UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission File Number 1-11234
KINDER MORGAN ENERGY PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 76-0380342
______________________________ _______________________________
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
1301 McKinney St.
Suite 3450
Houston, Texas 77010
_______________________________ _______________________________
(Address of principal executive (Zip Code)
offices)
(713) 844-9500
___________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The Registrant had 6,510,000 Common Units outstanding at March 31, 1997.
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KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited)
Consolidated Statement of Income - Three
Months Ended March 31, 1997 and 1996 3
Consolidated Balance Sheet - March 31, 1997
and December 31, 1996 4
Consolidated Statement of Cash Flows - Three
Months Ended March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
ITEM 1. Legal Proceeding 13
ITEM 5. Other Information 13
ITEM 6. Exhibits and Reports on Form 8-K 13
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In Thousands Except Per Unit Amounts)
(Unaudited)
Three Months Ended
March 31,
1997 1996
------------------------
Revenues
Trade $19,132 $ 18,431
------------------------
19,132 18,431
------------------------
Costs and Expenses
Cost of products sold 2,161 1,495
Operations and maintenance 3,817 4,915
Fuel and power 1,705 1,273
Depreciation and amortization 2,555 2,411
General and administrative 2,045 2,287
Taxes other than income taxes 922 926
------------------------
13,205 13,307
------------------------
Operating Income 5,927 5,124
Other Income (Expense)
Equity in earnings of partnerships 839 887
Interest expense (3,283) (3,192)
Other 155 197
Minority Interest (35) (29)
------------------------
Income Before Income Taxes 3,603 2,987
Income Tax Expense 175 177
------------------------
Net Income $3,428 $ 2,810
------------------------
General Partner's interest in Net Income 59 53
------------------------
Limited Partners' interest in Net Income $3,369 $ 2,757
========================
Allocation of Net Income per Unit $ 0.52 $ 0.42
========================
Number of Units used in Computation 6,510 6,510
========================
The accompanying notes are an integral part of these
consolidated financial statements.
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KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands)
(Unaudited)
March 31, December 31,
1997 1996
----------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 16,396 $ 14,299
Accounts receivable
Trade 10,030 7,970
Related parties - 4,390
Inventories
Products 823 882
Materials and supplies 1,665 1,827
----------------------------
28,914 29,368
----------------------------
Property, Plant and Equipment, at cost 272,891 272,178
Less accumulated depreciation 38,631 36,184
----------------------------
234,260 235,994
----------------------------
Investments in Partnerships 32,630 32,043
----------------------------
Deferred Charges and Other Assets 7,018 6,198
----------------------------
TOTAL ASSETS $ 302,822 $ 303,603
============================
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Accounts payable
Trade $ 7,384 $ 5,512
Related parties 220 4,520
Current portion of long-term debt 1,848 1,709
Accrued liabilities 2,868 811
Accrued taxes 2,343 2,304
Distribution payable - 4,210
----------------------------
14,663 19,066
----------------------------
Long-Term Liabilities and Deferred Credits
Long-term debt 160,214 160,211
Other 3,648 3,492
----------------------------
163,862 163,703
----------------------------
Minority Interest 2,525 2,490
----------------------------
Partners' Capital
Common units 120,534 117,165
General Partner 1,238 1,179
----------------------------
121,772 118,344
============================
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 302,822 $ 303,603
============================
The accompanying notes are an integral part of these
consolidated financial statements.
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KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
1997 1996
----------------------
Cash Flows From Operating Activities
Reconciliation of net income to net cash
provided by operating activities
Net income $ 3,428 $ 2,810
Depreciation and amortization 2,555 2,411
Equity in earnings of partnerships (839) (887)
Distributions from investments in partnerships 1,545 1,737
Changes in components of working capital
Accounts receivable 2,330 2,413
Inventories 221 609
Accounts payable (2,428) (2,349)
Accrued liabilities 2,057 1,841
Accrued taxes 39 (67)
Other, net (737) 150
----------------------
Net Cash Provided by Operating Activities 8,171 8,668
----------------------
Cash Flows From Investing Activities
Additions to property, plant and equipment (713) (1,910)
Contributions to partnership investment (1,293) (1,906)
----------------------
Net Cash Used in Investing Activities (2,006) (3,816)
----------------------
Cash Flows From Financing Activities
Issuance of long-term debt 14,600 -
Payments of long-term debt (14,597) (425)
Increase in short-term debt 139 -
Distributions to partners
Common units (4,101) (4,101)
General partner (67) (67)
Minority interest (42) (42)
----------------------
Net Cash Used In Financing Activities (4,068) (4,635)
----------------------
Increase in Cash and Cash Equivalents 2,097 217
Cash and Cash Equivalents, Beginning of Period 14,299 14,202
----------------------
Cash and Cash Equivalents, End of Period $16,396 $14,419
======================
The accompanying notes are an integral part of these
consolidated financial statements.
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KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
Kinder Morgan Energy Partners, L.P. (the "Partnership", formerly Enron
Liquids Pipeline, L.P.), a Delaware limited partnership was formed in August
1992. Effective February 14, 1997, Kinder Morgan, Inc. ("KMI") acquired all the
issued and outstanding stock of Enron Liquids Pipeline Company, the general
partner, from Enron Liquids Holding Corp. ("ELHC"). At the time of acquisition,
the general partner and the Partnership's subsidiaries were renamed as follows:
Kinder Morgan G.P., Inc. (the "General Partner", formerly Enron Liquids Pipeline
Company); Kinder Morgan Operating L.P. "A" ("OLP-A", formerly Enron Liquids
Pipeline Operating Limited Partnership); Kinder Morgan Operating L.P. "B" ("OLP-
B", formerly Enron Transportation Services, L.P.); and Kinder Morgan Natural Gas
Liquids Corporation ("KMNGL", formerly Enron Natural Gas Liquids Corporation).
The unaudited consolidated financial statements included herein have been
prepared by the Partnership without audit pursuant to the rules and regulations
of the Securities and Exchange Commission. Accordingly, they reflect all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the financial results for the interim periods. Certain
information and notes normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. However, the Partnership
believes that the disclosures are adequate to make the information presented not
misleading. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1996 ("Form 10-K").
Certain reclassifications have been made to the consolidated financial
statements for the prior period to conform with the current presentation.
2. Litigation
On September 12, 1995, the State of Illinois filed suit against the General
Partner for events related to a fire that occurred in September 1994 at the
North System's above-ground natural gasoline storage sphere at Morris, Illinois.
The suit seeks civil penalties in the stated amount of $50,000 each for three
counts of air and water pollution, plus $10,000 per day for any continuing
violation. The State also seeks an injunction against future similar events. On
August 29, 1996 the Illinois Attorney General's office proposed a settlement in
the form of a consent decree that would require the Partnership to implement
several fire protection recommendations, pay a $100,000 civil penalty, and pay a
$500 per day penalty if established deadlines for implementing the
recommendations are not met. The Partnership has made a settlement offer to the
State and settlement negotiations are ongoing. If attempts at settlement are
unsuccessful, the General Partner will vigorously defend itself and the
Partnership against the charges. Although no assurance can be given, the
Partnership believes that the ultimate resolution of this matter will not have a
material adverse effect on its financial position or results of operations.
On December 10, 1996, the U.S. Department of Transportation ("D.O.T.")
issued to the General Partner a notice of eight probable violations of federal
safety regulations in connection with the fire at the Morris storage field. The
D.O.T. proposed a civil penalty of $90,000. The General Partner has responded to
the notice, and believes that the alleged violations and proposed fine will not
have a material impact on the Partnership.
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It is expected that the Partnership will reimburse the General Partner for
any liability or expenses incurred by the General Partner in connection with
these legal proceedings.
3. Distributions
On February 14, 1997, the Partnership paid a cash distribution for the
quarterly period ended December 31, 1996, of $0.63 per unit. The distribution
was declared on December 19, 1996, payable to unitholders of record as of
January 31, 1997.
On April 16, 1997, the Partnership declared a cash distribution for the
quarterly period ended March 31, 1997, of $0.63 per unit. The distribution will
be paid on May 15, 1997, to unitholders of record as of April 30, 1997. Since
the distribution was declared after the end of the quarter, no amount is shown
on the March 31, 1997, balance sheet as a Distribution Payable. In prior
periods, distributions were declared prior to the end of such period.
4. Investment in Mont Belvieu Associates
Summarized income statement information for the Partnership's investment in
Mont Belvieu Associates, of which it holds a 50% interest, is presented below
(in thousands):
Three Months Ended
March 31,
1997 1996
-------------------
Income Statement
Revenues $ 8,228 $ 5,557
Expenses $ 6,981 $ 3,661
Net Income $ 1,247 $ 1,896
5. Assignment of Mobil Gas Processing Agreement
On October 1, 1995, the Partnership assumed Enron Gas Processing Company's
("EGP") rights and obligations under a gas processing agreement with Mobil
Natural Gas, Inc. (the "Mobil Agreement"). Pursuant to the Mobil Agreement, the
Partnership is required to process dedicated volumes of natural gas produced by
Mobil. Also on October 1, 1995, the Partnership entered into a sublease
agreement with EGP (the "Sublease Agreement"), pursuant to which the Partnership
subleases a portion of the capacity at the Bushton gas processing plant located
in Ellsworth County, Kansas (the "Bushton Plant"). On March 31, 1997, KN
Processing, Inc. ("KN"), a Colorado corporation, acquired the stock of EGP.
Effective April 1, 1997, the Partnership assigned its rights and
obligations under the Mobil Agreement to KN in exchange for KN's agreement to
terminate the Sublease Agreement. The Partnership also amended its Bushton
storage agreement with KN. The amendment extends the current agreement to 2004
and provides for a reduction in annual fees to be paid to KN. The Partnership
will also amend its facilities agreement with KN, providing for additional
services and cost reductions to the Partnership.
6. Partners' Capital
At December 31, 1996, Partners' capital consisted of 5,650,000 Common Units
held by third parties and 860,000 units held by the General Partner. Together,
these 6,510,000 units represent the limited partners' interest and a 98%
economic interest in the Partnership. The general partner interest represents a
2% economic interest in the Partnership, as defined in the Partnership
Agreements. On February 14, 1997, the limited partner interests held by the
General Partner were converted to Common Units. Also, on February 14, 1997,
429,000 of these units were sold by the General Partner to a third
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party. The General Partner retained the remaining 431,000 units. Since the
units owned by the General Partner are now Common Units, they are no longer
separately disclosed.
7. Related Party Transactions
The General Partner employs all employees of the Partnership and provides
the Partnership with general and administrative services. The General Partner is
entitled to reimbursement of all direct and indirect costs related to the
business activities of the Partnership. The General Partner has no related
commercial transactions with the Partnership; therefore, the Partnership's
reimbursements to the General Partner are not considered related party
transactions.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
First Quarter 1997 Compared With First Quarter 1996
Net income of the Partnership increased to $3.4 million (22%) in 1997 from
$2.8 million in 1996. The increase primarily reflects higher earnings from the
Cora Terminal, North System, and the Central Basin Pipeline., offset by lower
earnings on the Painter Processing Plant.
Revenues of the Partnership increased $0.7 million (4%) in the first
quarter of 1997 compared to the same period in 1996. The increase in revenues
was due primarily to a 31% increase in transport volumes at the Cora Terminal,
partially offset by lower average revenue per ton. The Central Basin Pipeline
and the North System also realized higher revenues. Central Basin's revenue
increase was due to a 32% increase in transported volumes, partially offset by a
decrease in average tariffs due to contractual discounts. Although total
throughput on the North System declined by 6%, the product mix of the throughput
resulted in higher revenues per barrel which led to a 26% increase in revenues.
Cypress Pipeline's revenues increased 10% due to a 14% increase in transported
volumes, partially offset by a decrease in average tariffs due to contractual
discounts. Revenues decreased at the Partnership's Painter Plant due to the
termination of the gas processing agreement by Chevron, USA ("Chevron")
effective as of August 1, 1996. The overall increase in first quarter revenues
were partially offset by a decrease in revenues at the Painter Gas Plant due to
the lack of processing at the Plant. On February 14, 1997, the Partnership
executed an operating lease agreement with Amoco Oil Company ("Amoco") for
Amoco's use of the Painter Plant fractionator and the Millis facilities with the
nearby Amoco Painter Complex Gas Plant. The lease will generate approximately
$1.0 million of cashflow in 1997 with annual escalations thereafter.
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<PAGE>
Operating statistics for the first quarter are as follows:
First Quarter
1997 1996
------------------
Liquids pipelines
North System
Delivery Volumes (MMBbls) 8.8 9.4
Average Tariff ($/Bbl) $1.01 $0.86
Cypress Pipeline
Delivery Volumes (MMBbls) 3.2 2.8
Average Tariff ($/Bbl) $0.46 $0.49
Central Basin Pipeline
Delivery Volumes (MMcf/d) 192 146
Average Tariff ($/Mcf) $0.14 $0.16
Coal transfer and storage
Cora Terminal
Transport Volumes (MM Tons) 1.7 1.3
Average Revenues ($/Ton) $1.41 $1.46
Gas processing and fractionation
Painter Gas Processing Plant
Processing Volumes (MMcf/d) - 34
Average Revenues ($/Mcf) $0.00 $0.34
Fractionator Volumes (MBbls/d) 4.0 5.3
Average Revenues ($/Bbl) $0.98 $0.94
Bushton Facility Sublease
Production Volumes (MMBbls) 0.4 0.5
Average Revenues ($/Bbl) $2.76 $2.68
Earnings contribution by business segment for the first quarter is as
follows:
Earnings Contribution by Business Segment*
(Unaudited)
(In Thousands)
First Quarter
1997 1996
------------------
Liquids pipelines 6,508 5,750
Coal transfer and storage 1,657 937
Gas Processing and Fractionation 448 1,444
----------------------
* Excludes general and administrative expenses, debt costs and minority
interest
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<PAGE>
Combined cost of products sold and fuel and power expenses increased $1.1
million to $3.9 million during the first quarter of 1997 compared to $2.8
million during the first quarter of 1996, due primarily to increased volumes.
This increase was offset by a $1.1 million decrease in operations and
maintenance expenses, which was partially attributable to the cessation of gas
processing at the Painter Gas Plant. Operating income benefited from an 11%
reduction in general and administrative costs due to cost savings realized by
the General Partner.
Earnings were negatively affected by a decrease in Equity in earnings of
partnerships and an increase in interest expense. Together, these two items
resulted in only a $0.1 million (6%) decrease from the first quarter of 1996.
Financial Condition
General
The Partnership's primary cash requirements, in addition to normal
operating expenses, are debt service, sustaining capital expenditures,
discretionary capital expenditures, and quarterly distributions to partners. In
addition to utilizing cash generated from operations, the Partnership could meet
its cash requirements through the utilization of credit facilities or by issuing
additional limited partner interests in the Partnership. In addition, the
Partnership has a $15.0 million committed line of credit with a bank of which
$2.0 million was available at March 31, 1997. The Partnership also has the
ability to borrow up to an additional $25.0 million in accordance with the
provisions of the First Mortgage Notes. Additionally, Kinder Morgan Operating
L.P. "B" ("OLP-B") has established a $7.225 million revolving line of credit
with a bank which could be used to meet its cash requirements. The General
Partner has agreed that, if necessary, it will contribute up to $10.9 million to
the Partnership through November 15, 1997 in exchange for additional partnership
interests to support the Partnership's ability to distribute the Minimum
Quarterly Distribution, as defined in the Partnership Agreement.
Cash Provided by Operating Activities
Cash flow from operations totaled $8.2 million during the first quarter of
1997 compared to $8.7 million in the same period in 1996. The decrease is
primarily due to increased working capital requirements caused by increased
product inventory over March 31, 1996 levels and an increase in the net amount
owed to the Partnership by Enron Corporation. Cash flow from operations also
decreased due to prepayment of NGL storage fees during the quarter ended March
31, 1997.
Effective April 1, 1997, the Partnership terminated its sublease of the
Bushton gas processing plant. See Note 5 to the Consolidated Financial
Statements. The Partnership does not expect the termination of the Bushton
sublease to have a material affect on the operations of the Partnership.
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<PAGE>
Cash Used in Investing Activities
Cash used in investing activities totaled $2.0 million during the first
quarter of 1997 compared to $3.8 million during the first quarter of 1996.
Additions to property, plant and equipment totaled $0.7 million in the first
quarter of 1997 compared to $1.9 million during the same period in 1996. The
higher additions to property, plant and equipment in the first quarter of 1996
primarily reflect construction costs of a propane terminal on the North System
located in Tampico, Illinois.
Contributions to Partnership investments decreased $0.6 million during the
first quarter of 1997. The Contributions to Partnership investments for 1996
reflect the Partnership's partial funding of its $6.5 million share of an
expansion project at the Mont Belvieu Fractionator.
Cash Used in Financing Activities
Cash used in financing activities totaled $4.1 million during the first
quarter of 1997 as compared to $4.6 million during the same period in 1996. Both
periods primarily reflect cash distributions paid to unitholders.
Information Regarding Forward Looking Statements
This filing includes forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although the Partnership believes that its expectations
are based on reasonable assumptions, it can give no assurance that its goals
will be achieved. Price trends and overall demand for NGLs, CO2 and coal in the
United States and the condition of the capital markets and equity markets could
cause actual results to differ from those in the forward looking statements
herein.
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PART II. OTHER INFORMATION
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
ITEM 1. Legal Proceedings
See Part I, Item 1, Note 2 to Consolidated Financial Statements entitled
"Litigation" which is incorporated herein by reference.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 10.1 Employment agreement with William V.
Morgan
Exhibit 10.2 Employment agreement with Thomas B. King
Exhibit 27 Financial Data Schedule as of and for
the three months ended March 31, 1997
(b) Reports on Form 8-K.
Report dated February 14, 1997, on Form 8-K was filed on March 3, 1997,
pursuant to Items 1, 5, and 7 of that form. A change in control of Registrant
was disclosed in accordance with Item 1, the establishment of a revolving credit
facility in the amount of $15,875,000 with First Union National Bank of North
Carolina was disclosed according to Item 5, and exhibits of security agreements,
credit agreements, and amendments to such agreements were filed pursuant to Item
7.
Report dated April 2, 1997, on Form 8-K was filed on April 15, 1997,
pursuant to Items 4 and 5 of that form. A change in Registrant's independent
accountants was disclosed in Item 4 of this filing. The assignment of a gas
processing agreement with Mobil Natural Gas, Inc. to KN Processing, Inc. was
disclosed pursuant to Item 5 of this filing.
Report dated April 17, 1997, on Form 8-K was filed on April 25, 1997,
pursuant to Item 1 of that form. A change in control of Registrant was disclosed
in this filing.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KINDER MORGAN ENERGY PARTNERS, L.P.
(A Delaware Limited Partnership)
By: Kinder Morgan G.P., Inc.
as General Partner
Date: May 12, 1997 By: /s/ David G. Dehaemers, Jr.
_______________________________
David G. Dehaemers, Jr.
Secretary/Treasurer and
Chief Accounting Officer
Page 14 of 14
EMPLOYMENT AGREEMENT
This Agreement (the "Agreement") is made and entered into on April 17,
1997, but effective as of February 14, 1997 (the "Effective Date"), between
KINDER MORGAN G.P., INC., (the "Company"), a Delaware corporation, and WILLIAM
V. MORGAN ("Employee"), who currently resides at Four Seasons Place, 1111
Caroline Street, Apt. 2801, Houston, Texas 77010.
1. Agreement to Employ. The Company hereby employs Employee and
Employee hereby accepts employment upon the terms and conditions hereinafter
set forth. Employee will initially serve as the Vice Chairman of the Company
and will perform such other duties as may be designated or assigned to him from
time to time by the Company's Board of Directors and which are consistent with
the executive-level responsibilities currently assigned to Employee. Employee
agrees to devote a majority of his time to the discharge of the affairs of the
Company; but, the Company acknowledges and agrees that Employee has outside
business interests which will also require a portion of Employee's time and
attention.
2. Compensation.
a. Salary. For all services to be rendered by Employee, the Company
shall pay Employee a salary at the rate of $200,000.00 per year,
in installments of equal frequency to the Company's standard payroll
practices. Salary payments shall be subject to withholding and other
applicable taxes (e.g., federal and state withholding, FICA, earnings
tax, etc.). The amount of salary due to Employee under this
Agreement for any period of time less than one (1) month shall be
prorated, based upon the number of days worked by Employee.
b. Salary Adjustments. The salary payable to Employee hereunder
will be adjusted on each anniversary of the Effective Date, by
increasing it in the same proportion that the "Consumer Price Index"
most recently published (as of such anniversary) by the United States
Department of Labor has increased in comparison to the Consumer Price
Index which had been most recently published by the Department of Labor
one (1) year earlier. The Company will notify Employee each year of the
amount of the CPI increase and Employee's salary for that year. No
decrease in Employee salary, as adjusted from time to time, will occur
as a result of the adjustments provided herein. The "Consumer Price
Index" shall mean the Consumer Price Index for Urban Wage Earners and
Clerical Workers, U.S. City Average, for all items, as promulgated by
the Bureau of Labor Statistics of the United States Department of Labor
(or if publication of such index is discontinued, any substantially
equivalent successor index).
3. Term. This Agreement shall be for a term commencing on the
Effective Date and continuing for an initial term of three (3)
<PAGE>
years. The term of this Agreement shall be extended on each anniversary of
the Effective Date for an additional one (1) year period, such that as of
each anniversary of the Effective Date, there shall be three (3) years
remaining in the term of this Agreement.
4. Personnel Policies and Employee Benefits. The general personnel
policies of the Company will apply to Employee with the same force and effect
as to any other employee of the Company, except to the extent such general
personnel policies are inconsistent with the terms and provisions of this
Agreement, in which event, the terms and provisions of this Agreement shall
control. Such personnel policies shall include Employee's eligibility
for employee benefits, if any, such as insurance of any kind, including life,
medical and disability insurance, and similar employee benefits as the
Board of Directors of the Company determines, in its sole discretion, from
time to time. In the event that the Company's general personnel policies
provide benefits or compensation to the Company's employees such as vacation,
and Employee is given a similar or comparable benefit pursuant to this
Agreement, the benefit shall not be cumulative and Employee shall be entitled
only to the benefits conferred by this Agreement.
5. Termination of Employment by the Company.
a. Without Cause. The Company may terminate Employee's
employment under this Agreement at any time without cause; provided,
however, that in such event, the Company shall continue to pay Employee
salary as required (and as adjusted from time to time) pursuant to
Section 2 hereof as severance pay for the remaining unexpired term of
this Agreement, as it may have been extended from time to time pursuant
to Section 3 (the "Severance Period"). Although, as stated above,
the Company will continue to make salary payments to Employee during the
Severance Period following his termination without cause, Employee will
cease to be an employee of the Company as of the date notice of
termination is given and he will not receive or accrue any benefits of
employment after such termination of employment (e.g., life insurance,
health insurance (other than COBRA extension rights), disability insurance,
vacation accrual or other benefits provided pursuant to this Agreement
or otherwise in conjunction with Employee's employment).
b. With Cause. The Company may terminate Employee's employment
under this Agreement at any time for cause effective immediately upon
Notice of Termination. In the event the Company terminates this
Agreement for cause on the part of Employee, Employee shall receive
salary for the period to the date of his termination, but the Company
shall not be obligated to pay any salary or other compensation for any
2
<PAGE>
period of time after such termination. Employee shall not be entitled
to receive severance pay from the Company if his employment is
terminated for cause. For purposes of this Agreement, "cause" shall
mean the occurrence of any of the following events:
(i) A Grand Jury indictment or a prosecutorial information
(or any procedurally equivalent action) charging Employee with
illegal or fraudulent acts, criminal conduct or willful misconduct
relating to the activities of the Company;
(ii) A Grand Jury indictment or a prosecutorial information
(or any procedurally equivalent action) charging Employee with any
criminal acts involving moral turpitude having a material adverse
effect upon the Company;
(iii) Grossly negligent failure by Employee to perform his duties
in a manner which he knows, or has reason to know, to be in the
Company's best interests;
(iv) Bad faith refusal by Employee to carry out reasonable
instructions of the Board not inconsistent with the provisions of this
Agreement; or
(v) Material violation by the Employee of any of the covenants
and agreements contained in Section 1 hereof.
c. Death. If Employee dies during the term of this Agreement,
this Agreement shall terminate as of the date of such death and no
salary or severance pay will be paid for the period subsequent to
Employee's death.
d. Disability. The Company may terminate Employee's employment
under this Agreement at any time effective immediately upon written
Notice of Termination if Employee becomes "totally and permanently
disabled" (as hereinafter defined) so as to preclude Employee from
performing his duties hereunder. If so terminated, Employee shall be
entitled to receive: (i) the amount of any insurance proceeds payable to
Employee under disability insurance policies, if any, then maintained for
Employee's (and not the Company's) benefit; and (ii) salary through the
effective date of termination of employment. Employee shall be deemed
to be "totally and permanently disabled" (x) if Employee provides written
acknowledgement thereof (or if Employee is unable to give such
acknowledgement, it is provided by any adult member of his family),
(y) a qualified independent physician selected by the Company shall have
provided his opinion that Employee either (1) is permanently disabled,
or (2) is incapable of resuming substantially full performance of his
duties for the Company
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for a period of at least six (6) months after his initial disability,
or (z) Employee refuses to submit to an examination by an independent
physician selected by the Company for purposes of determining whether
a total and permanent disability has occurred.
6. Termination of Employment by Employee. Employee shall have the
right to terminate his employment at any time by providing at least
thirty (30) days' prior written Notice of Termination to the Company.
Following such termination, Employee shall receive salary for the period
through the date of termination, but the Company shall not be obligated
to pay any salary or compensation (including severance pay) for any period
of time after such termination.
7. Notice of Termination. Any termination of Employee's employment
by the Company pursuant to Section 5 or by Employee pursuant to Section 6
shall be communicated by written Notice of Termination to the other party
hereto. Said Notice shall be deemed to have been duly given when delivered
or mailed by United States certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Company:
Kinder Morgan G.P., Inc.
1301 McKinney Street, Suite 3450
Houston, Texas 77010
Attention: Richard D. Kinder
If to the Employee:
William V. Morgan
Four Seasons Place
1111 Caroline Street, Apt. 2801
Houston, Texas 77010
or at such other address as either party may designate in
writing to the other.
8. Company Property; Confidentiality. Upon termination of this Agreement
for any reason whatsoever, Employee shall immediately deliver to the Company
any and all confidential, proprietary or other property, tangible or intangible,
of the Company. Employee agrees to maintain the confidentiality of all trade
secrets and proprietary and confidential information (collectively, the
"Confidential Information") of the Company, both during and subsequent to any
periods of employment with the Company, and Employee will not, without express
written authorization by the Company, directly or indirectly reveal or cause
or allow to be revealed any such Confidential Information to any
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person other than to the Company's employees who are authorized to receive
such Confidential Information in order to perform their duties for the Company,
nor will Employee use any such Confidential Information to the detriment of
the Company or other than in the course of his employment with the Company.
9. Intellectual Property. Any interest in patents, patent applications,
inventions, copyrights, developments and processes ("Inventions") which
Employee now or hereafter during the period Employee is employed by the
Company may own or develop relating to the fields in which the Company may
then be engaged shall belong to the Company; and forthwith upon request of the
Company, Employee shall execute all assignments and other documents and take
all such other action as the Company may reasonably request in order to vest
in the Company all his right, title and interest in and to the Inventions free
and clear of all liens, charges and encumbrances.
10. Key-Man Life Insurance. If requested by the Company, Employee shall
submit to such physical examinations and otherwise take such actions and execute
and deliver such documents as may be reasonably necessary to enable the
Company, at its expense and for its own benefit, to obtain life insurance
on the life of the Employee. The disposition of the proceeds of such policy
shall be in the sole discretion of the Company.
11. Restrictive Covenant.
a. Non-Competition. Employee agrees that while he remains in the
employ of the Company and for a period of twelve (12) months following
termination of such employment (whether such termination is effected
by Employee or the Company and whether with or without cause), Employee
will not anywhere in the United States, directly or indirectly, own,
manage, operate, join, contract or participate in the ownership,
management or control of or be employed by or be connected in any manner
with any business which is or may be competitive in any manner to the
business engaged in as of the date of such termination by the Company or
any partnership in which the Company is a general partner or any of the
direct or indirect subsidiaries or affiliates of such partnerships,
including, without limitation, Kinder Morgan Energy Partners, L.P.,
Kinder Morgan Operating L.P. "A", Kinder Morgan Operating L.P.
"B" and Kinder Morgan Natural Gas Liquids Corporation (collectively,
excluding the Company, the "Company Affiliates"). Notwithstanding the
foregoing, both during and subsequent to his employment with the Company,
Employee may: (i) own up to five percent (5%) of the outstanding equity
securities of any corporation, partnership or other business which is
listed upon a national stock exchange or traded in the over-the-counter
market, and (ii) continue his ownership, management, operation, control
and other participation with
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those businesses in which Employee is involved as of the Effective Date
and any additional businesses or opportunities which have been approved
by the Board of Directors of the Company or its Conflicts and Audit
Committee (or other appropriate committee of the Board of Directors).
b. Reformation. In the event any restriction contained in this
Section 11.a. should be considered by any court of competent jurisdiction
to be unenforceable because unreasonable either in length of time or area
to which said restriction applies, it is the intent of the parties hereto
that said court reduce and reform the provisions thereof so as to
apply to limits considered enforceable by said court.
c. Specific Performance. Recognizing that irreparable damage will
result to the Company and/or the Company Affiliates in the event of
breach of the covenants and assurances of Section 10.a. by Employee,
the Company and/or the Company Affiliates shall be entitled to an
injunction to be issued by any court of competent jurisdiction enjoining
and restraining Employee and each and every person, firm, company,
corporation, partnership or other entity acting in concert or
participating with Employee from the continuation of such breach, and in
addition thereto, Employee shall pay to the Company and the Company
Affiliates all ascertainable damages, including costs and reasonable
attorneys' fees and expenses, sustained by the Company and the Company
Affiliates by reason of the breach of said covenants and assurances.
12. Expense Reimbursement. Employee shall be reimbursed by the Company
for the reasonable and necessary business expenses incurred by Employee in the
discharge of his duties, subject to the Company's standard policies and
procedures related to expense reimbursement and approval thereof.
13. Waiver. Failure of either party to demand strict compliance with
any of the terms, covenants or conditions hereof shall not be deemed a waiver
of such term, covenant or condition, nor shall any waiver or relinquishment by
either party of any right or power hereunder at any one time or more times
be deemed a waiver or relinquishment of such right or power at any other
time or times.
14. Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
15. Governing Law; Binding Effect. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas and shall be
binding upon the parties hereto, their heirs, executors, administrators,
successors and assigns.
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16. Entire and Final Agreement. This Agreement shall supersede any and
all agreements of employment, oral or written (including correspondence,
memoranda, term sheets, etc.), heretofore existing and contains the entire
agreement of the parties with respect to the subject matter hereof. This
Agreement may not be modified orally, but only by an agreement in writing,
signed by the party against whom the enforcement of any waiver, change,
modification, extension or discharge is sought.
17. Assignment. This Agreement is not assignable by any party hereto
without the written consent of the other parties hereto.
18. Section Headings. The section headings contained in this Agreement
are inserted for purposes of convenience only and shall not affect the meaning
or interpretation of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf and Employee has hereunto set his hand the day and year first
above written.
EMPLOYEE: COMPANY:
KINDER MORGAN G.P., INC.
/s/ William v. Morgan By: /s/ Richard D. Kinder
__________________________ ___________________________
William V. Morgan
7
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), including the attached Exhibit
A", is entered into between Kinder Morgan G.P. Inc. ("Employer"), a __________
corporation, having offices at 1301 McKinney, Suite 3450, Houston, Texas 77010,
and Thomas B. King ("Employee"), an individual currently residing at 5816
Charlotte St., Houston, TX 77005, to be effective as of February 15, 1997
(the "Effective Date").
WITNESSETH:
WHEREAS, Employer is desirous of employing Employee pursuant to the terms
and conditions and for the consideration set forth in this Agreement, and
Employee is desirous of entering the employ of Employer pursuant to such terms
and conditions and for such consideration.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants,
and obligations contained herein, Employer and Employee agree as follows:
ARTICLE 1: EMPLOYMENT AND DUTIES:
1.1 Employer agrees to employ Employee, and Employee agrees to be employed
by Employer, beginning as of the Effective Date and continuing until the date
set forth on Exhibit "A" (the "Term"), subject to the terms and conditions
of this Agreement.
1.2 Employee initially shall be employed in the position set forth on
Exhibit A. Employer may subsequently assign Employee to a different position
or modify Employee's duties and responsibilities. Moreover, Employer may
assign this Agreement and Employee's employment to an affiliate of Employer.
Employee agrees to serve in the assigned position and to perform diligently
and to the best of Employee's abilities the duties and services appertaining to
such position as determined by Employer, as well as such additional or
different duties and services appropriate to such position which Employee from
time to time may be reasonably directed to perform by Employer. Employee shall
at all times comply with and be subject to such policies and procedures as
Employer may establish from time to time.
1.3 Employee shall, during the period of Employee's employment by Employer,
devote Employee's full business time, energy, and best efforts to the business
and affairs of Employer. Employee may not engage, directly or indirectly, in
any other business, investment, or activity that interferes with Employee's
performance of Employee's duties hereunder, is contrary to the interests of
Employer, or requires any significant portion of Employee's business time.
<PAGE>
1.4 In connection with Employee's employment by Employer, Employer shall
endeavor to provide Employee access to such confidential information pertaining
to the business and services of Employer as is appropriate for Employee's
employment responsibilities. Employer also shall endeavor to provide to
Employee the opportunity to develop business relationships with those of
Employer's clients and potential clients that are appropriate for Employee's
employment responsibilities.
1.5 Employee acknowledges and agrees that Employee owes a fiduciary duty
of loyalty, fidelity and allegiance to act at all times in the best interests
of the Employer and to do no act which would injure Employer's business,
its interests, or its reputation. It is agreed that any direct or indirect
interest in, connection with, or benefit from any outside activities,
particularly commercial activities, which interest might in any way adversely
affect Employer, or any of its affiliates, involves a possible conflict of
interest. In keeping with Employee's fiduciary duties to Employer, Employee
agrees that Employee shall not knowingly become involved in a conflict of
interest with Employer or its affiliates, or upon discovery thereof, allow
such a conflict to continue. Moreover, Employee agrees that Employee shall
disclose to Employer's Chief Executive Officer any facts which might involve
such a conflict of interest that has not been approved by Employer's Chief
Executive Officer.
1.6 Employer and Employee recognize that it is impossible to provide an
exhaustive list of actions or interests which constitute a "conflict of
interest." Moreover, Employer and Employee recognize there are many borderline
situations. In some instances, full disclosure of facts by the Employee to
Employer's Chief Executive Officer may be all that is necessary to enable
Employer or any affiliate to protect its interests. In others, if no improper
motivation appears to exist and the interests of Employer or its affiliates
have not suffered, prompt elimination of the outside interest will suffice. In
still others, it may be necessary for Employer to terminate the employment
relationship. Employer and Employee agree that Employer's determination as to
whether a conflict of interest exists shall be conclusive. Employer reserves
the right to take such action as, in its judgment, will end the conflict.
ARTICLE 2: COMPENSATION AND BENEFITS:
2.1 Employee's monthly base salary during the Term shall be not less than
the amount set forth under the heading "Monthly Base Salary" on Exhibit A,
subject to increase at the sole discretion of the Employer, which shall be paid
in semimonthly installments in accordance with Employer's standard payroll
practice. By February 1, 1998, Employer shall conduct an industry related
salary survey of similarly situated employers of like size and profitability,
and present such data with an assessment of Employee's performance for
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<PAGE>
1997 to its Board of Directors for review and determination of Employee's
monthly base salary. Any calculation to be made under this Agreement with
respect to Employee's Monthly Base Salary shall be made using the then current
Monthly Base Salary in effect at the time of the event for which such
calculation is made.
2.2 While employed by Employer (both during the Term and thereafter),
Employee shall be allowed to participate, on the same basis generally as other
employees of Employer, in all general employee benefit plans and programs,
including improvements or modifications of the same, which on the effective
date or thereafter are made available by Employer to all or substantially all
of Employer's employees. Such benefits, plans, and programs may include,
without limitation, medical, health, and dental care, life insurance,
disability protection, and pension plans. Nothing in this Agreement is to be
construed or interpreted to provide greater rights, participation, coverage,
or benefits under such benefit plans or programs than provided to similarly
situated employees pursuant to the terms and conditions of such benefit plans
and programs.
2.3 Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such employee benefit program or plan, so long as such actions are similarly
applicable to covered employees generally. Moreover, unless specifically
provided for in a written plan document adopted by the Board of Directors of
Employer, none of the benefits or arrangements described in this Article 2
shall be secured or funded in any way, and each shall instead constitute an
unfunded and unsecured promise to pay money in the future exclusively from the
general assets of Employer.
2.4 Employer shall use its best efforts to establish and implement by
May 15, 1997, a phantom equity plan for its key personnel. Employee shall be
entitled to participate in such phantom equity plan.
2.5 Employer may withhold from any compensation, benefits, or amounts
payable under this Agreement all federal, state, city, or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
ARTICLE 3: TERMINATION PRIOR TO EXPIRATION OF TERM AND
EFFECTS OF SUCH TERMINATION:
3.1 Notwithstanding any other provisions of this Agreement, Employer shall
have the right to terminate Employee's employment under this Agreement at any
time prior to the expiration of the Term for any of the following reasons:
(i) For "cause" upon the good faith determination by Employer's Board
of Directors that "cause" exists for the
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termination of the employment relationship. As used in this Section
3.1(i), the term "cause" shall mean [a] Employee's gross negligence
or willful misconduct in the performance of the duties and services
required of Employee pursuant to this Agreement; or [b] Employee's
final conviction of a felony or of a misdemeanor involving moral
turpitude; [c] Employee's involvement in a conflict of interest
as referenced in Sections 1.5-1.6 for which Employer makes a
determination to terminate the employment of Employee; or
[d]Employee's material breach of any material provision of this
Agreement which remains uncorrected for thirty (30) days following
written notice to Employee by Employer of such breach. It is
expressly acknowledged and agreed that the decision as to whether
"cause" exists for termination of the employment relationship by
Employer is delegated to the Board of Directors of Employer for
determination. If Employee disagrees with the decision reached by
Employer, the dispute will be limited to whether the Board of
Directors of Employer reached its decision in good faith;
(ii) for any other reason whatsoever, with or without cause, in the sole
discretion of the Chief Executive Officer of Employer;
(iii) upon Employee's death; or
(iv) upon Employee's becoming incapacitated by accident, sickness, or
other circumstance which renders him or her mentally or physically
incapable of performing the duties and services required of Employee.
The termination of Employee's employment by Employer prior to the expiration of
the Term shall constitute a "Termination for Cause" if made pursuant to Section
3.1(i); the effect of such termination is specified in Section 3.4. The
termination of Employee's employment by Employer prior to the expiration of the
Term shall constitute an "Involuntary Termination" if made pursuant to Section
3.1(ii); the effect of such termination is specified in Section 3.5. The
effect of the employment relationship being terminated pursuant to Section
3.1(iii) as a result of Employee's death is specified in Section 3.6.
The effect of the employment relationship being terminated pursuant to Section
3.1(iv) as a result of the Employee becoming incapacitated is specified in
Section 3.7.
3.2 Notwithstanding any other provisions of this Agreement except Section
7.5, Employee shall have the right to terminate the employment relationship
under this Agreement at any time prior to the expiration of the Term of
employment for any of the following reasons:
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(i) a material breach by Employer of any material provision of this
Agreement which remains uncorrected for 30 days following written
notice of such breach by Employee to Employer; or
(ii) for any other reason whatsoever, in the sole discretion of Employee.
The termination of Employee's employment by Employee prior to the expiration
of the Term shall constitute an "Involuntary Termination" if made pursuant to
Section 3.2(i); the effect of such termination is specified in Section 3.5.
The termination of Employee's employment by Employee prior to the expiration
of the Term shall constitute a "Voluntary Termination" if made pursuant to
Section 3.2(ii); the effect of such termination is specified in Section 3.3.
3.3 Upon a "Voluntary Termination" of the employment relationship by
Employee prior to expiration of the Term, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination. Employee shall be
entitled to pro rata salary through the date of such termination, but Employee
shall not be entitled to any individual bonuses or individual incentive
compensation not yet paid at the date of such termination.
3.4 If Employee's employment hereunder shall be terminated by Employer
for Cause prior to expiration of the Term, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination. Employee shall be
entitled to pro rata salary through the date of such termination, but Employee
shall not be entitled to any individual bonuses or individual incentive
compensation not yet paid at the date of such termination.
3.5 Upon an Involuntary Termination of the employment relationship by
either Employer or Employee prior to the expiration of the Term, Employee shall
be entitled, in consideration of Employee's continuing obligations hereunder
after such termination (including, without limitation, Employee's
non-competition obligations), to receive monthly payments in the amount of
Employee's then current Monthly Base Salary as if Employee's employment
(which shall cease on the date of such Involuntary Termination) had continued
for twenty four (24) months from the date of Involuntary Termination. Employee
shall not be under any duty or obligation to seek or accept other employment
following Involuntary Termination and the amounts due Employee hereunder shall
not be reduced or suspended if Employee accepts subsequent employment.
Employee's rights under this Section 3.5 are Employee's sole and exclusive
rights against Employer, and Employer's sole and exclusive liability to Employee
under this
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Agreement, in contract, tort, or otherwise, for any Involuntary Termination of
the employment relationship. Employee covenants not to sue or lodge any claimed
demand or cause of action against Employer for any sums for Involuntary
Termination other than those sums specified in this Section 3.5. If Employee
breaches this covenant, Employer shall be entitled to recover from Employee all
sums expended by Employer (including costs and attorneys fees) in connection
with such suit, claim, demand or cause of action.
3.6 Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's unpaid pro rata salary through the date of such
termination, but Employee's heirs, administrators, or legatees shall not be
entitled to any individual bonuses or individual incentive compensation not yet
paid to Employee at the date of such termination.
3.7 Upon termination of the employment relationship as a result of
Employee's incapacity, Employee shall be entitled to Employee's pro rata salary
through the date of such termination, but Employee shall not be entitled to
any individual bonuses or individual incentive compensation not yet paid to
Employee at the date of such termination.
3.8 In all cases, the compensation and benefits payable to Employee under
this Agreement upon termination of the employment relationship shall be offset
against any amounts to which Employee may otherwise be entitled under any and
all severance plans and policies of Employer.
3.9 Termination of the employment relationship does not terminate those
obligations imposed by this Agreement which are continuing obligations,
including, without limitation, Employee's obligations under Articles 5 and 6.
ARTICLE 4: CONTINUATION OF EMPLOYMENT BEYOND TERM;
TERMINATION AND EFFECTS OF TERMINATION:
4.1 Should Employee remain employed by Employer beyond the expiration of
the Term specified on Exhibit "A," such employment shall convert to a
month-to-month relationship terminable at any time by either Employer or
Employee for any reason whatsoever, with or without cause. Upon such
termination of the employment relationship by either Employer or Employee for
any reason whatsoever, all future compensation to which Employee is entitled
and all future benefits for which Employee is eligible shall cease and
terminate. Employee shall be entitled to pro rata salary through the date of
such termination, but Employee shall not be entitled to any individual bonuses
or individual incentive compensation not yet paid at the date of such
termination.
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ARTICLE 5: OWNERSHIP AND PROTECTION OF INFORMATION:
5.1 Employee acknowledges that the business of Employer and its affiliates
is highly competitive and that Employer's strategies, methods, books, records
and documents, Employer's technical information concerning its products,
equipment, services and processes, procurement procedures and pricing
techniques, the names of and other information (such as credit and financial
data) concerning Employer's customers and business affiliates, all comprise
confidential business information and trade secrets of Employer which are
valuable, special and unique assets and the sole and exclusive property of
Employer, which Employer uses in its business to obtain a competitive advantage
over Employer's competitors which do not know or use this information.
Employee further acknowledges that protection of Employer's confidential
business information and trade secrets against unauthorized disclosure and use,
is of critical importance to Employer in maintaining its competitive position.
Accordingly, Employee hereby agrees that Employee will not, at any time during
or after Employee's employment by Employer, make any unauthorized disclosure of
any confidential business information or trade secrets of Employer, or make any
use thereof, except for the benefit of, and on behalf of, Employer.
5.2 Employee acknowledges that, as a result of Employee's employment by
Employer, Employee may from time to time have access to, or knowledge of,
confidential business information or trade secrets of third parties, such as
customers, suppliers, partners, joint venturers, and the like, of Employer.
Employee agrees to preserve and protect the confidentiality of such third party
confidential information and trade secrets to the same extent, and on the same
basis, as Employer confidential business information and trade secrets.
5.3 All materials, records and other documents made by, or coming into the
possession of, Employee during the period of Employee's employment by Employer
which contain or disclose Employer Confidential business information or
trade secrets shall be and remain the property of Employer. Upon termination
of Employee's employment by Employer, for any reason, Employee promptly shall
deliver the same, and all copies thereof, to Employer.
ARTICLE 6: POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:
6.1 As part of the consideration for the compensation and benefits to be
paid to Employee hereunder, in keeping with Employee's duties as a fiduciary
and in order to protect Employer's interests in the confidential information
of Employer and the business relationships developed by Employee with the
clients and potential clients of Employer, and as an additional incentive for
Employer to enter into this Agreement, Employer and Employee agree to the
noncompetition provisiosn of this Article 6. Employee agrees that during the
period of Employee's non-competition obligations
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hereunder, Employee will not, directly or indirectly for Employee or for
others, in any geographic area or market where Employer or any of its
affiliates are conducting any business as of the date of termination of the
employment relationship or have during the previous twelve months conducted any
business:
(i) engage in any business competitive with the business conducted by
Employer;
(ii) render advice or services to, or otherwise assist, any other person,
association, or entity who is engaged, directly or indirectly, in any
business competitive with the business conducted by Employer;
(iii) induce any employee of Employer or any of its affiliates to terminate
his or her employment with Employer or its affiliates, or hire or
assist in the hiring of any such employee by person, association, or
entity not affiliated with Employer or its affiliates.
These non-competition obligations shall extend until the later of the
expiration of the Term or until the expiration of any period of time during
which Employer is required to pay compensation to Employee under Section
3.5, whether or not Employee remains employed with Employer until the
expiration of the Term.
6.2 Employee understands that the foregoing restrictions may limit
Employee's ability to engage in certain businesses anywhere in the world during
the period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits (e.g., the right to receive
compensation under Section 3.5 upon Involuntary Termination) under this
Agreement to justify such restriction. Employee acknowledges that money
damages would not be sufficient remedy for any breach of this Article 6 by
Employee, and Employer shall be entitled to enforce the provisions of this
Article 6 by terminating any payments then owing to Employee under this
Agreement and/or to specific performance and injunctive relief as remedies for
such breach or any threatened breach. Such remedies shall not be deemed the
exclusive remedies for a breach of this Article 6, but shall be in addition to
all remedies available at law or in equity to Employer, including, without
limitation, the recovery of damages from Employee and Employee's agents
involved in such breach.
6.3 It is expressly understood and agreed that Employer and Employee
consider the restrictions contained in this Article 6 to be reasonable and
necessary to protect the proprietary information of Employer. Nevertheless,
if any of the aforesaid restrictions are found by a court having jurisdiction
to be unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set
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are found by a court having jurisdiction to be unreasonable, or overly broad
as to geographic area or time, or otherwise unenforceable, the parties intend
for the restrictions therein set forth to be modified by such courts so as to
be reasonable and enforceable and, as so modified by the court, to be fully
enforced.
ARTICLE 7: MISCELLANEOUS:
7.1 For purposes of this Agreement the terms "affiliate" "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control, whether
by ownership or operating agreement, with Employer. Affiliate includes, but is
not limited to, Kinder Morgan Energy Partners, L.P.
7.2 For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to Employer, to:
Kinder Morgan G.P. Inc.
1301 McKinney, Suite 3450
Houston, Texas 77010
Attention: Chief Executive Officer
If to Employee, to the address shown on the first page hereof
Either Employer or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address
shall be effective only upon receipt.
7.3 This Agreement shall be governed in all respects by the laws of the
State of Texas, excluding any conflict-of-law rule or principle that might
refer the construction of the Agreement to the laws of another State or country.
7.4 No failure by either party hereto at any time to give notice of any
breach by the other party of, or to require compliance with, any condition or
provision of this Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
7.5 If a dispute arises out of or related to this Agreement, other than a
dispute regarding Employee's obligations under Sections 5.2, Article 5, or
Section 6.1, and if the dispute cannot be settled through direct discussions,
then Employer and Employee agree to first endeavor to settle the dispute in an
amicable manner by mediation, before having recourse to any other proceeding
or forum. Thereafter, if either party to this Agreement brings legal action
to enforce the terms of this Agreement, the party who prevails in such legal
action, whether plaintiff or defendant, in addition to the remedy or relief
obtained in such legal action
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shall be entitled to recover its, his, or her expenses incurred in connection
with such legal action, including, without limitation, costs of Court and
attorneys fees.
7.6 It is a desire and intent of the parties that the terms, provisions,
covenants, and remedies contained in this Agreement shall be enforceable to the
fullest extent permitted by law. If any such term, provision, covenant,
or remedy of this Agreement or the application thereof to any person,
association, or entity or circumstances shall, to any extent, be construed to
be invalid or unenforceable in whole or in part, then such term, provision,
covenant, or remedy shall be construed in a manner so as to permit its
enforceability under the applicable law to the fullest extent permitted by law.
In any case, the remaining provisions of this Agreement or the application
thereof to any person, association, or entity or circumstances other than those
to which they have been held invalid or unenforceable, shall remain in full
force and effect.
7.7 This Agreement shall be binding upon and inure to the benefit of
Employer and any other person, association, or entity which may hereafter
acquire or succeed to all or substantially all of the business or assets of
Employer by any means whether direct or indirect, by purchase, merger,
consolidation, or otherwise. Employee's rights and obligations under Agreement
hereof are personal and such rights, benefits, and obligations of Employee
shall not be voluntarily or involuntarily assigned, alienated, or transferred,
whether by operation of law or otherwise, without the prior written consent of
Employer.
7.8 There exist, and from time to time may exist, other agreements between
Employer and Employee relating to the employment relationship between them,
e.g., an agreement with respect to company policies and or conduct of Employer's
business and business practices, and agreements with respect to benefit plans,
which are incorporated herein by reference. This Agreement replaces and merges
previous agreements and discussions pertaining to the following subject matters
covered herein: the nature of Employee's employment relationship with Employer
and the term and termination of such relationship. This Agreement constitutes
the entire agreement of the parties with regard to such subject matters, and
contains all of the covenants, promises, representations, warranties, and
agreements between the parties with respect such subject matters. Each party
to this Agreement acknowledges that no representation, inducement, promise, or
agreement, oral or written, has been made by either party with respect to
such subject matters, which is not embodied herein, and that no agreement,
statement, or promise relating to the employment of Employee by Employer that
is not contained in this Agreement shall be valid or binding. Any modification
of this Agreement will be effective only if it is in writing and signed by each
party whose rights hereunder are
10
<PAGE>
affected thereby, provided that any such modification must be authorized or
approved by the Board of Directors of Employer.
IN WITNESS WHEREOF, Employer and Employee have duly executed this
Agreement in multiple originals on this 16th day of April, 1997, to be
effective on the date first stated above.
KINDER MORGAN G.P. INC. THOMAS B. KING
By: /s/ Richard D. Kinder /s/ Thomas B. King
_________________________ ________________________
Name: Richard D. Kinder
Title: Chairman and Chief
Executive Officer
11
<PAGE>
EXHIBIT "A" TO
EXECUTIVE EMPLOYMENT AGREEMENT
BETWEEN KINDER MORGAN G.P. INC. AND THOMAS B. KING
Employee Name: Thomas B. King
Term: Three Years from Effective Date;
through February 14, 2000
Position: President and Chief Operating
Officer
Location: Houston, Texas
Reporting Relationship: Reports to Chairman and Chief
Executive Officer
Monthly Base Salary: $13,333.33
Bonus: Employee shall be eligible for
an annual bonus in an amount
determined in the discretion of
Employer's Board of Directors
upon its review of the
performance of the company for
the annual period. Employee
shall be eligible to participate
in any long term incentive plan
for senior officers that may be
established after the Effective
Date by Employer's Board of
Directors, according to the
provisions thereof.
Executed this 16th day of April, 1997.
KINDER MORGAN G.P. INC.
By: /s/ Richard D. Kinder
____________________________
Name: Richard D. Kinder
Title: Chairman and Chief
Executive Officer
THOMAS B. KING
/s/ Thomas B. King
________________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from the Consolidated
Statement of Income and Cash Flows for the three
months ended March 31, 1997 and 1996, the
Consolidated Balance Sheet for March 31, 1997 and
December 31, 1996 and the Notes thereto and is
qualified in its entirety by reference to such
financial statements.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 16,396
<SECURITIES> 0
<RECEIVABLES> 10,030
<ALLOWANCES> 0
<INVENTORY> 2,488
<CURRENT-ASSETS> 28,914
<PP&E> 272,891
<DEPRECIATION> 38,631
<TOTAL-ASSETS> 302,822
<CURRENT-LIABILITIES> 14,524
<BONDS> 164,001
0
0
<COMMON> 0
<OTHER-SE> 121,772
<TOTAL-LIABILITY-AND-EQUITY> 302,822
<SALES> 19,132
<TOTAL-REVENUES> 19,132
<CGS> 2,161
<TOTAL-COSTS> 13,205
<OTHER-EXPENSES> (959)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,283
<INCOME-PRETAX> 3,603
<INCOME-TAX> 175
<INCOME-CONTINUING> 3,428
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,428
<EPS-PRIMARY> .52
<EPS-DILUTED> .52
</TABLE>
