6,000, 8,000, 8,000, 144,375, 156,709 and
174,375 stock options, respectively. Stock options granted under
our plans are not subject to execution, attachment or similar
process and cannot be transferred, assigned, pledged or
hypothecated in any manner other than by will or by the
applicable laws of descent and distribution. |
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(3) |
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Based on 700,795,328 shares outstanding as of
February 29, 2008. |
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(4) |
|
According to a Schedule 13G/A filed on February 8,
2008, as of December 31, 2007, Franklin Resources, Inc. was
deemed to beneficially own 56,493,607 shares of common
stock. |
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(5) |
|
According to a Schedule 13G filed on February 14,
2008, as of December 31, 2007, FMR LLC was deemed to
beneficially own 37,109,628 shares of common stock. |
|
(6) |
|
Mr. Braniffs beneficial ownership excludes
3,500 shares owned by his wife. Mr. Braniff disclaims
any beneficial ownership in those shares. |
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(7) |
|
Mr. Kuehns beneficial ownership excludes
28,720 shares owned by his wife or children. Mr. Kuehn
disclaims any beneficial ownership in those shares. |
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(8) |
|
Ms. McCleans beneficial ownership includes
1,500 shares held by her husbands IRA and
2,475 shares held in a revocable trust. |
The following table sets forth, as of February 29, 2008,
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.
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|
|
|
|
|
|
Percentage of
|
|
|
|
|
Common Units
|
|
Common Units
|
Title of Class
|
|
Name of Beneficial Owner
|
|
Beneficially Owned
|
|
Beneficially Owned (1)
|
|
Common Units
|
|
J. C. Braniff
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|
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0
|
|
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|
*
|
|
Common Units
|
|
J. L. Dunlap
|
|
|
7,500
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|
|
*
|
|
Common Units
|
|
R. W. Goldman
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|
|
5,000
|
|
|
|
*
|
|
Common Units
|
|
A. W. Hall, Jr.
|
|
|
0
|
|
|
|
*
|
|
Common Units
|
|
T. R. Hix
|
|
|
0
|
|
|
|
*
|
|
Common Units
|
|
W. H. Joyce
|
|
|
0
|
|
|
|
*
|
|
Common Units
|
|
R. L. Kuehn, Jr.
|
|
|
62,070
|
|
|
|
*
|
|
Common Units
|
|
F. P. McClean
|
|
|
8,000
|
|
|
|
*
|
|
Common Units
|
|
J. M. Talbert
|
|
|
0
|
|
|
|
*
|
|
Common Units
|
|
S. J. Shapiro
|
|
|
6,000
|
|
|
|
*
|
|
Common Units
|
|
R. F. Vagt
|
|
|
0
|
|
|
|
*
|
|
Common Units
|
|
J. L. Whitmire
|
|
|
25,000
|
|
|
|
*
|
|
Common Units
|
|
J. B. Wyatt
|
|
|
15,000
|
|
|
|
*
|
|
Common Units
|
|
D. L. Foshee
|
|
|
25,000
|
|
|
|
*
|
|
Common Units
|
|
D. M. Leland
|
|
|
13,200
|
|
|
|
*
|
|
Common Units
|
|
B. J. Smolik
|
|
|
12,500
|
|
|
|
*
|
|
Common Units
|
|
R. W. Baker
|
|
|
5,000
|
|
|
|
*
|
|
Common Units
|
|
J. C. Yardley
|
|
|
10,000
|
|
|
|
*
|
|
|
|
Directors and executive officers as a group (21 persons
total), including those individuals listed above
|
|
|
196,270
|
|
|
|
*
|
|
|
|
|
* |
|
Less than one percent |
|
(1) |
|
Based on 57,194,036 common units outstanding as of
February 29, 2008. |
21
INDIVIDUAL
EXECUTIVE PROFILES
The following are individual executive profiles that summarize
the compensation earned or paid in 2007 to our CEO, our CFO and
our three other most highly compensated executive officers, whom
we refer to as our 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 2007 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 43 of
this proxy statement. Please consult those tables and the
accompanying footnotes for an explanation of how the
compensation information is calculated.
22
Douglas
L.
Foshee:
Individual Executive Profile
President, Chief Executive
Officer,
and a Director of El Paso Corporation
Age: 48
Tenure with El Paso:
5 years
Tenure in Industry: 26 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 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 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 serves on the Federal Reserve
Bank of Dallas, Houston Branch, as a director. Mr. Foshee
serves on the Board of Trustees of Rice University where he
chairs the Building and Grounds Committee and serves as a member
of the Council of Overseers for the Jesse H. Jones Graduate
School of Management at Rice University. He is a member of the
Greater Houston Partnership Board and Executive Committee and
serves as Chair of the Environment Advisory Committee. In
addition, Mr. Foshee serves on the boards of Central
Houston, Inc.,
Childrens Museum of Houston, Goodwill Industries,
Small Steps Nurturing Center and the Texas Business Hall of Fame
Foundation. Mr. Foshee also serves as a director of El Paso
Pipeline GP Company, L.L.C., the general partner of
El Pasos publicly-traded master limited partnership,
El Paso Pipeline Partners, L.P.
2007
Compensation1
|
|
|
|
|
Salary
|
|
|
|
|
Base Salary
|
|
$
|
987,507
|
|
Performance-Based Cash Bonus
|
|
$
|
1,518,000
|
|
Perquisites and Personal Benefits
|
|
$
|
58,961
|
|
|
|
|
|
|
Annual Long-Term
Incentive Award
|
|
|
|
|
|
|
|
|
|
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock
|
|
$
|
2,930,536
|
|
Stock Options
|
|
$
|
2,017,100
|
|
Restricted Stock Dividends
|
|
$
|
59,693
|
|
|
|
|
|
|
Retirement
Benefits
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual increase in accumulated pension benefit
|
|
$
|
109,103
|
|
|
|
|
|
|
Retirement Savings Plan (RSP)
|
|
|
|
|
Company matching contribution to RSP
|
|
$
|
10,125
|
|
Supplemental RSP benefit
|
|
$
|
97,313
|
|
Annual earnings on supplemental RSP benefit
|
|
$
|
19,043
|
|
2007
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,
2007)
|
|
|
|
|
Voluntary Termination
|
|
$
|
13,017,813
|
|
Involuntary Termination without Cause
|
|
$
|
3,327,353
|
2
|
Retirement
|
|
$
|
0
|
2
|
Death
|
|
$
|
15,439,751
|
2
|
Disability
|
|
$
|
8,718,048
|
2
|
Termination with Cause
|
|
$
|
0
|
2
|
Change in Control of El Paso
|
|
$
|
20,718,628
|
2
|
|
|
1
|
Please note total 2007 Compensation does not tie directly
to the Summary Compensation Table.
|
|
2
|
Reflects incremental value of enhanced benefits above amounts
Mr. Foshee is entitled to as a result of voluntary
termination. Value of equity reflects $17.24, the closing price
of our common stock on December 31, 2007.
|
23
D. Mark
Leland:
Individual Executive Profile
Executive Vice President and
Chief Financial Officer
Age: 46
Tenure with El Paso:
22 years
Tenure in Industry: 22 years
BBA, University of Puget Sound
Certified Management Accountant
Certified Internal Auditor
Mr. Leland has been Executive Vice President and Chief Financial
Officer of El Paso since August 2005. Mr. Leland 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. He served as Senior Vice President and Chief Operating
Officer of GulfTerra Energy Partners, L.P. and its general
partner from January 2003 to December 2003, as Senior Vice
President and Controller from July 2000 to January 2003,
and as Vice President from August 1998 to July 2000. Mr. Leland
has also worked in various capacities for El Paso Field Services
and El Paso Natural Gas Company since 1986. Mr. Leland also
serves as a director of El Paso Pipeline GP Company, L.L.C., the
general partner of El Pasos
publicly-traded
master limited partnership, El Paso Pipeline Partners, L.P.
2007
Compensation1
|
|
|
|
|
Salary
|
|
|
|
|
Base Salary
|
|
$
|
513,567
|
|
Performance-Based Cash Bonus
|
|
$
|
430,358
|
|
Perquisites and Personal Benefits
|
|
$
|
0
|
|
|
|
|
|
|
Annual Long-Term
Incentive Award
|
|
|
|
|
|
|
|
|
|
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock
|
|
$
|
1,153,438
|
|
Stock Options
|
|
$
|
579,626
|
|
Restricted Stock Dividends
|
|
$
|
15,867
|
|
|
|
|
|
|
Retirement
Benefits
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual increase in accumulated pension benefit
|
|
$
|
0
|
|
|
|
|
|
|
Retirement Savings Plan (RSP)
|
|
|
|
|
Company matching contribution to RSP
|
|
$
|
10,125
|
|
Supplemental RSP benefit
|
|
$
|
35,038
|
|
Annual earnings on supplemental RSP benefit
|
|
$
|
5,386
|
|
2007
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,
2007)
|
|
|
|
|
Voluntary Termination
|
|
$
|
1,735,205
|
|
Involuntary Termination without Cause
|
|
$
|
1,168,736
|
2
|
Retirement
|
|
$
|
0
|
2
|
Death
|
|
$
|
4,285,775
|
2
|
Disability
|
|
$
|
1,852,082
|
2
|
Termination with Cause
|
|
$
|
0
|
2
|
Change in Control of El Paso
|
|
$
|
4,983,952
|
2
|
|
|
1
|
Please note total 2007 Compensation does not tie directly
to the Summary Compensation Table.
|
|
2
|
Reflects incremental value of enhanced benefits above amounts
Mr. Leland is entitled to as a result of voluntary termination.
Value of equity reflects $17.24, the closing price of our common
stock on December 31, 2007.
|
24
Brent J.
Smolik:
Individual
Executive Profile
Executive Vice President and
President of El Paso Exploration
& Production Company
Age: 46
Tenure with El Paso: 2 years
Tenure in Industry: 24 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. Prior to joining El Paso, 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 held various engineering management and
executive positions for Burlington Resources Inc.
2007
Compensation1
|
|
|
|
|
Salary
|
|
|
|
|
Base Salary
|
|
$
|
550,008
|
|
Performance-Based Cash Bonus
|
|
$
|
622,100
|
|
Perquisites and Personal Benefits
|
|
$
|
337,425
|
|
|
|
|
|
|
Annual Long-Term
Incentive Award
|
|
|
|
|
|
|
|
|
|
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock
|
|
$
|
768,964
|
|
Stock Options
|
|
$
|
579,626
|
|
Restricted Stock Dividends
|
|
$
|
27,594
|
|
|
|
|
|
|
Retirement
Benefits
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual increase in accumulated pension benefit
|
|
$
|
27,913
|
|
|
|
|
|
|
Retirement Savings Plan (RSP)
|
|
|
|
|
|
|
|
|
|
Company matching contribution to RSP
|
|
$
|
10,125
|
|
Supplemental RSP benefit
|
|
$
|
12,563
|
|
Annual earnings on supplemental RSP benefit
|
|
$
|
228
|
|
2007
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,
2007)
|
|
|
|
|
Voluntary Termination
|
|
$
|
53,580
|
|
Involuntary Termination without Cause
|
|
$
|
986,333
|
2
|
Retirement
|
|
$
|
0
|
2
|
Death
|
|
$
|
3,867,695
|
2
|
Disability
|
|
$
|
1,015,982
|
2
|
Termination with Cause
|
|
$
|
0
|
2
|
Change in Control of El Paso
|
|
$
|
5,084,363
|
2
|
|
|
1
|
Please note total 2007 Compensation does not tie directly
to the Summary Compensation table.
|
|
2
|
Reflects incremental value of enhanced benefits above amounts
Mr. Smolik is entitled to as a result of voluntary termination.
Value of equity reflects $17.24, the closing price of our common
stock on December 31, 2007.
|
25
Robert W.
Baker:
Individual
Executive Profile
Executive Vice President and
General Counsel
Age: 51
Tenure with El Paso: 25 years
Tenure in Industry: 27 years
JD, The University of Texas Law School
BA and BS, Business, Economics and Accounting, University of
Delaware
Licensed to practice law In Texas and Louisiana
Mr. Baker has been Executive Vice President and General Counsel
of El Paso since January 2004. From February 2003 to
December 2003, he served as Executive Vice President of El Paso
and President of El Paso Merchant Energy. He was Senior Vice
President and Deputy General Counsel of El Paso from January
2002 to February 2003. Prior to that time, he worked in various
capacities in the legal department of Tenneco Energy and El Paso
since 1983. Mr. Baker also serves as the Executive Vice
President and General Counsel of El Paso Pipeline GP Company,
L.L.C., the general partner of EI Pasos publicly-traded
master limited partnership, El Paso Pipeline Partners,
L.P.
2007
Compensation1
|
|
|
|
|
Salary
|
|
|
|
|
Base Salary
|
|
$
|
451,257
|
|
Performance-Based Cash Bonus
|
|
$
|
315,120
|
|
Perquisites and Personal Benefits
|
|
$
|
752
|
|
|
|
|
|
|
Annual Long-Term
Incentive Award
|
|
|
|
|
|
|
|
|
|
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock
|
|
$
|
1,076,543
|
|
Stock Options
|
|
$
|
579,626
|
|
Restricted Stock Dividends
|
|
$
|
16,124
|
|
|
|
|
|
|
Retirement
Benefits
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual increase in accumulated pension benefit
|
|
$
|
42,776
|
|
|
|
|
|
|
Retirement Savings Plan (RSP)
|
|
|
|
|
Company matching contribution to RSP
|
|
$
|
10,125
|
|
Supplemental RSP benefit
|
|
$
|
28,266
|
|
Annual earnings on supplemental RSP benefit
|
|
$
|
5,696
|
|
2007
Total Compensation
Stock
Ownership Requirements
Mr. Bakers 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,
2007)
|
|
|
|
|
Voluntary Termination
|
|
$
|
2,938,173
|
|
Involuntary Termination without Cause
|
|
$
|
1,146,759
|
2
|
Retirement
|
|
$
|
0
|
2
|
Death
|
|
$
|
4,291,610
|
2
|
Disability
|
|
$
|
2,139,783
|
2
|
Termination with Cause
|
|
$
|
0
|
2
|
Change in Control of El Paso
|
|
$
|
4,907,809
|
2
|
|
|
1
|
Please note total 2007 Compensation does not tie directly
to the Summary Compensation table.
|
|
2
|
Reflects incremental value of enhanced benefits above amounts
Mr. Baker is entitled to as a result of voluntary termination.
Value of equity reflects $17.24, the closing price of our common
stock on December 31, 2007.
|
26
James C.
Yardley:
Individual
Executive Profile
Executive Vice President,
Pipeline Group
Age: 56
Tenure with El Paso: 30 years
Tenure in Industry: 30 years
MBA, Harvard Business School
BA, Economics, Duke University
Mr. Yardley has been Executive Vice President of El Paso with
responsibility for the regulated pipeline business unit since
August 2006. He has served as President of Southern Natural Gas
Company since May 1998, and President and Chairman of the Board
of Tennessee Gas Pipeline since August 2006. He has also been
Chairman of El Paso Natural Gas Company since August 2006. Mr.
Yardley has been a member of the Management Committees of both
Colorado Interstate Gas Company and Southern Natural Gas Company
since their conversion to general partnerships in November 2007.
Mr. Yardley served as Vice President, Marketing and Business
Development for Southern Natural Gas Company from April 1994 to
April 1998. Prior to that time, Mr. Yardley worked in various
capacities with Southern Natural and Sonat Inc. beginning in
1978. Mr. Yardley also serves as the President and Chief
Executive Officer of El Paso Pipeline GP Company, L.L.C., the
general partner of El Pasos publicly-traded master
limited partnership, El Paso Pipeline Partners, L.P.
2007
Compensation1
|
|
|
|
|
Salary
|
|
|
|
|
Base Salary
|
|
$
|
500,004
|
|
Performance-Based Cash Bonus
|
|
$
|
432,191
|
|
Perquisites and Personal Benefits
|
|
$
|
38,818
|
|
|
|
|
|
|
Annual Long-Term
Incentive Award
|
|
|
|
|
|
|
|
|
|
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock
|
|
$
|
1,038,096
|
|
Stock Options
|
|
$
|
579,626
|
|
Restricted Stock Dividends
|
|
$
|
11,236
|
|
|
|
|
|
|
Retirement
Benefits
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual increase in accumulated pension benefit
|
|
$
|
0
|
|
|
|
|
|
|
Retirement Savings Plan (RSP)
|
|
|
|
|
Company matching contribution to RSP
|
|
$
|
10,125
|
|
Supplemental RSP benefit
|
|
$
|
38,004
|
|
Annual earnings on supplemental RSP benefit
|
|
$
|
4,536
|
|
2007
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,
2007)
|
|
|
|
|
Voluntary Termination
|
|
$
|
4,931,485
|
|
Involuntary Termination without Cause
|
|
$
|
501,999
|
2
|
Retirement
|
|
$
|
0
|
2,3
|
Death
|
|
$
|
3,067,279
|
2
|
Disability
|
|
$
|
930,758
|
2
|
Termination with Cause
|
|
$
|
0
|
2
|
Change in Control of El Paso
|
|
$
|
3,904,750
|
2
|
|
|
1
|
Please note total 2007 Compensation does not tie directly
to the Summary Compensation Table.
|
|
2
|
Reflects incremental value of enhanced benefits above amounts
Mr. Yardley is entitled to as a result of voluntary termination.
Value of equity reflects $17.24, the closing price of our common
stock on December 31, 2007.
|
|
3
|
Mr. Yardley is eligible for early retirement. The value of his
retirement benefits is reflected under Voluntary Termination.
|
27
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
At El Paso, stewardship and accountability are two of our
core values. As active stewards, we strive to serve our
customers and our shareholders by consistently building
long-term value. In addition, accountability measures are a key
part of the metrics we use to judge the performance of our
company and the performance of our executive officers. These
principles of stewardship and accountability play an integral
role in our compensation programs, which are designed to reward
performance and the creation of stockholder value.
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 and our
other named executive officers. This section also describes the
actions and decisions of the Compensation Committee of our Board
of Directors, which oversees our compensation programs and sets
executive officer compensation.
Our
Compensation Programs
Our compensation programs, which reflect our core values of
stewardship and accountability, have two primary and
straight-forward objectives:
|
|
|
|
|
attract, retain and motivate high-performing executive
talent, and
|
|
|
|
align the interests of our executive officers with both the
short-term and long-term interests of our stockholders.
|
We believe these designs are accomplished by providing our
executives with a competitive mix of short-term and long-term
compensation, by rewarding superior performance, and by linking
a significant portion of each officers pay to specific,
measurable performance goals.
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, who we refer to as our executive officers. 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 Consulting
(Deloitte) as its independent compensation
consultant. Deloitte advises the 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) updates on trends in
executive and director compensation, (vi) review of the
compensation discussion and analysis and related tables included
in our proxy statement, and (vii) handling other matters
requested by the Compensation Committee. The compensation
consultant is directly accountable to the Compensation Committee
and the committee approves all fees paid to the consultant for
such compensation advice.
Certain Deloitte affiliates are also engaged by El Paso to
provide the following services: tax and tax-related services,
financial advisory services, process optimization consulting and
technology consulting. The Compensation Committee and
El Paso believe that each of these relationships is
separate and independent and does not impair Deloittes
ability to provide independent advice to the committee.
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
28
the Compensation Committees request, we recommend
appropriate company-wide and business unit financial and
non-financial performance goals. 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 all officers and employees. We also work
with the Compensation Committee to establish the agenda and
prepare meeting information for each Compensation Committee
meeting. Our CEO likewise assists the Compensation Committee by
providing his evaluation of the performance of the executive
officers who report directly to him, and recommends compensation
levels for such officers. The Compensation Committee also has a
process for soliciting from the CEO a candid and critical
self-assessment of his own performance.
Elements
of Executive Compensation
Total Compensation. Our named executive
officers total annual compensation includes three
principal elements:
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base salary,
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performance-based annual cash incentive, and
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long-term equity-based incentive awards.
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We also provide our executives with retirement and welfare
benefits as well as certain limited perquisites.
While we seek to provide each executive officer with a level of
cash compensation commensurate with the executives
professional status in the form of base salary, our main focus
is on at-risk, performance-based pay. Such performance-based pay
is designed to reward stewardship and accountability, to align
our executive officers interests with those of our
stockholders and to promote the creation of stockholder value.
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Base Salary. Base salary is paid for ongoing
performance throughout the year and consists of fixed cash
salary. We pay base salaries in order to provide our executive
officers with a level of assured cash compensation sufficient,
together with performance-based incentives, to motivate the
executives to perform at a consistently high level. The
Compensation Committee reviews base salaries annually to ensure
they are competitive and commensurate with each named executive
officers job responsibilities and the executive
officers performance.
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Performance-Based Annual Cash Bonuses. Annual
cash incentive bonuses are paid to reward short-term performance
and the achievement of pre-established performance goals. The
Compensation Committee establishes the annual cash incentive
bonus opportunity for each named executive officer at the
beginning of the year. Annual cash incentive bonuses are paid
after the end of a calendar year once the Compensation Committee
has determined our companys performance (and, where
appropriate, the performance of our corporate shared services
group and our pipeline and exploration and production business
units) and each named executive officers performance
relative to the performance goals that were established at the
beginning of each year.
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Long-Term Equity Incentive Awards. We use
restricted stock and stock options for our long-term incentive
awards. The Compensation Committee believes restricted stock and
stock options are appropriate forms of long-term incentive
because these awards tie directly to the performance of our
common stock and motivate the named executive officers to build
stockholder value. The Compensation Committee further believes
that annual grants of restricted stock and stock options provide
an effective means of executive retention because the awards
focus on long-term value and vest over a period of years. The
target value of long-term incentive awards is allocated
approximately 50% in restricted stock and 50% in stock options.
The amount of equity available to fund the restricted stock
portion of the equity pool is based on the achievement of
pre-established
performance goals: 50% on our achievement of the annual overall
corporate performance goals and 50% on our relative total
shareholder return (TSR) compared to our peer group
of companies. The Compensation Committee believes this
allocation is appropriate because restricted stock is designed
to reward our named executive officers for the achievement of
the performance goals, as well as to provide an incentive to
create additional stockholder value. In contrast, stock options
are not adjusted for either corporate or individual performance
and are granted at target levels.
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29
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The Compensation Committee believes this is appropriate because
the value of stock options is recognized only if our stock price
increases, thereby creating value for all of our stockholders. A
named executive officer will forfeit his or her long-term
incentive awards if he or she voluntarily terminates employment
prior to vesting or is terminated for cause.
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Retirement Benefits. Our named executive
officers participate in our Pension Plan and our Retirement
Savings Plan, which are broad-based plans provided to all
eligible employees. Our named executive officers also
participate in our supplemental benefits plans.
The Retirement Savings Plan is a defined contribution 401(k)
plan which provides for immediate vesting of benefits for both
participant contributions and company matching contributions.
Participating employees may electively contribute up to 50% of
their eligible compensation into the plan. We contribute an
amount equal to 75% of each participants voluntary
contributions under the plan, up to a maximum of 6% of eligible
compensation for each participant.
The Pension Plan is a defined benefit plan which provides
pension benefits under a cash balance formula. The Pension
Plans cash balance formula defines participant benefits in
terms of a notional account balance based on quarterly interest
credits and pay credits (determined by age and years of
service). Participants are fully vested in their pension
benefits upon the earliest of the completion of 5 years of
service or attainment of age 65. Effective January 1,
2008, the vesting requirement was reduced from 5 to 3 years
of service.
The Code places limitations on the amount of compensation that
can be considered when calculating benefits under the Pension
Plan and making contributions to the Retirement Savings Plan.
These excess benefits are payable under our supplemental
benefits plans. The supplemental benefits plans are described in
more detail on pages 54 and 55 of this proxy statement. See
page 53 of this proxy statement for the Pension Benefits
table and further discussion regarding the actuarial present
value of the named executive officers accumulated pension
benefits under the Pension Plan and supplemental benefits plans.
Health and Welfare Benefits. We offer
subsidized health and group benefits to all eligible employees.
Each named executive officer may elect to receive the health and
group benefits that are generally available to all employees
subject to the payment of required premiums. We offer
comprehensive cafeteria-style health and group benefits, which
include medical, dental, vision, disability and life insurance
coverage as well as dependent day-care and healthcare flexible
spending accounts. In addition, each named executive officer
participates in our Senior Executive Survivor Benefits Plan,
which provides the officers with survivor benefit coverage in
lieu of coverage generally provided under our group life
insurance plan. The amount of the executive officers
survivor benefit, on an after-tax-basis, is two and one-half
times the executive officers annual salary. See
page 58 of this proxy statement for a description of our
Senior Executive Survivor Benefits Plan.
Perquisites and Personal Benefits. We seek to
maintain equal standards of treatment between our executive
officers and our non-executive employees, and in 2003 we
eliminated perquisite and benefit allowances for all officers.
While we no longer provide perquisite allowances, we do provide
certain benefits which we consider to be business expenses that
could be characterized as having a personal benefit.
Specifically, we provide a separate parking space (with no
incremental cost to us) for our CEO, Mr. Foshee. Our named
executive officers may use season tickets purchased by us to
attend sporting events when the tickets are not otherwise being
used for business reasons (with no incremental cost to us). We
make available for business use to our executive officers
private aircraft that we have entered into lease agreements to
use, and there are limited instances when the named executive
officers are permitted to use leased aircraft for personal
travel or to bring personal guests as passengers on
business-related flights. When the executive officers use
of leased aircraft or a guests travel does not meet the
Internal Revenue Services (IRS) standard for
business use, but nevertheless is determined by us to be
business-related, the cost of that travel is imputed as income
to the officer and a
gross-up
payment for taxes is provided. We pay for the costs of annual
physicals for all of our officers, including the named executive
officers. In addition, during 2007, we paid for the installation
of a home security system for Mr. Foshee. We do not have
any outstanding loans with our executive officers, and no loans
of any kind have been made by us to our executive officers since
federal law prohibited this practice in 2002.
30
Factors
Considered When Determining Total Compensation
Competitive Benchmark Data the Starting
Point. When making compensation decisions, we
review the compensation paid to our CEO and other named
executive officers relative to the compensation paid to
similarly-situated
executives at our peer companies. This practice is often
referred to as benchmarking. We also utilize survey
data representing the market of companies in which we compete
for executive talent as an additional means of benchmarking.
While we believe benchmarks are helpful and provide a point of
reference, they are not determinative. Rather, competitive
benchmarking is a starting point in our evaluation of total
executive compensation.
The Compensation Committee is provided market data compiled by
its independent compensation consultant and our human resources
department. This comparative information provides a basis for
the evaluation of the compensation paid to our named executive
officers. The committee then reviews the benchmarking data
together with each officers job responsibilities and
individual performance, internal pay equity, and performance
against pre-established targets, each as described below, in
making compensation decisions. The committee also reviews an
analysis of wealth accumulation and potential payments upon
various termination scenarios as part of its competitive
compensation decisions as described below.
The Compensation Committee generally sets total compensation
targets for our executives, including base salary,
performance-based annual incentives, and long-term equity
awards, near the market median of our peer comparables. However,
because comparative data is just one of several analytic tools
that are used in determining executive officer compensation, pay
may exceed or be less than the median range of comparative
compensation based on:
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the level of achievement of our pre-established performance
goals,
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our performance against our peer group,
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individual performance,
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scope of job responsibilities, and
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internal equity considerations.
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The 2007 total direct compensation targets for our named
executive officers fell at the
55th percentile
when compared to 2006 proxy and survey data (based on the most
recent information available in March 2007).
El Pasos Peer Groups 2007 and
2008. The Compensation Committee selects an
appropriate peer group of companies to review executive officer
compensation and to compare TSR relative to our performance. TSR
is utilized as a metric in funding a portion of the long-term
equity pool, described later in this compensation discussion and
analysis. The Compensation Committee established our peer group
of companies in 2006, initially consisting of 11 diversified
energy companies and 7 non-diversified energy companies. The
peer group of companies was selected by identifying
U.S. publicly traded companies competing in the energy
industry that had revenues and business characteristics similar
to us. The peer group of companies included a proportional
weighting of pipeline companies and exploration and production
companies and a balanced range of revenues within the peer
group. In February 2007, the Compensation Committee, upon advice
from its compensation consultant, approved certain changes to
our peer group for 2007. Specifically, Western Gas Resources,
Inc. and Kinder Morgan, Inc. were removed from the peer group
and Spectra Energy Corp., the former natural gas business of
Duke Energy, which became a stand-alone, publicly traded company
in January 2007, was added. Western Gas Resources, Inc. was
removed because it had been acquired by Anadarko Petroleum Corp.
during 2006, and Kinder Morgan was removed because of its
acquisition by investors who intended to take the company
private during the first part of 2007. Following these
revisions, our peer group for 2007 consisted of the following
companies:
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Anadarko Petroleum Corp.
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Equitable Resources, Inc.
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Sempra Energy
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Apache Corp.
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NiSource, Inc.
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Southern Union Co.
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CenterPoint Energy, Inc.
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ONEOK, Inc.
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Spectra Energy Corp.
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Devon Energy Corp.
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PG&E Corp.
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Transcanada Corp.
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Dominion Resources, Inc.
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PPL Corp.
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Williams Companies, Inc.
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Enbridge, Inc.
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Questar Corp.
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31
In October 2007, the Compensation Committee, in consultation
with its compensation consultant, elected to approve a revised
peer group for use starting in 2008. The revised peer group is
comprised of our 2007 peer group (with the exception of
PG&E Corporation and PPL Corporation, which in each case
were removed due to their lack of comparable gas and pipeline
business), as well as certain additional companies with which we
compete for executive talent. The revised peer group is
comprised of a proportional mix of exploration and production,
pipeline and diversified energy companies within the oil and gas
and electric and gas industries. The revised peer group consists
of 22 companies, and is made up of 45% pipeline/utility
companies, 41% exploration and production companies, and 14%
diversified energy companies. Our peer group for 2008 is
comprised of the following companies:
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Anadarko Petroleum
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Equitable Resources, Inc.
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Questar Corporation
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Apache Corporation
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National Fuel Gas
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Sempra Energy
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CenterPoint Energy, Inc.
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Newfield Exploration
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Southern Union Company
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Chesapeake Energy Corporation
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NiSource Inc.
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Spectra Energy Partners
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Devon Energy Corporation
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Noble Energy Company
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TransCanada Corporation
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Dominion Resources, Inc.
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ONEOK, Inc.
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Williams Companies
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Enbridge Inc.
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Pioneer Natural Resources
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XTO Energy Inc.
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EOG Resources, Inc.
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External Market Conditions and Individual
Factors. As discussed above, while benchmarking
data is helpful in assessing the overall competitiveness of our
compensation program, we believe our executive compensation
program must take into account external market conditions and
individual factors. Some of these factors include the
executives level of experience, the executives
tenure and responsibilities within our company, the
executives position and the appropriate competitive
pressures for that position within the industry, and of course,
performance. In addition, the Compensation Committee asks its
compensation consultant to provide it with an objective opinion
regarding total executive compensation levels relative to each
individual executives responsibilities.
Internal Pay Equity. We also believe that our
executive compensation program must be internally consistent and
equitable in order to motivate our employees to create
stockholder value. We are committed to internal pay equity and
our Compensation Committee closely monitors, on an annual basis,
the relationship between the compensation of our named executive
officers and the compensation of our non-managerial employees.
In 2007, the Compensation Committee reviewed a comparison of CEO
pay and senior management pay to non-management employee pay.
This analysis included a three-year period from 2004 through
2006. With respect to our CEO, the results showed a flat trend
in base salary, a slightly increasing trend in bonus, and a
slightly decreasing trend in total compensation in comparison to
non-management employees. With respect to our other named
executive officers, the results showed a slightly increasing
trend in base salaries and bonuses, and a slightly decreasing
trend in total compensation in comparison to non-management
employees. Overall, it was noted that the disparity in total
compensation between all of our named executive officers and
non-management employees is on a slightly decreasing trend due
primarily to reduced equity awards to the former group
consistent with our lower TSR performance relative to our peer
group. The Compensation Committee will continue to periodically
conduct these analyses to monitor and avoid any unjustified
widening of compensation differentials.
Tally Sheets and Payments upon Termination
Events. When making compensation decisions, the
Compensation Committee reviews tally sheets prepared for each of
our named executive officers. These tally sheets are prepared by
the compensation group of our human resources department and are
reviewed by the compensation consultant. The tally sheets
quantify the elements of each named executives total
compensation, including base salary, annual incentive bonus, and
long-term equity grants.
The committee also reviews tally sheets reflecting the potential
payments upon various termination scenarios. These termination
scenarios include voluntary termination, involuntary termination
without cause, termination with cause, retirement, death,
disability and termination within two years following a change
in control. The tally sheets provide the total remuneration that
would be payable to the named executive officers, including all
aspects of each
32
named executive officers compensation and benefits under
our plans. In addition to qualified plan benefits, our named
executive officers may be entitled to post termination benefits
under the following plans:
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Severance Pay Plan: a broad-based severance plan
available to all of our employees which provides benefits
following an involuntary termination without cause. The maximum
amount of severance payable under the plan is one times the
employees annual salary.
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2004 Key Executive Severance Protection Plan: a plan
covering key executive personnel, including our 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 2 years
following a change in control. The plan provides benefits only
upon a double triggering event, meaning both a change in control
and an involuntary termination of employment must occur.
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Senior Executive Survivor Benefits Plan: a plan which
provides our 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. The amount of the executive
officers survivor benefit, on an after-tax-basis, is two
and one-half times the executive officers annual salary.
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In its most recent review of tally sheets, the Compensation
Committee discovered no unintended consequences of the
compensation program design, and 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 56 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 and a description of our Severance Pay Plan,
Senior Executive Survivor Benefits Plan and 2004 Key Executive
Severance Protection Plan.
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 named executive
officer. The 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 is done to more effectively analyze
not only the amount of compensation each named executive officer
has accumulated to date, but also to better understand the
amount the named executive officer could accumulate in the
future. In connection with the Compensation Committees
2007 review, no unintended consequences of the compensation
program design were discovered and no material changes were made
or deemed necessary to the executive compensation program as a
result of this review.
Employment
Agreements
We do not enter into employment agreements with our executive
officers. However, in certain limited circumstances, we have
entered into letter agreements to assist in recruiting critical
talent at critical times.
We entered into a letter agreement with Mr. Foshee to serve
as our President and CEO in 2003, at a time when our company was
experiencing significant difficulties. The letter agreement was
designed to recruit and motivate Mr. Foshee and to
compensate him for the risk associated with his position. The
letter agreement outlines the basic terms of his initial
compensation arrangement.
We also entered into a letter agreement with Mr. Smolik to
serve as our Executive Vice President and President of our
exploration and production business in 2006, which letter
agreement outlines the basic terms of his initial compensation
arrangement.
A description of the letter agreements with Messrs. Foshee
and Smolik can be found in the narrative following the Grants of
Plan-Based Awards table.
We do not have letter agreements with any of our other named
executive officers.
33
Director
and Officer Indemnification Agreements
We have entered into indemnification agreements with each member
of our Board of Directors and certain officers, including each
of the named executive officers. These agreements reiterate the
rights to indemnification that are provided to our Board and
certain officers under our By-laws, clarify procedures related
to those rights, and provide that such rights are also available
to fiduciaries under certain of our employee benefit plans. As
is the case under the By-laws, the agreements provide for
indemnification to the full extent permitted by Delaware law,
including the right to be paid the reasonable expenses
(including attorneys fees) incurred in defending a
proceeding related to service as a director, officer or
fiduciary in advance of that proceedings final
disposition. El Paso may maintain insurance, enter into
contracts, create a trust fund or use other means available to
provide for indemnity payments and advances. In the event of a
change in control (as defined in the indemnification
agreements), El Paso is obligated to pay the costs of
independent legal counsel who will provide advice concerning the
rights of each director and officer to indemnity payments and
advances.
Stock
Ownership Requirements
Our corporate governance guidelines impose stock ownership
requirements on our executive officers. These stock ownership
requirements are designed to emphasize stock ownership by our
executive officers and to further align their interests with our
stockholders through good times and bad. These
requirements are as follows:
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Position
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Minimum Aggregate
Value
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Chief Executive Officer
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5 x base salary
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Other Executive Officers
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2 x base salary
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Each executive officer is required to meet the ownership
threshold within five years of election as an executive officer.
As of December 31, 2007, 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 pages 6 and 7 of this proxy statement for
further information regarding the stock ownership requirements
for our executive officers.
Determination
of 2007 Compensation
2007
Annual Base Salary Adjustments and 2007 Target Bonus
Opportunities
At the beginning of 2007, the Compensation Committee considered
whether adjustments would be made to the annual base salaries
and target bonus opportunities for our named executive officers.
On February 13, 2007, the Compensation Committee adjusted
Messrs. Foshees, Lelands and Bakers base
salaries based on individual performance and 2007 market
conditions. The Compensation Committee decided not to provide
salary increases for Messrs. Smolik and Yardley for 2007
because each executive was relatively new to his current
position at the time the base salary adjustments were
considered, Mr. Smolik being hired in November 2006, and
Mr. Yardley being promoted in August 2006. No adjustments
were made to the named executive officers 2007 target
bonus opportunities. The following tables set forth the base
salaries and annual target bonus opportunities for the named
executive officers. The base salary adjustments for 2007 were
effective April 1, 2007.
Annual
Base Salaries
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2006 Base Salary
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2007 Base Salary
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2006-2007
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Effective 4/1/06
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Effective 4/1/07
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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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950,004
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$
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1,000,008
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5
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%
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D. Mark Leland
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$
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495,000
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$
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519,756
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5
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%
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Brent J. Smolik
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$
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550,008
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$
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550,008
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0
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%
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Robert W. Baker
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$
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434,940
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$
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456,696
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5
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%
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James C. Yardley
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$
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500,004
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$
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500,004
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0
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%
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34
Target
Bonus Opportunities
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2006 Target
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2007 Target
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Bonus
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Bonus
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2006-2007
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|
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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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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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%
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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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Robert W. Baker
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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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%
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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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%
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Annual
Cash Incentive Awards for 2007 Performance
On February 6, 2008 the Compensation Committee approved the
amount of the named executive officers annual cash
incentive awards for 2007 performance. The following discussion
sets forth the process the Compensation Committee followed in
determining the amount of each named executive officers
annual cash incentive award for 2007 performance. The annual
cash incentive bonuses for 2007 performance are scheduled to be
paid in March 2008.
Performance Goals. At the beginning of 2007,
the Compensation Committee established a threshold, target and
maximum annual cash incentive bonus level for each of the named
executive officers (see the ranges of cash incentive bonuses as
a percentage of base salary on page 38). The Compensation
Committee also established corporate and business unit financial
and non-financial performance goals. In a change from prior
years, the Compensation Committee approved a threshold, target
and maximum for each performance goal, as opposed to solely a
threshold and target goal. This change was made in consultation
with the Compensation Committees independent compensation
consultant and was done to ensure that above-target incentives
correspond with superior satisfaction of the related goal. As an
additional change, the committee approved designated weightings
for each goal. This change was made to ensure a more formulaic
method of calculating annual incentives.
Our 2007 corporate financial goals, which are the primary goals
used in determining the annual incentive bonuses for our named
executive officers, were as follows:
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2007 Goals
|
Corporate Financial
Goals
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Threshold
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Target
|
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Maximum
|
|
Weighting
|
|
Earnings Per Share(1)
|
|
$
|
0.77
|
|
|
$
|
0.91
|
|
|
$
|
1.05
|
|
|
|
35
|
%
|
EBITDA(1)
|
|
$
|
2,926 MM
|
|
|
$
|
3,075 MM
|
|
|
$
|
3,209 MM
|
|
|
|
35
|
%
|
Cash Flow from Operations
|
|
$
|
1,600 MM
|
|
|
$
|
2,120 MM
|
|
|
$
|
2,720 MM
|
|
|
|
15
|
%
|
Debt (net of cash)
|
|
$
|
12,200 MM
|
|
|
$
|
11,600 MM
|
|
|
$
|
11,000 MM
|
|
|
|
15
|
%
|
|
|
|
(1) |
|
Excluded planned debt repurchase costs. |
In addition, the Compensation Committee approved additional
performance goals for our corporate shared services group and
our pipeline and exploration and production business units. For
our corporate shared services group, the 2007 financial goals
included the corporate goals listed above, plus an additional
goal of corporate cost. For our pipeline business unit, the 2007
financial goals were based on value creation, which is a measure
of the cash value created in excess of the cost of invested
capital. For our exploration and production
(E&P) business unit, the 2007 financial goals
included EBITDA, cash costs, average daily production rates
measured in million cubic feet of natural gas equivalent per day
(MMcfe/d), present value ratio, and reserve replacement cost.
Our corporate and business unit financial goals were set in
alignment with our strategic plan and objectives for the year.
In making the determination of the threshold, target and maximum
levels, the Compensation Committee considered the specific
circumstances expected to be faced by our company and its
business units in 2007. Generally, target levels are set such
that the relative difficulty of achieving the target level is
consistent from year to year. Corporate and corporate shared
services performance was determined to be above the target level
for 2006 and
35
2005 performance and at target level for 2004 performance. For
2006, 2005 and 2004 performance, our pipeline business unit
achieved performance above the target level that was set for
each of those years and our E&P business unit achieved
performance below the target level that was set for each of
those years.
The Compensation Committee also approved certain non-financial
goals for our corporate shared services group and business
units, including certification of compliance with our Code of
Business Conduct by 100 percent of our employees, no
material weakness in our internal controls over financial
reporting, and safety goals relating to (i) recordable
injuries, (ii) preventable vehicle incident rates, and
(iii) the number of spills outside of secondary
containment. The 2007 non-financial goals also included a goal
relating to the successful in-line inspection of our pipelines
as part of our pipeline integrity program.
Potential Adjustment Considerations. At the
same time the performance goals were approved, the Compensation
Committee approved a list of potential adjustment categories
relating to unusual or extraordinary events that the committee
could consider, in its discretion, in evaluating whether the
2007 performance goals had been achieved.
Weighting
of Corporate and Business Unit Goals
The annual cash incentive awards for our named executive
officers, including our business unit heads, are primarily
weighted towards the achievement of our corporate financial
goals. With respect to our business unit heads, including
Mr. Smolik and Mr. Yardley, the Compensation Committee
determined it would be appropriate to weight their annual
bonuses primarily on corporate performance to ensure the
business unit heads are aligning the performance of their
business units with corporate performance. Below is a chart
summarizing the weighting of the corporate and
business-unit
goals for purposes of determining each officers annual
incentive award.
Performance
Weights for Named Executive Officers
Annual Incentive Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
Shared Services
|
|
Exploration &
|
|
|
Named Executive
Officer
|
|
Corporate Goals
|
|
Goals
|
|
Production Goals
|
|
Pipeline Goals
|
|
Douglas L. Foshee
|
|
|
75
|
%
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
D. Mark Leland
|
|
|
75
|
%
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
Brent J. Smolik
|
|
|
75
|
%
|
|
|
|
|
|
|
25
|
%
|
|
|
|
|
Robert W. Baker
|
|
|
75
|
%
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
James C. Yardley
|
|
|
75
|
%
|
|
|
|
|
|
|
|
|
|
|
25
|
%
|
Funding of the Annual Incentive Bonus Pool
Negative Discretion. The Compensation Committee
uses negative discretion in funding the pool
available for annual incentive awards for our corporate,
corporate shared services, E&P and pipeline employees. For
purpose of Section 162(m) of the Code, the annual incentive
pool is funded at maximum to the extent any of the corporate
financial goals are achieved at threshold performance. The
Compensation Committee then exercises its negative discretion to
reduce the funding of the incentive pool to reflect actual
corporate, business unit and individual performance. By setting
a high amount which can then be reduced, we believe our annual
incentive payments qualify for full deductibility under
Section 162(m) of the Code. This reduction is not a
negative reflection on the performance of our company or our
named executive officers, but rather is done to ensure maximum
flexibility with respect to the payment of performance-based
bonuses. If the Compensation Committee were to have instead
funded the incentive pool at a minimum threshold and used
discretion to increase the amounts to reflect company and
individual performance, actual payouts would not qualify for the
Section 162(m) tax deduction. For further information on
Section 162(m), see the description of Section 162(m)
beginning on page 42 of this proxy statement.
36
After the 2007 financial results became available, the
Compensation Committee determined the appropriate funding of the
2007 annual incentive bonus pool based on the achievement of the
pre-established financial and
non-financial
performance goals for the year and the pre-approved adjustment
factors. 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%(4)
|
|
|
|
|
(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. |
|
(4) |
|
No annual incentive awards will be made if the minimum threshold
is not met for at least one of the overall corporate financial
goals. |
Individual Performance Adjustment. As
mentioned above, accountability plays an important role in our
compensation programs, and individual performance is an
important factor in determining annual incentives. In addition,
individual performance goals support our objectives 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 2007 included leadership
training and development initiatives, recruiting top talent for
key management positions, finalizing the ANR sale, controlling
costs, successful IPO of our master limited partnership,
supporting volunteer efforts in the communities in which we
work, and continued improvement of metrics in our E&P
business. The Compensation Committee applies the individual
rating assigned to each named executive officer as an adjustment
performance factor to determine the executive officers
actual annual cash incentive award. Based on such individual
performance rating, the individual performance factor can range
between 0 and 150%, as determined by the Compensation Committee.
Under this formula, the maximum bonus opportunity is 225% of the
target bonus calculated by taking 150% of the maximum annual
incentive bonus pool times 150% of the maximum individual
performance adjustment factor in the case of exceptional
performance by our company and the individual executive. The
range of annual cash incentive bonuses, based on the level of
company performance (and, where appropriate, the performance of
our business units) and the individual executive, is illustrated
as a percentage of base salary for each named executive officer
in the following table. The actual percentage of cash incentive
bonuses could be at any level between the minimum and maximum
percentages based on performance.
37
Range of
Cash Incentive Bonuses as a Percentage of Base Salary for
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
|
|
|
|
|
|
Threshold
|
|
|
|
|
|
|
|
|
Not Met
|
|
Minimum
|
|
Target
|
|
Maximum (1)
|
|
Douglas L. Foshee
|
|
|
0
|
%
|
|
|
60
|
%
|
|
|
120
|
%
|
|
|
270
|
%
|
D. Mark Leland
|
|
|
0
|
%
|
|
|
30
|
%
|
|
|
60
|
%
|
|
|
135
|
%
|
Brent J. Smolik
|
|
|
0
|
%
|
|
|
45
|
%
|
|
|
90
|
%
|
|
|
202.50
|
%
|
Robert W. Baker
|
|
|
0
|
%
|
|
|
30
|
%
|
|
|
60
|
%
|
|
|
135
|
%
|
James C. Yardley
|
|
|
0
|
%
|
|
|
37.50
|
%
|
|
|
75
|
%
|
|
|
168.75
|
%
|
|
|
|
(1) |
|
On February 13, 2007, the Compensation Committee determined
that the range of cash incentive bonuses for all our named
executive officers would be would be capped at 2.25 times each
named executive officers target bonus opportunity for the
year. |
The potential range of values of the annual cash incentive
awards for 2007 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 47 of this proxy
statement.
El Paso Performance. On February 6,
2008, the Compensation Committee reviewed the actual performance
of our company and its business units relative to the corporate
and business unit performance goals that were established for
the year. In reviewing our actual performance relative to the
corporate financial goals, the Compensation Committee determined
that it would be appropriate to consider certain pre-approved
adjustment factors established in early 2007, including the
effects of significant commodity price fluctuations,
acquisitions, the effect of asset sales and impairments, and the
impact of legacy items in the power, marketing and corporate
segments. In addition, the committee considered the impact on
our earnings, cash flow and net debt relating to our acquisition
of Peoples Energy Production Company. The Compensation Committee
also took into consideration the earnings and strategic benefits
from the successful initial public offering in November 2007 of
El Paso Pipeline Partners, L.P., El Pasos master
limited partnership, in assessing the achievement of the
financial goals. Based on these additional factors, the
Compensation Committee determined that El Paso achieved:
|
|
|
|
|
adjusted earnings per share of $0.88, which is above the
threshold performance goal of $0.77, but below the target of
$0.91;
|
|
|
|
adjusted EBITDA of $3,177 million, which is above the
target goal of $3,075 million;
|
|
|
|
adjusted cash flow from operations of $1,877 million, which
is above the threshold performance goal of $1,600 million,
but below the target of $2,120 million; and
|
|
|
|
adjusted outstanding debt (net of cash) of $11,245 million,
which is less than the target of $11,600 million and
therefore above target achievement.
|
In addition, the Compensation Committee determined that our
corporate shared services group and our pipeline and E&P
business units achieved their respective financial goals and
substantially all of the non-financial performance goals.
Based on these results, for the 2007 performance period, the
Compensation Committee approved cash incentive bonuses above
target for corporate and corporate shared services performance,
above target for our pipeline business unit, and above target
for our E&P business unit.
Chief Executive Officer 2007 Annual
Incentive. Based on the policies described
earlier in this compensation discussion and analysis, the
Compensation Committee reviewed all elements of
Mr. Foshees total compensation for 2007, including
his annual base salary, annual cash incentive bonus and
long-term incentive award. Based on the Compensation
Committees review of these and external factors, they
found Mr. Foshees total compensation to be reasonable
and not excessive. Under Mr. Foshees leadership, 2007
marked El Pasos fifth consecutive year of continuous
improvement. Our pipeline business unit put six expansion
projects in place and enters 2008 with a multi-billion project
backlog. Our E&P business unit increased production by 8%,
decreased costs, high-graded its
38
portfolio and made important international progress. In
addition, El Paso completed a successful initial public
offering of its master limited partnership, El Paso
Pipeline Partners, L.P., and completed the sale of ANR Pipeline
Company, our Michigan storage assets, and our 50% interest in
Great Lakes Gas Transmission. Having reviewed the contribution
that Mr. Foshee made to El Pasos performance in
2007, the Compensation Committee believes that he continues to
demonstrate the integrity, planning and leadership qualities
that the executive compensation program was designed to foster
and reward. In light of the foregoing, the Compensation
Committee concluded that Mr. Foshee should receive an
annual cash incentive bonus for his 2007 performance in the
amount of $1,518,000, which is based 75% on our above target
corporate performance and 25% on our above target corporate
shared services performance, as well as Mr. Foshees
individual performance. The amount was calculated by starting
with the maximum bonus amount payable for Code
Section 162(m) purposes, which was then reduced to reflect
the following formula:
target bonus X weighted
corporate/business unit funding percentage X individual
performance factor = annual incentive award
The amount awarded to Mr. Foshee for his annual cash
incentive bonus for 2007 performance is included in the Summary
Compensation Table under the column Non-Equity Incentive
Plan Compensation on page 43 of this proxy
statement.
2007 Annual Incentives for Other Named Executive
Officers. The Compensation Committee reviewed all
elements of total compensation for the other named executive
officers for 2007 in the same manner as the committee reviewed
the total compensation of our CEO. The committee also considered
recommendations from our CEO regarding total compensation for
those executives reporting directly to him. Based upon
corporate, corporate shared services and business unit
performance for 2007, as well as the individual performance of
the other named executive officers, the Committee concluded that:
|
|
|
|
|
Mr. Leland should receive an annual cash incentive bonus
for his 2007 performance in the amount of $430,358, which is
based 75% on our above target corporate performance and 25% on
our above target corporate shared services performance, as well
as Mr. Lelands individual performance;
|
|
|
|
Mr. Smolik should receive an annual cash incentive bonus
for his 2007 performance in the amount of $622,100, which is
based 75% on our above target corporate performance and 25% on
our E&P business units above target performance, as
well as Mr. Smoliks individual performance;
|
|
|
|
Mr. Baker should receive an annual cash incentive bonus for
his 2007 performance in the amount of $315,120, which is based
75% on our above target corporate performance and 25% on our
above target corporate shared services performance, as well as
Mr. Bakers individual performance; and
|
|
|
|
Mr. Yardley should receive an annual cash incentive bonus
for his 2007 performance in the amount of $432,191, which is
based 75% on our above target corporate performance and 25% on
our pipeline business units above target performance, as
well as Mr. Yardleys individual performance.
|
The amount awarded to these executive officers for their annual
cash incentive bonuses for 2007 performance is included in the
Summary Compensation Table under the column Non-Equity
Incentive Plan Compensation on page 43 of this proxy
statement. The following is a comparison of each named executive
officers target annual cash incentive bonus versus the
actual amount that will be paid to the executive officer for his
annual cash incentive bonus for 2007 performance.
39
Target
vs. Actual
Annual Cash Incentive Bonuses
Paid for 2007 Performance
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
Actual
|
|
|
Cash Incentive Bonus
(1)
|
|
Cash Incentive Bonus
(2)
|
|
Douglas L. Foshee
|
|
$
|
1,200,010
|
|
|
$
|
1,518,000
|
|
D. Mark Leland
|
|
$
|
311,854
|
|
|
$
|
430,358
|
|
Brent J. Smolik
|
|
$
|
495,007
|
|
|
$
|
622,100
|
|
Robert W. Baker
|
|
$
|
274,018
|
|
|
$
|
315,120
|
|
James C. Yardley
|
|
$
|
375,003
|
|
|
$
|
432,191
|
|
|
|
|
(1) |
|
The range of potential annual cash incentive bonuses for 2007
performance for each named executive officer is reflected in the
Grants of Plan-Based Awards table in the Estimated
Possible Payments under Non-Equity Incentive Plan Awards
column. |
|
(2) |
|
Annual cash incentive bonuses for 2007 performance are scheduled
to be paid in March 2008. |
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) of the Code 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 (or strike price)
based upon the average between the high and low selling prices
at which our common stock traded on the grant date. Grants may
also be made in connection with significant hires or promotions.
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. Restricted
stock awards are performance-based and are adjusted for both
company and individual performance, as described below. The
target equity opportunities for the 2006 performance year and
for the 2007 performance year, including both the option and
restricted stock components, were as follows:
Target
Long-Term Equity Opportunities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 Performance
|
|
2007 Performance
|
|
2006-2007
|
|
|
Year Target Equity
|
|
Year Target Equity
|
|
Percentage
|
Name
|
|
Opportunity (1)
|
|
Opportunity (1)
|
|
Increase
|
|
Douglas L. Foshee
|
|
$
|
4,350,000
|
|
|
$
|
4,350,000
|
|
|
|
0
|
%
|
D. Mark Leland
|
|
$
|
1,250,000
|
|
|
$
|
1,250,000
|
|
|
|
0
|
%
|
Brent J. Smolik
|
|
$
|
1,250,000
|
|
|
$
|
1,250,000
|
|
|
|
0
|
%
|
Robert W. Baker
|
|
$
|
1,250,000
|
|
|
$
|
1,250,000
|
|
|
|
0
|
%
|
James C. Yardley
|
|
$
|
1,250,000
|
|
|
$
|
1,250,000
|
|
|
|
0
|
%
|
|
|
|
(1) |
|
We use a Black Scholes valuation to convert the dollar value of
the grant into options, and we use a 10 day average of the
closing sales price of our stock in advance of the Compensation
Committee meeting in which the awards are approved to convert
the dollar value of the grant in into restricted stock. |
40
The amount of equity available to fund the equity pool for
annual restricted stock grants is based 50% on achievement of
the annual overall corporate financial goals and 50% on
El Pasos relative TSR compared to our peer group of
companies.
The portion of the equity pool used for restricted stock grants
that is funded based on El Pasos TSR compared to its
peer group of companies is determined as follows:
Funding
of Portion of Equity Pool
for Restricted Stock Grants
Based on Total Shareholder Return
|
|
|
Total Shareholder
Return
|
|
Equity Pool Funding
|
|
1st
Quartile
(75th to
100th percentile)
|
|
Funded at 150%
|
2nd
Quartile
(50th to
74th percentile)
|
|
Funded from 100% to 150% based on actual TSR results
|
3rd &
4th Quartile
(0 to
49th percentile)
|
|
Funded from 0% to 100%(1)
|
|
|
|
(1) |
|
If our TSR is below the
50th percentile
(i.e., third 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. If at least one of the pre-established
performance goals is achieved, funding will be at
0%-100%,
with the actual funding level determined by the Compensation
Committee guided by competitive, market, industry and other
factors. |
The portion of the equity pool used for restricted stock grants
that is funded based on achievement of the annual overall
corporate financial goals is determined using the same
percentage rating approved by the Compensation Committee for
purposes of funding the corporate annual incentive pool.
Following the determination of the funding percentage for the
equity pool, the Compensation Committee applies the individual
performance factors described on page 37 as an adjustment
performance factor to determine the executive officers
actual restricted stock award.
Annual
Grant based on 2006 Performance
On February 13, 2007, the Compensation Committee approved
the 2007 annual grant of long-term incentive awards in the form
of restricted stock and stock options based on 2006 performance.
These long-term awards were granted to the named executive
officers on April 2, 2007. During 2006, we achieved above
target performance of our overall corporate financial
performance goals, resulting in the funding of one-half of the
restricted stock portion of the equity pool at 110%. In
addition, during 2006, El Pasos TSR relative to its
peer group was in the second quartile
(72nd percentile),
resulting in the funding of one-half of the restricted stock
portion of the equity pool at 144%. Accordingly, the restricted
stock grants that were granted to the named executive officers
on April 2, 2007 were funded at 127% of overall target 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
market value of the restricted stock and stock options awarded
in April 2007 to each named executive officer is reflected in
the Grants of Plan-Based Awards table on page 47 of this
proxy statement.
Annual
Grant based on 2007 Performance
On February 6, 2008, the Compensation Committee approved
the 2008 annual grant of long-term incentive awards in the form
of restricted stock and stock options based on 2007 performance.
These long-term incentive awards are expected to be granted to
the named executive officers on April 1, 2008. During 2007,
we achieved above target performance of our overall corporate
financial performance goals, resulting in the funding of
one-half of the restricted stock portion of the equity pool at
115%. Also during 2007, El Pasos TSR relative to our
peer group of companies was in the third quartile
(41st percentile),
resulting in the funding of one-half of the restricted stock
portion of the equity pool at 82%. Accordingly, restricted stock
grants that will occur in April 2008 based upon 2007 performance
will be funded at 98.5% of overall target and the value of each
named executive officers individual
41
grant will be 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
following table sets forth the annual grant of long-term
incentive awards that will be granted in April 2008 for 2007
performance for each of the named executive officers.
2008
Annual Grant of
Long-Term Incentive Awards
Based on 2007 Performance
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
Restricted Stock
|
Name
|
|
(#)
|
|
(#)
|
|
Douglas L. Foshee
|
|
|
376,950
|
|
|
|
139,115
|
|
D. Mark Leland
|
|
|
108,319
|
|
|
|
43,610
|
|
Brent J. Smolik
|
|
|
108,319
|
|
|
|
39,976
|
|
Robert W. Baker
|
|
|
108,319
|
|
|
|
36,341
|
|
James C. Yardley
|
|
|
108,319
|
|
|
|
36,341
|
|
Regulatory
Considerations
Section 409A. Section 409A of the
Code imposes new requirements for deferred compensation
arrangements. During 2005 through 2007, we reviewed our plans
and arrangements, identified what plans would be affected by
Section 409A, operated in good faith compliance with the
proposed regulations, and adopted the requisite amendments to
our compensation plans to comply with the requirements of
Section 409A.
Section 162(m). Section 162(m) of
the Code 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 the our other 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 the 2005
Omnibus Incentive Compensation Plan, are structured so that
awards under the plans are intended to qualify as
performance-based compensation under Section 162(m).
Specifically, annual cash incentive awards, stock options and
performance-based restricted stock are designed to meet the
requirements of Section 162(m). 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 2007 were intended to be
performance-based within the meaning of Section 162(m).
Certain restricted stock grants awarded during 2006 and prior
years may be considered non-performance-based within the meaning
of Section 162(m) and, therefore, subject to the
deductibility limitations under Section 162(m) when they
vest.
Forfeiture
of Certain Awards in the event of an Accounting
Restatement
Under our omnibus plan, which provides for grants of annual cash
incentive awards and long-term incentive awards, if it is
determined that an executive officer in the plan knowingly
engaged in, or was grossly negligent with respect to, misconduct
that causes us to prepare an accounting restatement due to
material noncompliance with any financial reporting requirement
under the securities laws, the executive is required to
reimburse us the amount of any payment in settlement of an award
earned or accrued during the twelve-month period following the
first public issuance or filing, whichever first occurred, of
the financial document that is required to be restated. See the
description of our omnibus plan beginning on page 68 of
this proxy statement.
42
Summary
Compensation Table
The following table and the narrative text that follows it
provide a summary of the compensation earned or paid in 2007 and
2006 to our CEO, our CFO and our three other most highly
compensated 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. This table also identifies the principal capacity
in which each of the named executive officers served us at the
end of 2007.
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
|
|
($)
|
|
($) (1)
|
|
($) (2)
|
|
($) (3)
|
|
($) (4)
|
|
($) (5)
|
|
($) (6)
|
|
($) (7)
|
|
Douglas L. Foshee
|
|
|
2007
|
|
|
$
|
987,507
|
|
|
$
|
0
|
|
|
$
|
2,241,918
|
|
|
$
|
1,957,958
|
|
|
$
|
1,518,000
|
|
|
$
|
109,884
|
|
|
$
|
166,399
|
|
|
$
|
6,981,666
|
|
President & Chief Executive Officer
|
|
|
2006
|
|
|
$
|
950,004
|
|
|
$
|
0
|
|
|
$
|
1,643,310
|
|
|
$
|
1,684,220
|
|
|
$
|
1,400,000
|
|
|
$
|
106,714
|
|
|
$
|
109,408
|
|
|
$
|
5,893,656
|
|
D. Mark Leland
|
|
|
2007
|
|
|
$
|
513,567
|
|
|
$
|
0
|
|
|
$
|
786,232
|
|
|
$
|
479,222
|
|
|
$
|
430,358
|
|
|
$
|
223
|
|
|
$
|
45,163
|
|
|
$
|
2,254,765
|
|
Executive Vice President & Chief Financial Officer
|
|
|
2006
|
|
|
$
|
483,750
|
|
|
$
|
0
|
|
|
$
|
457,363
|
|
|
$
|
331,515
|
|
|
$
|
490,050
|
|
|
$
|
2,974
|
|
|
$
|
40,146
|
|
|
$
|
1,805,798
|
|
Brent J. Smolik
|
|
|
2007
|
|
|
$
|
550,008
|
|
|
$
|
0
|
|
|
$
|
1,683,289
|
|
|
$
|
264,828
|
|
|
$
|
622,100
|
|
|
$
|
27,924
|
|
|
$
|
360,113
|
|
|
$
|
3,508,262
|
|
Executive Vice President & President of
Exploration & Production
|
|
|
2006
|
|
|
$
|
91,668
|
|
|
$
|
500,000
|
|
|
$
|
250,007
|
|
|
$
|
0
|
|
|
$
|
177,000
|
|
|
$
|
0
|
|
|
$
|
48,134
|
|
|
$
|
1,066,809
|
|
Robert W. Baker
|
|
|
2007
|
|
|
$
|
451,257
|
|
|
$
|
0
|
|
|
$
|
722,122
|
|
|
$
|
476,535
|
|
|
$
|
315,120
|
|
|
$
|
43,010
|
|
|
$
|
39,143
|
|
|
$
|
2,047,187
|
|
Executive Vice President & General Counsel
|
|
|
2006
|
|
|
$
|
432,807
|
|
|
$
|
0
|
|
|
$
|
456,677
|
|
|
$
|
345,269
|
|
|
$
|
401,885
|
|
|
$
|
47,722
|
|
|
$
|
33,628
|
|
|
$
|
1,717,988
|
|
James C. Yardley
|
|
|
2007
|
|
|
$
|
500,004
|
|
|
$
|
0
|
|
|
$
|
639,066
|
|
|
$
|
404,451
|
|
|
$
|
432,191
|
|
|
$
|
189
|
|
|
$
|
86,947
|
|
|
$
|
2,062,848
|
|
Executive Vice President,
Pipeline Group
|
|
|
2006
|
|
|
$
|
385,680
|
|
|
$
|
0
|
|
|
$
|
215,278
|
|
|
$
|
162,816
|
|
|
$
|
569,536
|
|
|
$
|
56,065
|
|
|
$
|
119,338
|
|
|
$
|
1,508,713
|
|
|
|
|
(1) |
|
The amount reflected in this column for Mr. Smolik during
2006 is a sign-on bonus Mr. Smolik received on his start
date of employment, which was designed to offset a portion of
the value of unvested equity Mr. Smolik was forfeiting from
his previous employer. |
|
(2) |
|
The amounts reflected in this column are the amounts of
compensation cost recognized in 2007 and 2006 for restricted
stock granted in 2007 and 2006 and prior years for each named
executive officer. The calculation of these amounts disregards
the estimate of forfeitures related to time-based vesting
conditions. The grant date fair market value of the restricted
stock computed in accordance with FAS 123(R) 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 2007 Annual Report on Form
10-K filed
with the SEC on February 28, 2008, and our Annual Reports
on
Form 10-K
for prior years. |
|
(3) |
|
The amounts reflected in this column are the amounts of
compensation cost recognized in 2007 and 2006 for stock options
granted in 2007 and 2006 and prior years for each named
executive officer. The calculation of these amounts disregards
the estimate of forfeitures related to time-based vesting
conditions. The grant date fair market value of the stock
options computed in accordance with FAS 123(R) 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 2007 Annual Report on
Form 10-K
filed with the SEC on February 28, 2008, and our Annual
Reports on
Form 10-K
for prior years. |
|
(4) |
|
The dollar amounts in this column reflect each named executive
officers annual cash incentive bonus earned for 2007
performance and 2006 performance. Annual cash incentive bonuses
are performance-based and driven by company and individual
performance. Amounts for 2007 are expected to be paid to the
named executive officers in March 2008. |
|
(5) |
|
The amounts in this column reflect the annual change in the
actuarial present value of each named executive officers
accumulated pension and supplemental pension benefits and
above-market interest credited to the named executive
officers supplemental Retirement Savings Plan account
balances. The change in pension value is equal |
43
|
|
|
|
|
to the difference between the actuarial present value at the end
of the year and the beginning of the year, calculated using
FAS 87 assumptions. The annual change in the actuarial
present value of Messrs. Foshees, Lelands,
Smoliks, Bakers and Yardleys accumulated
pension and supplemental pension benefits for 2007 is $109,103,
-$16,201, $27,913, $42,776, and -$1,033, respectively. The
amounts for Messrs. Leland and Yardley for 2007 are listed
as $0 in this column because the present value of their pension
benefits as of December 31, 2006 was greater than that as
of December 31, 2007, primarily due to the increase in the
discount rate used to determine the present value of the
accumulated pension benefits. The annual change in the actuarial
present value of Messrs. Foshees, Lelands,
Bakers and Yardleys accumulated pension and
supplemental pension benefits for 2006 was $106,640, $2,956,
$47,700 and $56,051, respectively. For 2007 and the latter half
of 2006, 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 percent of the applicable federal
long-term rate in January February, and
April December of 2007, and in June, July, October,
November and December of 2006. The total amount of the
above-market interest credited to Messrs. Foshees,
Lelands, Smoliks, Bakers and Yardleys
supplemental Retirement Savings Plan account balance during 2007
was $781, $223, $11, $234 and $189, respectively. The total
amount of the above-market interest that was credited to
Messrs. Foshees, Lelands, Bakers and
Yardleys supplemental Retirement Savings Plan account
balance during 2006 was $74, $18, $22 and $14, respectively. See
the Nonqualified Deferred Compensation table and narrative
description on pages 55 and 56 of this proxy statement for
a description of the named executive officers supplemental
Retirement Savings Plan benefits. |
|
|
|
(6) |
|
The compensation reflected in the All Other
Compensation column 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, relocation expenses
paid or incurred by El Paso, annual executive physicals,
installation of a home security system and tax reimbursements,
which are listed in the table following these footnotes. |
|
(7) |
|
The amount reported in the Total column is the sum
of all of the columns. It includes the Stock Awards, Option
Awards and Change in Pension Value amounts, which were not
actually paid to any named executive officer in 2007. The Stock
Awards, Option Awards and Change in Pension Value amounts
actually paid or provided in the future may be more or less than
the reported amounts. The amount of compensation actually paid
or provided to each named executive officer for 2007 (being
Salary, Non-Equity Incentive Plan Compensation and All Other
Compensation) was Mr. Foshee: $2,671,906; Mr. Leland:
$989,088; Mr. Smolik $1,532,221; Mr. Baker $805,520;
and Mr. Yardley $1,019,142. |
44
All Other
Compensation included in the Summary Compensation
Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
Supplemental
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matching
|
|
Company Matching
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
Contributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to the
|
|
accrued under the
|
|
Personal
|
|
|
|
Annual
|
|
|
|
|
|
|
|
|
Retirement
|
|
2005 Supplemental
|
|
Use of
|
|
Relocation
|
|
Executive
|
|
Security
|
|
Tax
|
|
|
|
|
Savings Plan
|
|
Benefits Plan
|
|
Aircraft
|
|
Expenses
|
|
Physicals
|
|
System
|
|
Reimbursements
|
|
Total
|
Name
|
|
($)
|
|
($) (A)
|
|
($) (B)
|
|
($) (C)
|
|
($) (D)
|
|
($) (E)
|
|
($) (F)
|
|
($)
|
|
Douglas L. Foshee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
$
|
10,125
|
|
|
$
|
97,313
|
|
|
$
|
42,395
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,377
|
|
|
$
|
15,189
|
|
|
$
|
166,399
|
|
2006
|
|
$
|
9,900
|
|
|
$
|
95,850
|
|
|
$
|
56
|
|
|
$
|
0
|
|
|
$
|
912
|
|
|
$
|
0
|
|
|
$
|
2,690
|
|
|
$
|
109,408
|
|
D. Mark Leland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
$
|
10,125
|
|
|
$
|
35,038
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
45,163
|
|
2006
|
|
$
|
9,900
|
|
|
$
|
29,334
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
912
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
40,146
|
|
Brent J. Smolik
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
$
|
10,125
|
|
|
$
|
12,563
|
|
|
$
|
196,448
|
|
|
$
|
88,917
|
|
|
$
|
912
|
|
|
$
|
0
|
|
|
$
|
51,148
|
|
|
$
|
360,113
|
|
2006
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
45,731
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,403
|
|
|
$
|
48,134
|
|
Robert W. Baker
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
$
|
10,125
|
|
|
$
|
28,266
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
752
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
39,143
|
|
2006
|
|
$
|
9,900
|
|
|
$
|
22,816
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
912
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
33,628
|
|
James C. Yardley
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
$
|
10,125
|
|
|
$
|
38,004
|
|
|
$
|
9,143
|
|
|
$
|
16,121
|
|
|
$
|
1,150
|
|
|
$
|
0
|
|
|
$
|
12,404
|
|
|
$
|
86,947
|
|
2006
|
|
$
|
9,900
|
|
|
$
|
19,063
|
|
|
$
|
1,492
|
|
|
$
|
53,250
|
|
|
$
|
536
|
|
|
$
|
0
|
|
|
$
|
35,097
|
|
|
$
|
119,338
|
|
|
|
|
(A) |
|
The compensation reflected in this column for each of the named
executive officers for 2007 and 2006 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 55 of this proxy statement. |
|
(B) |
|
El Paso makes available for business use to its executive
officers private aircraft leased by El Paso and in certain
circumstances will pay for the cost of bringing personal guests
on business-related flights using a commercial carrier. In
addition, when Mr. Smolik began his employment in November
2006, El Paso agreed to make private aircraft available to
him until he relocated from Calgary, Canada to Houston, Texas.
The amounts shown in this column for Messrs. Foshee and
Yardley for 2007 and 2006 reflect the incremental cost to
El Paso for occasions when the executives family
members or professional guests accompanied the executive on
business-related flights on private aircraft leased by
El Paso. In addition, the amount shown for Mr. Yardley
for 2007 includes $9,129 for an occasion when the
executives spouse accompanied him on a business-related
flight using a commercial carrier. The amounts shown in this
column for Mr. Smolik for 2007 and 2006 reflect the
incremental cost to El Paso for personal travel by the
executive, and in certain limited circumstances during 2007,
Mr. Smoliks family members, on private aircraft
leased by El Paso. Incremental cost is calculated based on
the variable operating costs to El Paso, which include
hourly rate fees, fuel charges, segment fees, federal excise
taxes and, if applicable, international fees and does not
include the fixed costs associated with the lease agreements
since private aircraft are used primarily for business purposes.
When the executive officers use of leased aircraft or a
guests travel does not meet the IRSs standard for
business use, the cost of that travel is imputed as income to
the executive officer. Any tax reimbursements with respect to
the imputed income for the travel are reflected in the Tax
Reimbursements column of this table. |
|
(C) |
|
The amount in this column for Mr. Smolik for 2007 reflects
expenses paid by El Paso to relocate Mr. Smolik and
his family from Calgary, Canada to Houston, Texas in connection
with his appointment as President of our Exploration &
Production Company. The amounts in this column for
Mr. Yardley for 2007 and 2006 reflect expenses paid by
El Paso to relocate Mr. Yardley and his family from
Birmingham, Alabama to Houston, Texas in connection with his
appointment as Chairman of our Pipeline Group. The relocation
expenses reflected in this column for 2007 and 2006 were imputed
as income to Messrs. Smolik and Yardley. Any tax
reimbursements with respect to imputed income for relocation
expenses are reflected in the Tax Reimbursements
column of this table. |
45
|
|
|
(D) |
|
The amounts in this column for Messrs. Smolik, Baker and
Yardley for 2007, and Messrs. Foshee, Leland, Baker and
Yardley for 2006, reflect the cost to El Paso for the
executive officers annual physical. |
|
(E) |
|
The amount in this column for Mr. Foshee for 2007 reflects
a reimbursement made to Mr. Foshee by El Paso for the
cost of installation of a home security system. |
|
(F) |
|
The amount in this column for Mr. Foshee for 2007 reflects
$14,399 related to tax reimbursements associated with imputed
income for personal air travel that does not meet the IRSs
standard for business use and $790 related to a tax
reimbursement associated with the cost of installation of a home
security system paid by Mr. Foshee and reimbursed by
El Paso. The amount in this column for Mr. Smolik for
2007 reflects $6,241 related to tax reimbursements associated
with imputed income for personal air travel that does not meet
the IRSs standard for business use, $76 related to tax
reimbursements for a year-end corrective company matching
contribution accrued under the 2005 Supplemental Benefits Plan,
and $44,831 related to tax reimbursements associated with
relocation expenses paid by El Paso. The amount in this
column for Messrs. Foshee and Smolik for 2006 reflects tax
reimbursements associated with imputed income for personal air
travel that does not meet the IRSs standard for business
use. The amounts in this column for Mr. Yardley for 2007
and 2006 reflect $5,214 and $725, respectively, related to tax
reimbursements associated with imputed income for personal air
travel that does not meet the IRSs standard for business
use and $7,190 and $34,372, respectively, relating to tax
reimbursements associated with relocation expenses paid by
El Paso. |
|
|
|
In addition to the items included in the above table that could
be characterized as having a personal benefit, El Paso also
provides a separate parking space for Mr. Foshee.
Mr. Foshees use of the parking space is not included
in the table because there is no incremental cost to
El Paso for Mr. Foshees use of this parking
space. The named executive officers may use season tickets
purchased by El Paso to attend sporting events when the
tickets are not otherwise being used for business purposes. The
named executive officers use of these tickets for personal
reasons is not included in the table because there is no
incremental cost to El Paso. |
The following is a description of material factors necessary to
understand the information disclosed above in the Summary
Compensation Table. As described in the Compensation Discussion
and Analysis, at the beginning of 2007, the Compensation
Committee established a minimum, target and maximum annual cash
incentive bonus level for each of the named executive officers
and the financial and non-financial goals for El Paso and
its business units. The annual cash incentive bonus
opportunities for 2007 performance were capped at 2.25 times
2007 target bonus opportunities for the named executive
officers. The range of potential annual cash incentive bonuses
for 2007 performance for each named executive officer is
reflected as a dollar amount (based on the percentage of annual
base salary) in the Grants of Plan-Based Awards table in the
Estimated Possible Payments under Non-Equity Incentive
Plan Awards column below. See the discussion under
Annual Cash Incentive Awards for 2007 Performance in
the Compensation Discussion and Analysis for additional
information on the determination of annual cash incentive
bonuses for 2007 performance, including the 2007 performance
goals, beginning on page 35 of this proxy statement. After
the financial results were available for 2007, the Compensation
Committee determined the appropriate funding of the annual
incentive bonus pool based on the level of El Pasos
and its business units performance relative to the
performance goals that were established for the year. Then the
Compensation Committee determined the specific percentage cash
bonus to be awarded to the named executive officers based on the
individual performance adjustment factors. See the discussion
under El Paso Performance, Chief
Executive Officer 2007 Annual Incentive and 2007
Annual Incentives for Other Named Executive Officers in
the Compensation Discussion and Analysis for additional
information about the financial and non-financial performance
goals that were achieved and individual executive officer
performance in 2007, beginning on page 38 of this
proxy statement. The dollar amount earned (as of
December 31, 2007) as an annual cash incentive bonus
for 2007 performance by each of the named executive officers is
reflected in the Summary Compensation Table in the
Non-Equity Incentive Plan Compensation column. The
annual cash incentive bonuses are expected to be paid to the
named executive officers in March 2008.
46
Grants of
Plan-Based Awards Table
The following table sets forth the range of potential annual
cash incentive bonuses for 2007 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 2007 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 2007, 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 2007. 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, 2007
|
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|
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|
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|
|
|
|
|
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All Other
|
|
All Other
|
|
|
|
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Grant Date
|
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|
|
|
|
|
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Stock
|
|
Option
|
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Fair
|
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|
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Estimated Possible Payouts
|
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Awards:
|
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Awards:
|
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Exercise
|
|
Closing
|
|
Value
|
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Under Non-Equity Incentive
|
|
Number of
|
|
Number of
|
|
or Base
|
|
Market Price
|
|
of Stock
|
|
|
|
|
Date of
|
|
Plan Awards (1)
|
|
Shares of
|
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Securities
|
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Price
|
|
of Underlying
|
|
and
|
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Compensation
|
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Threshold
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Stock or
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Underlying
|
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of Option
|
|
Securities on
|
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Option
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Grant
|
|
Committee
|
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Not Met
|
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Threshold
|
|
Target
|
|
Maximum
|
|
Units
|
|
Options
|
|
Awards
|
|
Grant Date
|
|
Awards
|
Name
|
|
Date
|
|
Action
|
|
($)
|
|
($)
|
|
($)
|
|
($) (2)
|
|
(#) (3)
|
|
(#) (4)
|
|
($/Sh) (5)
|
|
($/Sh) (6)
|
|
($) (7)
|
|
Douglas L. Foshee
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Incentive
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
0
|
|
|
$
|
600,005
|
|
|
$
|
1,200,010
|
|
|
$
|
2,700,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
4/2/2007
|
|
|
|
2/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,930,536
|
|
Stock Options
|
|
|
4/2/2007
|
|
|
|
2/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
369,270
|
|
|
$
|
14.58
|
|
|
$
|
14.74
|
|
|
$
|
2,017,100
|
|
D. Mark Leland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Incentive
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
0
|
|
|
$
|
155,927
|
|
|
$
|
311,854
|
|
|
$
|
701,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
4/2/2007
|
|
|
|
2/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,153,438
|
|
Stock Options
|
|
|
4/2/2007
|
|
|
|
2/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,112
|
|
|
$
|
14.58
|
|
|
$
|
14.74
|
|
|
$
|
579,626
|
|
Brent J. Smolik
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Incentive
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
0
|
|
|
$
|
247,504
|
|
|
$
|
495,007
|
|
|
$
|
1,113,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
4/2/2007
|
|
|
|
2/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
768,964
|
|
Stock Options
|
|
|
4/2/2007
|
|
|
|
2/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,112
|
|
|
$
|
14.58
|
|
|
$
|
14.74
|
|
|
$
|
579,626
|
|
Robert W. Baker
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Incentive
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
0
|
|
|
$
|
137,009
|
|
|
$
|
274,018
|
|
|
$
|
616,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
4/2/2007
|
|
|
|
2/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,076,543
|
|
Stock Options
|
|
|
4/2/2007
|
|
|
|
2/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,112
|
|
|
$
|
14.58
|
|
|
$
|
14.74
|
|
|
$
|
579,626
|
|
James C. Yardley
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Incentive
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
0
|
|
|
$
|
187,502
|
|
|
$
|
375,003
|
|
|
$
|
843,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
4/2/2007
|
|
|
|
2/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,038,096
|
|
Stock Options
|
|
|
4/2/2007
|
|
|
|
2/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,112
|
|
|
$
|
14.58
|
|
|
$
|
14.74
|
|
|
$
|
579,626
|
|
|
|
|
(1) |
|
These columns show the potential value of the payout of the
annual cash incentive bonuses for 2007 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 2007 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 range of
annual cash incentive bonuses for Messrs. Foshee, Leland,
Smolik, Baker and Yardley for 2007 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 2007 to the named executive officers. The shares of
restricted stock time vest in three equal annual installments
beginning one year from the date of grant. |
47
|
|
|
(4) |
|
This column shows the number of stock options granted in 2007 to
the named executive officers. The stock options time vest in
three equal annual installments beginning one year from the date
of grant. |
|
(5) |
|
This column shows the exercise price for the stock options
granted during 2007, 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 FAS 123R and the grant date
fair value of stock options computed in accordance with
FAS 123R granted to the named executive officers during
2007. 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 on February 13, 2007, and granted to
the named executive officers on April 2, 2007, as part of
our 2007 annual grant of long-term incentive awards. The equity
awards were granted under our 2005 Omnibus Incentive
Compensation Plan. The 2005 Omnibus Incentive Compensation Plan
provides that 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.
In 2007, the value of restricted stock and stock option awards
granted as part of our annual grant of long-term incentive
awards was based on both company and individual performance. The
grant date fair value per share for the restricted stock granted
on April 2, 2007 was $14.58, computed in accordance with
FAS 123(R). The grant date fair value per option for the
stock options granted on April 2, 2007 was $5.4624,
computed using a Black-Scholes option-pricing model based on
several assumptions and in accordance with FAS 123(R).
These assumptions are based on managements best estimate
at the time of grant and are listed below, as follows:
|
|
|
|
|
|
|
Grant Date
|
|
|
4/2/2007
|
|
Expected Term in Years
|
|
|
6.0
|
|
Expected Volatility
|
|
|
34
|
%
|
Expected Dividends
|
|
|
1
|
%
|
Risk-Free Interest Rate
|
|
|
4.60
|
%
|
Restricted stock carries voting and dividend rights. Dividends
are paid on restricted stock directly to the holder of the
restricted stock and at the same rate as other holders of our
common stock. Dividends are not paid on unexercised stock
options. The amount of dividends received during 2007 on shares
of unvested restricted stock granted to the named executives is
factored into the grant date fair value per share in accordance
with FAS 123(R) and is not required to be included in the
Grants of Plan-Based Awards table but is reflected in the table
below.
|
|
|
|
|
|
|
Dividends Received
|
|
|
during 2007 on
|
|
|
Restricted Stock
|
Name
|
|
($)
|
|
Douglas L. Foshee
|
|
$
|
59,693
|
|
D. Mark Leland
|
|
$
|
15,867
|
|
Brent J. Smolik
|
|
$
|
27,594
|
|
Robert W. Baker
|
|
$
|
16,124
|
|
James C. Yardley
|
|
$
|
11,236
|
|
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. See page 68 of this
proxy statement for a description of our 2005 Omnibus Incentive
Compensation Plan and page 61 for the definitions of
good reason and change in control. Under
the terms of our 2005 Omnibus Incentive Compensation Plan, the
48
Compensation Committee may, in its sole discretion and at any
time, change the vesting of shares of restricted stock or stock
options. The total value of restricted stock can be realized
only if the executives remain employees of El Paso for the
required vesting period. Certain non-qualified stock options may
be transferred to immediate family members, directly or
indirectly or by means of a trust, corporate entity or
partnership. 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.
Letter
Agreements
As indicated in the Compensation Discussion and Analysis, we do
not enter into employment agreements with our executive
officers. We did, however, provide letter agreements to
Mr. Foshee, in connection with his employment as our
President and Chief Executive Officer, and Mr. Smolik, in
connection with his employment as Executive Vice President and
President of El Paso Exploration & Production
Company. The letter agreements outline the basic terms of their
initial compensation arrangements.
We entered into a letter agreement with Mr. Foshee
effective September 1, 2003. Under this agreement,
Mr. Foshee serves as our President and CEO, as well as a
director of our company, and receives compensation subject to
adjustment by the compensation committee. On the start date of
his employment, Mr. Foshee was granted 1,000,000 options to
purchase our common stock and 200,000 shares of restricted
stock. The options time vest in five equal annual installments
beginning one year from the date of grant. The shares of
restricted stock have both time and performance-based vesting
conditions. Based on El Pasos performance relative to
its peer group of companies during the first year of his
employment, 100,000 of the 200,000 shares of restricted
stock vested and the remaining 100,000 shares were
forfeited. The 100,000 shares that vested based on
performance also time vest in five equal annual installments
beginning one year from the date of grant. In addition, on his
start date, Mr. Foshee received common stock with a value
of $875,000 and an additional cash payment of $875,000.
Mr. Foshee was prohibited from pledging or selling the
common stock received as part of the sign-on bonus for a period
of two years from the grant date.
We entered into a letter agreement with Mr. Smolik
effective November 1, 2006. Under this agreement,
Mr. Smolik serves as our Executive Vice President and
President of our Exploration and Production Group.
Mr. Smolik received a starting annual base salary payable
at a rate of $550,008, a sign-on bonus of $500,000 and a target
annual cash incentive bonus opportunity at a rate of
90 percent of his annual base salary. Mr. Smolik was
also granted 146,092 shares of restricted stock on the
start date of his employment. Mr. Smoliks sign-on
bonus and restricted stock grant were designed to offset the
value of unvested equity Mr. Smolik forfeited from his
previous employer. The restricted shares vest in two equal
annual installments beginning one year from the date of grant.
We paid or incurred certain of Mr. Smoliks
expatriate, relocation and travel costs related to his
transition from Calgary, Canada to Houston, Texas and his
benefits are determined in accordance with the policies
described under our plans in effect from time to time.
49
Outstanding
Equity Awards Table
The following table sets forth, on an
award-by-award
basis, the number of securities underlying unexercised stock
options and the total number and aggregate market value of
shares of unvested restricted stock held by the named executive
officers as of December 31, 2007. The table also provides
the exercise price and date of expiration of each unexercised
stock option.
Outstanding
Equity Awards
at December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Market Value
|
|
|
Option Awards
|
|
Shares or
|
|
of Shares or
|
|
|
Number of Securities
|
|
|
|
|
|
Units of
|
|
Units of
|
|
|
Underlying Unexercised
|
|
Option
|
|
|
|
Stock That
|
|
Stock That
|
|
|
Options at Fiscal Year-End
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
Have Not
|
|
|
(#)
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
($) (8)
|
|
Date
|
|
(#)
|
|
($) (13)
|
|
Douglas L. Foshee
|
|
|
800,000
|
|
|
|
200,000
|
(1)
|
|
$
|
7.345
|
|
|
|
9/2/2013
|
|
|
|
20,000
|
(1)
|
|
$
|
344,800
|
|
|
|
|
281,250
|
|
|
|
93,750
|
(2)
|
|
$
|
7.090
|
|
|
|
4/1/2014
|
|
|
|
64,780
|
(9)
|
|
$
|
1,116,807
|
|
|
|
|
201,975
|
|
|
|
201,975
|
(3)
|
|
$
|
10.685
|
|
|
|
4/1/2015
|
|
|
|
83,333
|
(10)
|
|
$
|
1,436,661
|
|
|
|
|
84,241
|
|
|
|
168,481
|
(4)
|
|
$
|
12.155
|
|
|
|
4/3/2016
|
|
|
|
200,997
|
(11)
|
|
$
|
3,465,188
|
|
|
|
|
0
|
|
|
|
369,270
|
(5)
|
|
$
|
14.580
|
|
|
|
4/2/2017
|
|
|
|
|
|
|
|
|
|
D. Mark Leland
|
|
|
5,000
|
|
|
|
0
|
|
|
$
|
35.406
|
|
|
|
7/24/2008
|
|
|
|
7,871
|
(9)
|
|
$
|
135,696
|
|
|
|
|
63,000
|
|
|
|
0
|
|
|
$
|
42.125
|
|
|
|
10/25/2009
|
|
|
|
8,333
|
(6)
|
|
$
|
143,661
|
|
|
|
|
55,000
|
|
|
|
0
|
|
|
$
|
62.975
|
|
|
|
1/29/2011
|
|
|
|
23,036
|
(10)
|
|
$
|
397,141
|
|
|
|
|
6,375
|
|
|
|
0
|
|
|
$
|
62.975
|
|
|
|
1/29/2011
|
|
|
|
79,111
|
(11)
|
|
$
|
1,363,874
|
|
|
|
|
20,000
|
|
|
|
0
|
|
|
$
|
46.275
|
|
|
|
8/13/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
39,843
|
|
|
|
13,282
|
(2)
|
|
$
|
7.090
|
|
|
|
4/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
24,540
|
|
|
|
24,540
|
(3)
|
|
$
|
10.685
|
|
|
|
4/1/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
25,000
|
(6)
|
|
$
|
11.990
|
|
|
|
8/10/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
23,288
|
|
|
|
46,575
|
(4)
|
|
$
|
12.155
|
|
|
|
4/3/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
106,112
|
(5)
|
|
$
|
14.580
|
|
|
|
4/2/2017
|
|
|
|
|
|
|
|
|
|
Brent J. Smolik
|
|
|
0
|
|
|
|
106,112
|
(5)
|
|
$
|
14.580
|
|
|
|
4/2/2017
|
|
|
|
73,046
|
(12)
|
|
$
|
1,259,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,741
|
(11)
|
|
$
|
909,255
|
|
Robert W. Baker
|
|
|
15,000
|
|
|
|
0
|
|
|
$
|
35.406
|
|
|
|
7/24/2008
|
|
|
|
19,434
|
(9)
|
|
$
|
335,042
|
|
|
|
|
40,000
|
|
|
|
0
|
|
|
$
|
42.125
|
|
|
|
10/25/2009
|
|
|
|
18,429
|
(10)
|
|
$
|
317,716
|
|
|
|
|
15,334
|
|
|
|
0
|
|
|
$
|
49.469
|
|
|
|
8/1/2010
|
|
|
|
73,837
|
(11)
|
|
$
|
1,272,950
|
|
|
|
|
55,000
|
|
|
|
0
|
|
|
$
|
62.975
|
|
|
|
1/29/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
6,375
|
|
|
|
0
|
|
|
$
|
62.975
|
|
|
|
1/29/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
0
|
|
|
$
|
46.275
|
|
|
|
8/13/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
105,000
|
|
|
|
35,000
|
(2)
|
|
$
|
7.090
|
|
|
|
4/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
60,592
|
|
|
|
60,593
|
(3)
|
|
$
|
10.685
|
|
|
|
4/1/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
18,630
|
|
|
|
37,260
|
(4)
|
|
$
|
12.155
|
|
|
|
4/3/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
106,112
|
(5)
|
|
$
|
14.580
|
|
|
|
4/2/2017
|
|
|
|
|
|
|
|
|
|
James C. Yardley
|
|
|
10,000
|
|
|
|
0
|
|
|
$
|
43.875
|
|
|
|
4/22/2008
|
|
|
|
7,291
|
(9)
|
|
$
|
125,697
|
|
|
|
|
16,400
|
|
|
|
0
|
|
|
$
|
27.438
|
|
|
|
12/3/2008
|
|
|
|
8,359
|
(10)
|
|
$
|
144,109
|
|
|
|
|
63,000
|
|
|
|
0
|
|
|
$
|
42.125
|
|
|
|
10/25/2009
|
|
|
|
6,666
|
(7)
|
|
$
|
114,922
|
|
|
|
|
55,000
|
|
|
|
0
|
|
|
$
|
62.975
|
|
|
|
1/29/2011
|
|
|
|
71,200
|
(11)
|
|
$
|
1,227,488
|
|
|
|
|
6,375
|
|
|
|
0
|
|
|
$
|
62.975
|
|
|
|
1/29/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
0
|
|
|
$
|
46.275
|
|
|
|
8/13/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
36,656
|
|
|
|
12,219
|
(2)
|
|
$
|
7.090
|
|
|
|
4/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
22,731
|
|
|
|
22,731
|
(3)
|
|
$
|
10.685
|
|
|
|
4/1/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
8,451
|
|
|
|
16,901
|
(4)
|
|
$
|
12.155
|
|
|
|
4/3/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
6,667
|
|
|
|
13,333
|
(7)
|
|
$
|
14.275
|
|
|
|
8/16/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
106,112
|
(5)
|
|
$
|
14.580
|
|
|
|
4/2/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
On the start date of his employment, Mr. Foshee was granted
1,000,000 options that time vest in five equal annual
installments beginning one year from the date of grant, with the
remaining vesting date on September 2, 2008. On his start
date of employment, Mr. Foshee was also granted
200,000 shares of restricted stock. The |
50
|
|
|
|
|
shares of restricted stock had both time and performance vesting
provisions. Based on El Pasos performance relative to
its peer group of companies during the first year of
Mr. Foshees employment, 100,000 of the
200,000 shares of restricted stock vested and the remaining
100,000 shares were forfeited. The 100,000 shares that
vested based on performance also time vest in five equal annual
installments beginning one year from the date of grant, with the
remaining vesting date on October 1, 2008. |
|
(2) |
|
These are stock options that were granted as part of the 2004
annual grant of long-term incentive awards and time vest in four
equal annual installments beginning one year from the date of
grant, with the remaining vesting date on April 1, 2008. |
|
(3) |
|
These are stock options that were granted as part of the 2005
annual grant of long-term incentive awards and time vest in four
equal annual installments beginning one year from the date of
grant, with remaining vesting dates on April 1, 2008 and
April 1, 2009. |
|
(4) |
|
These are stock options that were granted as part of the 2006
annual grant of long-term incentive awards and time vest in
three equal annual installments beginning one year from the date
of grant, with remaining vesting dates on April 3, 2008 and
April 3, 2009. |
|
(5) |
|
These are stock options that were granted as part of the 2007
annual grant of long-term incentive awards and time vest in
three equal annual installments beginning one year from the date
of grant, with vesting dates on April 2, 2008,
April 2, 2009 and April 2, 2010. |
|
(6) |
|
On August 10, 2005, Mr. Leland received an additional
grant of long-term incentive awards in the form of 50,000 stock
options and 25,000 shares of restricted stock in connection
with his appointment as Executive Vice President and Chief
Financial Officer. The stock options time vest in four equal
annual installments beginning one year from the date of grant,
with remaining vesting dates on August 10, 2008 and
August 10, 2009. The shares of restricted stock time vest
in three equal annual installments beginning one year from the
date of grant, with the remaining vesting date on
August 10, 2008. |
|
(7) |
|
On August 16, 2006, Mr. Yardley received an additional
grant of long-term incentive awards in the form of 20,000 stock
options and 10,000 shares of restricted stock in connection
with his appointment as Executive Vice President of El Paso
and Chairman of our Pipeline Group. The stock options and
restricted stock time vest in three equal annual installments
beginning one year from the date of grant, with remaining
vesting dates on August 16, 2008 and August 16, 2009. |
|
(8) |
|
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. |
|
(9) |
|
These are shares of restricted stock that were granted as part
of the 2005 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, 2008. |
|
(10) |
|
These are shares of restricted stock that were granted as part
of the 2006 annual grant of long-term incentive awards and time
vest in three equal annual installments beginning one year from
the date of grant, with remaining vesting dates on April 3,
2008 and April 3, 2009. |
|
(11) |
|
These are shares of restricted stock that were granted as part
of the 2007 annual grant of long-term incentive awards and time
vest in three equal annual installments beginning one year from
the date of grant, with vesting dates on April 2, 2008,
April 2, 2009, and April 2, 2010. |
|
(12) |
|
These are shares of restricted stock that were granted to
Mr. Smolik on the start date of his employment and time
vest in two equal annual installments beginning one year from
the date of grant, with vesting dates on November 1, 2007
and November 1, 2008. |
|
(13) |
|
The values represented in this column have been calculated by
multiplying $17.24, the closing price of our common stock on
December 31, 2007 by the number of shares of stock. |
51
Option
Exercises and Stock Vested Table
The following table sets forth information concerning stock
option exercises and vesting of restricted stock during 2007 for
each of the named executive officers. In satisfaction of
applicable SEC regulations, the number of securities for which
stock options were exercised (if any) and the aggregate dollar
value realized upon the exercise of such stock options is
reflected in this table. The number of shares of restricted
stock that have vested and the aggregate dollar value realized
upon the vesting of such restricted stock is also reflected.
None of the named executive officers exercised stock options
during 2007.
Option
Exercises and Stock Vested
During Fiscal Year 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of Shares
|
|
Value Realized
|
|
Number of Shares
|
|
Value Realized
|
|
|
Acquired on Exercise
|
|
on Exercise
|
|
Acquired on Vesting
|
|
on Vesting
|
Name
|
|
(#)
|
|
($)
|
|
(#)
|
|
($) (1)
|
|
Douglas L. Foshee
|
|
|
0
|
|
|
$
|
0
|
|
|
|
188,941
|
|
|
$
|
2,811,426
|
|
D. Mark Leland
|
|
|
0
|
|
|
$
|
0
|
|
|
|
36,578
|
|
|
$
|
552,706
|
|
Brent J. Smolik
|
|
|
0
|
|
|
$
|
0
|
|
|
|
73,046
|
|
|
$
|
1,276,479
|
|
Robert W. Baker
|
|
|
0
|
|
|
$
|
0
|
|
|
|
51,981
|
|
|
$
|
758,762
|
|
James C. Yardley
|
|
|
0
|
|
|
$
|
0
|
|
|
|
22,950
|
|
|
$
|
337,753
|
|
|
|
|
(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. |
52
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 2007. No pension benefits were paid to the
named executive officers during the year.
Pension
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years
|
|
Present Value of
|
|
Payments During
|
|
|
|
|
Credited Service
|
|
Accumulated Benefit
|
|
Last Fiscal Year
|
Name
|
|
Plan Name
|
|
(#) (1)
|
|
($) (2)
|
|
($)
|
|
Douglas L. Foshee
|
|
Pension Plan
|
|
|
4
|
|
|
$
|
41,072
|
|
|
$
|
0
|
|
|
|
Supplemental Benefits Plan
|
|
|
1
|
|
|
$
|
58,621
|
|
|
$
|
0
|
|
|
|
2005 Supplemental Benefits Plan
|
|
|
3
|
|
|
$
|
283,023
|
|
|
$
|
0
|
|
D. Mark Leland
|
|
Pension Plan
|
|
|
22
|
|
|
$
|
175,180
|
|
|
$
|
0
|
|
|
|
Supplemental Benefits Plan
|
|
|
19
|
|
|
$
|
208,122
|
|
|
$
|
0
|
|
|
|
2005 Supplemental Benefits Plan
|
|
|
3
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Brent J. Smolik
|
|
Pension Plan
|
|
|
1
|
|
|
$
|
9,013
|
|
|
$
|
0
|
|
|
|
Supplemental Benefits Plan
|
|
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
2005 Supplemental Benefits Plan
|
|
|
1
|
|
|
$
|
18,900
|
|
|
$
|
0
|
|
Robert W. Baker
|
|
Pension Plan
|
|
|
11
|
|
|
$
|
136,634
|
|
|
$
|
0
|
|
|
|
Supplemental Benefits Plan
|
|
|
8
|
|
|
$
|
111,252
|
|
|
$
|
0
|
|
|
|
2005 Supplemental Benefits Plan
|
|
|
3
|
|
|
$
|
100,945
|
|
|
$
|
0
|
|
James C. Yardley
|
|
Pension Plan
|
|
|
30
|
|
|
$
|
820,030
|
|
|
$
|
0
|
|
|
|
Supplemental Benefits Plan
|
|
|
27
|
|
|
$
|
1,185,929
|
|
|
$
|
0
|
|
|
|
2005 Supplemental Benefits Plan
|
|
|
3
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
(1) |
|
Credited service shown for Mr. Leland was 16 years as
of December 31, 2001 for his Minimum Benefit (as described
below), and for Mr. Yardley was 27 years as of
December 31, 2004 for his Sonat Transition Benefit (as
described below). Credited service shown for Mr. Baker
reflects years of participation since January 1, 1997, when
he became eligible to participate in these plans. |
|
(2) |
|
The present value of the named executive officers
accumulated pension benefits in this column reflects a
6.25 percent discount rate and September 30, 2007
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 five years of service or
attainment of age 65. Effective January 1, 2008, the
vesting requirement was reduced from five to three years of
service. At the end of each calendar quarter, participant cash
account balances are increased by an interest credit based on
5-Year
Treasury bond yields, 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 percentage is based on the
sum of age plus service at the end of the prior calendar year
according to the following schedule:
53
|
|
|
|
|
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 September 30, 2007 using
FAS 87 assumptions. These are the same assumptions that are
used for our pension liability disclosure in Note 13 to our
financial statements included in our 2007 Annual Report on
Form 10-K
filed with the SEC on February 28, 2008. 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, Baker 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 $225,000 cannot be taken into account
and the maximum payable benefit in 2007 was $180,000. For 2007,
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 prior
Supplemental Benefits Plan was amended to utilize certain
grandfathering provisions under Section 409A. The benefits
that accrue under the 2005 Supplemental Benefits Plan are
supplemental benefits for officers and key management employees
(including all of the name 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 (unless a valid irrevocable election was made to
receive payment in a form other than lump sum prior to
June 1, 2004), 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
54
under the plan equal to the amount of the matching contribution
to the Retirement Savings Plan that cannot be made due to Code
limitations and the participants elective deferrals. See
the Nonqualified Deferred Compensation table below for
additional information regarding the named executive
officers supplemental Retirement Savings Plan benefits.
The 2005 Supplemental Benefits Plan and prior Supplemental
Benefits Plan may not be terminated so long as the Pension Plan
and/or
Retirement Savings Plan remain in effect. 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. A change in control under the plans has the same
meaning as under the 2005 Omnibus Incentive Compensation Plan.
See the description of the 2005 Omnibus Incentive Compensation
Plan beginning on page 68 of this proxy statement.
Named Executive Officers Eligible for Early
Retirement. Since Mr. Yardley is
age 56, he is eligible for early retirement benefits
payable from the Pension Plan and the Supplemental Benefits
Plan. If Mr. Yardley had terminated employment on
September 30, 2007 and commenced his benefits as of
October 1, 2007, his present value of accumulated benefits
would have been $1,010,000 for the Pension Plan and $1,560,000
for the Supplemental Benefits Plan (based on the same
assumptions used above, including a 6.25 percent discount
rate). Note that these amounts exceed those shown in the Pension
Benefits table for Mr. Yardley because the value of the
early retirement benefits is greater at his current age.
Nonqualified
Defined Contribution and
Other Nonqualified Deferred Compensation Plans
The following table sets forth information with respect to
nonqualified defined contribution plans for each of the named
executive officers as of December 31, 2007. We sponsor a
supplemental benefits plan that provides for the deferral of
benefits that could not be paid under the Retirement Savings
Plan. We do not sponsor a traditional nonqualified deferred
compensation plan that provides for deferrals of base salary and
bonuses for executive officers. None of the named executive
officers had withdrawals or distributions of supplemental
Retirement Savings Plan benefits during 2007.
Nonqualified
Deferred Compensation
as of December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registrant
|
|
Aggregate
|
|
Aggregate
|
|
|
Contributions in
|
|
Earnings in
|
|
Balance at Last
|
|
|
Last Fiscal Year
|
|
Last Fiscal Year
|
|
Fiscal Year End
|
Name
|
|
($) (1)
|
|
($)
|
|
($) (2)
|
|
Douglas L. Foshee
|
|
$
|
97,313
|
|
|
$
|
19,043
|
|
|
$
|
357,658
|
|
D. Mark Leland
|
|
$
|
35,038
|
|
|
$
|
5,386
|
|
|
$
|
104,626
|
|
Brent J. Smolik
|
|
$
|
12,563
|
|
|
$
|
228
|
|
|
$
|
12,791
|
|
Robert W. Baker
|
|
$
|
28,266
|
|
|
$
|
5,696
|
|
|
$
|
109,239
|
|
James C. Yardley
|
|
$
|
38,004
|
|
|
$
|
4,536
|
|
|
$
|
92,928
|
|
|
|
|
(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 6 to the Summary Compensation Table on page 44
of this proxy statement. |
|
(2) |
|
Of the totals in this column, $330,664 for Mr. Foshee,
$82,415 for Mr. Leland, $12,563 for Mr. Smolik,
$99,278 for Mr. Baker and $57,067 for Mr. Yardley was
reported as compensation in the Summary Compensation Table
included in our proxy statement for this year and prior years. |
The following is a description of material factors necessary to
understand the information disclosed above in the Nonqualified
Deferred Compensation table for each of the named executive
officers. The 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 2007, these excess
benefits were credited to each
55
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 2007, 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 54 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, 2007, 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, 2007
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
|
|
Savings
|
|
|
|
|
|
|
|
|
Pension
|
|
Pension
|
|
Plan
|
|
Supplemental
|
|
Equity
|
|
|
|
|
Benefits
|
|
Benefits
|
|
Benefits
|
|
RSP Benefits
|
|
Awards
|
|
Total
|
Name
|
|
($) (1) (2)
|
|
($) (2)
|
|
($)
|
|
($)
|
|
($) (3)
|
|
($)
|
|
Douglas L. Foshee(4)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
137,156
|
|
|
$
|
357,658
|
|
|
$
|
12,522,999
|
|
|
$
|
13,017,813
|
|
D. Mark Leland
|
|
$
|
185,553
|
|
|
$
|
217,873
|
|
|
$
|
412,217
|
|
|
$
|
104,626
|
|
|
$
|
814,936
|
|
|
$
|
1,735,205
|
|
Brent J. Smolik(4)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
40,789
|
|
|
$
|
12,791
|
|
|
$
|
0
|
|
|
$
|
53,580
|
|
Robert W. Baker
|
|
$
|
169,227
|
|
|
$
|
253,419
|
|
|
$
|
848,624
|
|
|
$
|
109,239
|
|
|
$
|
1,557,664
|
|
|
$
|
2,938,173
|
|
James C. Yardley
|
|
$
|
1,194,119
|
|
|
$
|
1,594,080
|
|
|
$
|
990,854
|
|
|
$
|
92,928
|
|
|
$
|
1,059,504
|
|
|
$
|
4,931,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22,676,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Prior to January 1, 2008, a participant in our Pension Plan
could elect to receive his or her qualified pension benefit in
the form of a single lump sum payment only if his or her vested
balance was less than or equal to |
56
|
|
|
|
|
$100,000, except for Mr. Leland who could elect to receive
a lump sum distribution regardless of his vested balance
pursuant to the terms of the transition formula under which he
participates. Effective January 1, 2008, the account
balance limit that applied to lump sums was removed for
participants who work at least one hour on or after
January 1, 2008. The amount in this column reflects a lump
sum payment. |
|
(2) |
|
The amounts in these columns may differ from the amounts in the
Pension Benefits table due to several factors, including the use
of different assumptions, a measurement date of
December 31, 2007, and the timing of commencement of
payment. |
|
(3) |
|
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 $17.24, the closing
price of our common stock on December 31, 2007 and the
applicable exercise price for each stock option.
Mr. Yardley is age 56 and eligible for early
retirement. For Mr. Yardley, a voluntary termination would
be treated as a qualified retirement. Therefore, for
Mr. Yardley, this column also shows the value of shares of
restricted stock that vest on a pro-rata basis in the event of
retirement calculated using $17.24, the closing price of our
common stock on December 31, 2007. |
|
(4) |
|
As of December 31, 2007, Messrs. Foshee and Smolik
were not vested in their pension benefits. |
Incremental
Payments made upon Involuntary Termination without
Cause
The following table reflects the incremental value of enhanced
benefits the named executive officers would receive in the event
of an involuntary termination without cause above the
compensation and benefits the executive officer is entitled to
as a result of a voluntary termination, which include a
severance payment, continued medical benefits and the value of
restricted stock that vests on a pro-rata basis. El Paso
sponsors a Severance Pay Plan that provides benefits to the
named executive officers following an involuntary termination
without cause. The Severance Pay Plan is a broad-based employee
plan providing severance benefits following a qualifying
termination for all of our salaried employees and
employees of certain of our subsidiaries, including the named
executive officers. A qualifying termination is
(1) a termination upon the elimination of the
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 equal
to the participants annual base salary. Severance pay is
paid in lump sum as soon as administratively practicable after
the expiration of the revocation period. 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 is vested on a pro-rata
basis and unvested stock options are forfeited in the event of
an involuntary termination without cause. Unless stock options
expire by their own terms, vested stock options may be exercised
for a period of one year.
Incremental
Payments made upon Involuntary Termination without
Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
El Paso Corporation
|
|
|
|
|
|
|
Severance Pay Plan
|
|
|
|
|
|
|
Severance
|
|
Continued
|
|
Equity
|
|
|
|
|
Payment
|
|
Medical Benefits
|
|
Awards
|
|
Total
|
Name
|
|
($)
|
|
($)
|
|
($) (1)
|
|
($)
|
|
Douglas L. Foshee
|
|
$
|
1,000,008
|
|
|
$
|
2,790
|
|
|
$
|
2,324,555
|
|
|
$
|
3,327,353
|
|
D. Mark Leland
|
|
$
|
519,756
|
|
|
$
|
2,790
|
|
|
$
|
646,190
|
|
|
$
|
1,168,736
|
|
Brent J. Smolik
|
|
$
|
550,008
|
|
|
$
|
2,601
|
|
|
$
|
433,724
|
|
|
$
|
986,333
|
|
Robert W. Baker
|
|
$
|
456,696
|
|
|
$
|
2,790
|
|
|
$
|
687,273
|
|
|
$
|
1,146,759
|
|
James C. Yardley
|
|
$
|
500,004
|
|
|
$
|
1,995
|
|
|
$
|
0
|
|
|
$
|
501,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,131,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
For Messrs. Foshee, Leland, Baker and Smolik, 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 $17.24, the |
57
|
|
|
|
|
closing price of our common stock on December 31, 2007. 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. |
Incremental
Payments made upon Retirement
None of the named executive officers is eligible for retirement
except for Mr. Yardley. Participants in our Pension Plan
may commence their qualified pension benefits before age 65
if they are at least age 55 and have ten years of service.
Mr. Yardley is age 56 and eligible for early
retirement under our Pension Plan. For Mr. Yardley, the
value of the benefits he would have received in the event he
retired as of December 31, 2007 is reflected in the
voluntary termination table above. The commencement of pension
benefits before age 65 may result in a participants
qualified pension benefits being reduced to cover the cost of
paying the benefits over a longer period of time. 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 pages 53 and 54 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. For Messrs. Foshee and Smolik, this also includes
the value of their qualified pension benefits and supplemental
pension benefits which become fully vested in the event of the
named executive officers death. 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, on an after-tax basis, is two and one-half
times the executive officers annual salary. Benefits are
payable over 30 months beginning within 31 days after
the executives death, except that the plan administrator
may, in its discretion, accelerate payments. Under our equity
compensation plans, outstanding stock options become fully
vested and exercisable and the restriction periods applicable to
shares of 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
|
|
Survivor
|
|
Equity Awards
|
|
|
|
|
Pension
|
|
Pension
|
|
Benefit
|
|
Stock
|
|
Restricted
|
|
|
|
|
Benefits
|
|
Benefits
|
|
Coverage
|
|
Options
|
|
Stock
|
|
Total
|
Name
|
|
($) (1)
|
|
($) (1)
|
|
($)
|
|
($) (2)
|
|
($) (3)
|
|
($)
|
|
Douglas L. Foshee
|
|
$
|
54,907
|
|
|
$
|
427,875
|
|
|
$
|
2,500,020
|
|
|
$
|
6,093,493
|
|
|
$
|
6,363,456
|
|
|
$
|
15,439,751
|
|
D. Mark Leland
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,299,390
|
|
|
$
|
946,014
|
|
|
$
|
2,040,371
|
|
|
$
|
4,285,775
|
|
Brent J. Smolik
|
|
$
|
14,331
|
|
|
$
|
27,518
|
|
|
$
|
1,375,020
|
|
|
$
|
282,258
|
|
|
$
|
2,168,568
|
|
|
$
|
3,867,695
|
|
Robert W. Baker
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,141,740
|
|
|
$
|
1,224,162
|
|
|
$
|
1,925,708
|
|
|
$
|
4,291,610
|
|
James C. Yardley
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,250,010
|
|
|
$
|
680,756
|
|
|
$
|
1,136,513
|
|
|
$
|
3,067,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30,952,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amount in these columns for Messrs. Foshee and Smolik
includes qualified pension benefits and supplemental pension
benefits which become fully vested in the event of the named
executive officers death. |
|
(2) |
|
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 $17.24, the closing price of
our common stock on December 31, 2007. |
58
|
|
|
(3) |
|
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 $17.24, the closing price of
our common stock on December 31, 2007. |
Incremental
Payments made upon Disability
The following table reflects the incremental value of enhanced
benefits the named executive officers would receive in the event
of permanent disability above the compensation and benefits the
executive officers are entitled to as a result of a voluntary
termination, which include disability benefits, the value of
unvested stock options that become fully vested and the value of
restricted stock that vests on a pro-rata basis. The named
executive officers may elect to receive the disability benefits
that are generally available to all eligible employees under our
subsidized health and group benefits plan. In the event of a
named executive officers permanent disability, disability
income would be payable on a monthly basis as long as the
executive officer qualifies as permanently disabled. For
purposes of this table, we have assumed the executive officer is
disabled for a period of one year. The restrictions on
outstanding shares of restricted stock lapse on a prorated basis
and all stock options become fully vested and exercisable in the
event an executive officer becomes permanently disabled. Unless
stock options expire by their own terms, vested stock options
may be exercised for a period of three years following permanent
disability.
Incremental
Payments made upon Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Awards
|
|
|
|
|
|
|
Disability
|
|
|
Stock
|
|
|
Restricted
|
|
|
|
|
|
|
Income
|
|
|
Options
|
|
|
Stock
|
|
|
Total
|
|
Name
|
|
($) (1)
|
|
|
($) (2)
|
|
|
($) (3)
|
|
|
($)
|
|
|
Douglas L. Foshee
|
|
$
|
300,000
|
|
|
$
|
6,093,493
|
|
|
$
|
2,324,555
|
|
|
$
|
8,718,048
|
|
D. Mark Leland
|
|
$
|
259,878
|
|
|
$
|
946,014
|
|
|
$
|
646,190
|
|
|
$
|
1,852,082
|
|
Brent J. Smolik
|
|
$
|
300,000
|
|
|
$
|
282,258
|
|
|
$
|
433,724
|
|
|
$
|
1,015,982
|
|
Robert W. Baker
|
|
$
|
228,348
|
|
|
$
|
1,224,162
|
|
|
$
|
687,273
|
|
|
$
|
2,139,783
|
|
James C. Yardley
|
|
$
|
250,002
|
|
|
$
|
680,756
|
|
|
$
|
0
|
|
|
$
|
930,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,656,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 $17.24, the closing price of
our common stock on December 31, 2007. |
|
(3) |
|
For Messrs. Foshee, Leland, Baker and Smolik, this column
shows the value of shares of restricted stock that vest on a
pro-rata basis in the event of disability calculated using
$17.24, the closing price of our common stock on
December 31, 2007. 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.
59
Incremental
Payments made upon a Change in Control of El Paso
The following table reflects the incremental value of enhanced
benefits the named executive officers would receive in the event
of termination of employment following a change in control of
El Paso above the compensation and benefits the executive
officers are entitled to as a result of a voluntary termination,
which include benefits under our 2004 Key Executive Severance
Protection Plan and the value of stock options and restricted
stock that become fully vested. For Messrs. Foshee and
Smolik, this also includes the value of their supplemental
pension benefits which become fully vested in the event an
executive officer is not vested in his or her qualified pension
benefits. In March 2004, El Paso adopted the 2004 Key
Executive Severance Protection Plan to more closely align our
executive severance protection plans with current market
arrangements. This plan provides severance benefits following a
termination of employment within two years of a change in
control of El Paso for our executives and certain
executives of our subsidiaries designated by our Board of
Directors or the Compensation Committee, including all of the
named executive officers. This plan is intended to replace our
prior severance protection plans and participants are required
to waive their participation under the prior plans (if
applicable) as a condition to becoming participants in this
plan. The benefits of the plan include: (1) a cash
severance payment in an amount equal to three times the annual
base salary and target bonus for Mr. Foshee, two times the
annual base salary and target bonus for executive vice
presidents and senior vice presidents, including
Messrs. Leland, Smolik, Baker and Yardley, and one times
the annual base salary and target bonus for vice presidents;
(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, 24 months for executive vice presidents
and senior vice presidents, including Messrs. Leland,
Smolik, Baker and Yardley, and 12 months for vice
presidents; (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%
or less would cause no excise tax to be payable in respect of
that executive, then the executive will not be entitled to a
gross-up
payment and payments to the executive shall be reduced to the
extent necessary so that the payments shall not be subject to
the excise tax; and (5) payment of legal fees and expenses
incurred by the executive to enforce any rights or benefits
under the plan. Supplemental pension benefits become fully
vested and payable to the executive in the event of a
termination of employment following a change in control of
El Paso. Under our equity compensation plans, the
restriction periods applicable to shares of restricted stock
immediately lapse and all outstanding stock options become fully
vested and exercisable.
Incremental
Payments made upon a Change in Control of El Paso
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 Key Executive
|
|
|
|
|
|
|
|
|
|
|
Severance Protection Plan
|
|
|
|
|
|
|
|
|
Supplemental
|
|
|
|
|
|
Continued
|
|
Equity Awards
|
|
|
|
|
Pension
|
|
Severance
|
|
Bonus
|
|
Medical
|
|
Stock
|
|
Restricted
|
|
|
|
|
Benefits
|
|
Payment
|
|
Payment
|
|
Benefits
|
|
Options
|
|
Stock
|
|
Total
|
Name
|
|
($) (1)
|
|
($)
|
|
($)
|
|
($)
|
|
($) (2)
|
|
($) (3)
|
|
($)
|
|
Douglas L. Foshee
|
|
$
|
427,875
|
|
|
$
|
6,600,053
|
|
|
$
|
1,200,010
|
|
|
$
|
33,741
|
|
|
$
|
6,093,493
|
|
|
$
|
6,363,456
|
|
|
$
|
20,718,628
|
|
D. Mark Leland
|
|
$
|
0
|
|
|
$
|
1,663,219
|
|
|
$
|
311,854
|
|
|
$
|
22,494
|
|
|
$
|
946,014
|
|
|
$
|
2,040,371
|
|
|
$
|
4,983,952
|
|
Brent J. Smolik
|
|
$
|
27,518
|
|
|
$
|
2,090,030
|
|
|
$
|
495,007
|
|
|
$
|
20,982
|
|
|
$
|
282,258
|
|
|
$
|
2,168,568
|
|
|
$
|
5,084,363
|
|
Robert W. Baker
|
|
$
|
0
|
|
|
$
|
1,461,427
|
|
|
$
|
274,018
|
|
|
$
|
22,494
|
|
|
$
|
1,224,162
|
|
|
$
|
1,925,708
|
|
|
$
|
4,907,809
|
|
James C. Yardley(4)
|
|
$
|
0
|
|
|
$
|
1,696,344
|
|
|
$
|
375,003
|
|
|
$
|
16,134
|
|
|
$
|
680,756
|
|
|
$
|
1,136,513
|
|
|
$
|
3,904,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
39,599,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amount in this column for Messrs. Foshee and Smolik
includes supplemental pension benefits which become fully vested
in the event of a change in control of El Paso. |
|
(2) |
|
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 $17.24, the closing price of our
common stock on December 31, 2007. |
|
(3) |
|
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 $17.24, the closing price of our
common stock on December 31, 2007. |
60
|
|
|
(4) |
|
Pursuant to the terms of the 2004 Key Executive Severance
Protection Plan, the amounts payable to Mr. Yardley would
have been subject to a cutback to avoid the imposition of the
federal excise tax imposed by Section 4999 of the Code.
Accordingly, the amount of Mr. Yardleys severance
payment listed above was reduced by $53,670. |
Benefits are payable for any termination of employment of an
executive 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 fifty mile radius of his or her
principal place of employment immediately prior to the change in
control; (d) the 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 also payable under the plan for
terminations of employment prior to a change in control that
arise in connection with, or in anticipation of, a change in
control. 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% 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% 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 shall 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 shall 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.
El Paso maintains the Benefits Protection Trust for the
purpose of funding certain of our employee benefit plans
(including the 2004 Key Executive Severance Protection Plan
described above). The trust consists of a trustee expense
account, which is used to pay the fees and expenses of the
trustee, and a benefit account, which is made up of three
subaccounts and used to make payments to participants and
beneficiaries in the participating plans. The trust is revocable
at any time before a threatened change in control
(which is generally defined to include the commencement of
actions that would lead to a change in control) as to assets
held in the trustee expense account, but is not revocable
(except as provided below) as to assets held in the benefit
account at any time. The trust generally becomes fully
irrevocable as to assets held in the trust upon a threatened
change in control. The trust is a grantor trust for federal tax
purposes, and assets of the trust are subject to claims by our
general creditors in preference to the claims of plan
participants and beneficiaries. Upon a threatened change in
control, we are required to deliver $1.5 million in cash to
the trustee expense account. Prior to a threatened change in
control, we may freely withdraw and substitute the assets held
in the benefit account, other than the initially funded amount;
however, no such assets may be withdrawn from the benefit
account during a threatened change in control period. Any assets
contributed to the trust during a threatened change in control
period may be withdrawn if the threatened change in control
period ends and there has been no threatened change in control.
In addition, after a change in control occurs, if the trustee
determines that the amounts held in the trust are less than
designated percentages (as defined in the Benefits
Protection Trust Agreement) with respect to each subaccount
in the benefit account, the trustee must make a written demand
to us to deliver funds in an amount determined by the trustee
sufficient to attain the designed percentages. Following a
change in control and if the trustee has not been requested to
pay benefits from any subaccount during a determination
period (as defined in the Benefits Protection
Trust Agreement), we may make a written request to
61
the trustee to withdraw certain amounts which were allocated to
the subaccounts after the change in control occurred. The trust
generally may be amended or terminated at any time, provided
that no amendment or termination may result, directly or
indirectly, in the return of any assets of the benefit account
to us prior to the satisfaction of all liabilities under the
participating plans (except as described above) and no amendment
may be made unless we reasonably believe that such amendment
would have no material adverse effect on the amount of benefits
payable under the trust to participants. In addition, no
amendment may be made after the occurrence of a change in
control which would (i) permit us to withdraw any assets
from the trustee expense account, (ii) directly or
indirectly reduce or restrict the trustees rights and
duties under the trust, or (iii) permit us to remove the
trustee following the date of the change in control.
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. Our employee directors,
including Mr. Foshee, do 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 benefits and recommends changes (if
appropriate) to the full Board of Directors based upon
competitive market practices. In May 2007, the Compensation
Committee asked Deloitte to prepare an analysis of the current
non-employee director compensation program, including the
compensation (discussed below) of our Chairman of the Board.
El Pasos peer group of companies were examined to
determine the competitive market for non-employee director
compensation. The analysis showed that our non-employee director
compensation is generally at median of El Pasos peer
group. However, consistent with industry trends, the
Compensation Committee approved an increase in the retainer for
the Chairman of the Audit Committee from $15,000 to $20,000 and
a $5,000 increase in the Audit Committee member fee. The
Compensation Committee further determined that when comparing
our Chairmans compensation to those in El Pasos
peer group, our Chairmans compensation is positioned in
the middle of the range and is reasonable in light of his
involvement and contributions to the Board.
62
Chairman
of the Board
Mr. Kuehn receives the same compensation and benefits as
the other non-employee directors for his service on the Board,
plus a cash payment of $33,750 per quarter to compensate him for
the additional time spent on Board matters as Chairman of the
Board. As part of the merger with Sonat Inc., we entered into a
termination and consulting agreement with Mr. Kuehn, dated
October 25, 1999. Under this agreement, we agreed to pay
Mr. Kuehns club dues until he retires from the Board.
For the remainder of his life, Mr. Kuehn will also receive
certain ancillary benefits made available to him prior to the
merger with Sonat Inc., including the provision of office space
and related services, and payment of life insurance premiums
sufficient to provide a death benefit equal to one-half his base
pay as in effect immediately prior to October 25, 1999.
Mr. Kuehn, his wife and his eligible dependents will
receive retiree medical coverage.
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, Hall, Kuehn and
Wyatt (and eleven 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. The aggregate cost of
the program to El Paso for 2007 was $35,459, which relates
to the last three months of the April 1, 2006 to
April 1, 2007 policy period. We do not expect that any
premium payments will need to be made in future years.
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 $5,000 per employee or director.
Director
Compensation Table
The following table sets forth (1) the aggregate dollar
amount of all fees, including each non-employee directors
annual retainer and any additional retainer for directors who
chair a Committee of the Board, paid in cash or deferred cash to
each of our non-employee directors during 2007 for their
services on the Board, (2) the aggregate dollar amount of
deferred shares of common stock received by each non-employee
director as part of his or her annual retainer
and/or
long-term equity credit, and (3) the value of total
compensation that each of our non-employee directors earned
during 2007. Our non-employee directors do not receive stock
options or pension benefits.
63
Director
Compensation
for the Year Ended December 31, 2007 (1)
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Fees
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Earned or
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Paid in Cash
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Stock Awards
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Change in
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($) (2)
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($) (3)
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Pension
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Annual
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Deferred
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Deferred
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Value and
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Board/
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Shares of
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Shares of
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Nonqualified
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Committee
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Common Stock
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Common Stock
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Deferred
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Chair
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for Retainer/
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for Long-
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Option
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Compensation
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All Other
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Cash
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Committee
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Term Equity
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Awards
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Earnings
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Compensation
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Total
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Name
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Retainer
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Chair Fees
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Credit
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($) (4)
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($) (5)
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($) (6)
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($)
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Juan Carlos Braniff
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$
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63,750
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$
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25,000
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$
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80,000
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|
$
|
0
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|
|
$
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0
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$
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0
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|
$
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168,750
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James L. Dunlap
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$
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60,000
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$
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30,625
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$
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80,000
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|
$
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0
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$
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152
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|
$
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0
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|
$
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170,777
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|
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Robert W. Goldman
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$
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78,750
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|
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$
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36,813
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$
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80,000
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|
|
$
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0
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|
|
$
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0
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|
$
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5,000
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$
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200,563
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Anthony W. Hall, Jr.
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$
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75,000
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|
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$
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25,000
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|
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$
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80,000
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|
|
$
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0
|
|
|
$
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0
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|
$
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0
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|
$
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180,000
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Thomas R. Hix
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$
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78,750
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$
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44,688
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$
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80,000
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|
$
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0
|
|
|
$
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0
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|
$
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0
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|
$
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203,438
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William H. Joyce
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$
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60,000
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|
|
$
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40,000
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|
|
$
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80,000
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|
|
$
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0
|
|
|
$
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0
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|
|
$
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0
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|
$
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180,000
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Ronald L. Kuehn, Jr.(7)
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$
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195,000
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$
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40,000
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$
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80,000
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|
$
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0
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|
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$
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0
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$
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31,979
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$
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346,979
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Ferrell P. McClean
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$
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60,000
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$
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40,000
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$
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80,000
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|
$
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0
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|
$
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0
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$
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0
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|
$
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180,000
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Steven J. Shapiro
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$
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63,750
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$
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40,938
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$
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80,000
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|
$
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0
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|
|
$
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0
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|
$
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0
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|
$
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184,688
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J. Michael Talbert
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$
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60,000
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$
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25,000
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$
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80,000
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|
$
|
0
|
|
|
$
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0
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|
|
$
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0
|
|
|
$
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165,000
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|
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Robert F. Vagt
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$
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60,000
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$
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25,750
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$
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80,000
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|
$
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0
|
|
|
$
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0
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|
$
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0
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$
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165,750
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John L. Whitmire
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$
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78,750
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$
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44,688
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$
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80,000
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$
|
0
|
|
|
$
|
0
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|
|
$
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0
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$
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203,438
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Joe B. Wyatt
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$
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75,000
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$
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34,375
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$
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80,000
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$
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0
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|
|
$
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0
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$
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0
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$
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189,375
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|
|
|
|
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|
(1) |
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Employee directors do not receive any additional compensation
for serving on the Board of Directors; therefore,
Mr. Foshees compensation is reflected in the Summary
Compensation Table on page 43 of this proxy statement.
Amounts paid as reimbursable business expenses to each director
for attending Board functions are not reflected in this table.
We do not consider the directors reimbursable business
expenses for attending board functions and other business
expenses required to perform board duties to have a personal
benefit and thus be considered a perquisite. |
|
(2) |
|
This column includes the value of a directors annual
retainer or additional retainer for directors who chair a
Committee of the Board of Directors that the director has
elected to receive in cash, deferred cash or deferred shares of
common stock. The amount reflected in this column for
Mr. Dunlap for 2007 includes $7,500 that Mr. Dunlap
elected to receive in deferred cash. The amount reflected in
this column for Messrs. Dunlap, Goldman, Hix, Joyce, Kuehn,
Ms. McClean and Messrs. Shapiro, Vagt, Whitmire and
Wyatt for 2007 includes $22,500, $47,250, $78,750, $60,000,
$60,000, $60,000, $63,750, $3,000, $78,750, and $37,500,
respectively, that the director elected to receive in deferred
stock. |
|
(3) |
|
Directors are not entitled to receive their deferred amounts
until they cease to be a director of El Paso. The aggregate
number of stock awards outstanding as of December 31, 2007
is 97,423 deferred shares for Mr. Braniff; 55,694 deferred
shares for Mr. Dunlap; 72,931 deferred shares for
Mr. Goldman; 62,131 deferred shares for Mr. Hall;
55,531 deferred shares for Mr. Hix; 52,755 deferred shares
for Mr. Joyce; 90,378 deferred shares for Mr. Kuehn;
24,031 deferred shares for Ms. McClean; 14,190 deferred
shares for Mr. Shapiro, 45,213 deferred shares for
Mr. Talbert; 21,471 deferred shares for Mr. Vagt;
87,929 deferred shares for Mr. Whitmire and 89,090 deferred
shares for Mr. Wyatt. Directors receive dividends on the
deferred shares at the same rate as all stockholders. Any such
dividends are reinvested in deferred shares of common stock. |
|
(4) |
|
We terminated our 2001 Stock Option Plan for Non-Employee
Directors in December 2003 and no longer award stock options to
our non-employee directors. Certain of the directors in the
table have vested stock options that were granted under the 2001
Stock Option Plan for Non-Employee Directors or prior plans. The
aggregate number of vested stock options outstanding under all
plans as of December 31, 2007 is 15,000 stock options for
Mr. Braniff, 8,000 stock options for Mr. Dunlap, 8,000
stock options for Mr. Goldman, 12,000 stock options for
Mr. Hall, 123,600 stock options for Mr. Kuehn, 8,000
stock options for Mr. Talbert, 8,000 stock options for
Mr. Whitmire and 14,000 stock options Mr. Wyatt. The
following directors have vested stock options that have an |
64
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|
|
exercise price of $40 or higher: Messrs. Braniff, Hall,
Kuehn and Wyatt have 5,000, 6,000, 8,000 and 8,000 stock
options, respectively, at or above a $40 exercise price. It is
not likely that our stock price will reach $40 during the
remaining term of these stock options, thus it is not likely the
stock options will be in-the-money before they expire by their
own terms. |
|
(5) |
|
When a director elects to receive any amount of his or her
annual retainer in deferred cash, interest is credited on a
monthly basis to the directors deferred cash account
balance. In 2006, Mr. Dunlap elected to receive a portion
of his annual retainer in deferred cash and it was determined
that the rate of interest applied to his deferred cash account
balance during 2007 exceeded 120 percent of the applicable
federal long-term rate for certain months during 2007. The
amount in this column for Mr. Dunlap for 2007 is
above-market interest credited to Mr. Dunlaps
deferred cash account balance during 2007. |
|
(6) |
|
The amount reflected in this column for Mr. Goldman represents
the amount of charitable matching contributions made pursuant to
our Educational Matching Gift Program. The amount reflected in
this column for Mr. Kuehn for 2007 includes $14,475 to
reimburse Mr. Kuehn for country club dues, $1,410 to
reimburse Mr. Kuehn for annual airline membership dues and
$1,050 to reimburse Mr. Kuehn for parking garage fees
pursuant to Mr. Kuehns termination and consulting
agreement. Also included in this column for Mr. Kuehn for
2007 is $9,276 of imputed income, plus a gross up payment of
$768, related to insurance premiums paid by us for
Mr. Kuehns benefit, as well as $5,000 representing
the amount of charitable matching contributions made pursuant to
our Educational Matching Gift Program. |
|
(7) |
|
As described above, Mr. Kuehn receives the same
compensation and benefits as the other non-employee directors
for his service on the Board, plus a cash payment of $33,750 per
quarter to compensate him for additional time spent as Chairman
of the Board. |
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. Dunlap, Joyce, Shapiro, Talbert, Wyatt and
Ms. McClean.
As a Committee, our primary function is to ensure
El Pasos executive compensation program is
competitive so that El Paso can attract and retain
executive personnel and performance-based so that the interests
of El Pasos management are aligned with both the
short-term and long-term interests of El Pasos
stockholders. We engage an independent executive compensation
consulting firm to assist us in our review of
El Pasos executive and director compensation programs
to ensure these programs are competitive and consistent with our
stated objectives. The executive compensation consultant is
retained by and is directly accountable to us and we generally
approve all related fees paid to the executive compensation
consultant. We have no interlocks or insider participation and
we engage in annual self evaluations to determine our
effectiveness as a Committee. We have adopted a charter which
may be found on El Pasos website at
www.elpaso.com.
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
|
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|
|
|
|
|
|
|
|
|
Joe B. Wyatt
|
|
James L. Dunlap
|
|
William H. Joyce
|
|
Ferrell P. McClean
|
|
Steven J. Shapiro
|
|
J. Michael Talbert
|
(Chairman)
|
|
(Member)
|
|
(Member)
|
|
(Member)
|
|
(Member)
|
|
(Member)
|
65
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 five members:
Messrs. Braniff, Goldman, Hix, Shapiro and Whitmire. During
2007, the Audit Committee met nine times and discussed, among
other things, the financial information contained in each
quarterly earnings announcement and the
Form 10-K
and
Forms 10-Q
with management, our internal auditors and our independent
auditor prior to release.
Policies
and Mission
As a Committee, our primary purpose is to assist the Board of
Directors in fulfilling its oversight responsibilities with
respect to:
|
|
|
|
|
the integrity of El Pasos financial statements;
|
|
|
|
El Pasos disclosure controls and procedures and
internal control over financial reporting;
|
|
|
|
the evaluation and retention of El Pasos independent
auditors and any third party petroleum reserves engineer
(including a review of their qualifications, independence,
performance and procedures utilized in their reserve estimation
process);
|
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|
|
the performance of El Pasos internal audit and ethics
and compliance functions;
|
|
|
|
El Pasos compliance with legal and regulatory
requirements and its Code of Business Conduct; and
|
|
|
|
El Pasos risk management policies and procedures.
|
We have prepared this audit committee report as required by the
SEC. As part of completing this report, we conduct a number of
activities. We engage in an annual self evaluation to determine
our effectiveness as a Committee. We review annually with the
head of El Pasos internal audit function the scope of
internal audit activities, the results of audits that have been
performed, the adequacy of internal audit staffing, its annual
budget and the internal audit department charter. We are
directly responsible for the appointment, compensation,
retention, oversight and dismissal of independent auditors
engaged by El Paso for the purpose of preparing or issuing
an audit report or related work, and the independent auditors
report directly to us. We obtain and review annually a report by
our principal independent auditor describing, among other
matters, the independent auditors internal quality control
procedures and all relationships between the independent auditor
and El Paso. We review with El Pasos Controller
and the independent auditor all critical accounting policies and
practices, significant changes in El Pasos selection
and application of accounting principles, judgments made in
connection with the preparation of the financial statements and
other significant financial reporting issues. We meet at least
on a quarterly basis with the head of El Pasos
internal audit function, the independent auditor and management
to discuss the effectiveness of disclosure controls and
procedures, and any changes in El Pasos internal
control over financial reporting that occurred during its most
recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, internal control over
financial reporting. Annually, we also discuss the effectiveness
of internal control over financial reporting and
managements assessment of its effectiveness. We review the
procedures for the receipt, retention and treatment of
complaints received by El Paso regarding any accounting,
internal accounting controls or auditing matters. We review
El Pasos risk assessment and risk management
guidelines and policies, including El Pasos
significant risk exposures and steps taken by management to
monitor and control these exposures. All audit services and
permitted non-audit services provided to El Paso by its
independent auditors are pre-approved by us in accordance with
our pre-approval policy and applicable law. These
responsibilities do not preclude us from obtaining the input of
management, but these responsibilities may not be delegated to
management.
Consistent with our policies and mission stated above, we have
adopted a charter which may be found on El Pasos
website at www.elpaso.com.
66
Audit
Committee Statement
We have reviewed and discussed the audited financial statements
with El Paso management; discussed the effectiveness of
disclosure controls and procedures and internal control over
financial reporting with El Paso management; discussed with
our independent registered public accounting firm the matters
required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees), as modified
or supplemented; received a written disclosure letter from
El Pasos independent registered public accounting
firm as required by Independence Standards Board Standard
No. 1 (Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees), as modified or
supplemented, and have discussed with our independent registered
public accounting firm their independence and internal quality
control procedures; and based on the review and discussions
contained in this paragraph, recommended to the Board of
Directors that the audited financial statements be included in
El Pasos Annual Report on
Form 10-K
for the 2007 fiscal year for filing with the SEC.
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.
Current
Members of the Audit Committee of the Board of
Directors
|
|
|
|
|
|
|
|
|
|
|
Thomas R. Hix
|
|
Juan Carlos Braniff
|
|
Robert W. Goldman
|
|
Steven J. Shapiro
|
|
John Whitmire
|
|
|
(Chairman)
|
|
(Member)
|
|
(Member)
|
|
(Member)
|
|
(Member)
|
|
|
EQUITY
COMPENSATION PLAN INFORMATION TABLE
The following table provides information concerning equity
compensation plans as of December 31, 2007, that have been
approved by our stockholders and equity compensation plans that
have not been approved by our stockholders. All shares remaining
available for future issuance under our plans have been approved
by our stockholders. The table includes (a) the number of
securities to be issued upon exercise of options, warrants and
rights outstanding under our equity compensation plans,
(b) the weighted-average exercise price of all outstanding
options, warrants and rights and (c) additional shares
available for future grants under all of our equity compensation
plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
Number of
|
|
|
|
Number of Securities
|
|
|
Securities to
|
|
|
|
Remaining Available for
|
|
|
be Issued upon
|
|
|
|
Future Issuance under
|
|
|
Exercise
|
|
Weighted-Average
|
|
Equity Compensation
|
|
|
of Outstanding
|
|
Exercise Price of
|
|
Plans (Excluding
|
|
|
Options,
|
|
Outstanding Options,
|
|
Securities Reflected in
|
Plan Category
|
|
Warrants and Rights (1)
|
|
Warrants and Rights
|
|
Column (a))
|
|
Equity compensation plans approved by stockholders
|
|
|
9,018,867
|
|
|
$
|
13.90
|
|
|
|
29,015,084
|
(2)
|
Equity compensation plans not approved by stockholders
|
|
|
14,202,592
|
|
|
$
|
43.53
|
|
|
|
0
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
23,221,459
|
|
|
|
|
|
|
|
29,015,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Column (a) does not include 762,536 shares with a
weighted-average exercise price of $29.12 per share which we
assumed under the Executive Award Plan of Sonat Inc. as a result
of our merger with Sonat in October 1999. The Executive Award
Plan of Sonat Inc. has been terminated and no future awards can
be made under it. Of the 23,221,459 shares listed in this
column, 9,391,135 are stock options that have an exercise price
of $40 or higher. It is not likely that our stock price will
reach $40 during the remaining terms of these stock options,
thus it is not likely the stock options will be in-the-money
before they expire by their own terms. |
67
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(2) |
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This includes 2,563,269 shares available for future
issuance under the Employee Stock Purchase Plan. |
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(3) |
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In 2005, our stockholders approved the adoption of our 2005
Omnibus Incentive Compensation Plan, which replaced all existing
stockholder approved and non-stockholder approved plans. All
shares remaining available for future issuance under the
terminated plans were canceled, although certain stock options
remain outstanding under them. Consequently, all shares
remaining available for future issuance under our plans have
been approved by our stockholders. |
Stockholder
Approved Plans
2005 Omnibus Incentive Compensation Plan. This
plan provides for the grant to all of our employees (other than
an employee who is a member of a unit covered by a collective
bargaining agreement) and members of our Board of Directors who
are salaried officers of stock options, stock appreciation
rights, restricted stock, restricted stock units, performance
shares, performance units, incentive awards, cash awards and
other stock-based awards. In addition, the plan administrator
may grant awards to any person who, in the sole discretion of
the plan administrator, holds a position of responsibility and
is able to contribute substantially to our success. The plan
administrator also designates which employees are eligible to
participate. Subject to any adjustments for a change in
capitalization (as defined in the plan), a maximum of
35,000,000 shares in the aggregate may be subject to awards
under the plan, provided however, that a maximum of
17,500,000 shares in the aggregate may be issued under the
plan with respect to restricted stock, restricted stock units,
performance shares, performance units and other stock-based
awards. Except as otherwise provided in an award agreement, in
the event of a participants termination of employment
without cause or by the participant for good reason
(as defined in the plan), if applicable, within two years
following a change in control (defined in
substantially the same manner as under the 2004 Key Executive
Severance Protection Plan) (1) all stock options and stock
appreciation rights will become fully vested and exercisable,
(2) the restriction periods applicable to all shares of
restricted stock and restricted stock units will immediately
lapse, (3) the performance periods applicable to any
performance shares, performance units and incentive awards that
have not ended will end and such awards will become vested and
payable in cash in an amount equal to the target level thereof
(assuming target levels of performance by us and the individual
participants have been achieved) within ten days following such
termination and (4) any restrictions applicable to cash
awards and other stock-based awards will immediately lapse and,
if applicable, become payable within ten days following such
termination. 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 during the twelve-month period following the
public issuance or filing of the financial document that is
required to be restated. The plan generally may be amended at
any time, provided that stockholder approval is required to the
extent required by law, regulation or stock exchange, and no
change in any award previously granted under the plan may be
made without the consent of the participant if such change would
impair the right of the participant to acquire or retain common
stock or cash that the participant may have acquired as a result
of the plan.
2001 Omnibus Incentive Compensation Plan, 1999 Omnibus
Incentive Compensation Plan and 1995 Omnibus Compensation
Plan Terminated Plans. These plans
provided for the grant to eligible officers and key employees of
stock options, stock appreciation rights, limited stock
appreciation rights, performance units and restricted stock.
These plans have been replaced by the 2005 Omnibus Incentive
Compensation Plan. Although these plans have been terminated
with respect to new grants, certain stock options and shares of
restricted stock remain outstanding under their terms. In the
event of a change in control, all outstanding stock
options become fully exercisable and restrictions placed on
restricted stock lapse. For purposes of these plans, the term
change in control has substantially the same meaning
given such term in our Key Executive Severance Protection Plan.
Non-stockholder
Approved Plans
Strategic Stock Plan, Restricted Stock Award Plan for
Management Employees and Omnibus Plan for Management
Employees Terminated Plans. These
equity compensation plans were not approved by our stockholders.
The Strategic Stock Plan provided for the grant of stock
options, stock appreciation rights, limited stock appreciation
rights and shares of restricted stock to non-employee members of
our Board of Directors, our officers and key employees and
officers and key employees of our subsidiaries primarily in
68
connection with strategic acquisitions. The Restricted Stock
Award Plan for Management Employees provided for the grant of
restricted stock to our management employees (other than
executive officers and directors) and management employees of
our subsidiaries for specific accomplishments beyond that which
were normally expected and which had a significant and
measurable impact on our long-term profitability. The Omnibus
Plan for Management Employees provided for the grant of stock
options, stock appreciation rights, limited stock appreciation
rights and shares of restricted stock to our salaried employees
(other than employees covered by a collective bargaining
agreement) and salaried employees of our subsidiaries. These
plans have been replaced by our 2005 Omnibus Incentive
Compensation Plan. Although these plans have been terminated
with respect to new grants, certain stock options and shares of
restricted stock remain outstanding under their terms. In the
event of a change in control, outstanding stock
options granted under the Strategic Stock Plan and Omnibus Plan
for Management Employees become fully exercisable and
restrictions placed on restricted stock lapse. For purposes of
the Strategic Stock Plan and Omnibus Plan for Management
Employees, the term change in control has
substantially the same meaning given such term in our Key
Executive Severance Protection Plan.
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PROPOSAL NO. 2
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Ratification
of Appointment of Ernst & Young LLP as our Independent
Registered Public Accountant
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The Board of Directors, at the request of the Audit Committee,
is seeking stockholder ratification of the resolution appointing
Ernst & Young LLP, 5 Houston Center, Suite 1200,
1401 McKinney Street, Houston, Texas 77010, as our independent
registered public accounting firm for fiscal year 2008.
In the normal course of the Audit Committees duties, as
set forth in the Audit Committee Charter, the Audit Committee
performs a thorough evaluation of our independent registered
public accounting firm, including a review of the quality and
expertise assigned to our engagement team, the scope of the
audit work and the firms independence. These evaluations
are part of an overall review of our internal controls that are
designed to safeguard our financial and accounting integrity.
The Board of Directors, at the request of the Audit Committee,
is recommending the ratification of the appointment of
Ernst & Young LLP as our independent registered public
accounting firm for the fiscal year 2008.
The affirmative vote of a majority in voting power of the
votes cast on the proposal is required for approval of this
proposal. Abstentions and broker non-votes are not counted as
votes cast, and therefore do not affect the outcome of the
proposal.
If the appointment is not ratified by a majority of the votes
cast, the adverse vote will be considered as an indication to
the Audit Committee that it should consider selecting another
independent registered public accounting firm for the following
fiscal year. Given the difficulty and expense of making any
substitution of independent registered public accounting firms
after the beginning of the current fiscal year, it is
contemplated that the appointment for the fiscal year 2008 will
stand unless the Audit Committee finds other good reason to make
a change.
Ernst & Young LLP audited our and certain of our
subsidiaries financial statements for fiscal year 2007 and
2006. Included in the table below are the aggregate fees for
professional services rendered to us by Ernst & Young
LLP for the years ended December 31, 2007 and 2006.
69
Principal
Accountant Fees and Services
Aggregate fees for professional services rendered to us by
Ernst & Young LLP for the years ended
December 31, 2007 and 2006 were (in thousands):
|
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|
|
|
|
|
|
|
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December 31,
|
|
December 31,
|
|
|
2007
|
|
2006
|
|
Audit
|
|
$
|
9,797
|
|
|
$
|
9,468
|
|
Audit Related
|
|
|
310
|
|
|
|
0
|
|
Tax
|
|
|
4
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,111
|
|
|
$
|
9,482
|
|
|
|
|
|
|
|
|
|
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Audit fees for the years ended December 31, 2007 and
2006 were primarily for professional services rendered for the
audits of our consolidated financial statements; the audits of
our internal control over financial reporting in compliance with
Section 404 of the Sarbanes-Oxley Act of 2002; subsidiary
audits required by statute, regulation or contract; the review
of documents filed with the SEC; consents; the issuance of
comfort letters; and accounting consultations.
Audit Related fees for the year ended December 31,
2007 were primarily for professional services rendered for the
audit of our employee benefit plans and other attest services.
Tax fees for the years ended December 31, 2007 and
2006 were for professional services related to tax compliance
and tax planning.
Our Audit Committee has adopted a pre-approval policy for audit
and non-audit services. See page 10 of this proxy
statement for a description of this policy. The Audit Committee
has considered whether the provision of
non-audit
services by Ernst &Young LLP is compatible with
maintaining auditor independence and has determined that auditor
independence has not been compromised.
A representative of Ernst & Young LLP will be at the
Annual Meeting, will have an opportunity to make a statement if
he or she desires to do so and is expected to be available to
answer appropriate questions.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR THE RATIFICATION OF THE APPOINTMENT OF
ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE FISCAL YEAR 2008.
70
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors,
certain officers and beneficial owners of more than
10 percent of a registered class of our equity securities
to file reports of ownership and reports of changes in ownership
with the SEC and the NYSE. Directors, officers and beneficial
owners of more than 10 percent of our equity securities are
also required by SEC regulations to furnish us with copies of
all such reports that they file. Based on our review of copies
of such forms and amendments provided to us, we believe that all
filing requirements were timely complied with during the fiscal
year ended December 31, 2007, except that Ronald L.
Kuehn, Jr. filed one late report regarding the sale of
2,000 shares of stock he owned indirectly. This transaction
was reported to the SEC on November 28, 2007.
By Order of the Board of Directors
Marguerite N. Woung-Chapman
Corporate Secretary
Houston, Texas
March 27, 2008
71
000004
MR A SAMPLE
DESIGNATION (IF ANY) ADD 1 ADD
2 ADD 3 ADD 4 ADD 5 ADD 6 |
Using a black ink pen, mark your votes with an X as shown in X
this example. Please do not write outside the designated areas. |
Annual Meeting Proxy Card |
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Electronic Voting Instructions |
You can vote by Internet or
telephone! Available 24 hours a
day, 7 days a week! |
Instead of mailing your proxy, you may
choose one of the two voting methods outlined
below to vote your proxy. |
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. |
Proxies submitted by the Internet or telephone
must be received by 1:00 a.m. Central Time, on
May 14, 2008. |
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Vote by Internet |
Log on to the Internet and go to www.investorvote.com/ep
Follow the steps outlined on the secured website. |
Vote by telephone |
Call toll free 1-800-652-VOTE (8683) within the United States, Canada & Puerto Rico
any time on a touch tone telephone. There is NO CHARGE to you for the call. |
Follow the instructions provided by the recorded message. |
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IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION,
DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. 3 |
A Proposals The Board of Directors recommends a vote FOR all the nominees listed
and FOR Proposal 2. |
1. Election of
Director Nominees: |
1 Juan Carlos Braniff
4 Robert W. Goldman
7 William H. Joyce
10 Steven J. Shapiro
13 John L. Whitmire |
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2. Ratification of the appointment of Ernst & Young LLP as our independent
registered public accounting firm for fiscal year ending December 31, 2008. |
B Non-Voting Items |
Change of Address Please print new address below. Comments Please print your comments
below. |
C Authorized Signatures This section must be completed for your vote to be counted. Date
and Sign Below |
Please sign exactly as your name appears. If acting as attorney, executor, trustee or in other
representative capacity, sign name and title. If a corporation, please sign with the full
corporation name by President or other authorized officer. If a partnership, please sign in
partnership name by authorized person. If held jointly, both parties must sign and date. |
Date (mm/dd/yyyy) Please print date below. |
Signature 1 Please keep signature within the box. |
Signature 2 Please keep signature within the box. |
[Graphic Appears Here] |
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MR A SAMPLE
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140 CHARACTERS) MR
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MR A SAMPLE AND MR
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MR A SAMPLE AND
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1 U P X 0 1 6 7 8 4 1 AND + |
<STOCK#> 00UI9C |
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH
AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. |
Proxy El Paso Corporation
Solicited by the Board of Directors
Annual Meeting of Stockholders May 14, 2008
The undersigned hereby appoints Douglas L. Foshee and Robert W. Baker, and each or any of them
individually, with power of substitution, proxies for the undersigned and authorizes them to
represent and vote, as designated, all of the shares of common stock of El Paso Corporation, held
of record by the undersigned on March 17, 2008 at the Annual Meeting of Stockholders to be held at
the Doubletree Hotel Houston Downtown, 400 Dallas Street, Houston, Texas 77002 on Wednesday, May
14, 2008, and at any adjournment(s) or postponement(s) of such meeting for the purposes identified
on the reverse side of this proxy and with discretionary authority as to any other matters that may
properly come before the Annual Meeting, including substitute nominees if any of the named nominees
for Director should be unavailable to serve for election, in accordance with and as described in
the Notice of Annual Meeting of Stockholders and Proxy Statement. This proxy when properly executed
will be voted in the manner directed herein by the undersigned stockholder. If this proxy is
returned without direction given, this proxy will be voted FOR proposals 1 and 2. |
Your email address can now help save the environment. Vote online and register for
electronic communications with the eTree® program and well have a tree planted on
your behalf. |
(IMPORTANT TO BE SIGNED AND DATED ON REVERSE SIDE) |
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VOTE BY INTERNET www.proxyvote.com |
ATTN: ARMIDA D. ESTRADA
1001 LOUISIANA STREET
HOUSTON, TX 77002
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Use the Internet to transmit your
voting instructions and for electronic delivery of information up until
11:59 P.M. Eastern Time on May 12, 2008. Have your proxy card
in hand when you access the web site and follow the instructions to obtain your records and to
create an electronic voting instruction form. |
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ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS |
|
If you would like to reduce the costs incurred by El Paso Corporation in mailing proxy materials,
you can consent to receiving all future proxy statements, proxy cards and annual reports electronically
via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above
to vote using the Internet and, when prompted, indicate that you agree to receive or access
shareholder communications electronically in future years. |
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VOTE BY PHONE 1-800-690-6903 |
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Use any
touch-tone telephone to transmit your voting instructions up until
11:59 P.M. Eastern Time on May 12, 2008. Have your proxy card in
hand when you call and then follow the instructions. |
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VOTE BY MAIL |
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Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided
or return it to El Paso Corporation, c/o Broadridge, 51 Mercedes Way,
Edgewood, N |