-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, USUMq/bVNCvSCaeZHlzYpUYwwAuTZSE4InMAz++8SqP22VS5HePJrVlJN+vS31zW UXbRMwV66Rkx2422P2KXiw== 0001014108-97-000036.txt : 19970515 0001014108-97-000036.hdr.sgml : 19970515 ACCESSION NUMBER: 0001014108-97-000036 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KINDER MORGAN ENERGY PARTNERS L P CENTRAL INDEX KEY: 0000888228 STANDARD INDUSTRIAL CLASSIFICATION: PIPE LINES (NO NATURAL GAS) [4610] IRS NUMBER: 760380342 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11234 FILM NUMBER: 97605126 BUSINESS ADDRESS: STREET 1: 1301 MCKINNEY STREET 2: STE 3450 CITY: HOUSTON STATE: TX ZIP: 77010 BUSINESS PHONE: 7138537273 MAIL ADDRESS: STREET 1: PO BOX 1188 CITY: HOUSTON STATE: TX ZIP: 77251-1188 FORMER COMPANY: FORMER CONFORMED NAME: ENRON LIQUIDS PIPELINE L P DATE OF NAME CHANGE: 19970304 10-Q 1 10-Q FOR FIRST QUARTER 1977 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. Page 1 of 14 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 Page 2 of 14 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. Page 3 of 14 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. Page 4 of 14 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. Page 5 of 14 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. Page 6 of 14 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 Page 7 of 14 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. Page 8 of 14 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 $1.0 million of cashflow in 1997 with annual escalations thereafter. Page 9 of 14 Operating statistics for the first quarter are as follows: First Quarter 1997 1996 ------------------ Liquids pipelines North System Delivery Volumes (MMBbls) 8.8 9.4 Average Tariff ($/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 Page 10 of 14 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. Page 11 of 14 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. Page 12 of 14 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. Page 13 of 14 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 EX-10.1 2 EMPLOYMENT AGMT.DATED APR. 17, 1997 FOR WM. MORGAN 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) 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 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 3 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 4 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 5 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. 6 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 EX-10.2 3 EMPLOYMENT AGMT. DATED APR. 16, 1997 FOR TOM KING 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. 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 2 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 3 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: 4 (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 5 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. 6 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 7 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 8 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 9 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 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 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 ________________________________ EX-27 4 ARTICLE 5 FDS FOR QUARTERLY 1997
5 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. 1,000 3-MOS DEC-31-1997 MAR-31-1997 16,396 0 10,030 0 2,488 28,914 272,891 38,631 302,822 14,524 164,001 0 0 0 121,772 302,822 19,132 19,132 2,161 13,205 (959) 0 3,283 3,603 175 3,428 0 0 0 3,428 .52 .52
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