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


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(EL PASO LOGO)
 
Dear El Paso Stockholder:
 
We cordially invite you to attend our 2009 Annual Meeting of Stockholders. The Annual Meeting will be held on Wednesday, May 6, 2009, beginning at 9:00 a.m. (local/Central time) at the Doubletree Hotel Houston Downtown, 400 Dallas Street, Houston, Texas 77002.
 
At this year’s Annual Meeting, you will be asked to vote on the election of 11 directors, an amendment and restatement of our 2005 Omnibus Incentive Compensation Plan, an amendment and restatement of our Employee Stock Purchase Plan, and the ratification of Ernst & Young LLP’s appointment as our independent registered public accounting firm for 2009.
 
Our Chairman Ronald L. Kuehn, Jr., and board members William H. Joyce and Joe B. Wyatt will be retiring from our Board of Directors at this Annual Meeting pursuant to our mandatory retirement age policy. We thank them for their dedicated service to El Paso and wish them well.
 
We remain committed to providing transparent and fulsome compensation disclosures in our proxy statement. To that end, in addition to required disclosures, we have included in the accompanying proxy statement individual executive profiles that summarize the compensation earned or paid during 2008 to our CEO, our CFO and our three other most highly compensated executive officers. We believe these individual executive profiles, which begin on page 25 of the proxy statement, provide a clear and concise summary that is easy to understand.
 
In addition, we are pleased this year to take advantage of SEC rules that allow companies to furnish their proxy materials over the Internet. As a result, we are mailing to most of our stockholders an Important Notice Regarding the Availability of Proxy Materials (“Notice”) instead of a paper copy of this proxy statement and our 2008 Annual Report on Form 10-K. The Notice contains instructions on how to access those documents over the Internet. The Notice also contains instructions on how to request a paper copy of our proxy materials, including this proxy statement, our 2008 Annual Report on Form 10-K and a form of proxy card. All stockholders who do not receive a Notice will receive a paper copy of the proxy materials by mail. We believe that this new process will allow us to provide our stockholders with the information they need in an efficient, cost-effective manner, while reducing the environmental impact of printing and distributing proxy materials.
 
I urge you to vote for your Board’s nominees, the two plan restatements and the ratification of Ernst & Young LLP. Your vote is important. I hope you will be able to attend the annual meeting, but if you cannot, please vote your proxy as soon as you can.
 
Sincerely,
 
-s- Douglas L. Foshee
Douglas L. Foshee
President and Chief Executive Officer
 
Houston, Texas
March 26, 2009


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EL PASO CORPORATION
1001 Louisiana Street
Houston, Texas 77002
 
NOTICE OF 2009 ANNUAL MEETING OF STOCKHOLDERS
May 6, 2009
 
On May 6, 2009, El Paso Corporation will hold its 2009 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 11, 2009, 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 take action and consider proposals to:
 
  1.  Elect 11 directors, each to hold office for a term of one year;
 
  2.  Approve the El Paso Corporation 2005 Omnibus Incentive Compensation Plan, as amended and restated, to increase the number of shares available for issuance by 12.5 million;
 
  3.  Approve the El Paso Corporation Employee Stock Purchase Plan, as amended and restated, to extend the term of the plan until such time as no additional shares remain available for purchase; and
 
  4.  Ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2009.
 
These proposals are described in the attached proxy statement. 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
 
-s- Marguerite N. Woung Chapman
Marguerite N. Woung-Chapman
Corporate Secretary
 
Houston, Texas
March 26, 2009
 
 
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2009 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 6, 2009
 
Our proxy statement for the 2009 Annual Meeting and our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 are available at www.proxyvote.com.
 


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ATTENDING THE MEETING
 
If you plan to attend the Annual Meeting in person and are a stockholder of record, bring with you a form of government-issued personal identification to the Annual Meeting. If you own stock through a bank, broker or other nominee, you will need proof of ownership as of the record date to attend the Annual Meeting. If you are an authorized proxy holder, you must present the proper documentation. Please see page 4 for more information on what documents you will need for admission to the Annual Meeting. Registration will begin at 8:00 a.m. (local/Central time), and seating will be on a “first come first served” basis. No cameras, recording equipment or other electronic devices will be allowed in the meeting room. If you do not provide photo identification or comply with the other procedures outlined above upon request, you may not be admitted to the Annual Meeting. In addition, please note parking is not provided for the Annual Meeting. There is parking generally available at the Doubletree Hotel Houston Downtown and at other public parking garages around the Doubletree Hotel Houston Downtown.


 

 
EL PASO CORPORATION
 
PROXY STATEMENT
 
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EL PASO CORPORATION
1001 Louisiana Street
Houston, Texas 77002
 
PROXY STATEMENT
 
2009 ANNUAL MEETING OF STOCKHOLDERS — May 6, 2009
 
Our Board of Directors is furnishing you with this proxy statement to solicit proxies on its behalf to be voted at the 2009 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 Wednesday, May 6, 2009, at 9:00 a.m. (local/Central time). The proxies also may be voted at any adjournments or postponements of the Annual Meeting.
 
In accordance with the “Notice and Access” rules adopted by the U.S. Securities and Exchange Commission (“SEC”), we have elected to provide access to our proxy materials to our stockholders by providing access to such documents on the Internet. Accordingly, on or about March 26, 2009, an Important Notice Regarding the Availability of Proxy Materials (“Notice”) will be mailed to our stockholders of record. Stockholders will have the ability to access the proxy materials on a website referred to in the Notice or request a printed set of the proxy materials be sent to them, by following the instructions on the Notice.
 
Unless stated otherwise or the context otherwise requires, all references in this proxy statement to “us,” “we,” “our,” “company” or “El Paso” are to El Paso Corporation.
 
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
 
1.   Who may vote?
 
Stockholders holding shares of El Paso’s common stock, par value $3.00 per share, as of the close of business on the record date, March 11, 2009, and present in person or represented by a properly executed proxy are entitled to vote at the Annual Meeting, or any adjournments or postponements of the Annual Meeting. You have one vote for each share of common stock held as of the record date, which may be voted on each proposal presented at the Annual Meeting.
 
2.   What is the record date and what does it mean?
 
The record date for the Annual Meeting is March 11, 2009. The record date was established by the Board of Directors as required by our By-laws and Delaware law. Owners of record of El Paso’s common stock at the close of business on the record date are entitled to:
 
  •  Receive notice of the Annual Meeting; and
 
  •  Vote at the Annual Meeting, and any adjournments or postponements of the Annual Meeting.
 
3.   How many shares of El Paso common stock were outstanding on the record date?
 
There were 698,634,520 shares of common stock outstanding and entitled to vote at the Annual Meeting at the close of business on the record date. Common stock is the only class of stock entitled to vote.
 
4.   Why did I receive a Notice in the mail regarding the Internet availability of proxy materials this year instead of a full set of proxy materials?
 
This year, in connection with SEC rules that allow companies to furnish their proxy materials over the Internet, we have sent to most of our stockholders an Important Notice Regarding the Availability of Proxy Materials instead of a paper copy of the proxy materials. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found in the Notice. In addition, stockholders may request to receive proxy materials in


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printed form by mail or electronically by e-mail on an ongoing basis. A stockholder’s election to receive proxy materials by mail or e-mail will remain in effect until the stockholder terminates the election.
 
5.   Why didn’t I receive a Notice in the mail regarding the Internet availability of proxy materials?
 
We are providing stockholders who have previously requested to receive paper copies of the proxy materials with paper copies of the proxy materials instead of a Notice. If you would like to reduce the costs incurred by us in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions provided in your Notice, or if you received a printed version of the proxy materials by mail, by following the instructions provided with your proxy materials and on your proxy card or voting instruction card to vote using the Internet. When prompted, indicate that you agree to receive or access stockholder communications electronically in the future.
 
6.   Can I vote my shares by filling out and returning the Notice?
 
No. The Notice will, however, provide instructions on how to vote by Internet, by requesting and returning a paper proxy card, or by submitting a ballot in person at the Annual Meeting.
 
7.   How can I access the proxy materials over the Internet?
 
You can view the proxy materials for the Annual Meeting on the Internet at www.proxyvote.com. Please have your 12 digit control number available. Your 12 digit control number can be found on your Notice. If you received a paper copy of your proxy materials, your 12 digit control number can be found on your proxy card or voting instruction form.
 
Our proxy materials are also available on our website at www.elpaso.com.
 
8.   What am I voting on?
 
You are voting on the following:
 
  •  the election of 11 directors;
 
  •  the approval of the El Paso Corporation 2005 Omnibus Incentive Compensation Plan, as amended and restated;
 
  •  the approval of the El Paso Corporation Employee Stock Purchase Plan, as amended and restated; and
 
  •  the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2009.
 
9.   How does the Board recommend that I vote?
 
The Board recommends that you vote:
 
  •  FOR each of the nominees for director;
 
  •  FOR the approval of the El Paso Corporation 2005 Omnibus Incentive Compensation Plan, as amended and restated;
 
  •  FOR the approval of the El Paso Corporation Employee Stock Purchase Plan, as amended and restated; and
 
  •  FOR the approval of the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2009.
 
10.   Why should I vote?
 
Your vote is very important regardless of the number of shares you hold. The Board strongly encourages you to exercise your right to vote as a stockholder of the company.


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


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15.   What happens if other matters come up at the Annual Meeting?
 
The matters described in the notice of Annual Meeting are the only matters we know of which will be voted on at the Annual Meeting. If other matters are properly presented at the Annual Meeting, the persons named in the enclosed proxy card or voting instruction form will vote your shares according to their best judgment.
 
16.   Who will count the votes?
 
A representative of Broadridge, an independent tabulator appointed by the Board of Directors, will count the votes and act as the Inspector of Election. The Inspector of Election shall have the authority to receive, inspect, electronically tally and determine the validity of the proxies received.
 
17.   What is a “quorum?”
 
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. Broker non-votes are treated as present for the purpose of determining a quorum.
 
18.   Who can attend the Annual Meeting?
 
Admission to the Annual Meeting is limited to stockholders of El Paso, persons holding validly executed proxies from stockholders who held El Paso common stock on March 11, 2009, and invited guests of El Paso.
 
If you are a stockholder of El Paso, you must bring certain documents with you in order to be admitted to the Annual Meeting. The purpose of this requirement is to help us verify that you are actually a stockholder of El Paso. Please read the following rules carefully because they specify the documents that you must bring with you to the Annual Meeting in order to be admitted. The items that you must bring with you differ depending upon whether you are a record holder or hold your stock in “street name.”
 
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 11, 2009, then you must bring a valid government-issued personal identification (such as a driver’s license or passport).
 
If a broker, bank, trustee or other nominee was the record holder of your shares of El Paso common stock on March 11, 2009, then you must bring:
 
  •  Valid government-issued personal identification (such as a driver’s license or passport), and
 
  •  Proof that you owned shares of El Paso common stock on March 11, 2009.
 
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 11, 2009; (2) a brokerage account statement indicating that you owned El Paso common stock on March 11, 2009; or (3) the voting instruction form provided by your broker indicating that you owned El Paso common stock on March 11, 2009.
 
If you are a proxy holder for a stockholder of El Paso, then you must bring:
 
  •  The validly executed proxy naming you as the proxy holder, signed by a stockholder of El Paso who owned shares of El Paso common stock on March 11, 2009, and
 
  •  Valid government-issued personal identification (such as a driver’s license or passport), and
 
  •  If the stockholder whose proxy you hold was not a record holder of El Paso common stock on March 11, 2009, proof of the stockholder’s ownership of shares of El Paso common stock on March 11, 2009, 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 11, 2009.
 
You may not use cameras, recording equipment or other electronic devices during the Annual Meeting.


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19.   How many votes must each proposal receive to be adopted?
 
  •  With respect to the election of directors, our By-laws provide for the election of directors by the majority vote of stockholders in uncontested elections. This means the number of votes cast for a nominee’s election must exceed the number of votes cast against such nominee’s election in order for him or her to be elected to the Board of Directors.
 
  •  With respect to the approval of the amendment and restatement of our 2005 Omnibus Incentive Compensation Plan, in order to satisfy the listing standards of the New York Stock Exchange, or NYSE, the total vote cast with respect to the proposal concerning the omnibus plan must represent more than 50% of the total number of shares entitled to vote on the proposal, and the proposal must receive the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting.
 
  •  With respect to the approval of the amendment and restatement of our Employee Stock Purchase Plan, in order to satisfy the requirements of Section 423 of the Internal Revenue Code and our By-laws, the proposal must receive the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting.
 
  •  With respect to the ratification of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2009, the proposal must receive the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting.
 
20.   How are votes counted?
 
Votes are counted in accordance with our By-laws and Delaware law. A broker non-vote or abstention will not be counted in determining the election of directors. A broker non-vote or abstention will be counted towards a quorum and as represented at the meeting. Accordingly, a broker non-vote or abstention will have the same effect as a vote against each of the proposals other than the election of directors. Shares will not be voted at the Annual Meeting if a properly executed proxy card covering those shares has not been returned and the holder does not cast votes in respect of those shares in person at the Annual Meeting.
 
21.   How can I view the stockholder list?
 
A complete list of the registered stockholders entitled to vote at the Annual Meeting will be available to view during the Annual Meeting. You may access this list at El Paso’s offices at 1001 Louisiana Street, Houston, Texas 77002 during ordinary business hours for a period of ten days before the Annual Meeting.
 
22.   Who pays for the proxy solicitation related to the Annual Meeting?
 
We do. In addition to sending you or making available to you these materials, some of our directors and officers as well as management and non-management employees may contact you by telephone, mail, e-mail or in person. You may also be solicited by means of press releases issued by El Paso, postings on our website, www.elpaso.com, and advertisements in periodicals. None of our officers or employees will receive any extra compensation for soliciting you. We have retained Georgeson Inc. to assist us in soliciting your proxy for an estimated fee of $17,500, plus reasonable out-of-pocket expenses. Georgeson will ask brokers and other custodians and nominees whether other persons are beneficial owners of El Paso common stock. If so, we will supply them with the Notice or proxy materials for distribution to the beneficial owners. We will also reimburse banks, nominees, fiduciaries, brokers and other custodians for their costs of sending the Notice or proxy materials to the beneficial owners of El Paso common stock.
 
23.   If I want to submit a stockholder proposal for the 2010 Annual Meeting, when is it due?
 
If you want to submit a proposal for possible inclusion in next year’s proxy statement, you must submit it in writing to the Corporate Secretary, El Paso Corporation, P.O. Box 2511, Houston, Texas 77252-2511, telephone (713) 420-4018 and facsimile (713) 420-4099. El Paso must receive your proposal on or before November 26, 2009. El Paso will consider only proposals meeting the requirements of the applicable rules of the SEC.


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Additionally, under our By-laws, for a stockholder to bring any matter before the 2010 Annual Meeting that is not included in the 2010 Proxy Statement, the stockholder’s written notice must be received not less than 90 days nor more than 120 days prior to the first anniversary of the 2009 Annual Meeting. Under this criterion, stockholders must provide us with a notice of a matter to be brought before the 2010 Annual Meeting during the period from January 6, 2010 to February 5, 2010.
 
If the 2010 Annual Meeting is held more than 30 days before or 60 days after May 6, 2010, for a stockholder seeking to bring any matter before the 2010 Annual Meeting, the stockholder’s written notice must be received not less than 90 days nor more than 120 days before the date of the 2010 Annual Meeting or by the tenth day after we publicly announce the date of the 2010 Annual Meeting, if that would result in a later deadline.
 
24.   How can I obtain a copy of the Annual Report on Form 10-K?
 
As set forth on the Notice, you may receive a hardcopy of proxy materials, including the Annual Report on Form 10-K, by following the directions set forth on the Notice. The Annual Report on Form 10-K is also available at on our website at www.elpaso.com.
 
CORPORATE GOVERNANCE
 
We are committed to maintaining the highest standards of corporate governance. We believe that strong corporate governance is critical to achieving our performance goals, and to maintaining the trust and confidence of investors, employees, suppliers, business partners, customers, regulatory agencies and other stakeholders.
 
Corporate Governance Guidelines.  Our Corporate Governance Guidelines, together with the Board committee charters, provide the framework for the effective governance of El Paso. The Board of Directors has adopted our Corporate Governance Guidelines to address matters including qualifications for directors, standards for independence of directors, election of directors, responsibilities of directors, mandatory retirement for directors, limitation on serving on other boards/committees, the composition and responsibility of committees, conduct and minimum frequency of Board and committee meetings, management succession, director access to management and outside advisors, director compensation, stock ownership requirements, prohibition on hedging company stock, director orientation and continuing education, annual self-evaluation of the Board, its committees and directors and our policy on poison pills. The Board of Directors recognizes that effective corporate governance is an on-going process, and the Board, either directly or through the Governance & Nominating Committee, will review and revise as necessary our Corporate Governance Guidelines annually, or more frequently if deemed necessary. Our Corporate Governance Guidelines may be found on our website at www.elpaso.com.
 
Independence of Board Members.  Our Corporate Governance Guidelines require that a majority of our Board of Directors meet the “independence” requirements of the NYSE listing requirements and at least 75 percent of our Board of Directors must not be from current management. The Board of Directors observes and complies with all criteria for independence established by the NYSE listing requirements and other governing laws and regulations. The Board of Directors makes its determination of the independence of its members based on categorical standards it has adopted to assist in its assessment of the independence of each director. The categorical standards adopted by the Board of Directors are consistent with the NYSE listing requirements and provide that a director, in order to be considered independent, must not have a direct or indirect material relationship with us or our management other than as a director. The standards of independence adopted by the Board are contained in our Corporate Governance Guidelines, which may be found on our website at www.elpaso.com.
 
The Board has affirmatively determined that each of our directors, with the exception of our President and Chief Executive Officer (“CEO”) 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 2008 (as reflected in the Director Compensation table on page 66 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 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


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continued service on the Board. The Board also reviewed each director’s commercial and charitable relationships and determined that, with the exception of Mr. Foshee’s service as our President and CEO, none of these relationships affect the independence of the individual directors. Thus, 13 of our 14 current directors, and 10 of our 11 director nominees, are independent. Further, our Audit, Compensation, Governance & Nominating, Finance and Health, Safety & Environmental Committees are composed entirely of independent directors.
 
Audit Committee Financial Expert.  The Audit Committee plays an important role in promoting effective accounting, financial reporting, risk management and compliance procedures and controls. All members of our Audit Committee meet the financial literacy standard required by the NYSE rules and at least one member qualifies as having accounting or related financial management expertise under the NYSE rules. In addition, the Board of Directors has affirmatively determined that Messrs. Hix (chairman of our Audit Committee), Goldman and Shapiro are “audit committee financial experts.”
 
Chairman/Lead Director.  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 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. However, on May 6, 2009, Mr. Kuehn will be retiring from our Board of Directors.
 
Mr. Kuehn served as the Lead Director of the Board from September 2002 to March 2003. In March 2003, Mr. Kuehn assumed the role of Chairman and interim CEO until Douglas L. Foshee joined El Paso as President, CEO and a director in September 2003. Mr. Foshee arrived at a seminal time in El Paso’s history. An acrimonious proxy battle had only recently ended and Mr. Foshee was charged with leading an aggressive turnaround plan to reorganize the company around its two key businesses — pipelines and exploration and production — and return the company to growth and profitability. During that period of time to the present, Mr. Kuehn continued to serve as Chairman and Mr. Foshee was able to devote 100 percent of his time to achieving the turnaround.
 
Following our Annual Meeting on May 6, 2009, the Board intends to elect Mr. Foshee to succeed Mr. Kuehn as Chairman. Mr. Foshee will also continue to serve as our President and CEO. In determining that Mr. Foshee was the appropriate person to serve in the combined role of Chairman and CEO, the Board relied on several important measures. First, Mr. Foshee’s leadership, integrity and vision have been instrumental in the successful execution of El Paso’s turnaround and its continued strong performance, despite challenging economic conditions. Second, Mr. Foshee has the confidence of the Board, the company and its stockholders. Third, the Board’s performance and El Paso’s corporate governance have flourished since Mr. Foshee’s arrival. Fourth and most importantly, the Board believes that Mr. Foshee has the ability to execute on both the company’s short-term and long-term strategies necessary for the challenging marketplace in which the company competes.
 
While these measures were important, the Board would not have considered combining the roles of Chairman and CEO if it did not firmly believe that El Paso has in place sound counter-balancing mechanisms to ensure that the company maintains the highest standards of corporate governance and continued accountability of the CEO to the Board. These counter-balancing mechanisms include:
 
  •  A super-majority of independent directors on the Board, which super-majority will be maintained.
 
  •  The Board will designate an independent Lead Director, effective upon Mr. Foshee’s election as Chairman, who will be directly available to address any stockholder inquiries. It is the Board’s intent to designate J. Michael Talbert as Lead Director. Mr. Talbert has been a member of our Board since 2003 and until 2007, served as non-executive Chairman of the Board of Transocean Inc. Mr. Talbert has been a strong and influential addition to the Board and played an integral role in promoting robustness and confidence in the Board’s execution of its responsibilities. As detailed below in how the roles will interact, Mr. Talbert’s responsibilities as Lead Director and advisory role to Mr. Foshee will complement Mr. Foshee’s role as Chairman and CEO while providing the necessary checks and balances to hold both the Board and the Chairman/CEO accountable in their respective roles.
 
  •  Each of the Board’s standing committees, including the Audit, Compensation, Governance & Nominating, Finance and Health, Safety & Environmental Committees, are comprised of and chaired solely by


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  non-employee directors who meet the independence requirements under the NYSE listing standards and other governing laws and regulations.
 
  •  Review and determination of Mr. Foshee’s compensation and performance will remain within the purview of the Compensation Committee.
 
  •  The independent directors will continue to meet in regular executive sessions without management present to discuss the effectiveness of the company’s management, the quality of the Board meetings and any other issues and concerns.
 
  •  The Board will provide continued oversight of succession planning.
 
As stated in our Corporate Governance Guidelines, the Board does not have a policy as to whether the role of the CEO and the Chairman should be separate, or whether the Chairman should be a management or non-management director. Thus, while the Board has determined that Mr. Foshee will serve in the combined role of Chairman and CEO, the Board has the right to separate those roles if in the future it determines that such a separation would be in the best interest of the company and its stockholders.
 
Below is a summary of the respective responsibilities of the Chairman/CEO and the Lead Director.
 
       
       
Chairman/CEO
    Lead Director
   
       
•   Calls meetings of the Board and the stockholders
    •   Calls meetings of the Board or executive sessions with the independent directors
       
•   Chairs meetings of the Board and the annual meeting of stockholders
    •   Chairs meetings of the Board and the annual meeting of stockholders when the Chairman is unavailable
     
•   Chairs meetings of the Board when there is a potential conflict of interest with the Chairman on issues to be considered
     
•   Chairs executive sessions of the independent directors
       
•   Establishes Board meeting schedules and
agendas
    •   Coordinates with the Chairman to ensure that meeting schedules allow sufficient time for discussion of all agenda items and agendas cover all items necessary for the Board to discharge its responsibilities
     
•   Establishes agendas for executive sessions
       
•   Ensures that information provided to the Board is sufficient for the Board to fulfill its primary responsibilities
    •   Provides input to the Chairman on the scope, quality, quantity and timeliness of the information provided to the Board
       
•   Communicates with all directors on key issues and concerns outside of Board meetings
    •   Serves as a non-exclusive conduit to the Chairman of views and concerns of the independent directors
       
•   With Lead Director, jointly recommends Committee Chair positions to full Board and the Governance Committee
    •   With Chairman, jointly recommends Committee Chair positions to full Board and the Governance Committee
       
 


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Chairman/CEO
    Lead Director
   
       
•   In conjunction with the Governance & Nominating Committee, ensures that the Board is balanced in composition and structure and leads Board recruitment efforts
    •   Collaborates with the Chairman and the Governance Committee in monitoring the composition and structure of the Board and assists in Board recruitment efforts
       
•   Oversees compliance with the Company’s governance principles
    •   Collaborates with the Governance & Nominating Committee on questions of possible conflicts of interest or breaches of the Company’s governance principles by other directors, including the Chairman
       
•   Represents the Company to and interacts with external stakeholders and employees
    •   Is available for consultation and direct communication with stockholders and interested parties
       
•   Leads the Board review of management
succession and development plans
    •   Leads the executive sessions of the independent directors on management succession and development plans and provides feedback to the Chairman/CEO
     
•   Oversees the process of hiring or firing a CEO including any compensation arrangements
     
•   Recommends to the Board the retention of outside advisors who report directly to the Board
     
•   Participates with the Compensation Committee Chair in communicating performance feedback and compensation decisions to the CEO
       
 
Communications with Chairman/Lead Director.  Interested parties may communicate directly with Mr. Kuehn, or following his retirement, with Mr. Talbert, by writing to Chairman/Lead Director 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. Upon Mr. Kuehn’s retirement in May 2009, the Lead Director will preside over the executive sessions. During 2008, non-management members of the Board met in executive session five times and several Committees of the Board met in executive session without members of management present. The purpose of these executive sessions is to promote open and candid discussion among the non-management directors.
 
Committees of the Board of Directors.  The Board of Directors has adopted charters for the Audit Committee, the Compensation Committee and the Governance & Nominating Committee that comply with the corporate governance rules adopted by the SEC pursuant to the Sarbanes-Oxley Act of 2002 and the NYSE listing standards. The Audit Committee, the Compensation Committee, the Governance & Nominating Committee, the Finance Committee and the Health, Safety & Environmental Committee charters may be found on our website at www.elpaso.com.
 
Board/Committee/Director Evaluations.  Each year the Board of Directors and each Board committee participates in a self-assessment or evaluation of the effectiveness of the Board and its committees. At least once every three years, the Board conducts an evaluation of each individual director. During 2008, each director participated in a 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.

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Management Succession.  The Board periodically reviews with the CEO the management succession and development plan which includes the succession of the CEO in the event of an emergency or retirement, as well as the succession of other employees critical to our company’s continued operations and success.
 
Director Education.  We encourage and facilitate director participation in seminars and conferences and other opportunities for continuing director education. All of our directors are required to attend, at least once every two years, a continuing educational program, seminar or conference designed for board members. In addition, each of our directors is a member of the National Association of Corporate Directors. Each of our directors has met the continuing director education requirements specified above.
 
Stock Ownership Requirements.  Our Board of Directors is committed to director and senior management stock ownership. Directors are required to own shares of our common stock with a value of five times the annual cash retainer paid to non-employee directors within a five-year time period following initial election to the Board. The Board also requires that our CEO own shares of our common stock with a value of at least five times his or her annual base salary, and that other executive officers own shares of our common stock with a value of at least two times their base salary within a five-year time period following initial election to that position. Each share of common stock owned by a director or executive officer is deemed to have a value equal to the greater of (i) the trading price of our common stock as of the date the applicable share was acquired by the director or executive officer or (ii) the trading price of the share of common stock as of the measurement date. Shares of restricted stock, deferred shares and shares in our retirement savings plan or other similar plans are counted towards meeting these requirements. Additionally, a director or executive officer is deemed to own shares of common stock with a value equal to the in-the-money value, if any, of any vested or unvested stock option, stock appreciation right, or similar equity-linked grant that is held by the director or executive officer on any given measurement date. Each of our executive officers and non-employee directors met the stock ownership requirements as of December 31, 2008.
 
Voting Standard to Elect Directors.  Our By-laws provide for the election of directors by the majority vote of stockholders in uncontested elections. This means the number of votes cast for a nominee’s election must exceed the number of votes cast against such nominee’s election in order for him or her to be elected to the Board of Directors. Our By-laws provide for the election of directors by the plurality of votes cast in contested elections. This means that in elections where the number of nominees exceeds the number of directors to be elected, the nominees who receive the highest number of votes will be elected to the Board of Directors. In addition, our Corporate Governance Guidelines provide that the Board will nominate for election or appoint to Board vacancies only candidates who irrevocably agree to resign if they fail to receive the required majority vote in uncontested elections. In the event a director fails to receive a majority of votes cast and the Board accepts the resignation tendered, then that director would cease to be a director of El Paso. In accordance with our Corporate Governance Guidelines, our By-laws require as a part of a stockholder’s written notice in connection with the nomination of a director, a statement whether the nominated individual intends to tender an irrevocable resignation effective upon such person’s failure to receive the required vote for re-election at the next meeting at which such person would face re-election. Each of our directors has submitted an irrevocable letter of resignation that becomes effective in the event he or she does not receive a majority of votes cast for his or her election.
 
Policy on Poison Pill Plans.  Our Corporate Governance Guidelines include a policy on poison pills, or stockholder rights plans. We do not currently have in place a stockholders rights plan, and the Board currently has no plans to adopt such a plan. However, if the Board is presented with a set of facts and circumstances which leads it to conclude that adopting a stockholder rights plan would be in the best interests of stockholders, the Board will seek prior stockholder approval unless the Board, in exercising its fiduciary responsibilities under the circumstances, determines by vote of a majority of the independent directors that such submission would not be in the best interests of our stockholders in the circumstances. If the Board were ever to adopt a stockholder rights plan without prior stockholder approval, the Board would present such plan to the stockholders for ratification within one year or cause it to expire within one year, without being renewed or replaced. Further, if the Board adopts a stockholder rights plan and our stockholders do not approve such plan, it will terminate.
 
Code of Ethics.  We have adopted a code of ethics, referred to as our “Code of Business Conduct,” that applies to all of our directors and employees, including our CEO, Chief Financial Officer (“CFO”) and senior financial and accounting officers. Our Code of Business Conduct is a value-based code that is built on our five core values:


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stewardship, integrity, safety, accountability and excellence. In addition to other matters, our Code of Business Conduct establishes policies to deter wrongdoing and to promote honest and ethical conduct, including ethical handling of actual or apparent conflicts of interest, compliance with applicable laws, rules and regulations, full, fair, accurate, timely and understandable disclosure in public communications and prompt internal reporting of violations of our Code of Business Conduct. We also have an Ethics & Compliance Office and Ethics & Compliance Committee, which is composed of members of senior management, that administers our ethics and compliance program and reports to the Audit Committee of our Board of Directors. A copy of our Code of Business Conduct is available on our website at www.elpaso.com. We will post on our internet website all waivers to or amendments of our Code of Business Conduct, which are required to be disclosed by applicable law and the NYSE listing standards. Currently, we do not have nor do we anticipate any waivers of or amendments to our Code of Business Conduct. We believe our Code of Business Conduct exceeds the requirements set forth in the applicable SEC regulations and the corporate governance rules of the NYSE.
 
Transactions with Related Persons.  Our Board has adopted a written related person transactions policy. The policy defines a related person transaction as one in which El Paso is a participant, the amount involved equals or exceeds $120,000, and a related person has a direct or indirect material interest. The policy defines a related person as any executive officer, director or director nominee, person known to be the beneficial owner of 5 percent or more of El Paso’s voting securities, immediate family member of any of the foregoing persons, or firm or corporation in which any of the foregoing persons is employed as an officer, a partner or greater than 10 percent owner.
 
The policy includes procedures to review and approve, as necessary, any related person transactions prior to the transaction being entered into, or ratify any related person transactions that have not been previously approved. Other than certain pre-approved transactions specifically set forth in the policy, any related person transaction involving executive officers or their immediate family members other than the CEO or the general counsel are referred to the CEO and general counsel for approval. If the CEO and the general counsel cannot agree on the approval or non-approval of the related person transaction, the transaction will be referred to the Governance & Nominating Committee for approval. Any related person transaction involving the general counsel and his or her immediate family members will be referred to the CEO for approval. Any related person transaction involving 5 percent stockholders, directors, director nominees or the CEO and their immediate family members will be referred to the Governance & Nominating Committee for approval. All determinations made by the CEO and the general counsel are reported to the Governance & Nominating Committee at its next regularly scheduled meeting.
 
In determining whether to approve a related person transaction, the CEO, general counsel or Governance & Nominating Committee will consider whether:
 
  •  the terms of the transaction are fair to El Paso and would be on the same basis if the transaction did not involve a related person,
 
  •  there are business reasons to enter into the transaction,
 
  •  the transaction would impair the independence of an outside director,
 
  •  the transaction would present an improper conflict of interest for any director or executive officer, and
 
  •  the transaction is material.
 
The policy for approval of related person transactions can be found on our website at www.elpaso.com.
 
During 2008, we did not enter into, and we do not currently propose entering into, any transactions with related persons required to be disclosed under SEC regulations.
 
Special Stockholder Meetings.  Our By-laws permit stockholders who own at least 25 percent of our outstanding shares to call a special meeting of stockholders.
 
Web Access.  We provide access through our website to current information relating to corporate governance, including a copy of each of the Board’s standing committee charters, our Corporate Governance Guidelines, our Code of Business Conduct, our Restated Certificate of Incorporation and By-laws, our policy for approval of related person transactions, biographical information concerning each director, and other matters regarding our corporate governance principles. We also provide access through our website to all filings submitted by El Paso to the SEC.


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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 person upon request. Such requests should be in writing, addressed to El Paso Corporation, c/o Ms. Marguerite Woung-Chapman, Corporate Secretary, P.O. Box 2511, Houston, TX 77252. Information contained on our website is not part of this proxy statement.
 
Process for Communication with the Board.  Our Board has established a process for interested parties to communicate with the Board. Such communications should be in writing, addressed to the Board or an individual director, c/o Ms. Marguerite N. Woung-Chapman, Corporate Secretary, El Paso Corporation, P.O. Box 2511, Houston, Texas 77252-2511. The Corporate Secretary will forward all communications to the addressee.
 
Director Attendance at Annual Meeting.  The Board encourages all director nominees standing for election to attend the Annual Meeting in accordance with our Corporate Governance Guidelines. All incumbent directors who were elected at our 2008 Annual Meeting attended our 2008 Annual Meeting of Stockholders.
 
INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES
 
The Board of Directors held nine meetings during 2008. Each director, with the exception of Mr. Vagt, attended at least 75 percent of his or her board and committee meetings. Mr. Vagt was unable to attend certain board and committee meetings due to scheduling conflicts associated with his appointment as President of The Heinz Endowments in January 2008, which appointment occurred after our 2008 board meeting dates had been selected. Prior to 2008, Mr. Vagt attended 52 of 54 of his board and committee meetings since his appointment to our Board in 2005. Scheduling conflicts with respect to his responsibilities as President of The Heinz Endowments are not expected to occur in 2009.
 
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 2008 and their principal responsibilities below.
 
                 
        Governance &
      Health, Safety &
Audit   Compensation   Nominating   Finance   Environmental
 
Thomas R. Hix
  Steven J. Shapiro   Anthony W. Hall, Jr.   Robert W. Goldman   John Whitmire
(Chairman)
  (Chairman)   (Chairman)   (Chairman)   (Chairman)
Juan Carlos Braniff
  James L. Dunlap   James L. Dunlap   Juan Carlos Braniff   Anthony W. Hall, Jr.
Robert W. Goldman
  William H. Joyce   Robert F. Vagt   Thomas R. Hix   William H. Joyce
Steven J. Shapiro
  Ferrell P. McClean   Joe B. Wyatt   Ferrell P. McClean   J. Michael Talbert
John Whitmire
  J. Michael Talbert       Robert F. Vagt    
    Joe B. Wyatt            
 
Audit Committee
 
The Audit Committee held nine meetings during 2008. 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 Exchange Act, the SEC rules thereunder, the NYSE listing standards and our Corporate Governance Guidelines. The Board of Directors has determined that each member of the Audit Committee possesses the necessary level of financial literacy required to enable him or her to serve effectively as an Audit Committee member. No Audit Committee member serves on more than three audit committees of public companies, including our Audit Committee. We maintain an Internal Audit Department to provide management and the Audit Committee with ongoing assessments of our risk management processes and system of internal controls. In addition, we maintain a Financial Controls Group to manage our internal control over financial reporting compliance activities. The Audit Committee’s duties, which are discussed in detail in its charter, include, among other duties:
 
  •  Assisting the Board of Directors in fulfilling its responsibilities with respect to the oversight of:
 
  the integrity of our financial statements;


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  our disclosure controls and procedures and internal control over financial reporting;
 
  the evaluation and retention, including a review of the qualifications, independence and performance, of independent auditors and any independent petroleum reserves engineer;
 
  the performance of our internal audit and ethics and compliance functions;
 
  our compliance with legal and regulatory requirements and our Code of Business Conduct; and
 
  our risk management policies and procedures.
 
  •  The appointment, compensation, retention, oversight and dismissal of our independent auditor or any other accounting firm engaged for the purpose of preparing or issuing an audit report or related work, or performing other audit, review or attestation services.
 
  •  The pre-approval of all auditing services and fees and, for our principal auditor, allowable non-audit (including tax) services and fees provided to us.
 
  •  The resolution of any disagreement between management and our independent auditor regarding financial reporting or audit matters.
 
  •  The appointment, compensation, retention, oversight and dismissal of any independent petroleum reserves engineer engaged for the purpose of reviewing, preparing or auditing an estimate of our natural gas and oil reserves.
 
  •  The review of procedures for the receipt, retention and treatment of complaints received by us regarding any accounting, internal accounting controls or auditing matters.
 
Our principal independent auditor, Ernst & Young LLP, reports directly to the Audit Committee. In addition, the Audit Committee provides an open avenue of communication between the internal auditors, the independent auditor and the Board. Interested parties may contact the Audit Committee members by following the process outlined in the Corporate Governance section of this proxy statement.
 
The Audit Committee Charter can be found on our website at www.elpaso.com.
 
Policy for Approval of Audit and Non-Audit Fees
 
During 2008, the Audit Committee approved all the types of audit and permitted non-audit services which our independent auditors were to perform during the year, as required under applicable law, and the cap on fees for each of these categories. The Audit Committee’s current practice is to consider for pre-approval annually all categories of audit and permitted non-audit services proposed to be provided by our independent auditors for a fiscal year. Pre-approval of tax services requires that the principal independent auditor provide the Audit Committee with written documentation of the scope and fee structure of the proposed tax services and discuss with the Audit Committee the potential effects, if any, of providing such services on the independent auditor’s independence. The Audit Committee will also consider for pre-approval annually the maximum amount of fees and the manner in which the fees are determined for each type of pre-approved audit and non-audit services proposed to be provided by our independent auditors for the fiscal year. The Audit Committee must separately pre-approve any service that is not included in the approved list of services or any proposed services exceeding pre-approved cost levels. The Audit Committee has delegated pre-approval authority to the Chairman of the Audit Committee for services that need to be addressed between Audit Committee meetings. The Audit Committee is then informed of these pre-approval decisions, if any, at the next meeting of the Audit Committee. See “Principal Accountant Fees and Services” on page 80 of this proxy statement for the aggregate fees paid to Ernst & Young LLP for the years ended December 31, 2008 and 2007.
 
Compensation Committee
 
The Compensation Committee held four meetings during 2008. 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


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director requirements of Section 162(m) of the Internal Revenue Code (the “Code”) and (d) our Corporate Governance Guidelines.
 
The Compensation Committee’s functions, which are discussed in detail in its charter, include, among other functions, responsibility to:
 
  •  Review and approve annually the individual elements of total compensation for the CEO, review and approve the corporate goals and objectives relevant to CEO compensation, evaluate the CEO’s performance in light of those goals and objectives, and determine and approve the CEO’s compensation level based on this evaluation.
 
  •  Review and approve annually the individual elements of total compensation for all executive officers, which includes all officers who are subject to Section 16(a) of the Exchange Act.
 
  •  Review appropriate criteria for establishing performance targets and determining annual corporate and executive performance ratings.
 
  •  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.
 
  •  Review our employee benefit and compensation programs (including all new equity-based compensation programs) and consider management recommendations subject, where appropriate, to stockholder or full Board approval.
 
  •  Review and approve goals and objectives relevant to director compensation, including annual retainer and meeting fees, and terms and awards of equity compensation, and recommend changes, where appropriate, for full Board approval.
 
  •  Select, retain, evaluate, and, where appropriate, replace the independent executive compensation consulting firm, and review all related fees.
 
The Compensation Committee Charter can be found on our website at www.elpaso.com.
 
At the beginning of each calendar year, the Compensation Committee approves our corporate and business unit financial and non-financial performance goals. The Compensation Committee also establishes the annual base salaries and minimum, target, and maximum annual cash incentive bonus levels for each of the executive officers. After the financial and non-financial results are available for the year, the Compensation Committee determines the appropriate achievement level of the performance goals for purposes of determining annual cash incentive bonuses and long-term incentive award grants. The Compensation Committee also takes into account the executives’ individual performances to determine the amount of each executive’s annual cash incentive bonus and the value of his or her long-term incentive awards. The Compensation Committee also considers recommendations from our CEO regarding the compensation levels for those executives reporting directly to him. During the year, the Compensation Committee generally meets at least four times and reviews, among other things, our compensation programs and recommended changes, our peer group, proxy and survey benchmarking data, internal pay disparity trends, wealth accumulation, total compensation profiles for our CEO and other executive officers, CEO accountabilities and the general compensation landscape.
 
See the Compensation Discussion and Analysis beginning on page 31 of this proxy statement for a further discussion of our procedures for determining and establishing executive compensation, including the Compensation Committee’s engagement of an independent executive compensation consultant, and the role of management in determining executive compensation.
 
Compensation Committee Interlocks and Insider Participation
 
During 2008, 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.


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Governance & Nominating Committee
 
The Governance & Nominating Committee met five times during 2008. The Governance & Nominating Committee currently consists of four non-employee directors, each of whom the Board has determined is “independent” as such term is defined in the NYSE listing standards and our Corporate Governance Guidelines. The Board has delegated to the Governance & Nominating Committee its oversight responsibilities relating to corporate governance and the establishment of criteria for Board selection (including an initial determination regarding director independence).
 
The Governance & Nominating Committee’s functions, which are discussed in detail in its charter, include, among other functions, responsibility to:
 
  •  Develop and recommend to the Board corporate governance principles and review and make recommendations regarding the Corporate Governance Guidelines.
 
  •  Identify and review the qualifications of candidates for Board membership, screen possible candidates for Board membership and communicate with members of the Board regarding Board meeting format and procedures.
 
  •  Determine desired qualifications, expertise and characteristics and, to the extent the Governance & Nominating Committee deems necessary, conduct searches for potential candidates for Board membership with such attributes.
 
  •  Ensure that we have an appropriate policy on potential conflicts of interest, including, but not limited to, the policies on (1) related person transactions (including any dealings with directors, officers or employees), and (2) such other transactions that could have the appearance of a potential conflict of interest.
 
  •  Monitor and report to the Board whether there is any current relationship between any director and El Paso that may adversely affect the independent judgment of the director.
 
  •  Oversee the process of annual performance evaluations for the Board, each committee and directors.
 
  •  Act as a nominating committee and consider any nominations properly submitted by the stockholders to the Corporate Secretary in accordance with our Corporate Governance Guidelines, our By-laws and the process set forth in this proxy statement.
 
  •  Review and make recommendations to the Board of Directors as to the chairpersons and members of each committee of the Board (other than the Governance & Nominating Committee).
 
The Governance & Nominating Committee Charter can be found on our website at www.elpaso.com.
 
Director Nomination Process
 
The Governance & Nominating Committee will review any nominations from stockholders, other Board members, third party search firms, executives and other such persons. At a minimum, we believe our directors, whether nominated by stockholders or by the Board, should possess the education, experience and skills necessary to assist and provide oversight to our management in the operation of our businesses, as set forth in our Corporate Governance Guidelines. Among other matters, the Board considers education; business, governmental and civic experience; leadership; diversity; communication, interpersonal and other required skills; independence; and other matters relevant to the Board’s objectives. We have a comprehensive process in place to identify and evaluate candidates to be nominated for director. The Governance & Nominating Committee identifies the needs of the Board by asking each director to identify particular skills that will strengthen the Board, and that are in conformity with the goals identified in our Corporate Governance Guidelines. A third party search firm is then retained to help identify, assess qualifications and screen specific candidates. The Governance & Nominating Committee reviews 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.


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Stockholders seeking to nominate persons for election as directors at the 2010 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 2010 Annual Meeting, the stockholder’s written notice must be received not less than 90 days nor more than 120 days prior to the first anniversary of the 2009 Annual Meeting. Under these criteria, stockholders must provide us with notice of nominations sought to be made at the 2010 Annual Meeting during the period from January 6, 2010 to February 5, 2010.
 
If the 2010 Annual Meeting is held more than 30 days before or 60 days after May 6, 2010, for a stockholder seeking to bring any matter before the 2010 Annual Meeting, the stockholder’s written notice must be received not less than 90 days nor more than 120 days before the date of the 2010 Annual Meeting or by the tenth day after we publicly announce the date of the 2010 Annual Meeting, if that would result in a later deadline.
 
Finance Committee
 
The Finance Committee met five times during 2008. 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 Committee’s functions, which are discussed in detail in its charter, include, among other functions, responsibility to:
 
  •  Review and recommend to the Board our long-range financial plan, including the amount and allocation of capital spending and financing thereof.
 
  •  Review and approve capital projects in excess of $25 million and up to $75 million.
 
  •  Recommend to the Board financial policies that maintain or improve our financial strength.
 
  •  Develop and recommend dividend policies and recommend to the Board specific dividend payments.
 
  •  Review terms and conditions of financing plans, including the issuance of securities, corporate borrowings, off-balance sheet structures and investments, and make recommendations to the Board regarding such financings.
 
  •  Review and make recommendations regarding our interest rate, foreign currency, commodity and other financial liquidity risk management policies, strategies and positions.
 
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 2008. 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 Board’s and our continuing commitment to improving the environment, ensuring the safety of our employees and ensuring that our businesses and facilities are operated and maintained in a safe and environmentally sound manner.
 
The Health, Safety & Environmental Committee’s functions, which are discussed in detail in its charter, include, among other functions, responsibility to:
 
  •  Review and provide oversight with regard to our policies, standards, accountabilities and programs relative to health, safety and environmental-related matters, including our pipeline integrity program and our greenhouse gas emissions inventory and reduction program.


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  •  Advise the Board and make recommendations for the Board’s consideration regarding health, safety and environmental-related issues.
 
  •  Review and provide oversight with respect to our safety and readiness to respond to crisis situations.
 
The Health, Safety & Environmental Committee Charter can be found on our website at www.elpaso.com.
 
AUDIT COMMITTEE REPORT
 
Each member of the Audit Committee is “independent,” as that term is defined under Section 10A of the Exchange Act, the SEC rules, the NYSE listing standards and our Corporate Governance Guidelines. Each member of the Audit Committee is also financially literate, as that qualification is interpreted by our Board of Directors in its business judgment. Further, each of Messrs. Goldman, Hix and Shapiro qualifies and is designated as an “audit committee financial expert,” serving on the Audit Committee as such term is defined in rules adopted by the SEC and interpreted by our Board. The Audit Committee currently consists of five members: Messrs. Braniff, Goldman, Hix, Shapiro and Whitmire. During 2008, 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 Paso’s financial statements;
 
  •  El Paso’s disclosure controls and procedures and internal control over financial reporting;
 
  •  the evaluation and retention of El Paso’s 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);
 
  •  the performance of El Paso’s internal audit and ethics and compliance functions;
 
  •  El Paso’s compliance with legal and regulatory requirements and its Code of Business Conduct; and
 
  •  El Paso’s 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 Paso’s 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 auditor’s internal quality control procedures and all relationships between the independent auditor and El Paso. We review with El Paso’s Controller and the independent auditor all critical accounting policies and practices, significant changes in El Paso’s 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 Paso’s internal audit function, the independent auditor and management to discuss the effectiveness of disclosure controls and procedures, and any changes in El Paso’s 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. We also discuss the effectiveness of internal control over financial reporting and management’s assessment of its effectiveness. We review the procedures for the receipt, retention and treatment of complaints received by El Paso regarding any accounting, internal controls or auditing matters. We review El Paso’s risk assessment and risk management guidelines and policies, including El Paso’s significant risk exposures and steps taken by management to monitor and control these exposures. All audit services and permitted


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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 Paso’s website at www.elpaso.com.
 
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 written disclosures and the letter from El Paso’s independent registered public accounting firm as required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with us concerning independence, and have discussed with our independent registered public accounting firm their independence, as well as their internal quality control procedures; and based on the review and discussions described in this paragraph, recommended to the Board of Directors that the audited financial statements be included in El Paso’s Annual Report on Form 10-K for the 2008 fiscal year for filing with the SEC.
 
El Paso’s management is responsible for El Paso’s financial reporting process, internal audit process, the effectiveness of disclosure controls and procedures and internal control over financial reporting, and the preparation of El Paso’s financial statements. El Paso’s independent registered public accounting firm is responsible for auditing those financial statements and the effectiveness of internal control over financial reporting. We monitor and review these processes but do not conduct auditing or accounting reviews or procedures. We meet with management and the independent registered public accounting firm to discuss the financial statements, and rely on El Paso’s management’s representation that the financial statements have been prepared in conformity with U.S. generally accepted accounting principles, and on the representations of El Paso’s independent registered public accounting firm included in their report on El Paso’s financial statements.
 
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)


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PROPOSAL NO. 1 — Election of Directors
 
The Board.  You will have the opportunity to elect our entire Board of Directors, consisting of 11 members, at the Annual Meeting. Messrs. Joyce, Kuehn and Wyatt are not standing for re-election and will be retiring from the Board as of the close of the Annual Meeting. All of our other incumbent directors are standing for re-election. All directors are elected annually and serve a one-year term or until his or her successor has been duly elected and shall qualify.
 
Nominations.  At the Annual Meeting, we will nominate the 11 persons named in this proxy statement as directors.
 
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES NAMED BELOW.
 
General Information about the Nominees for Election, as of March 11, 2009.  Each of the following nominees has agreed to be named in this proxy statement and to serve as a director if elected.
 
         
(JUAN CARLOS BRANIFF PHOTO)  
Juan Carlos Braniff
Age — 51

Member — Audit Committee
Member — Finance Committee
 
Director since 1997
 
Mr. Braniff has served as a director since 1997. Mr. Braniff has been Chairman of Capital I Ltd. Partners and a partner in Alpha Patrimonial S.A. de C.V. in Mexico City since August 2005. Mr. Braniff was a business consultant from January 2004 to August 2005. Mr. Braniff served Grupo Financíero BBVA Bancomer as Vice Chairman from October 1999 to January 2004, as Deputy Chief Executive Officer of Retail Banking from September 1994 to October 1999 and as Executive Vice President of Capital Investments, Mortgage Banking and Tourism from December 1991 to September 1994. Mr. Braniff is currently a member of the board of directors of Ixe Grupo Financiero S.A. de C.V.
 
         
(JAMES L. DUNLAP PHOTO)  
James L. Dunlap
Age — 71

Member — Compensation Committee
Member — Governance & Nominating Committee
 
Director since 2003
 
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. 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 trustee of the Woods Hole Oceanographic Institution.
 


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(DOUGLAS L. FOSHEE PHOTO)  
Douglas L. Foshee
Age — 49

President and Chief Executive Officer,
El Paso Corporation
 
Director since 2003
 
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 assuming his position at Halliburton, Mr. Foshee served as President, Chief Executive Officer and Chairman of the Board of Nuevo Energy Company and Chief Executive Officer and Chief Operating Officer of Torch Energy Advisors, Inc. Mr. Foshee presently serves as a director of Cameron International Corporation and is a trustee of AIG Credit Facility Trust. Mr. Foshee serves as Chairman of the Federal Reserve Bank of Dallas, Houston Branch. Mr. Foshee also serves on the Board of Trustees of Rice University and serves as a member of the Council of Overseers for the Jesse H. Jones Graduate School of Management. He is a member of the Greater Houston Partnership Board and Executive Committee and other civic and community organizations. Mr. Foshee also serves on the board of directors of El Paso Pipeline GP Company, L.L.C.
 
         
(DOUGLAS L. FOSHEE PHOTO)  
Robert W. Goldman
Age — 66

Chairman — Finance Committee
Member — Audit Committee
 
Director since 2003
 
Mr. Goldman has served as a director since 2003. Mr. Goldman’s primary occupation has been as a financial consultant since October 2002. Prior to that, Mr. Goldman served as Senior Vice President, Finance and Chief Financial Officer of Conoco, Inc. from 1998 to 2002 and Vice President, Finance from 1991 to 1998. For more than five years prior to that date, Mr. Goldman held various executive positions with Conoco, Inc. and E.I. Du Pont de Nemours & Co., Inc. From 2002 until July, 2008, Mr. Goldman served as the elected Vice President, Finance of the World Petroleum Council. He is a member of the Financial Executives Institute and the Outside Advisory Council of Global Infrastructure Partners. Mr. Goldman serves on the board of 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.
 
         
(ANTHONY W. HALL)  
Anthony W. Hall, Jr.
Age — 64

Chairman — Governance & Nominating Committee
Member — Health, Safety & Environmental Committee
 
Director since 2001
 
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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(DOUGLAS L. FOSHEE PHOTO)  
Thomas R. Hix
Age — 61

Chairman — Audit Committee
Member — Finance Committee
 
Director since 2004
 
Mr. Hix has served as a director since 2004. Mr. Hix has been a business consultant since January 2003. He served as Senior Vice President of Finance and Chief Financial Officer of Cooper Cameron Corporation from January 1995 to January 2003. From September 1993 to April 1995, Mr. Hix served as Senior Vice President of Finance, Treasurer and Chief Financial Officer of The Western Company of North America. Mr. Hix is a member of the board of directors of Health Care Service Corporation.
 
         
(DOUGLAS L. FOSHEE PHOTO)  
Ferrell P. McClean
Age — 62

Member — Compensation Committee
Member — Finance Committee
 
Director since 2006
 
Ms. McClean has served as a director since 2006. Ms. McClean has been a business consultant since 2002. Ms. McClean served as Managing Director and Senior Advisor of J.P. Morgan Chase & Co.’s energy/power investment banking group from 2000 to 2002. From 1991 until 2000, Ms. McClean served as Managing Director and headed the investment banking and global energy group at J.P.Morgan & Co. Prior to 1991, Ms. McClean held various positions with J.P. Morgan & Co. Ms. McClean served as a member of the board of directors of Unocal Corporation and is currently on the board of directors of GrafTech International Ltd. (formerly UCAR International, Inc.).
 
         
(DOUGLAS L. FOSHEE PHOTO)  
Steven J. Shapiro
Age — 57

Chairman — Compensation Committee
Member — Audit Committee
 
Director since 2006
 
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 Institute’s General Committee on Finance and is a trustee of the Houston Museum of Natural Science. Mr. Shapiro is a member of the board of directors of Barrick Gold Corporation.
 

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(DOUGLAS L. FOSHEE PHOTO)  
J. Michael Talbert
Age — 62

Member — Compensation Committee
Member — Health, Safety & Environmental Committee
 
Director since 2003
 
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 Akron’s College of Engineering Advancement Council. Mr. Talbert is a member of the board of directors of Transocean Inc.
 
         
(DOUGLAS L. FOSHEE PHOTO)  
Robert F. Vagt
Age — 62

Member — Finance Committee
Member — Governance & Nominating Committee
 
Director since 2005
 
Mr. Vagt has served as a director since 2005. Mr. Vagt has served as President of The Heinz Endowments since January 2008. Prior to that time, he served as President of Davidson College from July 1997 to August 2007. Mr. Vagt served as President and Chief Operating Officer of Seagull Energy Corporation from 1996 to 1997. From 1992 to 1996, he served as President, Chairman and Chief Executive Officer of Global Natural Resources. Mr. Vagt served as President and Chief Operating Officer of Adobe Resources Corporation from 1989 to 1992. Prior to 1989, he served in various positions with Adobe Resources Corporation and its predecessor entities.
 
         
(DOUGLAS L. FOSHEE PHOTO)  
John L. Whitmire
Age — 68

Chairman — Health, Safety & Environmental Committee
Member — Audit Committee
 
Director since 2003
 
Mr. Whitmire has served as a director since 2003. Mr. Whitmire has been Chairman of CONSOL Energy, Inc. since 1999. He served as Chairman and Chief Executive Officer of Union Texas Petroleum Holdings, Inc. from 1996 to 1998, and spent over 30 years serving Phillips Petroleum Company in various positions including Executive Vice President of Worldwide Exploration and Production from 1992 to 1996 and Vice President of North American Exploration and Production from 1988 to 1992. Mr. Whitmire 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.

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SECURITY OWNERSHIP OF A CERTAIN BENEFICIAL OWNER AND MANAGEMENT
 
The following table sets forth information as of February 27, 2009 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.
 
                                     
          Beneficial Ownership
    Stock
          Percent
Title of Class
   
Name of Beneficial Owner
  (Excluding Options) (1)     Options (2)     Total     of Class (3)
 
  Common Stock     FMR LLC(4)     64,396,102       0       64,396,102     9.2%
        82 Devonshire Street
Boston, MA 02109
                           
  Common Stock     Franklin Resources, Inc.(5)     51,707,341       0       51,707,341     7.4%
        One Franklin Parkway
San Mateo, CA 94403-1906
                           
  Common Stock     J. C. Braniff     107,583 (6)     13,000       120,583     *
  Common Stock     J. L. Dunlap     74,950       8,000       82,950     *
  Common Stock     R. W. Goldman     86,879       8,000       94,879     *
  Common Stock     A. W. Hall, Jr.     81,777       12,000       93,777     *
  Common Stock     T. R. Hix     73,081       0       73,081     *
  Common Stock     W. H. Joyce     69,233       0       69,233     *
  Common Stock     R. L. Kuehn, Jr.     295,336 (7)     11,000       306,336     *
  Common Stock     F. P. McClean     47,997 (8)     0       47,997     *
  Common Stock     J. M. Talbert     59,487       8,000       67,487     *
  Common Stock     S. J. Shapiro     40,753       0       40,753     *
  Common Stock     R. F. Vagt     33,342       0       33,342     *
  Common Stock     J. L. Whitmire     106,030       8,000       114,030     *
  Common Stock     J. B. Wyatt     107,489       14,000       121,489     *
  Common Stock     D. L. Foshee     896,195       2,403,502       3,299,697     *
  Common Stock     D. M. Leland     248,732       460,791       709,523     *
  Common Stock     B. J. Smolik     185,467       106,848       292,315     *
  Common Stock     R. W. Baker     278,950       580,632       859,582     *
  Common Stock     J. C. Yardley     205,674       404,245       609,919     *
  Common Stock     Directors and executive officers as a group (20 persons total), including those individuals listed above     3,196,837       4,574,738       7,771,575     1.1%
 
 
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 his spouse voting and investment power with respect to 5,000 shares of common stock held in a joint brokerage account. This column also includes shares of common stock held in the El Paso Corporation Benefits Protection Trust (as of February 27, 2009) 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 27, 2009, through the exercise of stock options. As of February 27, 2009, 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


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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 164,375 stock options, respectively. Stock options granted under our plans are not subject to execution, attachment or similar process and cannot be transferred, assigned, pledged or hypothecated in any manner other than by will or by the applicable laws of descent and distribution.
 
(3) Based on 698,637,338 shares outstanding as of February 27, 2009.
 
(4) According to a Schedule 13G/A filed on February 17, 2009, as of December 31, 2008, FMR LLC was deemed to beneficially own 64,396,102 shares of common stock.
 
(5) According to a Schedule 13G/A filed on February 6, 2009, as of December 31, 2008, Franklin Resources, Inc. was deemed to beneficially own 51,707,341 shares of common stock.
 
(6) Mr. Braniff’s beneficial ownership excludes 3,500 shares owned by his wife. Mr. Braniff disclaims any beneficial ownership in those shares.
 
(7) Mr. Kuehn’s beneficial ownership excludes 28,720 shares owned by his wife or children. Mr. Kuehn disclaims any beneficial ownership in those shares.
 
(8) Ms. McClean’s beneficial ownership includes 1,500 shares held by her husband’s IRA and 7,475 shares held in a revocable trust.
 
The following table sets forth, as of February 27, 2009, the number of common units of our master limited partnership, El Paso Pipeline Partners, L.P., owned by each of our executive officers and directors and all of our executive officers and directors as a group.
 
                     
            Percentage of
        Common Units
  Common Units
Title of Class
 
Name of Beneficial Owner
  Beneficially Owned   Beneficially Owned (1)
 
Common Units
  J. C. Braniff     0       *  
Common Units
  J. L. Dunlap     7,500       *  
Common Units
  R. W. Goldman     5,000       *  
Common Units
  A. W. Hall, Jr.     0       *  
Common Units
  T. R. Hix     10,000       *  
Common Units
  W. H. Joyce     0       *  
Common Units
  R. L. Kuehn, Jr.     65,239       *  
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 (20 persons total), including those individuals listed above     209,439       *  
 
 
Less than one percent
 
(1) Based on 84,965,923 common units outstanding as of February 27, 2009.


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INDIVIDUAL EXECUTIVE PROFILES
 
The following are individual executive profiles that summarize the compensation earned or paid in 2008 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 2008 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 48 of this proxy statement. Please consult those tables and the accompanying footnotes for an explanation of how the compensation information is calculated.


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Douglas L. Foshee: Individual Executive Profile
 

  (DOUGLAS L. FOSHEE PHOTO)
President, Chief Executive Officer,
and Director of El Paso Corporation
 
Age: 49
Tenure with El Paso: 6 years
Tenure in Industry: 27 years
 
MBA, Jesse H. Jones Graduate School of Management, Rice University
Graduate of Southwestern Graduate School of Banking, Southern Methodist University
BBA, Southwest Texas State University
 
Mr. Foshee has been President, Chief Executive Officer and a director of El Paso since September 2003. Prior to joining El Paso, Mr. Foshee served as Executive Vice President and Chief Operating Officer of Halliburton Company having joined that company in 2001 as Executive Vice President and Chief Financial Officer. Prior to assuming his position at Halliburton, Mr. Foshee served as President, Chief Executive Officer and Chairman of the Board of Nuevo Energy Company and Chief Executive Officer and Chief Operating Officer of Torch Energy Advisors, Inc. Mr. Foshee presently serves as a director of Cameron International Corporation and is a trustee of AIG Credit Facility Trust. Mr. Foshee serves as Chairman of the Federal Reserve Bank of Dallas, Houston Branch. Mr. Foshee also serves on the Board of Trustees of Rice University and serves as a member of the Council of Overseers for the Jesse H. Jones Graduate School of Management. He is a member of the Greater Houston Partnership Board and Executive Committee and other civic and community organizations. Mr. Foshee also serves on the board of directors of EI Paso Pipeline GP Company, L.L.C.
 
2008 Compensation1
 
         
   Salary
       
Base Salary
  $   1,037,502  
Performance-Based Cash Bonus
  $ 593,220  
Perquisites and Personal Benefits
  $ 3,214  
         
   Annual Long-Term Incentive Award
       
         
(Grant Date Fair Value)
       
Restricted Stock
  $ 2,323,916  
Stock Options
  $ 2,164,560  
Restricted Stock Dividends
  $ 59,659  
         
   Retirement Benefits
       
         
Pension Plan
       
Annual increase in accumulated pension benefit
  $ 133,632  
         
Retirement Savings Plan (RSP)
       
Company matching contribution to RSP
  $ 10,350  
Supplemental RSP benefit
  $ 104,648  
Annual earnings on supplemental RSP benefit
  $ 29,646  
 
 
2008 Total Compensation
 
GRAPH
 
 
Stock Ownership Requirements
Mr. Foshee’s ownership in our common stock exceeds the required ownership thresholds of five times base salary, as discussed elsewhere in this proxy statement.
 
Payment Upon Termination
(As of December 31, 2008)
 
         
Voluntary Termination
  $ 2,021,102  
Involuntary Termination without Cause
  $ 1,963,344  2
Retirement
  $ 0  2
Death
  $ 5,089,727  2
Disability
  $ 1,210,410  2
Termination with Cause
  $ 0  2
Change in Control of El Paso
  $ 10,690,196  2
 
1   Please note total 2008 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 $7.83, the closing price of our common stock on December 31, 2008.
 


 


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D. Mark Leland: Individual Executive Profile
 

  (DOUGLAS L. FOSHEE PHOTO)
Executive Vice President and
Chief Financial Officer
 
Age: 47
Tenure with El Paso: 23 years
Tenure in Industry: 23 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 (formerly known as EI Paso Production Holding Company) from January 2004 to August 2005, and as Chief Financial Officer and a director from April 2004 to August 2005. He served in various capacities for GulfTerra Energy Partners, L.P. and its general partner, including as Senior Vice President and Chief Operating Officer 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 beginning in 1986. Mr. Leland also serves on the board of directors of El Paso Pipeline GP Company, L.L.C.
 
2008 Compensation1
 
         
   Salary
       
Base Salary
  $ 519,756  
Performance-Based Cash Bonus
  $ 162,000  
Perquisites and Personal Benefits
  $ 1,150  
         
   Annual Long-Term Incentive Award
       
         
(Grant Date Fair Value)
       
Restricted Stock
  $    728,505  
Stock Options
  $ 622,000  
Restricted Stock Dividends
  $ 19,510  
         
   Retirement Benefits
       
         
Pension Plan
       
Annual increase in accumulated pension benefit
  $ 11,269  
         
Retirement Savings Plan (RSP)
       
Company matching contribution to RSP
  $ 10,350  
Supplemental RSP benefit
  $ 32,405  
Annual earnings on supplemental RSP benefit
  $ 8,753  
 
 
2008 Total Compensation
 
GRAPH
 
 
Stock Ownership Requirements
 
Mr. Leland’s ownership in our common stock exceeds the
required ownership thresholds of two times base salary, as
discussed elsewhere in this proxy statement.
 
 
Payment Upon Termination
(As of December 31, 2008)
 
         
Voluntary Termination
  $ 950,368  
Involuntary Termination without Cause
  $ 830,597  2
Retirement
  $ 0  2
Death
  $ 2,143,996  2
Disability
  $ 567,785  2
Termination with Cause
  $ 0  2
Change in Control of El Paso
  $   2,843,325  2
 
1   Please note total 2008 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 $7.83, the closing price of our common stock on December 31, 2008.


 


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Brent J. Smolik: Individual Executive Profile
 

  (DOUGLAS L. FOSHEE PHOTO)
Executive Vice President and
President of El Paso Exploration
& Production Company
 
Age: 47
Tenure with El Paso: 3 years
Tenure in Industry: 25 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 worked in various engineering and asset management capacities for Burlington Resources Inc., including the Chief Engineering role from 2000 to 2004. He was a member of the Burlington Executive Committee from 2001 to 2006. Mr. Smolik also serves on the boards of the American Exploration and Production Council and the Independent Petroleum Association of America.
 
2008 Compensation1
 
         
   Salary
       
Base Salary
  $ 562,392  
Performance-Based Cash Bonus
  $ 172,500  
Perquisites and Personal Benefits
  $      1,642  
         
   Annual Long-Term Incentive Award
       
         
(Grant Date Fair Value)
       
Restricted Stock
  $ 667,799  
Stock Options
  $ 622,000  
Restricted Stock Dividends
  $ 23,399  
         
   Retirement Benefits
       
         
Pension Plan
       
Annual increase in accumulated pension benefit
  $ 45,747  
         
Retirement Savings Plan (RSP)
       
         
Company matching contribution to RSP
  $ 10,350  
Supplemental RSP benefit
  $ 14,958  
Annual earnings on supplemental RSP benefit
  $ 1,179  
 
 
2008 Total Compensation
 
GRAPH
 
 
Stock Ownership Requirements
 
Mr. Smolik’s ownership in our common stock exceeds the required ownership thresholds of two times base salary, as discussed elsewhere in this proxy statement.
 
 
Payment Upon Termination
(As of December 31, 2008)
 
         
Voluntary Termination
  $ 91,720  
Involuntary Termination without Cause
  $ 750,835  2
Retirement
  $ 0  2
Death
  $   2,108,907  2
Disability
  $ 481,672  2
Termination with Cause
  $ 0  2
Change in Control of El Paso
  $ 3,349,944  2
 
Please note total 2008 Compensation does not tie directly to the Summary Compensation Table.
 
Reflects incremental value of enhanced benefits above amounts Mr. Smolik is entitled to as a result of voluntary termination. Value of equity reflects $7.83, the closing price of our common stock on December 31, 2008.
 


 


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James C. Yardley: Individual Executive Profile
 

  (DOUGLAS L. FOSHEE PHOTO)
Executive Vice President,
Pipeline Group
 
Age: 57
Tenure with El Paso: 31 years
Tenure in Industry: 31 years
 
 
MBA, Harvard Business School
BA, Economics, Duke University
 
 
Mr. Yardley has been Executive Vice President of El Paso with responsibility for the regulated pipeline business unit since August 2006. He has served as President of Tennessee Gas Pipeline since February 2007 and Chairman of the Board since August 2006. Mr. Yardley has been Chairman of EI Paso Natural Gas Company since August 2006 and has served as President of Southern Natural Gas Company since May 1998. Mr. Yardley has been a member of the Management Committees of both Colorado Interstate Gas Company and Southern Natural Gas Company since their conversion to general partnerships in November 2007. Mr. Yardley 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 Gas Company and Sonat Inc. beginning in 1978. Mr. Yardley is presently a member of the board of directors of Scorpion Offshore Ltd. and Chairman of the Board of Interstate Natural Gas Association of America. Mr. Yardley also serves as Director, President and Chief Executive Officer of EI Paso Pipeline GP Company, L.L.C.
 
2008 Compensation1
 
         
   Salary
       
Base Salary
  $ 511,263  
Performance-Based Cash Bonus
  $ 195,000  
Perquisites and Personal Benefits
  $ 5,939  
         
   Annual Long-Term Incentive Award
       
         
(Grant Date Fair Value)
       
Restricted Stock
  $     607,076  
Stock Options
  $ 622,000  
Restricted Stock Dividends
  $ 15,833  
         
   Retirement Benefits
       
         
Pension Plan
       
Annual increase in accumulated pension benefit
  $ 56,258  
         
Retirement Savings Plan (RSP)
       
Company matching contribution to RSP
  $ 10,350  
Supplemental RSP benefit
  $ 32,106  
Annual earnings on supplemental RSP benefit
  $ 7,605  
 
 
2008 Total Compensation
 
GRAPH
 
 
Stock Ownership Requirements
 
Mr. Yardley’s ownership in our common stock exceeds the required ownership thresholds of two times base salary, as discussed elsewhere in this proxy statement.
 
 
Payment Upon Termination
(As of December 31, 2008)
 
         
Voluntary Termination
  $   3,709,409  
Involuntary Termination without Cause
  $ 515,016  2
Retirement
  $ 0  2,3
Death
  $ 1,757,504  2
Disability
  $ 257,508  2
Termination with Cause
  $ 0  2
Change in Control of El Paso
  $ 2,672,864  2
 
Please note total 2008 Compensation does not tie directly to the Summary Compensation Table.
 
Reflects incremental value of enhanced benefits above amounts Mr. Yardley is entitled to as a result of voluntary termination. Value of equity reflects $7.83, the closing price of our common stock on December 31, 2008.
 
Mr. Yardley is eligible for early retirement. The value of his retirement benefits are reflected under Voluntary Termination.
 


 


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Robert W. Baker: Individual Executive Profile
 

  (DOUGLAS L. FOSHEE PHOTO)
Executive Vice President and
General Counsel
 
Age: 52
Tenure with El Paso: 26 years
Tenure in Industry: 28 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 beginning in 1983. Mr. Baker also serves as Executive Vice President and General Counsel of El Paso Pipeline GP Company, L.L.C.
 
2008 Compensation1
 
         
   Salary
       
Base Salary
  $ 456,696  
Performance-Based Cash Bonus
  $ 120,000  
Perquisites and Personal Benefits
  $ 1,150  
         
   Annual Long-Term Incentive Award
       
         
(Grant Date Fair Value)
       
Restricted Stock
  $   607,076  
Stock Options
  $ 622,000  
Restricted Stock Dividends
  $ 17,466  
         
   Retirement Benefits
       
         
Pension Plan
       
Annual increase in accumulated pension benefit
  $ 64,354  
         
Retirement Savings Plan (RSP)
       
Company matching contribution to RSP
  $ 10,350  
Supplemental RSP benefit
  $ 24,382  
Annual earnings on supplemental RSP benefit
  $ 8,605  
 
 
2008 Total Compensation
 
GRAPH
 
 
Stock Ownership Requirements
 
Mr. Baker’s ownership in our common stock exceeds the required ownership thresholds of two times base salary, as discussed elsewhere in this proxy statement.
 
 
Payment Upon Termination
(As of December 31, 2008)
 
         
Voluntary Termination
  $ 1,278,475  
Involuntary Termination without Cause
  $ 729,439  2
Retirement
  $ 0  2
Death
  $ 1,883,867  2
Disability
  $ 498,193  2
Termination with Cause
  $ 0  2
Change in Control of El Paso
  $   2,500,930  2
 
1   Please note total 2008 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 $7.83, the closing price of our common stock on December 31, 2008.


 


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EXECUTIVE COMPENSATION
 
Compensation Discussion and Analysis
 
The compensation discussion and analysis set forth below provides an explanation of our compensation programs, including the objectives of such programs and the rationale for each element of compensation, for our named executive officers. They include our Chief Executive Officer, Mr. Douglas L. Foshee, our Executive Vice President and Chief Financial Officer, Mr. D. Mark Leland, and our other three most highly compensated executive officers, Mr. Brent J. Smolik, Mr. James C. Yardley, and Mr. Robert W. Baker. This section also describes the actions and decisions of the Compensation Committee of our Board of Directors during 2008 through February 2009, which is the committee that oversees our compensation programs and sets executive officer compensation. The discussion is divided into the following six parts:
 
I.        Compensation Objectives
 
II.       Role of Compensation Committee, Independent Consultant and Management
 
III.      Elements of Total Compensation
 
IV.      Factors Considered When Determining Total Compensation
 
V.       2008 Compensation Decisions
 
VI.      Other Compensation Policies
 
I.   Compensation Objectives
 
At El Paso, stewardship and accountability are two of our core values. As active stewards, we strive to serve our stockholders by consistently building long-term value. In addition, accountability measures are a 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.
 
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 officer’s pay to specific, measurable performance goals.
 
II.   Role of Compensation Committee, Independent Consultant and Management
 
Compensation Committee
 
The Compensation Committee of the Board of Directors has primary responsibility for determining and approving, on an annual basis, the total compensation level of our CEO and other senior officers who are subject to Section 16(a) of the Exchange Act, 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 LLP (“Deloitte”) as its independent compensation consultant. Deloitte advises the Compensation Committee on an ongoing basis with regard to the general competitive landscape and trends in compensation and executive and director compensation matters, including (i) competitive benchmarking, (ii) incentive plan design, (iii) performance metrics testing, (iv) peer group


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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 attends meetings of the Compensation Committee and participates in the committee’s executive sessions, as well. The compensation consultant is directly accountable to the Compensation Committee and the committee reviews all fees paid to the consultant for such compensation advice. In addition, the Compensation Committee reviews, on an annual basis, the performance of the compensation consultant and provides the consultant with direct feedback.
 
Certain Deloitte affiliates are also engaged by El Paso to provide the following services: tax and tax-related services, financial advisory services and system integration and process optimization consulting. The Compensation Committee reviewed the payments made to the Deloitte affiliates during 2008, as well as the services the Deloitte affiliates performed for El Paso. In addition, the Compensation Committee discussed the payments and services with its independent compensation consultant and confirmed that the consultant’s compensation is not tied to the level of other services provided by Deloitte to El Paso. Based on its review, the Compensation Committee believes that each of these relationships is separate and independent and does not impair Deloitte’s ability to provide independent compensation advice to the committee.
 
Role of Management and CEO in Determining Executive Compensation
 
While the Compensation Committee has the responsibility to approve and monitor all compensation for our named executive officers, we, as management, play an important role in determining executive compensation. At the Compensation Committee’s request, we recommend appropriate company-wide and business unit financial and non-financial performance goals. We work with the compensation consultant to analyze competitive market data and to recommend base salary levels, annual incentive awards and long-term incentive awards for our executive officers. We also work with the Compensation Committee to establish the agenda and prepare meeting information for each Compensation Committee meeting. Our CEO likewise assists the Compensation Committee by providing his evaluation of the performance of the executive officers who report directly to him, and recommends compensation levels for such officers. The Compensation Committee also has a process for soliciting from the CEO a candid and critical self-assessment of his own performance, which is used to assist the Compensation Committee and the Board of Directors in their evaluation of the CEO’s performance.
 
III. Elements of Total Compensation
 
Total Compensation
 
Our named executive officers’ total annual compensation includes three principal elements:
 
  •  base salary,
 
  •  performance-based annual cash incentive, and
 
  •  long-term equity-based incentive awards.
 
We also provide our executives with retirement, severance, and health and welfare benefits.
 
We seek to provide each executive officer with a level of cash compensation commensurate with the executive’s professional status in the form of base salary. We also focus 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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The table below summarizes the elements of our total compensation program.
 
             
Compensation Element
   
Objective
   
Key Features
Base Salary
    To provide a level of assured cash compensation sufficient, together with performance-based incentives, to motivate executives to perform at a consistently high level     Reviewed annually with adjustments made based on individual performance, pay relative to market, and internal equity considerations
 
Performance-Based Annual Cash Bonuses
    To motivate and reward executive officers’ contributions to achievement of pre-established financial and operational performance goals, as well as individual performance    
Broad-based incentive bonus program covering all employees

Compensation Committee establishes annual cash incentive bonus opportunity for each named executive officer at beginning of year

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

To motivate and reward achievement of pre-established corporate financial goals and relative total shareholder return (“TSR”), as well as individual performance
    Broad-based long-term equity program covering all manager level employees and above

Target value is allocated approximately 50% in restricted stock and 50% in stock options

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

Stock options:

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

•   value of stock options is recognized only if stock price increases, thereby creating value for all stockholders

Restricted stock:

•   performance-based with target levels adjusted for corporate, TSR and individual performance

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

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


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

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

Retirement Savings Plan

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

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

Pension Plan

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

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

Supplemental Benefits Plan

•   plan covering key management employees, including named executive officers

•   non-contributory plan which provides benefits in excess of amounts payable under the Retirement Savings Plan and Pension Plan due to tax code limitations
             
Health & Welfare Benefits
    To provide reasonable health and welfare benefits to executives and their dependents and promote healthy living    
Broad-based health and welfare benefits available to all employees, including medical, dental, vision, disability and life insurance coverage as well as dependent day-care and healthcare flexible spending accounts

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

Senior Executive Survivor Benefits Plan:

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

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

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

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

Severance Pay Plan:

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

•   maximum payout is 1X annual salary

Key Executive Severance Protection Plan:

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

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

•   maximum payout is 3X annual salary + target bonus for CEO; 2X annual salary + target bonus for other named executive officers
             
Employee Stock Purchase Plan
    To encourage stock ownership and align interests of executives with stockholders     Broad-based plan under which employees, including executive officers, can contribute up to $23,750 each year through payroll deduction to purchase El Paso stock at a 5% discount
             
Perquisites
    Limited perquisites provided to assist executives in carrying out duties and increase productivity     Include limited personal use of leased aircraft, limited accompaniment of family members with executives traveling for business purposes, and subsidized annual physical examinations
             
 
Employment Agreements
 
We do not have employment agreements with our named executive officers.
 
IV.   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 benchmarking market data compiled by its independent compensation consultant and our human resources department. This comparative information provides a basis for the evaluation of the compensation paid to our named executive officers. The Compensation Committee then

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reviews the benchmarking data together with each officer’s job responsibilities and individual performance, internal pay equity, and performance against pre-established targets, each as described below, in making compensation decisions. The Compensation Committee also reviews an analysis of wealth accumulation and potential payments upon various termination scenarios as part of its competitive compensation decisions, also 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:
 
  •  the level of achievement of our pre-established performance goals,
 
  •  our performance against our peer group,
 
  •  individual performance,
 
  •  scope of job responsibilities,
 
  •  internal equity considerations, and
 
  •  the executive’s industry experience and tenure.
 
For example, the 2007 total annual compensation (base salary, annual cash incentive, and long-term incentive opportunity) for our named executive officers fell at the 51st percentile when compared to peer group proxy data. Our peer group is described below. In addition, the 2008 total annual compensation targets for our named executive officers fell at the 49th percentile when compared to peer group proxy data (based on the most recently available information disclosed in the peer companies’ 2008 proxy statements).
 
El Paso’s Peer Group.  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 for 2008 in October 2007. The Compensation Committee reviewed the peer group once again in October 2008, and after such review and discussions with its independent compensation consultant, determined that no changes were warranted. The peer group consists of 22 companies, and is made up of a proportional mix of pipeline/utility companies, exploration and production companies, and diversified energy companies. Our peer group for 2008 consisted of the following companies:
 
         
Anadarko Petroleum Corp. 
  Equitable Resources, Inc.   Sempra Energy
Apache Corporation
  National Fuel Gas Co.   Southern Union Co.
CenterPoint Energy, Inc. 
  Newfield Exploration Co.   Spectra Energy Corp.
Chesapeake Energy Corp. 
  NiSource, Inc.   TransCanada Corp.
Devon Energy Corp. 
  Noble Energy, Inc.   Williams Companies
Dominion Resources, Inc. 
  ONEOK, Inc.   XTO Energy Inc.
Enbridge Inc. 
  Pioneer Natural Resources    
EOG Resources, Inc. 
  Questar Corporation    
 
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 executive’s level of experience, the executive’s tenure and responsibilities within our company, the executive’s 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 executive’s 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 2008, the Compensation Committee reviewed a comparison of CEO and other named executive officer pay (base salary,


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target and actual bonus, and target and actual total compensation) to non-management employee pay for the period 2004 to 2007. The Compensation Committee also reviewed trends in pay equity from 2006 to 2007. The results showed a flat trend in base salary, a slightly decreasing trend in target bonus and actual bonus, a slightly decreasing trend in target total compensation and a slightly increasing trend in actual total compensation in comparison to non-management employees. Overall, it was noted that the reason actual total compensation between all of our named executive officers and non-management employees increased from 2006 to 2007 related to the difference in equity grants made from 2006 to 2007, with 2007 grants made at a higher level reflecting our higher TSR performance relative to our peer group in 2007. 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 executive’s total compensation, including base salary, annual incentive bonus, and long-term equity grants. The Compensation Committee does not assign a weighting to tally sheets in the overall decision making process, but rather uses the tally sheets as a tool to view the overall impact of each element of compensation.
 
The Compensation 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. Based upon certain assumptions related to the timing of these events, the tally sheets provide the total remuneration that would be payable to the named executive officers, including all aspects of each named executive officer’s compensation and benefits under our plans, and are used to ensure that there are no surprises or questions about compensation items in the event of the various termination events.
 
In its most recent review of tally sheets, which included year-end 2008 compensation information, 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 59 of this proxy statement for the total amount of compensation and benefits each named executive officer could receive as a result of the various termination events.
 
Wealth Accumulation.  The Compensation Committee also reviews annually all of the elements of total compensation paid to each named executive officer during the prior 5-year period, including base salaries, annual cash incentive bonuses, the value of long-term incentive awards and any special payments made to an individual executive. The Compensation Committee also reviews the projected value of each named executive officer’s accumulated equity grants over the subsequent five-year period based upon various stock appreciation scenarios. This is done to more effectively analyze not only the amount of compensation each named executive officer has accumulated to date, but also to better understand how current equity grants may affect the amount of wealth the named executive officers accumulate in the future. In addition, due to the volatility in the stock market during 2008, the Compensation Committee reviewed an analysis of the change in total equity values for outstanding equity awards held by our named executive officers from 12/31/07 to 12/31/08. The analysis reflected a cumulative loss of between 54% to 79% of the equity value of the awards, which is indicative of the linkage that exists between the interests of our named executive officers and our stockholders. While the Compensation Committee reviews a wealth accumulation analysis each year, to date, the amount of the named executive officers’ past compensation has generally not been a significant factor in the Compensation Committee’s determinations.
 
V.   2008 Compensation Decisions
 
2008 Annual Base Salary Adjustments and 2008 Target Bonus Opportunities
 
At the beginning of 2008, 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 6, 2008, the


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Compensation Committee made modest adjustments to Messrs. Foshee’s, Smolik’s and Yardley’s base salaries based on 2008 market conditions and comparative benchmarking data. The Compensation Committee decided not to adjust the base salaries of Messrs. Leland and Baker because the committee felt their existing salaries were reasonably positioned relative to peer group and survey benchmarking data. No adjustments were made to the named executive officers’ 2008 target bonus opportunities, which the Compensation Committee believes continue to be appropriate and commensurate with the responsibilities of the respective executives. These target bonus opportunities were derived in part from peer group and competitive survey benchmarking data and in part by the Compensation Committee’s judgment on the internal equity of the positions, scope of job responsibilities and the executives’ industry experience and tenure. The following tables set forth the base salaries and annual target bonus opportunities for the named executive officers. The base salary adjustments for 2008 were effective April 1, 2008.
 
Annual Base Salaries
 
                         
    2007 Base Salary
  2008 Base Salary
  2007-2008
    effective 4/1/07
  effective 4/1/08
  Percentage
Name
  ($)   ($)   Increase
 
Douglas L. Foshee
  $ 1,000,008     $ 1,050,000       5 %
D. Mark Leland
  $ 519,756     $ 519,756       0 %
Brent J. Smolik
  $ 550,008     $ 566,520       3 %
James C. Yardley
  $ 500,004     $ 515,016       3 %
Robert W. Baker
  $ 456,696     $ 456,696       0 %
 
Target Bonus Opportunities
 
                         
    2007 Target
  2008 Target
   
    Bonus
  Bonus
  2007-2008
    Opportunity
  Opportunity
  Percentage
Name
  (% of salary)   (% of salary)   Increase
 
Douglas L. Foshee
    120 %     120 %     0 %
D. Mark Leland
    60 %     60 %     0 %
Brent J. Smolik
    90 %     90 %     0 %
James C. Yardley
    75 %     75 %     0 %
Robert W. Baker
    60 %     60 %     0 %
 
Annual Cash Incentive Awards for 2008 Performance
 
In February 2009, the Compensation Committee approved the amount of the named executive officers’ annual cash incentive awards for 2008 performance. The following discussion sets forth the process the Compensation Committee followed in determining the amount of each named executive officer’s annual cash incentive award for 2008 performance. The annual cash incentive bonuses for 2008 performance are scheduled to be paid in March, 2009.
 
Performance Goals.  At the beginning of 2008, 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 41). The Compensation Committee also approved corporate and business unit financial and non-financial performance goals.


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Our 2008 corporate financial goals, which are the primary goals used in determining the annual incentive bonuses for our named executive officers, were as follows:
 
 
                                 
    2008 Goals
Corporate Financial Goals
  Threshold   Target   Maximum   Weighting
 
Earnings Per Share
  $ 1.00     $ 1.03     $ 1.10       35 %
EBITDA
  $ 3,330 MM     $ 3,400 MM     $ 3,550 MM       35 %
Cash Flow from Operations
  $ 2,065 MM     $ 2,120 MM     $ 2,280 MM       15 %
Debt (net of cash)
  $ 13,355 MM     $ 13,200 MM     $ 12,940 MM       15 %
 
 
In addition, the Compensation Committee approved additional performance goals for our corporate shared services group and our pipeline and exploration and production business units. For our corporate shared services group, the 2008 financial goals included the corporate goals listed above, plus additional goals relating to corporate and legacy costs. For our pipeline business unit, the 2008 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 2008 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 financial goals were set in alignment with our strategic plan and objectives for the year and in each case were more aggressive than the goals established for 2007. For example, the threshold 2008 EPS goal is $.23 higher than in 2007, and the threshold 2008 EBITDA goal is $404 million higher than in 2007. 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 2008. The threshold levels represent reasonably achievable goals and acceptable growth from 2007 targets, whereas the maximum levels would require exceptional performance and would result in top or near top quartile performance versus our peer group.
 
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 2008 non-financial goals also included a goal relating to the successful in-line inspection of our pipelines as part of our pipeline integrity program. While the Compensation Committee reviews these non-financial goals, they do not materially impact the incentive awards payable to our named executive officers, which awards are primarily weighted towards the achievement of our corporate financial goals, as described below.
 
Weighting of Corporate and Business Unit Goals. The annual cash incentive awards for our named executive officers, including our business unit heads Messrs. Smolik and Yardley, are primarily weighted towards the achievement of our corporate financial goals. With respect to our business unit heads, 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 officer’s annual incentive award.


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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 %        
James C. Yardley
    75 %                     25 %
Robert W. Baker
    75 %     25 %                
 
Annual Incentive Awards — Negative Discretion.  The Compensation Committee uses “negative discretion” in setting payouts under our annual incentive award program. For purpose of Section 162(m) of the Code, the annual incentives are payable at maximum to the extent any of the corporate or business unit financial or non-financial goals are achieved at threshold performance. The Compensation Committee then exercises its negative discretion to reduce the payout of incentive awards to reflect actual corporate, business unit and individual performance. By setting a high amount which can then be reduced, we believe our annual incentive payments qualify for full deductibility under Section 162(m) of the Code. This reduction is not a negative reflection on the performance of our company or our named executive officers, but rather is done to ensure maximum flexibility with respect to the payment of performance-based bonuses. If the Compensation Committee were to have instead funded incentive awards at a minimum threshold and used discretion to increase the amounts to reflect company and individual performance, actual payouts would not qualify for the Section 162(m) tax deduction. The Compensation Committee uses a similar “negative discretion” approach in determining the number of shares of restricted stock to be granted to our Section 162(m) covered executives, which grants are described later in this discussion. For further information on Section 162(m), see the description of Regulatory Considerations beginning on page 45 of this proxy statement.
 
After the 2008 financial results became available, the Compensation Committee determined the appropriate funding of the 2008 annual incentive bonus pool based on the achievement of the pre-established financial and non-financial performance goals for the year. The following table sets forth the percentage that the annual incentive bonus pool is funded based on the level of performance relative to the performance goals that were established for the year.
 
Funding of the
Annual Incentive Bonus Pool
 
         
Performance
  Pool Funding
 
Maximum Goals Met
    150 %(1)
Target Goals Met
    100 %(2)
Threshold Goals Met
    50 %(3)
Threshold Not Met
    0 %
 
 
(1) The maximum funding of the annual incentive bonus pool is 150% for performance at or above the maximum performance level.
 
(2) For performance above target but below maximum, actual funding is between 100%-150%, as determined by the Compensation Committee.
 
(3) For performance above threshold but below target, actual funding is between 50%-100%, as determined by the Compensation Committee.
 
Individual Performance Adjustment.  As mentioned above, accountability plays an important role in our compensation programs, and individual performance is an important factor in determining annual incentives. In addition, individual performance goals support our vision of being the place to work, the neighbor to have, and the company to own. Each year, our named executive officers receive an individual performance rating based on an


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evaluation of the executive officer’s individual contribution and performance against his or her individual performance goals for the year and determined through our performance management program. Individual performance goals for 2008 included leadership training and development initiatives, recruiting top talent for key management positions, controlling costs and supporting volunteer efforts in the communities in which we work. Based on such individual performance rating, an individual performance factor ranging between 0% and 150%, as approved by the Compensation Committee, is assigned to each executive. The Compensation Committee then uses the individual performance factor (ranging from 0%-150%) to apply discretion and adjust the executive’s actual annual cash incentive award.
 
Under this formula, the maximum bonus opportunity is 225% of the target bonus, which is calculated by taking 150% of the maximum annual incentive bonus pool times 150% of the maximum individual performance adjustment factor. The range of annual cash incentive bonuses, based on the level of company performance (and, where appropriate, the performance of our business units) and the individual executive, is illustrated as a percentage of base salary for each named executive officer in the following table. The actual percentage of cash incentive bonuses could be at any level between the minimum and maximum percentages (0%-225%) based on company and individual performance.
 
Range of Cash Incentive Bonuses as a Percentage of Base Salary for 2008
 
                                 
    Minimum
           
    Threshold
           
    Not Met   Threshold   Target   Maximum
 
Douglas L. Foshee
    0 %     60 %     120 %     270 %
D. Mark Leland
    0 %     30 %     60 %     135 %
Brent J. Smolik
    0 %     45 %     90 %     202.50 %
James C. Yardley
    0 %     37.50 %     75 %     168.75 %
Robert W. Baker
    0 %     30 %     60 %     135 %
 
The potential range of values of the annual cash incentive awards for 2008 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 51 of this proxy statement.
 
El Paso Performance.  In February 2009, the Compensation Committee reviewed the actual performance of our company and its business units relative to the corporate and business unit performance goals that were established for the year. In reviewing our actual performance relative to the corporate financial goals, the Compensation Committee excluded the impacts of certain items under pre-approved adjustment categories, including: items attributable to hurricanes Ike and Gustav and tropical storm Dolly such as repair costs and lower production, volatile commodity prices in the oil and gas industry, including a ceiling test impairment to our domestic and Brazilian full cost pools, unbudgeted delays or gains and losses on asset sales activity in Brazil, actions taken to resolve legacy issues, and certain unbudgeted or strategic items, including early spending on the Ruby Pipeline project approved by the Board of Directors in 2008. The Compensation Committee determined that these items were not related to the ongoing operation of El Paso in a manner consistent with the way the performance goals and ranges were set. Based on these adjustments, the Compensation Committee determined that El Paso achieved the following adjusted results:
 
  •  earnings per share of $1.17, which is above the maximum goal of $1.10,
 
  •  EBITDA of $3,389 million, which is above the threshold goal of $3,330 million, but below the target of $3,400 million,
 
  •  cash flow from operations of $2,192 million, which is above the target goal of $2,120 million, and
 
  •  outstanding debt (net of cash) of $12,973 million, which resulted in above target achievement,
 
which collectively resulted in a determination of a corporate achievement level of 100%. In addition, the Compensation Committee determined that our corporate shared services group and our pipeline business unit


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achieved their respective financial goals and substantially all of the non-financial performance goals (with achievement levels of 105% and 115%, respectively), and our E&P business unit achieved many of its financial and non-financial performance goals (with an achievement level of 67%).
 
Reduction and Modification of Bonus Amounts.  Although the company achieved its corporate financial performance goals, the Compensation Committee decided it would be appropriate to reduce and modify the cash incentive awards payable to our named executive officers for 2008 performance. Upon the recommendation of our CEO, the Compensation Committee elected to use its negative discretion to reduce the cash bonuses otherwise earned by our named executive officers, including our CEO, primarily due to the market downturn and weakening global economy. On average, the reduction resulted in approval of cash incentive awards at approximately 90% of target, despite higher weighted corporate and business unit achievement levels. Furthermore, the Compensation Committee determined that one-half of each named executive officer’s approved bonus should be paid in the form of restricted stock, rather than being paid entirely in cash. This is a change from prior years and was done for two reasons: (i) to continue to motivate the named executive officers to focus on building long-term shareholder value over short-term results, and (ii) to put a significant portion of the bonus at risk and encourage retention and focus. The restricted stock payable as part of the approved bonuses will be granted on April 1, 2009 at the same time as our annual equity grants are made, as described in the “Long Term Incentive Awards” section below, and the shares will cliff vest three years from the date of grant.
 
2008 Annual Incentives.  Based on the policies described earlier in this compensation discussion and analysis, the Compensation Committee reviewed all elements of the named executive officers’ total compensation for 2008, as well as company and individual performance. Based on the Compensation Committee’s review of these and external factors, the committee approved annual incentive bonuses for our named executive officers, as set forth in the chart below. The amount was calculated by starting with the maximum bonus amount payable for Code Section 162(m) purposes, which was then reduced to reflect the following formula:
 
target bonus X corporate/business unit achievement percentage X individual performance factor = annual incentive award
 
The amount was then further adjusted by the Compensation Committee per the CEO’s recommendation, as described above.
 
The following table compares each named executive’s target annual cash incentive for 2008 performance versus the actual incentive earned, as well as the portion of the incentive payable in cash and the portion payable in the form of restricted stock, as determined by the Compensation Committee.
 
Target vs. Actual
Annual Incentive Bonuses
Paid for 2008 Performance
 
                                                 
    Target Cash
  Percentage of
  Actual Incentive Bonus (1)    
    Incentive
  Target Bonus
  Cash
  Restricted Stock
       
    Bonus   Approved   Portion   Portion   Total    
 
Douglas L. Foshee
  $ 1,260,000       94 %   $ 593,220     $ 593,220     $ 1,186,440  
D. Mark Leland
  $ 311,854       104 %   $ 162,000     $ 162,000     $ 324,000  
Brent J. Smolik
  $ 509,868       68 %   $ 172,500     $ 172,500     $ 345,000  
James C. Yardley
  $ 386,262       101 %   $ 195,000     $ 195,000     $ 390,000  
Robert W. Baker
  $ 274,018       88 %   $ 120,000     $ 120,000     $ 240,000  
 
 
(1) The cash portion of the annual bonus will be paid in March, 2009. The portion of the annual bonus payable in the form of restricted stock will be granted on April 1, 2009 at the time of our annual equity grants and will cliff vest three years from the date of grant.
 
The cash portion of the amount awarded to our named executive officers for their annual incentive bonuses for 2008 performance is included in the Summary Compensation Table under the column “Non-Equity Incentive Plan Compensation” on page 48 of this proxy statement. The portion of the incentive bonuses payable in the form of restricted stock will be reflected in next year’s Summary Compensation Table and Grants of Plan-Based Awards Table in accordance with SEC requirements regarding equity grant reporting.


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Long-Term Incentive Awards
 
We use our stockholder approved 2005 Omnibus Incentive Compensation Plan, or omnibus plan, for long-term incentive awards. Under the omnibus plan, the Compensation Committee is the plan administrator with respect to employees subject to Section 162(m) and Section 16 of the Exchange Act, which includes our named executive officers. The Compensation Committee determines the timing of when the annual grants of restricted stock and stock options to such executives will occur as well as the terms and restrictions applicable to such grants.
 
The Compensation Committee approves the annual grant to our executive officers after the financial results are available for the prior fiscal year and selects a future grant date (usually several weeks subsequent to the Compensation Committee’s action) when the awards will be granted. The Compensation Committee’s standard practice is to select the first trading day of the quarter following the filing of the Annual Report on Form 10-K as the grant date for long-term incentive awards, which historically has been the first trading day of April. Stock options are granted with an exercise price based upon the average between the high and low selling prices at which our common stock traded on the grant date.
 
As described earlier, annual long-term incentives are comprised of an approximate 50/50 combination of stock options and restricted stock. Options are granted at target levels and are not adjusted for company or individual performance. This practice is in place to mitigate the effect of short term performance on a long-term incentive. Restricted stock awards are performance-based and are adjusted for both company and individual performance, as described below. The target equity opportunities for the 2007 performance year and for the 2008 performance year, including both the option and restricted stock components are included below. These target long-term equity opportunities were derived from peer group and competitive survey benchmarking data and from the Compensation Committee’s judgment on the internal equity of the positions and scope of job responsibilities.
 
Target Long-Term Equity Opportunities
 
                         
    2007 Performance
  2008 Performance
  2007-2008
    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 %
James C. Yardley
  $ 1,250,000     $ 1,250,000       0 %
Robert W. Baker
  $ 1,250,000     $ 1,250,000       0 %
 
The amount of equity available to fund the equity pool for annual restricted stock grants is based 50% on achievement of the annual overall corporate financial goals and 50% on El Paso’s one-year relative TSR compared to our peer group of companies.
 
The portion of the equity pool used for restricted stock grants that is funded based on El Paso’s TSR compared to its peer group of companies is determined as follows:
 
Funding of Portion of Equity Pool
Based on Total Shareholder Return
for Restricted Stock Grants
 
     
Total Shareholder Return
 
Equity Pool Funding
 
1st Quartile (75th to 100th percentile)
  Funded at 150%
2nd Quartile (50th to 74th percentile)
  Funded from 100% to 150% based on actual TSR results
3rd & 4th Quartile (0 to 49th percentile)
  Funded from 0% to 100% (1)
 
 
(1) If our TSR is below the 50th percentile (i.e., third or fourth quartile), at least one of the pre-established corporate or business unit financial or non-financial performance goals must be achieved before any restricted stock grants will be awarded.


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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 pages 40 and 41 as an adjustment performance factor to determine the executive officer’s actual restricted stock award.
 
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 awards were 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%. In addition, during 2007, El Paso’s TSR relative to its peer group 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, the restricted stock grants that were granted to the named executive officers on April 1, 2008 were funded at 98.5% of overall target (50% × (115% based on corporate financial performance + 82% based on TSR performance) = 98.5%) and were adjusted for individual performance. Stock options were granted at target and were not adjusted for corporate or individual performance. The restricted stock and stock options vest in three equal annual installments beginning one year from the date of grant. The number of shares and grant date fair market value of the restricted stock and stock options awarded in April 2008 to each named executive officer is reflected in the Grants of Plan-Based Awards table on page 51 of this proxy statement.
 
Annual Grant based on 2008 Performance
 
In February 2009, the Compensation Committee approved the 2009 annual grant of long-term incentive awards in the form of restricted stock and stock options based on 2008 performance. These long-term incentive awards are expected to be granted to the named executive officers on April 1, 2009. During 2008, we achieved target performance of our overall corporate financial performance goals, resulting in the funding of one-half of the restricted stock portion of the equity pool at 100%. However, during 2008, El Paso’s TSR relative to our peer group of companies was in the fourth quartile (18th percentile), and due to this lower quartile performance, the Compensation Committee determined that the funding of one-half of the restricted stock pool based on TSR results should be at 0%. Accordingly, restricted stock grants that will occur in April 2009 based upon 2008 performance will be funded at 50% of overall target (50% × (100% based on corporate financial performance + 0% based on TSR performance) = 50%) and the value of each named executive officer’s individual 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 compares each named executive officer’s target equity opportunity for 2008 performance versus the actual equity amount earned as described above.


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Target vs. Actual
Long-Term Incentive Awards
Based on 2008 Performance
 
                         
        Percentage of
   
    2008 Performance
  Target Equity
  2008 Performance
    Year Target Equity
  Opportunity
  Year Actual Equity
Name
  Opportunity   Approved   Payout (1)
 
Douglas L. Foshee
  $ 4,350,000       78 %   $ 3,398,220  
D. Mark Leland
  $ 1,250,000       78 %   $ 974,265  
Brent J. Smolik
  $ 1,250,000       75 %   $ 937,500  
James C. Yardley
  $ 1,250,000       84 %   $ 1,047,794  
Robert W. Baker
  $ 1,250,000       72 %   $ 900,735  
 
 
(1) We use a Black-Scholes valuation to convert the dollar value of the grant into options, and we use a 10 day average of the closing sales price of our stock in advance of the Compensation Committee meeting in which the awards are approved, which meeting is set pursuant to a pre-established corporate calendar, to convert the dollar value of the grant into restricted stock.
 
The number of shares and grant date fair market value of the restricted stock and stock options awarded in April 2009 to each named executive officer will be reflected in next year’s Grants of Plan-Based Awards table in accordance with SEC reporting requirements.
 
2009 Base Salary Freeze
 
At its February 2009 meeting, the Compensation Committee determined it would be appropriate to freeze base salaries at 2008 levels for all employees, including our named executive officers. The Compensation Committee felt this action would be appropriate to reflect the company’s ongoing efforts to reduce costs due to the ongoing financial crisis and the weakening economy and to better position the company for long-term success. As such, our named executive officers will not receive base salary increases in 2009. However, for the general employee population we will continue to assess the feasibility of providing base salary adjustments at some point during the year.
 
2009 Annual Cash Incentive Plan Changes
 
Also at its February 2009 meeting, the Compensation Committee determined that the corporate financial measures that will be used for our 2009 annual cash incentive program will include earnings per share, EBITDA, debt net of cash, and return on total capital (“ROTC”), and will not include cash flow from operations. Cash flow from operations was eliminated since it is primarily driven by EBITDA, which is already a performance measure, and ROTC was added in its place. ROTC is a measure of the company’s ability to earn a satisfactory return on its investments, and the Compensation Committee and management believe this is an important metric given the capital intensive nature of our company.
 
VI.   Other Compensation Policies
 
Regulatory Considerations
 
Section 162(m) imposes a limit of $1,000,000 on the amount that we may deduct for federal income tax purposes in any one year for compensation paid to our CEO and any of 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 Section’s limitations will not apply. Our executive compensation plans, including our omnibus plan, are structured so that awards such as cash incentive awards, stock options and restricted stock qualify as deductible performance-based compensation. While the Compensation Committee strives to make awards under our plans that are intended to qualify as performance-based compensation under Section 162(m), it is possible under certain circumstances that some portion of the compensation paid to our executive officers will not meet the standards of deductibility under


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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 2008 were intended to be performance-based within the meaning of Section 162(m).
 
Stock Ownership
 
Our Corporate Governance Guidelines impose stock ownership requirements on our executive officers. These stock ownership requirements are designed to emphasize stock ownership by our executive officers and to further align their interests with our stockholders — through good times and bad. These requirements are as follows:
 
         
Position   Minimum Aggregate Value
 
Chief Executive Officer     5 X base salary  
Other Executive Officers     2 X base salary  
 
Each executive officer is required to meet the ownership threshold within five years of election as an executive officer. As of December 31, 2008, each of our named executive officers’ ownership in our common stock exceeded the required ownership thresholds and did so in the requisite time frames. See page 10 of this proxy statement for further information regarding the stock ownership requirements for our executive officers.
 
Margin Trading Prohibition
 
In 2008, we adopted a policy prohibiting executives from hedging their ownership of company stock. Under the policy, executive officers are prohibited from holding El Paso securities in a margin account or otherwise entering into any pledge arrangement that would permit a third party to sell the El Paso securities without the executive’s consent or knowledge. This prohibition also applies to our non-employee directors.
 
Compensation Recovery
 
Under our omnibus plan, which provides for grants of annual cash incentive awards and long-term incentive awards, if it is determined that an executive officer in the plan knowingly engaged in, or was grossly negligent with respect to, misconduct that causes us to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under the securities laws, the executive is required to reimburse us the amount of any payment in settlement of an award earned or accrued during the 12-month period following the first public issuance or filing, whichever first occurred, of the financial document that is required to be restated.


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COMPENSATION COMMITTEE REPORT
 
Each member of the Compensation Committee is “independent,” as that term is defined under (a) the NYSE listing standards, (b) the non-employee director standards of Rule 16b-3 of the Exchange Act, as amended, (c) the outside director requirements of Section 162(m) of the Code and (d) El Paso’s Corporate Governance Guidelines. The Compensation Committee currently consists of Messrs. Dunlap, Joyce, Shapiro, Talbert and Wyatt and Ms. McClean.
 
As a Committee, our primary function is to ensure El Paso’s executive compensation program is competitive so that El Paso can attract and retain executive personnel and performance-based so that the interests of El Paso’s management are aligned with both the short-term and long-term interests of El Paso’s stockholders. We engage an independent executive compensation consulting firm to assist us in our review of El Paso’s executive and director compensation programs to ensure these programs are competitive and consistent with our stated objectives. The compensation consultant is retained by and is directly accountable to us and we review all related fees paid to the 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 Paso’s 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 Paso’s management the Compensation Discussion and Analysis included in this proxy statement, and based on that review and discussion, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
 
Current Members of the Compensation Committee of the Board of Directors
 
                     
Steven J. Shapiro
  James L. Dunlap   William H. Joyce   Ferrell P. McClean   J. Michael Talbert   Joe B. Wyatt
(Chairman)
  (Member)   (Member)   (Member)   (Member)   (Member)


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Summary Compensation Table
 
The following table and the narrative text that follows it provide a summary of the compensation earned or paid in 2008, 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 2008.
 
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)   ($) (6)   ($)
 
Douglas L. Foshee
    2008     $ 1,037,502     $ 0     $ 2,421,765     $ 2,145,868     $ 593,220     $ 139,878     $ 118,212     $ 6,456,445  
President & Chief
    2007     $ 987,507     $ 0     $ 2,241,918     $ 1,957,958     $ 1,518,000     $ 109,884     $ 166,399     $ 6,981,666  
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
    2008     $ 519,756     $ 0     $ 844,768     $ 589,900     $ 162,000     $ 13,116     $ 43,905     $ 2,173,445  
Executive Vice President &
    2007     $ 513,567     $ 0     $ 786,232     $ 479,222     $ 430,358     $ 223     $ 45,163     $ 2,254,765  
Chief Financial Officer
    2006     $ 483,750     $ 0     $ 457,363     $ 331,515     $ 490,050     $ 2,974     $ 40,146     $ 1,805,798  
Brent J. Smolik
    2008     $ 562,392     $ 0     $ 1,003,516     $ 495,830     $ 172,500     $ 46,011     $ 26,950     $ 2,307,199  
Executive Vice President &
    2007     $ 550,008     $ 0     $ 1,683,289     $ 264,828     $ 622,100     $ 27,924     $ 360,113     $ 3,508,262  
President of Exploration &
    2006     $ 91,668     $ 500,000     $ 250,007     $ 0     $ 177,000     $ 0     $ 48,134     $ 1,066,809  
Production
                                                                       
James C. Yardley
    2008     $ 511,263     $ 0     $ 715,866     $ 555,143     $ 195,000     $ 57,869     $ 48,395     $ 2,083,536  
Executive Vice President,
    2007     $ 500,004     $ 0     $ 639,066     $ 404,451     $ 432,191     $ 189     $ 86,947     $ 2,062,848  
Pipeline Group
    2006     $ 385,680     $ 0     $ 215,278     $ 162,816     $ 569,536     $ 56,065     $ 119,338     $ 1,508,713  
Robert W. Baker
    2008     $ 456,696     $ 0     $ 738,217     $ 582,433     $ 120,000     $ 66,168     $ 35,882     $ 1,999,396  
Executive Vice President &
    2007     $ 451,257     $ 0     $ 722,122     $ 476,535     $ 315,120     $ 43,010     $ 39,143     $ 2,047,187  
General Counsel
    2006     $ 432,807     $ 0     $ 456,677     $ 345,269     $ 401,885     $ 47,722     $ 33,628     $ 1,717,988  
 
 
(1) The amount reflected in this column for 2008 is the amount of compensation cost recognized in 2008 for restricted stock granted in 2008 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 Statement of Financial Accounting Standards No. 123 (revised 2004), Share- Based Payment (“SFAS No. 123(R)”) used to calculate these amounts is the same as that used for our stock-based compensation disclosure in Note 16 to our financial statements included in our 2008 Annual Report on Form 10-K filed with the SEC on March 2, 2009, and our Annual Reports on Form 10-K for prior years.
 
(2) The amount reflected in this column for 2008 is the amount of compensation cost recognized in 2008 for stock options granted in 2008 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 SFAS No. 123(R) used to calculate these amounts is the same as that used for our stock-based compensation disclosure in Note 16 to our financial statements included in our 2008 Annual Report on Form 10-K filed with the SEC on March 2, 2009, and our Annual Reports on Form 10-K for prior years.
 
(3) The amount in this column for 2008 reflects each named executive officer’s annual cash incentive bonus earned for 2008 performance. Annual cash incentive bonuses are performance-based and driven by company and individual performance. Amounts for 2008 will be paid to the named executive officers in March, 2009. See the discussion under “Annual Cash Incentive Awards for 2008 Performance” in the Compensation Discussion and Analysis for additional information.
 
(4) The amount in this column for 2008 reflects the annual change in the actuarial present value of each named executive officer’s accumulated pension and supplemental pension benefits. The change in pension value is generally equal to the difference between the actuarial present value at the end of the year and the beginning of the year. Effective January 1, 2008, we adopted the measurement date provisions of Statement of Financial


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Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (“SFAS No. 158”) and changed the measurement date of our pension and supplemental pension plans from September 30 to December 31. The reported values above have been annualized by multiplying the 15-month change in pension value from September 30, 2007 to December 31, 2008 by 12/15. The annual change in the actuarial present value of Messrs. Foshee’s, Leland’s, Smolik’s, Yardley’s and Baker’s accumulated pension and supplemental pension benefits for 2008 is $133,632, $11,269, $45,747, $56,258, and $64,354, respectively. In addition, effective January 1, 2008, the Pension Plan was amended to permit participants to elect to receive their pension benefits in the form of an unlimited lump sum (the supplemental pension plan already permitted unlimited lump sum payouts). Due to this amendment, our calculations as of December 31, 2008 assume participants elect their pension benefits as a lump sum. Our 2007 and 2006 disclosures using a September 30 measurement date reflected a single life annuity form of pension payment for all participants since their projected pension benefits exceeded the previous lump sum limit of $100,000. The impact for this change in methodology for Messrs. Foshee, Leland, Smolik, Yardley and Baker is $1,224, $15,694, $268, $70,674 and $4,069, respectively.
 
(5) The amount in this column for 2008 also reflects above-market interest credited to the named executive officers’ supplemental Retirement Savings Plan account balances. During 2008, interest was credited to the balance of each executive officer’s supplemental Retirement Savings Plan account balance on a monthly basis at a rate equal to the average of Moody’s Seasoned Aaa Corporate Bond Rate and Moody’s Seasoned Baa Corporate Bond Rate, as published by Moody’s Investors Services, Inc. It was determined that the rate of interest exceeded 120 percent of the applicable federal long-term rate for each month during 2008. The total amount of the above-market interest credited to Messrs. Foshee’s, Leland’s, Smolik’s, Yardley’s and Baker’s supplemental Retirement Savings Plan account balance during 2008 was $6,246, $1,847, $264, $1,611 and $1,814, respectively. See the Nonqualified Deferred Compensation table and narrative description on pages 58 and 59 of this proxy statement for a description of the named executive officer’s supplemental Retirement Savings Plan benefits.
 
(6) The compensation reflected in the “All Other Compensation” column for 2008 for each of the named executive officers includes company matching contributions to our Retirement Savings Plan, supplemental company matching contributions for the Retirement Savings Plan accrued under our 2005 Supplemental Benefits Plan, the incremental cost to El Paso of personal use of aircraft, annual executive physicals and tax reimbursements, which are listed in the table immediately below.
 
All Other Compensation included in the Summary Compensation Table for 2008
 
                                                                 
    Company
  Supplemental
                       
    Matching
  Company Matching
                       
    Contributions
  Contributions
                       
    to the
  Accrued under the
  Personal
  Annual
               
    Retirement
  2005 Supplemental
  Use of
  Executive
  Tax
           
    Savings Plan
  Benefits Plan
  Aircraft
  Physicals
  Reimbursements
  Total
       
Name
  ($)   ($) (A)   ($) (B)   ($) (C)   ($) (D)   ($)        
Douglas L. Foshee
  $ 10,350     $ 104,648     $ 46     $ 2,243     $ 925     $ 118,212  
D. Mark Leland
  $ 10,350     $ 32,405     $ 0     $ 1,150     $ 0     $ 43,905  
Brent J. Smolik
  $ 10,350     $ 14,958     $ 362     $ 1,150     $ 130     $ 26,950  
James C. Yardley
  $ 10,350     $ 32,106     $ 1,116     $ 2,850     $ 1,973     $ 48,395  
Robert W. Baker
  $ 10,350     $ 24,382     $ 0     $ 1,150     $ 0     $ 35,882  
 
 
(A) The compensation reflected in this column for each of the named executive officers for 2008 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 58 of this proxy statement.
 
(B) El Paso makes available for business use to its executive officers private aircraft leased by El Paso. The amount shown in this column for Mr. Foshee for 2008 reflects the incremental cost to El Paso for occasions when family members accompanied him on business-related flights on private aircraft leased by El Paso. The amount shown for Mr. Yardley likewise reflects the incremental cost to El Paso for an occasion when his spouse


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accompanied him on a business-related flight on private aircraft leased by El Paso, as well as occasions when his spouse accompanied him on business-related flights using a commercial carrier. The amount shown for Mr. Smolik reflects an occasion when his spouse accompanied him on a business-related flight using a commercial carrier. 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 officer’s use of leased aircraft or a guest’s travel does not meet the IRS’s standard for business use, but nevertheless is determined by us to be business-related, the cost of that travel is imputed as income to the executive officer and a gross-up payment for taxes is provided. Any tax reimbursements with respect to the imputed income for the travel are reflected in the “Tax Reimbursements” column of this table.
 
(C) The amounts in this column for 2008 reflect the cost to El Paso for the executive officer annual physicals.
 
(D) The amounts in this column for 2008 for Messrs. Foshee, Smolik and Yardley reflect tax reimbursements associated with imputed income for personal air travel that does not meet the IRS’s standard for business use.
 
In addition to the items included in the above table that could be characterized as having a personal benefit, El Paso provided a separate parking space for Mr. Foshee during a portion of 2008. Mr. Foshee’s use of the parking space is not included in the table above because there is no incremental cost to El Paso for Mr. Foshee’s use of this parking space. The named executive officers may also 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 above because there is no incremental cost to El Paso.


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Grants of Plan-Based Awards Table
 
The following table sets forth the range of potential annual cash incentive bonuses for 2008 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 2008 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 2008, 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 2008. 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, 2008
 
                                                                                         
                            All Other
  All Other
          Grant Date
                            Stock
  Option
          Fair
            Estimated Possible Payouts
  Awards:
  Awards:
  Exercise
  Closing
  Value
            Under Non-Equity Incentive
  Number of
  Number of
  or Base
  Market Price
  of Stock
        Date of
  Plan Awards (1)   Shares of
  Securities
  Price
  of Underlying
  and
        Compensation
  Threshold
              Stock or
  Underlying
  of Option
  Securities on
  Option
    Grant
  Committee
  Not Met
  Threshold
  Target
  Maximum
  Units
  Options
  Awards
  Grant Date
  Awards
Name
  Date   Action   ($)   ($)   ($)   ($) (2)   (#) (3)   (#) (4)   ($/Sh) (5)   ($/Sh) (6)   ($) (7)
 
Douglas L. Foshee
                                                                                       
Short-Term Incentive
    N/A       N/A     $ 0     $ 630,000     $ 1,260,000     $ 2,835,000                                          
Restricted Stock
    4/1/2008       2/6/2008                                       139,115                             $ 2,323,916  
Stock Options
    4/1/2008       2/6/2008                                               376,950     $ 16.71     $ 16.81     $ 2,164,560  
D. Mark Leland
                                                                                       
Short-Term Incentive
    N/A       N/A     $ 0     $ 155,927     $ 311,854     $ 701,672                                          
Restricted Stock
    4/1/2008       2/6/2008                                       43,610                             $ 728,505  
Stock Options
    4/1/2008       2/6/2008                                               108,319     $ 16.71     $ 16.81     $ 622,000  
Brent J. Smolik
                                                                                       
Short-Term Incentive
    N/A       N/A     $ 0     $ 254,934     $ 509,868     $ 1,147,203                                          
Restricted Stock
    4/1/2008       2/6/2008                                       39,976                             $ 667,799  
Stock Options
    4/1/2008       2/6/2008                                               108,319     $ 16.71     $ 16.81     $ 622,000  
James C. Yardley
                                                                                       
Short-Term Incentive
    N/A       N/A     $ 0     $ 193,131     $ 386,262     $ 869,090                                          
Restricted Stock
    4/1/2008       2/6/2008                                       36,341                             $ 607,076  
Stock Options
    4/1/2008       2/6/2008                                               108,319     $ 16.71     $ 16.81     $ 622,000  
Robert W. Baker
                                                                                       
Short-Term Incentive
    N/A       N/A     $ 0     $ 137,009     $ 274,018     $ 616,541                                          
Restricted Stock
    4/1/2008       2/6/2008                                       36,341                             $ 607,076  
Stock Options
    4/1/2008       2/6/2008                                               108,319     $ 16.71     $ 16.81     $ 622,000  
 
 
(1) These columns show the potential value of the payout of the annual cash incentive bonuses for 2008 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 2008 performance is shown in the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column.
 
(2) The values in this column reflect that the maximum amount of annual cash incentive bonuses for Messrs. Foshee, Leland, Smolik, Yardley and Baker for 2008 performance was capped at 2.25 times the executive officer’s target bonus opportunity for the year.
 
(3) This column shows the number of shares of restricted stock granted in 2008 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.
 
(4) This column shows the number of stock options granted in 2008 to the named executive officers. The stock options time vest in three equal annual installments beginning one year from the date of grant.


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(5) This column shows the exercise price for the stock options granted during 2008, 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 SFAS No. 123(R) and the grant date fair value of stock options computed in accordance with SFAS No. 123(R) granted to the named executive officers during 2008. 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 6, 2008, and granted to the named executive officers on April 1, 2008, as part of our 2008 annual grant of long-term incentive awards. The equity awards were granted under our 2005 Omnibus Incentive Compensation Plan. In 2008, the value of restricted stock 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 1, 2008 was $16.705, computed in accordance with SFAS No. 123(R). The grant date fair value per option for the stock options granted on April 1, 2008 was $5.7423, computed using a Black-Scholes option-pricing model based on several assumptions and in accordance with SFAS No. 123(R). These assumptions are based on management’s best estimate at the time of grant and are listed below, as follows:
 
         
    Grant Date
    04/01/2008
 
Expected Term in Years
    6.0  
Expected Volatility
    35 %
Expected Dividends
    1 %
Risk-Free Interest Rate
    2.8 %
 
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 2008 on shares of unvested restricted stock granted to the named executives is factored into the grant date fair value per share in accordance with SFAS No. 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 2008 on
    Restricted Stock
Name
  ($)
 
Douglas L. Foshee
  $ 59,659  
D. Mark Leland
  $ 19,510  
Brent J. Smolik
  $ 23,399  
James C. Yardley
  $ 15,833  
Robert W. Baker
  $ 17,466  
 
The restrictions will lapse on any unvested shares of restricted stock and any unvested stock options become fully exercisable in the event of an executive’s termination of employment without cause or by the executive for “good reason,” if applicable, within two years following a “change in control” of El Paso. See pages 69-75 of this proxy statement for a summary of our 2005 Omnibus Incentive Compensation Plan and page 74 for the definitions of “good reason” and “change in control.” The total value of restricted stock can be realized only if the executives remain employees of El Paso for the required vesting period. Stock options generally expire ten years from the date of grant. However, stock options are subject to forfeiture and/or time limitations on exercise in the event of a termination of employment.
 
Employment Agreements
 
As indicated in the Compensation Discussion and Analysis, we do not enter into employment agreements with our named executive officers.


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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, 2008. The table also provides the exercise price and date of expiration of each unexercised stock option.
 
Outstanding Equity Awards
at December 31, 2008
 
                                                 
                    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   ($) (7)   Date   (#)   ($) (11)
 
Douglas L. Foshee
    1,000,000       0     $ 7.345       9/02/2013       41,667 (8)   $ 326,253  
      375,000       0     $ 7.090       4/01/2014       133,998 (9)   $ 1,049,204  
      302,962       100,988 (1)   $ 10.685       4/01/2015       139,115 (10)   $ 1,089,270  
      168,481       84,241 (2)   $ 12.155       4/03/2016                  
      123,090       246,180 (3)   $ 14.580       4/02/2017                  
      0       376,950 (4)   $ 16.705       4/01/2018                  
D. Mark Leland
    63,000       0     $ 42.125       10/25/2009       11,518 (8)   $ 90,186  
      55,000       0     $ 62.975       1/29/2011       52,740 (9)   $ 412,954  
      6,375       0     $ 62.975       1/29/2011       43,610 (10)   $ 341,466  
      20,000       0     $ 46.275       8/13/2011                  
      53,125       0     $ 7.090       4/01/2014                  
      36,810       12,270 (1)   $ 10.685       4/01/2015                  
      37,500       12,500 (5)   $ 11.990       8/10/2015                  
      46,575       23,288 (2)   $ 12.155       4/03/2016                  
      35,371       70,741 (3)   $ 14.580       4/02/2017                  
      0       108,319 (4)   $ 16.705       4/01/2018                  
Brent J. Smolik
    35,371       70,741 (3)   $ 14.580       4/02/2017       35,160 (9)   $ 275,303  
      0       108,319 (4)   $ 16.705       4/01/2018       39,976 (10)   $ 313,012  
James C. Yardley
    63,000       0     $ 42.125       10/25/2009       4,180 (8)   $ 32,729  
      55,000       0     $ 62.975       1/29/2011       3,333 (6)   $ 26,097  
      6,375       0     $ 62.975       1/29/2011       47,466 (9)   $ 371,659  
      40,000       0     $ 46.275       8/13/2011       36,341 (10)   $ 284,550  
      48,875       0     $ 7.090       4/01/2014                  
      34,096       11,366 (1)   $ 10.685       4/01/2015                  
      16,901       8,451 (2)   $ 12.155       4/03/2016                  
      13,333       6,667 (6)   $ 14.275       8/16/2016                  
      35,371       70,741 (3)   $ 14.580       4/02/2017                  
      0       108,319 (4)   $ 16.705       4/01/2018                  
Robert W. Baker
    40,000       0     $ 42.125       10/25/2009       9,215 (8)   $ 72,153  
      15,334       0     $ 49.468       8/01/2010       49,224 (9)   $ 385,424  
      55,000       0     $ 62.975       1/29/2011       36,341 (10)   $ 284,550  
      6,375       0     $ 62.975       1/29/2011                  
      40,000       0     $ 46.275       8/13/2011                  
      140,000       0     $ 7.090       4/01/2014                  
      90,888       30,297 (1)   $ 10.685       4/01/2015                  
      37,260       18,630 (2)   $ 12.155       4/03/2016                  
      35,371       70,741 (3)   $ 14.580       4/02/2017                  
      0       108,319 (4)   $ 16.705       4/01/2018                  
 
 
(1) 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 the remaining vesting date on April 1, 2009.
 
(2) 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 the remaining vesting date on April 3, 2009.


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(3) These are stock options that were granted as part of the 2007 annual grant of long-term incentive awards and time vest in three equal annual installments beginning one year from the date of grant, with the remaining vesting dates on April 2, 2009 and April 2, 2010.
 
(4) These are stock options that were granted as part of the 2008 annual grant of long-term incentive awards and time vest in three equal annual installments beginning one year from the date of grant, with vesting dates on April 1, 2009, April 1, 2010 and April 1, 2011.
 
(5) On August 10, 2005, Mr. Leland received an additional grant of 50,000 stock options 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 the remaining vesting date on August 10, 2009.
 
(6) 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 the remaining vesting date on August 16, 2009.
 
(7) 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.
 
(8) 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 the remaining vesting date on April 3, 2009.
 
(9) These are shares of restricted stock that were granted as part of the 2007 annual grant of long-term incentive awards and time vest in three equal annual installments beginning one year from the date of grant, with the remaining vesting dates on April 2, 2009 and April 2, 2010.
 
(10) These are shares of restricted stock that were granted as part of the 2008 annual grant of long-term incentive awards and time vest in three equal annual installments beginning one year from the date of grant, with vesting dates on April 1, 2009, April 1, 2010 and April 1, 2011.
 
(11) The values represented in this column have been calculated by multiplying $7.83, the closing price of our common stock on December 31, 2008 by the number of shares of stock.


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Option Exercises and Stock Vested Table
 
The following table sets forth information concerning stock option exercises and vesting of restricted stock during 2008 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 2008.
 
Option Exercises and Stock Vested
During Fiscal Year 2008
 
                                 
    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       193,445     $ 3,131,001  
D. Mark Leland
    0     $ 0       54,093     $ 895,920  
Brent J. Smolik
    0     $ 0       90,627     $ 977,328  
James C. Yardley
    0     $ 0       38,537     $ 637,112  
Robert W. Baker
    0     $ 0       53,261     $ 884,491  
 
 
(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.


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Pension Benefits Table
 
The following table sets forth information with respect to the pension benefits of each of the named executive officers. El Paso sponsors a qualified Pension Plan and supplemental benefits plans in which the named executive officers participate. In satisfaction of applicable SEC regulations, this table provides the number of years of service credited to the named executive officers, the actuarial present value of the named executive officer’s accumulated benefits at the earliest unreduced retirement age and the dollar amount of benefits paid, if any, to a named executive officer under each of the plans during 2008. 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     5     $ 59,311     $ 0  
    Supplemental Benefits Plan     1     $ 61,976     $ 0  
    2005 Supplemental Benefits Plan     4     $ 428,469     $ 0  
D. Mark Leland
  Pension Plan     23     $ 190,232     $ 0  
    Supplemental Benefits Plan     19     $ 207,156     $ 0  
    2005 Supplemental Benefits Plan     4     $ 0     $ 0  
Brent J. Smolik
  Pension Plan     2     $ 21,724     $ 0  
    Supplemental Benefits Plan     0     $ 0     $ 0  
    2005 Supplemental Benefits Plan     2     $ 63,373     $ 0  
James C. Yardley
  Pension Plan     31     $ 891,038     $ 0  
    Supplemental Benefits Plan     27     $ 1,185,244     $ 0  
    2005 Supplemental Benefits Plan     4     $ 0     $ 0  
Robert W. Baker
  Pension Plan     12     $ 166,774     $ 0  
    Supplemental Benefits Plan     8     $ 117,872     $ 0  
    2005 Supplemental Benefits Plan     4     $ 144,627     $ 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 6.33 percent discount rate and December 31, 2008 measurement date. The calculations reflect an age 65 commencement date except for Messrs. Leland and Yardley whose calculations reflect their earliest unreduced retirement age. Mr. Leland has a Minimum Benefit (as described below) and will have 30 years of credited service prior to age 60, and therefore would be eligible for an unreduced early retirement benefit at age 60. Mr. Yardley has a Sonat Transition Benefit (as described below) and would be eligible for an unreduced early retirement benefit at age 62.
 
The following is a description of material factors necessary to understand the information disclosed above in the Pension Benefits table for each of the named executive officers. Effective January 1, 1997, we amended our qualified Pension Plan to provide pension benefits under a cash balance plan formula that defines participants’ accrued benefits in terms of a notional cash account balance. Eligible employees become participants in the Pension Plan immediately upon employment and are fully vested in their benefits upon the earliest of the completion of three years of service or attainment of age 65. At the end of each calendar quarter, participant cash account balances are increased by an interest credit based on 5-Year Treasury bond yields, subject to a minimum interest credit of


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4 percent per year, plus a pay credit equal to a percentage of salary and bonus. The pay credit percentage is based on the sum of age plus service at the end of the prior calendar year according to the following schedule:
 
         
Age Plus Service
  Pay Credit Percentage
 
Less than 35
    4 %
35 to 49
    5 %
50 to 64
    6 %
65 and over
    7 %
 
Prior to adopting a cash balance plan on January 1, 1997, we provided pension benefits under a plan that defined monthly benefits based on final average earnings and years of service (the “Prior Plan”). The Pension Plan provides for a special transition benefit for employees who were participants in the Prior Plan on December 31, 1996. These employees continued to accrue benefits under the old plan formula (the “Minimum Benefit”) through December 31, 2001, or termination, if earlier. The Minimum Benefit is based on years of credited service and the average of the highest five consecutive years of compensation out of the last ten years, subject to maximum limitations as defined under the Pension Plan. The initial cash account balance was equal to the present value of the Prior Plan benefit as of December 31, 1996. Upon separation of employment, these participants (including Mr. Leland) will receive the greater of the Minimum Benefit or a benefit based on their cash account balance.
 
The Pension Plan also provides for a special transition benefit for former Sonat Inc. employees who were participants in the Sonat Retirement Plan on December 31, 1999, and who became active participants in the Pension Plan on January 1, 2000. These participants continued to accrue benefits under the Sonat retirement plan formula (the “Sonat Transition Benefit”) through December 31, 2004, or termination, if earlier. The Sonat Transition Benefit is based on years of credited service and the average of the highest five consecutive years of compensation out of the last ten years, subject to maximum limitations as defined under the Pension Plan. The initial cash account balance was equal to the present value of the Sonat Retirement Plan benefit as of December 31, 1999. Upon separation of employment, these participants (including Mr. Yardley) will receive the greater of the Sonat Transition Benefit or a benefit based on their cash account balance. Additionally, active participants in the Pension Plan on January 1, 2000, who had a Sonat cash account benefit on December 31, 1999, will receive this cash balance benefit upon their termination of employment.
 
Amounts in the Pension Benefits table reported as the actuarial present value of each named executive officer’s accumulated benefits are calculated as of December 31, 2008 using SFAS No. 158 assumptions. These are the same assumptions that are used for our pension liability disclosure in Note 14 to our financial statements included in our 2008 Annual Report on Form 10-K filed with the SEC on March 2, 2009. 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, Smolik and Baker, an age 60 commencement date for Mr. Leland, and an age 62 commencement date for Mr. Yardley.
 
Under our qualified Pension Plan and applicable Code provisions, compensation in excess of $230,000 cannot be taken into account and the maximum payable benefit in 2008 was $185,000. For 2008, any excess benefits otherwise accruing under our Pension Plan were payable under the 2005 Supplemental Benefits Plan which was adopted effective January 1, 2005 in connection with the implementation of Section 409A of the Code. The 2005 Supplemental Benefits Plan replaced our prior Supplemental Benefits Plan for benefits accruing after 2004. The benefits that accrue under the 2005 Supplemental Benefits Plan are supplemental benefits for officers and key management employees (including all of the named executive officers) who could not be paid under our Pension Plan and/or Retirement Savings Plan due to certain Code limitations. The supplemental pension benefits under the 2005 Supplemental Benefits Plan, when combined with the supplemental pension benefits the executive is entitled to receive under our prior Supplemental Benefits Plan and the amounts a participant is entitled to receive under the qualified Pension Plan, will be the actuarial equivalent of the Pension Plan’s benefit formula had the limitations of the Code not been applied. The named executive officers will receive their supplemental pension benefits upon termination of employment in the form of a lump sum payment, except that supplemental pension benefit payments under the 2005 Supplemental Benefits Plan to certain “specified employees” (including all of the named executive officers), as determined pursuant to Section 409A of the Code, will be delayed until six months after their termination of employment. The supplemental Retirement Savings Plan benefits under the plan include a credit


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equal to the amount of the matching contribution to the Retirement Savings Plan that cannot be made due to Code limitations. See the Nonqualified Deferred Compensation table below for additional information regarding the named executive officers’ supplemental Retirement Savings Plan benefits. The 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 participant’s death, supplemental pension benefits become fully vested and nonforfeitable. A change in control under the plans has the same meaning as under the 2005 Omnibus Incentive Compensation Plan. See the summary of the 2005 Omnibus Incentive Compensation Plan beginning on page 69 of this proxy statement.
 
Named Executive Officers Eligible for Early Retirement.  Since Mr. Yardley is age 57, he is eligible for early retirement benefits payable from the Pension Plan and the Supplemental Benefits Plan. If Mr. Yardley had terminated employment on December 31, 2008 and commenced his benefits as of January 1, 2009, his present value of accumulated benefits would have been $1,320,000 for the Pension Plan and $1,760,000 for the Supplemental Benefits Plan (based on the same assumptions used above). Note that these amounts exceed those shown in the Pension Benefits table for Mr. Yardley because the value of the early retirement benefits is greater at his current age.
 
Nonqualified Defined Contribution and
Other Nonqualified Deferred Compensation Plans
 
The following table sets forth information with respect to nonqualified defined contribution plans for each of the named executive officers as of December 31, 2008. We sponsor a supplemental benefits plan that provides for the crediting of matching contributions that could not be paid under the Retirement Savings Plan due to Code limitations. We do not sponsor a traditional nonqualified deferred compensation plan that provides for deferrals of base salary and bonuses for executive officers. None of the named executive officers had withdrawals or distributions of supplemental Retirement Savings Plan benefits during 2008.
 
Nonqualified Deferred Compensation
as of December 31, 2008
 
                         
    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
  $ 104,648     $ 29,646     $ 491,952  
D. Mark Leland
  $ 32,405     $ 8,753     $ 145,784  
Brent J. Smolik
  $ 14,958     $ 1,179     $ 28,928  
James C. Yardley
  $ 32,106     $ 7,605     $ 132,639  
Robert W. Baker
  $ 24,382     $ 8,605     $ 142,226  
 
 
(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 49 of this proxy statement.
 
(2) Of the totals in this column, $435,312 for Mr. Foshee, $114,820 for Mr. Leland, $27,521 for Mr. Smolik, $89,173 for Mr. Yardley and $123,660 for Mr. Baker was reported as compensation in the Summary Compensation Table included in our proxy statement for this year and prior years.
 
The following is a description of material factors necessary to understand the information disclosed above in the Nonqualified Deferred Compensation table for each of the named executive officers. The registrant’s 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 2008, these excess benefits were credited to each


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executive’s supplemental Retirement Savings Plan account balance under the 2005 Supplemental Benefits Plan. The plan administrator determines the rate of interest, if any, periodically attributable to the balance of each supplemental Retirement Savings Plan account. For 2008, interest was credited to the balance of each executive’s supplemental Retirement Savings Plan account balance on a monthly basis at a rate equal to the average of Moody’s Seasoned Aaa Corporate Bond Rate and Moody’s Seasoned Baa Corporate Bond Rate, as published by Moody’s Investors Services, Inc. The balance of each executive’s supplemental Retirement Savings Plan account will be paid upon termination of employment in a lump sum payment except that benefit payments under the 2005 Supplemental Benefits Plan to certain “specified employees” (including all of the named executive officers), as determined pursuant to Section 409A of the Code, will be delayed until six months after termination. See the description of our supplemental benefits plans beginning on page 57 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, 2008, and thus include amounts earned through such time. All amounts are estimates of the amounts which would be paid to the executive officers upon their termination. The actual amounts to be paid can only be determined at the time of such executive officer’s termination. The Compensation Committee reviews this information each year as part of its overall analysis and review of executive compensation.
 
Potential Payments upon Termination or Change in Control
Assuming Termination Event Occurs
on December 31, 2008
 
Payments made upon Voluntary Termination
 
The following table reflects the total value of payments the named executive officers would receive in the event of a voluntary termination. In the event a named executive officer voluntarily terminates his or her employment, the executive officer is entitled to his or her vested benefits under our Pension Plan and Retirement Savings Plan (including supplemental benefits). The named executive officer will make an election to commence the qualified component of his or her pension benefit. Supplemental pension and supplemental Retirement Savings Plan benefits are paid in lump sum. Under our equity compensation plans, unvested restricted stock and stock options are forfeited in the event of a voluntary termination. Unless stock options expire by their own terms, vested stock options may be exercised for a period of three months.
 
Payments made upon Voluntary Termination
 
                                                         
            Retirement
  Supplemental
           
        Supplemental
  Savings
  Retirement
  Continued
       
    Pension
  Pension
  Plan
  Savings Plan
  Medical
  Equity
   
    Benefits
  Benefits
  Benefits
  Benefits
  Benefits
  Awards
  Total
Name
      ($) (1) (2)       ($) (2)       ($)       ($)       ($) (3)       ($) (4)       ($)
 
Douglas L. Foshee
  $ 71,268     $ 589,317     $ 106,065     $ 491,952     $ 0     $ 762,500     $ 2,021,102  
D. Mark Leland
  $ 209,825     $ 279,213     $ 276,233     $ 145,784     $ 0     $ 39,313     $ 950,368  
Brent J. Smolik(5)
  $ 0     $ 0     $ 62,792     $ 28,928     $ 0     $ 0     $ 91,720  
James C. Yardley
  $ 1,154,996     $ 1,540,473     $ 597,194     $ 132,639     $ 2,868     $ 281,239     $ 3,709,409  
Robert W. Baker
  $ 192,803     $ 303,469     $ 536,377     $ 142,226     $ 0     $ 103,600     $ 1,278,475  
                                                         
Total
                                                  $ 8,051,074  
                                                         
 
 
(1) The amounts in this column reflect a lump sum payment.


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(2) The amounts in these columns may differ from the amounts in the Pension Benefits table due to several factors, including the use of different assumptions and the timing of commencement of payment.
 
(3) For Mr. Yardley, a voluntary termination would be treated as a qualified retirement. Therefore, for Mr. Yardley, this column shows the value of continued medical, dental and vision benefits for a period of three months at no cost.
 
(4) Unvested restricted stock and stock options are forfeited in the event of a voluntary termination. This column shows the value of vested stock options held by the named executive officer calculated using the difference between $7.83, the closing price of our common stock on December 31, 2008 and the applicable exercise price for each stock option. Mr. Yardley is age 57 and eligible for early retirement. Therefore, for Mr. Yardley, this column also shows the value of shares of restricted stock that vest on a pro-rata basis in the event of retirement calculated using $7.83, the closing price of our common stock on December 31, 2008.
 
(5) As of December 31, 2008, Mr. Smolik was not vested in his 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 participant’s position, or (2) a termination as a result of a reduction in force. The amount of severance pay is based on the individual’s years of service and his or her compensation level. The maximum amount of severance pay is 1X the participant’s annual base salary. Severance pay is paid in lump sum as soon as administratively practicable following termination. Participants are also entitled to receive continued medical and dental coverage for a period of three months following termination. Under our equity compensation plans, restricted stock vests on a pro-rata basis and unvested stock options are forfeited in the event of an involuntary termination without cause. Unless stock options expire by their own terms, vested stock options may be exercised for a period of one year.
 
Incremental Payments made upon Involuntary Termination without Cause
 
                                 
    El Paso Corporation
       
    Severance Pay Plan        
    Severance
  Continued
  Equity
   
    Payment
  Medical Benefits
  Awards
  Total
Name
  ($)    ($)   ($) (1)   ($)
 
Douglas L. Foshee
   $ 1,050,000     $ 2,934     $ 910,410     $ 1,963,344  
D. Mark Leland
  $ 519,756     $ 2,934     $ 307,907     $ 830,597  
Brent J. Smolik
  $ 566,520     $ 2,643     $ 181,672     $ 750,835  
James C. Yardley
  $ 515,016     $ 0 (2)   $ 0     $ 515,016  
Robert W. Baker
  $ 456,696     $ 2,898     $ 269,845     $ 729,439  
                                 
Total
                          $ 4,789,231  
                                 
 
 
(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 $7.83, the closing price of our common stock on December 31, 2008. The value of Mr. Yardley’s shares of restricted stock that vest on a pro-rata basis are included in the voluntary termination table. Unvested stock options are forfeited in the event of an involuntary termination without cause.


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(2) The value of Mr. Yardley’s continued medical benefits is included in the voluntary termination table.
 
Incremental Payments made upon Retirement
 
None of the named executive officers is eligible for retirement except for Mr. Yardley. Participants in our Pension Plan are eligible for early retirement if they are at least age 55 and have ten years of service. Mr. Yardley is age 57 and eligible for early retirement under our Pension Plan. For Mr. Yardley, the value of the early retirement pension benefits he would have received in the event he retired as of December 31, 2008 is reflected in the voluntary termination table above. The commencement of pension benefits before age 65 may result in a participant’s monthly qualified pension benefits being reduced to cover the cost of paying the benefits over a longer period of time. Retirement eligible employees are also entitled to receive continued medical and dental coverage for a period of three months following termination at no cost. In addition, under our equity compensation plans, restricted stock is vested on a pro-rata basis and unvested stock options are forfeited in the event of retirement. Unless stock options expire by their own terms, vested stock options may be exercised for a period of three years following retirement. See pages 56 and 57 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 Mr. Smolik, this also includes the value of his qualified pension benefits and supplemental pension benefits which become fully vested in the event of the named executive officer’s death. In the event of a named executive officer’s death, our Senior Executive Survivor Benefits Plan provides our named executive officers with survivor benefit coverage in lieu of the coverage provided generally under our group life insurance plan. The amount of benefits provided is 2.5 times the executive officer’s annual salary. Benefits are payable over 30 months beginning within 31 days after the executive’s death, except that the plan administrator may, in its discretion, accelerate payments. Under our equity compensation plans, outstanding stock options become fully vested and exercisable and the restriction periods applicable to shares of restricted stock immediately lapse in the event of death. Unless stock options expire by their own terms, the executive officer’s beneficiary would have one year to exercise all vested stock options.
 
Incremental Payments made upon Death
 
                                                 
        Supplemental
  Survivor
  Equity Awards    
    Pension
  Pension
  Benefit
  Stock
  Restricted
   
    Benefits
  Benefits
  Coverage
  Options
  Stock
  Total
Name
  ($) (1)   ($) (1)   ($)   ($) (2)   ($) (3)   ($)
 
Douglas L. Foshee
  $ 0     $ 0     $ 2,625,000     $ 0     $ 2,464,727     $ 5,089,727  
D. Mark Leland
  $ 0     $ 0     $ 1,299,390     $ 0     $ 844,606     $ 2,143,996  
Brent J. Smolik
  $ 26,625     $ 77,667     $ 1,416,300     $ 0     $ 588,315     $ 2,108,907  
James C. Yardley
  $ 0     $ 0     $ 1,287,540     $ 0     $ 469,964     $ 1,757,504  
Robert W. Baker
  $ 0     $ 0     $ 1,141,740     $ 0     $ 742,127     $ 1,883,867  
                                                 
Total
                                          $ 12,984,001  
                                                 
 
 
(1) The amount in these columns for Mr. Smolik includes qualified pension benefits and supplemental pension benefits which become fully vested in the event of the named executive officer’s 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 $7.83, the closing price of our common stock on December 31, 2008. As the stock options in question have exercise prices greater than $7.83, the value of these options as of December 31, 2008 is reported as $0.


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(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 $7.83, the closing price of our common stock on December 31, 2008.
 
Incremental Payments made upon Disability
 
The following table reflects the incremental value of enhanced benefits the named executive officers would receive in the event of permanent disability above the compensation and benefits the executive officers are entitled to as a result of a voluntary termination, which include disability benefits, the value of unvested stock options that become fully vested and the value of restricted stock that vests on a pro-rata basis. The named executive officers may elect to receive the disability benefits that are generally available to all eligible employees under our subsidized health and welfare benefits plan. In the event of a named executive officer’s permanent disability, disability income would be payable on a monthly basis as long as the executive officer qualifies as permanently disabled. For purposes of this table, we have assumed the executive officer is disabled for a period of one year. The restrictions on outstanding shares of restricted stock lapse on a prorated basis and all stock options become fully vested and 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     $ 0     $ 910,410     $ 1,210,410  
D. Mark Leland
  $ 259,878     $ 0     $ 307,907     $ 567,785  
Brent J. Smolik
  $ 300,000     $ 0     $ 181,672     $ 481,672  
James C. Yardley
  $ 257,508     $ 0     $ 0     $ 257,508  
Robert W. Baker
  $ 228,348     $ 0     $ 269,845     $ 498,193  
                                 
Total
                          $ 3,015,568  
                                 
 
 
(1) In the event of a named executive officer’s permanent disability, disability income would be payable on a monthly basis as long as the executive officer qualifies as permanently disabled. The amounts in this column assume disability income is paid to the executive officer for a period of one year.
 
(2) This column shows the value of stock options that become fully vested and exercisable in the event of the disability of a named executive officer calculated using $7.83, the closing price of our common stock on December 31, 2008. As the stock options in question have exercise prices greater than $7.83, the value of these options as of December 31, 2008 is reported as $0.
 
(3) For Messrs. Foshee, Leland, Smolik and Baker, this column shows the value of shares of restricted stock that vest on a pro-rata basis in the event of disability calculated using $7.83, the closing price of our common stock on December 31, 2008. The value of Mr. Yardley’s shares of restricted stock that vest on a pro-rata basis are included in the voluntary termination table.
 
Incremental Payments made upon Termination with Cause
 
In the event a named executive officer is terminated with cause, the named executive officer would not receive any benefits above the compensation and benefits he or she is entitled to as a result of a voluntary termination. In the event a named executive officer is terminated with cause, the executive officer is entitled to his or her vested benefits under our Pension Plan and Retirement Savings Plan (including supplemental benefits). The value of these benefits is shown in the voluntary termination table above. Supplemental pension and supplemental Retirement Savings Plan benefits are paid in lump sum. Under our equity compensation plans, unvested restricted stock and vested but unexercised stock options are forfeited in the event of a termination with cause.


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Incremental Payments made upon a Change in Control of El Paso
 
The following table reflects the incremental value of enhanced benefits the named executive officers would receive in the event of termination of employment following a change in control of El Paso above the compensation and benefits the executive officers are entitled to as a result of a voluntary termination, which include benefits under our 2004 Key Executive Severance Protection Plan and the value of stock options and restricted stock that become fully vested. In March 2004, El Paso adopted the 2004 Key Executive Severance Protection Plan to more closely align our executive severance protection plan with current market arrangements. This plan provides severance benefits following a termination of employment within two years of a change in control of El Paso for our executives and certain executives of our subsidiaries designated by our Board or the Compensation Committee, including all of the named executive officers, and supersedes benefits payable under our Severance Pay Plan (see “Incremental Payments made upon Involuntary Termination without Cause” above). The benefits of the plan include: (1) a cash severance payment in an amount equal to 3 times the annual base salary and target bonus for Mr. Foshee, and 2 times the annual base salary and target bonus for executive vice presidents and senior vice presidents, including Messrs. Leland, Smolik, Yardley and Baker; (2) a pro-rated portion of the executive’s target bonus for the year in which the termination of employment occurs; (3) continuation of life and health insurance following termination for a period of 36 months for Mr. Foshee and 24 months for executive vice presidents and senior vice presidents, including Messrs. Leland, Smolik, Yardley and Baker; (4) a gross-up payment for any federal excise tax imposed on an executive in connection with any payment or distribution made by us or any of our affiliates under the plan or otherwise; provided that in the event a reduction in payments in respect of the executive of 10% or less would cause no excise tax to be payable in respect of that executive, then the executive will not be entitled to a gross-up payment and payments to the executive shall be reduced to the extent necessary so that the payments shall not be subject to the excise tax; and (5) payment of legal fees and expenses incurred by the executive to enforce any rights or benefits under the plan. Supplemental pension benefits also become fully vested and payable to the executive in the event of a termination of employment following a change in control of El Paso. Under our equity compensation plans, the restriction periods applicable to shares of restricted stock immediately lapse and all outstanding stock options become fully vested and exercisable.
 
Incremental Payments made upon a Change in Control of El Paso
 
                                                         
        2004 Key Executive
           
        Severance Protection Plan            
    Supplemental
          Continued
  Equity Awards    
    Pension
  Severance
  Bonus
  Medical
  Stock
  Restricted
   
    Benefits
  Payment
  Payment
  Benefits
  Options
  Stock
  Total
Name
  ($) (1)   ($)   ($)   ($)   ($) (2)   ($) (3)   ($) (4)
 
Douglas L. Foshee
  $ 0     $ 6,930,000     $ 1,260,000     $ 35,469     $ 0     $ 2,464,727     $ 10,690,196  
D. Mark Leland
  $ 0     $ 1,663,219     $ 311,854     $ 23,646     $ 0     $ 844,606     $ 2,843,325  
Brent J. Smolik
  $ 77,667     $ 2,152,776     $ 509,868     $ 21,318     $ 0     $ 588,315     $ 3,349,944  
James C. Yardley
  $ 0     $ 1,802,556     $ 386,262     $ 14,082     $ 0     $ 469,964     $ 2,672,864  
Robert W. Baker
  $ 0     $ 1,461,427     $ 274,018     $ 23,358     $ 0     $ 742,127     $ 2,500,930  
                                                         
Total
                                                  $ 22,057,259  
                                                         
 
 
(1) The amount in this column for Mr. 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 $7.83, the closing price of our common stock on December 31, 2008. As the stock options in question have exercise prices greater than $7.83, the value of these options as of December 31, 2008 is reported as $0.
 
(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 $7.83, the closing price of our common stock on December 31, 2008.
 
(4) The named executive officers did not exceed their respective Code Section 280G safe harbor amounts and therefore no gross-up payment for federal excise taxes would have been owed in the event their employment was terminated on December 31, 2008 following a change in control of El Paso.


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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 executive’s status, title, position or responsibilities, (b) a reduction in the executive’s annual base salary, (c) the requirement that the executive’s 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 executive’s employment for cause which does not comply with the plan. Benefits are not payable for any termination of employment following a change in control if (i) the termination occurs in connection with the sale, divestiture or other disposition of our designated subsidiaries, (ii) the purchaser or entity subject to the transaction agrees to provide severance benefits at least equal to the benefits available under the plan, and (iii) the executive is offered, or accepts, employment with the purchaser or entity subject to the transaction. A “change in control” generally occurs if: (i) any person or entity becomes the beneficial owner of more than 20% 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.
 
DIRECTOR COMPENSATION
 
Our non-employee directors are compensated for their services on the Board under the 2005 Compensation Plan for Non-Employee Directors, which is designed to attract and retain highly qualified individuals to serve as members of our Board. All members of the Board are reimbursed for their reasonable expenses for attending Board functions. As an employee director, Mr. Foshee does not receive any additional compensation for serving on the Board of Directors.
 
Pursuant to our 2005 Compensation Plan for Non-Employee Directors, non-employee directors receive an annual retainer of $80,000, $20,000 of which is required to be paid in deferred shares of our common stock and the remaining $60,000 of which is paid at the election of the director in any combination of cash, deferred cash or deferred shares of common stock. For any compensation received in deferred shares rather than cash, he or she is credited with deferred shares with a value representing a 25 percent premium to the cash retainer he or she would otherwise have received. For example, an individual director could receive $60,000 in cash and $25,000 ($20,000, plus a $5,000 premium) in mandatory deferred common stock assuming he or she elects not to take additional deferred common stock or could receive $100,000 in deferred common stock assuming he or she elects to take the entire retainer in deferred common stock.
 
Each non-employee director who chairs a Committee of the Board of Directors receives an additional retainer of $15,000 per year, except for the Chairman of the Audit Committee who receives an additional retainer of $20,000 per year, which may be paid in the same manner as the annual retainer (with a total up to $18,750, or $25,000 in the case of the Audit Committee Chairman, if he or she elects to take the entire retainer in deferred common stock). Each member of the Audit Committee, other than the Audit Committee Chairman, receives an additional amount of $5,000 per year to compensate him or her for the additional meetings required by the Audit Committee, which amount may be paid in the same manner as the annual retainer (with a total of up to $6,250 if he or she elects to take the entire amount in deferred common stock).


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Each non-employee director also receives an annual long-term equity credit in the form of deferred shares of our common stock (without any premium) equal to the amount of the annual retainer (currently $80,000). Directors are not entitled to receive their deferred amounts until they cease to be a director of El Paso.
 
The Compensation Committee, in consultation with its independent compensation consultant, periodically reviews non-employee director compensation and recommends changes (if appropriate) to the full Board of Directors based upon competitive market practices. In July 2008, the Compensation Committee asked Deloitte to prepare an analysis of our current non-employee director compensation program. El Paso’s peer group of companies were examined, as well as a group of 24 comparably sized general industry companies (“general industry group”), to determine the competitive market for non-employee director compensation. The analysis showed that our non-employee director compensation is slightly below the median of both our peer group and the general industry group, assuming a minimum deferral of the cash retainer into deferred shares. If directors elect to defer all of the cash retainer into deferred shares, then our non-employee director compensation is slightly above the median of both our peer group and the general industry group. The Compensation Committee also reviewed the compensation of our Chairman against a group of 29 comparatively-sized companies across all industries. The Compensation Committee determined that when comparing our Chairman’s compensation to this group, our Chairman’s compensation is positioned below the median. The Compensation Committee did not recommend any increases to our non-employee director compensation program during 2008.
 
Chairman of the Board
 
Mr. Kuehn receives the same compensation 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. Kuehn’s 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. No premium payments were made to the plan in 2008, and 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.


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Director Compensation Table
 
The following table sets forth (1) the aggregate dollar amount of all fees, including each non-employee director’s 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 2008 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 2008. Our non-employee directors do not receive stock options or pension benefits.
 
Director Compensation
for the Year Ended December 31, 2008 (1)
 
                                                                 
    Fees
                           
    Earned or
                           
    Paid in Cash
  Stock Awards
      Change in
           
    ($) (2)   ($) (3)       Pension
           
    Annual
  Deferred
  Deferred
      Value and
           
    Board/
  Shares of
  Shares of
      Nonqualified
           
    Committee
  Common Stock
  Common Stock
      Deferred
           
    Chair
  for Retainer/
  for Long-
  Option
  Compensation
  All Other
       
    Cash
  Committee
  Term Equity
  Awards
  Earnings
  Compensation
  Total
   
Name
  Retainer   Chair Fees   Credit   ($) (4)   ($) (5)   ($) (6)   ($)    
 
Juan Carlos Braniff
  $ 65,000     $ 25,000     $ 80,000     $ 0     $ 0     $ 1,841     $ 171,841  
James L. Dunlap
  $ 60,000     $ 38,125     $ 80,000     $ 0     $ 930     $ 0     $ 179,055  
Robert W. Goldman
  $ 80,000     $ 35,500     $ 80,000     $ 0     $ 0     $ 5,000     $ 200,500  
Anthony W. Hall, Jr. 
  $ 75,000     $ 25,000     $ 80,000     $ 0     $ 0     $ 0     $ 180,000  
Thomas R. Hix
  $ 80,000     $ 45,000     $ 80,000     $ 0     $ 0     $ 0     $ 205,000  
William H. Joyce
  $ 60,000     $ 40,000     $ 80,000     $ 0     $ 0     $ 0     $ 180,000  
Ronald L. Kuehn, Jr.(7)
  $ 195,000     $ 40,000     $ 80,000     $ 0     $ 0     $ 32,143     $ 347,143  
Ferrell P. McClean
  $ 60,000     $ 40,000     $ 80,000     $ 0     $ 0     $ 0     $ 180,000  
Steven J. Shapiro
  $ 76,250     $ 44,063     $ 80,000     $ 0     $ 0     $ 0     $ 200,313  
J. Michael Talbert
  $ 60,000     $ 25,000     $ 80,000     $ 0     $ 0     $ 0     $ 165,000  
Robert F. Vagt
  $ 60,000     $ 25,000     $ 80,000     $ 0     $ 0     $ 0     $ 165,000  
John L. Whitmire
  $ 80,000     $ 45,000     $ 80,000     $ 0     $ 0     $ 0     $ 205,000  
Joe B. Wyatt
  $ 63,750     $ 32,969     $ 80,000     $ 0     $ 0     $ 0     $ 176,719  
 
 
(1) Employee directors do not receive any additional compensation for serving on the Board of Directors; therefore, Mr. Foshee’s compensation is reflected in the Summary Compensation Table on page 48 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 director’s 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 Messrs. Dunlap, Goldman, Hix, Joyce, Kuehn, Ms. McClean and Messrs. Shapiro, Whitmire and Wyatt for 2008 includes $52,500, $42,000, $80,000, $60,000, $60,000, $60,000, $76,250, $80,000, and $31,875, 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, 2008 is 106,942 deferred shares for Mr. Braniff; 70,252 deferred shares for Mr. Dunlap; 86,376 deferred shares for Mr. Goldman; 71,273 deferred shares for Mr. Hall; 72,673 deferred shares for Mr. Hix; 67,850 deferred shares for Mr. Joyce; 105,876 deferred shares for Mr. Kuehn; 38,818 deferred shares for Ms. McClean; 30,605 deferred shares for Mr. Shapiro; 54,173


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deferred shares for Mr. Talbert; 30,177 deferred shares for Mr. Vagt; 105,419 deferred shares for Mr. Whitmire; and 101,689 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, 2008 is 13,000 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, 11,000 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 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) The amount in this column is above-market interest credited during 2008 to Mr. Dunlap’s deferred cash account balance under the 2005 Compensation Plan for Non-Employee Directors.
 
(6) The amount reflected in this column for Mr. Braniff reflects the cost of an airline ticket for an occasion when the director’s spouse accompanied him on a business-related flight using a commercial carrier. 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 includes $15,920 to reimburse Mr. Kuehn for country club dues pursuant to Mr. Kuehn’s termination and consulting agreement, $9,276 of imputed income, plus a gross up payment of $768, related to insurance premiums paid by us for Mr. Kuehn’s benefit, $1,179 for an airline ticket for an occasion when the director’s spouse accompanied him on a business-related flight using a commercial carrier, 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.
 
EQUITY COMPENSATION PLAN INFORMATION TABLE
 
The following table provides information concerning our equity compensation plans as of December 31, 2008. 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
    13,380,179     $ 14.83       22,045,194 (2)
Equity compensation plans not approved by stockholders
    11,390,094     $ 44.43       0 (3)
                         
Total
    24,770,273               22,045,194  
                         
 
 
(1) Of the 24,770,237 shares listed in this column, 7,850,777 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.


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(2) This includes 2,436,651 shares available for future issuance under our Employee Stock Purchase Plan. It also includes 1,961,774 shares available for future issuance under our 2005 Compensation Plan for Non-Employee Directors.
 
(3) 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.
 
Non-stockholder Approved Plans — Terminated 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 and in each case have been terminated. 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 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 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.
 
PROPOSAL NO. 2 — Approval of 2005 Omnibus Incentive Compensation Plan,
as amended and restated
 
The Board of Directors recommends that stockholders approve the El Paso Corporation 2005 Omnibus Incentive Compensation Plan, as amended and restated, to increase the number of shares available for issuance by 12.5 million.
 
Description of the Proposal and Material Plan Changes
 
On February 9, 2009, the Board of Directors approved an amendment to the El Paso Corporation 2005 Omnibus Incentive Compensation Plan, or omnibus plan, subject to stockholder approval, to (i) increase the number of shares of common stock available for issuance by 12.5 million shares, (ii) decrease the number of “full-value” awards (i.e., awards other than stock options and stock appreciation rights) available for grant under the omnibus plan by 3.0 million (from 17.5 million to 14.5 million), and (iii) clarify share counting provisions. No other material changes were made to the plan. The amendment has been incorporated into an amendment and restatement of the omnibus plan, which is attached as Appendix A hereto. The Board is submitting the omnibus plan, as amended, for stockholder approval at the 2009 Annual Meeting.
 
Stockholder approval of the omnibus plan, as amended, will also constitute re-approval of the material terms of the performance goals under which compensation intended to constitute performance-based compensation, for purposes of Section 162(m) of the Code, may be paid.
 
Section 162(m) places a limit of $1 million on the amount we may deduct in any one year for compensation paid to our chief executive officer and our other three most highly-paid executive officers, other than our chief financial officer. There is, however, an exception to this limit for certain performance-based compensation. Awards


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made pursuant to the omnibus plan may constitute performance-based compensation not subject to the $1 million deductibility limitation of 162(m). However, in order to qualify for this exception, stockholders must approve, at least every five years, the material terms of the performance goals of the omnibus plan under which compensation will be paid. Stockholders last approved the performance goals under the omnibus plan in 2005.
 
The material terms of the performance goals being submitted for approval for purposes of Section 162(m) of the Code include: (i) the employees eligible to receive awards under the omnibus plan, (ii) a description of the business criteria on which the performance goals are based, and (iii) either the maximum amount of compensation that could be paid to any employee or the formula used to calculate the amount of compensation to be paid to the employee if the performance goals are attained. This information is provided in the summary of the omnibus plan below.
 
Summary of the Omnibus Plan
 
The complete text of the omnibus plan, as amended, is set forth as Appendix A attached hereto. The following is a general summary of the omnibus plan, which is qualified in its entirety by reference to Appendix A.
 
Purpose of the Omnibus Plan
 
The purpose of the omnibus plan is to promote the interests of the company and its stockholders by enhancing the company’s ability to attract and retain salaried employees through suitable recognition of their ability and industry. The omnibus plan is further intended to align the employees’ interests and efforts with the long-term interests of the company’s stockholders, and to provide employees with a direct incentive to achieve the company’s strategic and financial goals.
 
Effective Date and Duration
 
The omnibus plan originally became effective on May 26, 2005 when it was approved by stockholders at the 2005 annual meeting, and authorizes the granting of awards for up to ten years. The plan, as amended and restated, will become effective on May 6, 2009 if it is approved by stockholders at the 2009 annual meeting. The omnibus plan will remain in effect, subject to the right of the Board of Directors to terminate the plan at any time, until no awards remain outstanding.
 
Administration of the Omnibus Plan
 
The Compensation Committee of our Board of Directors is the plan administrator with respect to participants considered to be Section 16 Insiders and participants subject to Section 162(m). A management committee, consisting of our CEO and other senior officers delegated by the CEO, is the plan administrator with respect to all other participants.
 
The plan administrator has the full power to select employees to receive awards under the omnibus plan; determine the terms and conditions of awards; construe and interpret the plan and any awards granted thereunder; and, subject to certain limitations, amend the terms and conditions of outstanding awards. The plan administrator’s determinations and interpretations under the omnibus plan are binding on all interested parties.
 
Eligibility and Participation
 
Eligible participants include all employees (other than an employee who is a member of a unit covered by a collective bargaining agreement) of the company or any subsidiary, including employees who are members of our Board of Directors, but excluding directors who are not employees, as determined by the plan administrator. 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 the success of our company. The number of employees who are currently eligible to participate in the omnibus plan is approximately 5,000, from which the plan administrator has selected approximately 970 participants.


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Shares Subject to the Omnibus Plan
 
When it became effective in 2005, the omnibus plan authorized the issuance of up to 35,000,000 shares of our common stock; provided, however, that the maximum number of “full-value” awards (i.e., restricted stock, restricted stock units, performance shares, performance units and other stock-based awards) that could be granted under the plan was 17,500,000. As of December 31, 2008, 17,646,769 shares remained available for issuance under the plan, of which 11,248,667 could be issued as “full-value” awards.
 
The amended and restated omnibus plan, if approved by stockholders, will increase the maximum number of shares of common stock that may be issued under the plan by 12,500,000 shares. Based on the number of shares available for issuance as of December 31, 2008, the 12,500,000 increase would result in 30,146,769 shares remaining available for issuance under the plan. The amended and restated omnibus plan will also reduce the number of “full-value” awards available for grant under the plan by 3,000,000 (from 17,500,000 to 14,500,000). Based on the number of full-value awards available for issuance as of December 31, 2008, the 3,000,000 reduction would result in 8,248,667 “full-value” awards remaining available for issuance under the plan.
 
Any shares subject to an award which is granted under the omnibus plan and which terminates by expiration, forfeiture, cancellation or otherwise shall again be available for grant under the omnibus plan. Likewise, shares that have been issued in connection with an award of restricted stock that is canceled or forfeited prior to vesting or settled in cash, causing the shares to be returned to the company, will not be counted as having been issued under the plan. Finally, any shares subject to a restricted stock unit, performance share, performance unit or other stock-based award which is settled in cash in lieu of shares may again be available for grant under the plan.
 
Under the terms of the amended and restated omnibus plan, if shares are returned to the company in satisfaction of taxes related to restricted stock, in connection with cash out of restricted stock (but excluding upon forfeiture of restricted stock) or in connection with the tendering of shares by a participant in satisfaction of the exercise price or taxes relating to an award, such issued shares shall not become available again for issuance under the plan. In addition, each stock appreciation right issued under the plan will be counted as one share issued under the plan without regard to the number of shares issued to the participant upon exercise of such stock appreciation right.
 
In the event of a change in capitalization, as defined in the omnibus plan, the plan administrator shall make such adjustments as it determines are appropriate and equitable to (i) the maximum number and class of shares of common stock or other stock or securities with respect to which awards may be granted under the plan, (ii) the maximum number and class of shares of common stock or other stock or securities that may be issued upon exercise of stock options, (iii) the individual annual grant limits for Section 162(m), (iv) the number and class of shares of common stock or other stock or securities which are subject to outstanding awards and the stock option price or exercise price therefor, if applicable, and (v) performance goals.
 
The shares to be delivered under the omnibus plan may be made available from any combination of shares held in El Paso’s treasury or authorized but unissued shares of El Paso’s common stock. The closing price of a share of El Paso common stock on the NYSE on February 27, 2009 was $6.75.
 
Individual Annual Grant Limits
 
For purposes of Section 162(m) of the Code, (i) the maximum numb