EXHIBIT 10.1
DELEGATION OF CONTROL AGREEMENT
AMONG
KINDER MORGAN G.P., INC.
KINDER MORGAN MANAGEMENT, LLC
KINDER MORGAN ENERGY PARTNERS, L.P.
KINDER MORGAN OPERATING L.P. "A"
KINDER MORGAN OPERATING L.P. "B"
KINDER MORGAN OPERATING L.P. "C"
KINDER MORGAN OPERATING L.P. "D"
AND
KINDER MORGAN CO2 COMPANY, L.P.
This Delegation of Control Agreement (the "AGREEMENT") dated
May 18, 2001 (the "EFFECTIVE DATE"), is among Kinder Morgan G.P.,
Inc., a Delaware corporation (the "GENERAL PARTNER"), Kinder Morgan Management,
LLC, a Delaware limited liability company ("MANAGEMENT"), Kinder Morgan Energy
Partners, L.P., a Delaware limited partnership (the "MASTER PARTNERSHIP"),
Kinder Morgan Operating L.P. "A", a Delaware limited partnership ("OLP "A""),
Kinder Morgan Operating L.P. "B", a Delaware limited partnership ("OLP "B""),
Kinder Morgan L.P. "C", a Delaware limited partnership ("OLP "C""), Kinder
Morgan L.P. "D", a Delaware limited partnership ("OLP "D""), Kinder Morgan CO2
Company, L.P., a Texas limited partnership ("CO2" and together with OLP "A," OLP
"B," OLP "C," and OLP "D," the "OPERATING PARTNERSHIPS," and, together with the
Master Partnership, the "PARTNERSHIPS"). The General Partner is the sole general
partner of the Partnerships.
Capitalized terms used but not defined in this Agreement shall have the
meanings given to them in the Master Partnership's Third Amended and Restated
Agreement of Limited Partnership (the "MASTER PARTNERSHIP AGREEMENT").
References herein to the Master Partnership Agreement or any limited partnership
agreement of an Operating Partnership (an "OPERATING PARTNERSHIP AGREEMENT") in
a context that contemplates a future time shall mean the Master Partnership
Agreement or an Operating Partnership Agreement (collectively, the "PARTNERSHIP
AGREEMENTS") as amended or restated at the applicable time. Management is an
"INDEMNITEE" and an "AFFILIATE" of the Partnerships and the General Partner, as
each of those terms is defined in Article II of the Master Partnership Agreement
and in each of the Operating Partnership Agreements.
RECITALS:
The Partnerships and the General Partner wish to delegate to Management
all the General Partner's power and authority to manage and control the business
and affairs of the Partnerships to the fullest extent permitted under the
Partnership Agreements and Delaware law, subject to the terms and conditions of
this Agreement, and Management wishes to accept such delegation.
2
Section 6.6(c) of the Master Partnership Agreement and Section __ of
each of the Operating Partnership Agreements permit the General Partner to enter
into an agreement with Management to render services to the Partnerships and the
General Partner in the discharge of the General Partner's duties as general
partner to the Partnerships.
Concurrently with the execution of this Agreement, Management is
issuing and selling in an initial public offering (the "OFFERING") its shares
representing limited liability company interests in Management (the "LISTED
SHARES"), and the Master Partnership is issuing to Management its i-units
representing limited partner interests in the Master Partnership.
Each of the Partnerships wishes to confirm hereby its agreement with
the terms of this Agreement relating to the management and control of the
Partnership's and the Operating Partnerships' business and affairs and certain
other agreements for the benefit of the General Partner, Management, their
Affiliates and certain Indemnitees and Indemnified Parties.
NOW, THEREFORE, the parties hereto agree as follows:
1. Delegation and Related Matters.
1.1. Delegation by General Partner to Management. The General
Partner hereby irrevocably delegates to Management, to the fullest
extent permitted under the Partnership Agreements and Delaware law, all
of the General Partner's power and authority to manage and control the
business and affairs of the Partnerships (the "MAXIMUM PERMITTED
DELEGATION"), subject to termination only in accordance with Section 9
hereof; and all provisions in this Agreement are qualified to the
extent required in order for all such provisions to be consistent, now
and in the future, with the Maximum Permitted Delegation. The power and
authority of the General Partner are set forth in the Partnership
Agreements (in particular, in Section 6.1 of each of the Partnership
Agreements) and are provided by Delaware law. If the General Partner's
power and authority as general partner of any Partnership(s) are
modified pursuant to a subsequent amendment or restatement of any of
the Partnership Agreements or changes in Delaware law, then the power
and authority delegated to Management with respect to such
Partnership(s) shall be modified on the same basis.
Notwithstanding the foregoing, the General Partner is not
hereby withdrawing from the Partnerships as a general partner or
otherwise; and the General Partner is retaining all of its Partnership
Interests, its Percentage Interests and its rights to profits, losses
and distributions from the Partnerships, and none of these are hereby
being assigned or transferred by the General Partner to Management.
1.2. Continued Responsibility of General Partner.
Notwithstanding the General Partner's making the Maximum Permitted
Delegation to Management, the General Partner shall remain responsible
to the Partnerships for actions taken or omitted by Management within
the scope of such delegation as if the General Partner had itself
2
3
taken or omitted to take any such actions. The General Partner's
responsibility to each of the Partnerships is not expanded or limited
by this Agreement and shall be in effect to the same extent and on the
same terms and conditions as specified in the applicable Partnership
Agreement or under Delaware law. Pursuant to Section 6.8(b) of each of
the Partnership Agreements, in each case as amended as of the Effective
Date, the General Partner is responsible for the misconduct or
negligence of Management in performing the Maximum Permitted Delegation
but is not responsible for any misconduct or negligence of other agents
appointed by the General Partner in good faith. The General Partner
shall be entitled to monitor Management's performance under this
Agreement. The General Partner shall have the right and power to direct
Management to take, or to cease from taking, any action that would
constitute a breach of any Partnership Agreement. The General Partner
shall have access to the books, records and documents of the
Partnerships and Management and to their officers, directors and
employees to monitor Management's performance under this Agreement.
1.3. Acceptance of Delegation by Management. Management hereby
accepts the Maximum Permitted Delegation and agrees to perform the
Maximum Permitted Delegation according to the standards specified in
Section 2 hereto.
1.4. Approval by General Partner. Without expanding or
limiting the definition of Maximum Permitted Delegation, the taking by
Management of the actions specified in Schedule 1.4 hereto shall be
subject to the approval of the General Partner.
1.5. Use of Affiliates by Management. The Partnerships and the
General Partner agree that Management may perform the Maximum Permitted
Delegation either directly or through one or more Affiliates. If
Management performs through any Affiliate, (i) Management shall remain
fully responsible for actions taken or omitted by the Affiliate and
(ii) for purposes of Sections 1, 2, 3, 4, 5, 6, 7 and 8 hereof,
Management and all such Affiliates shall be taken together and treated
as Management.
2. Standards of Performance. In performing the Maximum Permitted
Delegation, Management shall be responsible to the Partnerships and the General
Partner to the same extent and according to the same standards as would have
been applicable to the General Partner in favor of the Partnerships had the
General Partner continued to exercise the delegated power and authority
directly. Among other provisions of the Partnership Agreements that are
applicable to the duties and standards of performance assumed by Management, but
without limiting the generality of other provisions in this Agreement, the
following Sections of each of the Partnership Agreements, in each case as
amended, shall be applicable to Management's performance of the Maximum
Permitted Delegation: Sections 6.8, 6.9 and 6.10.
3. Conflicts of Interest. All potential and actual conflicts of
interest that exist or arise between the General Partner, Management and each of
their Affiliates, on the one hand, and the Partnerships, any subsidiary of the
Partnerships, any Partner or any Assignee, on the other hand, shall be subject
to Section 6.9 of each of the Partnership Agreements, in each case as amended as
of the Effective Date. Among other possible courses of action under these
Sections that are available to resolve conflicts of interest, the General
Partner and Management have
3
4
reserved the right granted under these Sections to seek Special Approval of the
General Partner's Conflicts and Audit Committee with respect to any such
conflict.
4. Reliance on Counsel, etc. Pursuant to Section 6.10 of each of the
Partnership Agreements, in each case as amended, Management shall have the
benefit of all of the provisions of these Sections to the same extent as the
General Partner.
5. Reliance by Third Parties. Pursuant to Section 6.14 of the Master
Partnership Agreement and Section 6.12 of each of the Operating Partnership
Agreements, in each case as amended, third parties dealing with the Partnerships
shall be entitled to assume that Management has the full power and authority of
the General Partner in acting for the Partnerships.
6. Indemnity. Management and its officers and directors and all other
persons covered within the definition of Indemnitee shall be entitled to
mandatory indemnity and shall be entitled to be held harmless by the
Partnerships to the extent and subject to the conditions provided in Section 6.7
of each of the Partnership Agreements, in each case as amended, with the General
Partner hereby deeming it advisable that such indemnification and holding
harmless shall (rather than may) be done and provided by the Partnerships to the
fullest extent and subject to the conditions provided therein.
The General Partner and the other parties specified in Section 6.7 of
each of the Partnership Agreements, in each case as amended, shall continue to
be entitled to the benefits of said Sections.
7. Damage Limitations. Since each of Management and certain other
parties specified in the Partnership Agreements who are associated with
Management are Indemnitees, the provisions of Section 6.8 in the Master
Partnership Agreement and Section 6.4(b) of each of the Operating Partnership
Agreements, in each case as amended, regarding the limitation on an Indemnitee's
liability for monetary damages shall be applicable to all such Indemnitees.
The General Partner and other Indemnitees shall continue to be entitled
to the limitation on liability for monetary damages set forth in Section 6.8
of each of the Partnership Agreements, in each case as amended as of the
Effective Date.
8. Reimbursement. Management shall be entitled to be reimbursed by the
Partnerships for direct, indirect, necessary or appropriate expenses it incurs
or payments it makes on behalf of the Partnerships, or which are allocable to or
otherwise reasonably incurred by the General Partner or Management, to the
fullest extent contemplated in both Section 6.4(b) and Section 6.6(c) of the
Master Partnership Agreement and in both Section 6.4(b) and Section 6.6(b) of
each of the Operating Partnership Agreements, in each case as amended. It is
understood and agreed that Management shall be entitled to reimbursement under
such Sections for all fees and expenses incurred in connection with the
performance of its obligations under the Securities Act of 1933, as amended, the
Securities Act of 1934, as amended, and any other federal and state laws
applicable to Management, including, without limitation, fees and expenses of
legal counsel, accountants and financial advisors.
4
5
The General Partner shall continue to be entitled to be reimbursed as
provided in these Sections of the Partnership Agreements.
9. Termination of Delegation. The Maximum Permitted Delegation under
this Agreement commences on the Effective Date and shall continue in effect
until the occurrence of the earliest of any of the following, at which time the
delegation of power and authority by the General Partner to Management shall
cease and terminate as provided below:
9.1. All outstanding Listed Shares shall become owned by the
General Partner or its Affiliates (including, without limitation,
Kinder Morgan, Inc. ("KMI") or its Affiliates) and such termination of
delegated power and authority shall have been approved by the General
Partner and Management at which time the delegation shall cease as to
all Partnerships; or
9.2. The General Partner shall withdraw or shall be removed as
general partner of any of the Partnerships, at which time the
delegation shall cease as to those Partnerships from which the General
Partner shall have withdrawn or shall have been removed; or
9.3. Such termination of delegated power and authority shall
have been approved by (i) the General Partner, (ii) Management and
(iii) holders (other than the General Partner and its Affiliates,
including KMI and its Affiliates) of a majority of the outstanding
Listed Shares (excluding any Listed Shares owned by the General Partner
and its Affiliates, including KMI).
The General Partner hereby covenants and agrees that it shall not
withdraw as general partner of any of the Partnerships so long as any of the
Listed Shares are owned by any persons other than KMI or its Affiliates.
10. Miscellaneous.
10.1. References. Except as specifically provided otherwise,
references to "Articles" and "Sections" are to Articles and Sections of
this Agreement.
10.2. Pronouns and Plurals. Whenever the context may require,
any pronoun used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular form of nouns,
pronouns and verbs shall include the plural and vice versa.
10.3. Further Action. The parties shall execute and deliver
all documents, provide all information and take or refrain from taking
actions as may be necessary or appropriate to achieve the purposes of
this Agreement.
10.4. Binding Effect; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
successors and permitted assigns. This Agreement may not be assigned,
in whole or in part, by any party to this Agreement without the written
consent of the other parties to this Agreement.
5
6
10.5. Integration. This Agreement and the other instruments
and agreements specifically referenced herein constitute the entire
agreement among parties hereto.
10.6. Creditors. None of the provisions of this Agreement
shall be for the benefit of, or shall be enforceable by, any creditor
of the Partnerships, the General Partner or Management.
10.7. Waiver. No failure by any party to insist upon the
strict performance of any covenant, duty, agreement or condition of
this Agreement or to exercise any right or remedy consequent upon a
breach thereof shall constitute waiver of any such breach or any other
covenant, duty, agreement or condition.
10.8. Counterparts. This Agreement may be executed in
counterparts, all of which together shall constitute an agreement
binding on all parties hereto, notwithstanding that all such parties
are not signatories to the original or the same counterpart.
10.9. Applicable Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware,
without regard to the principles of conflicts of law.
10.10. Invalidity of Provisions. If any provision of this
Agreement is or becomes invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected thereby.
10.11. Amendments. This Agreement may be amended by an
agreement in writing signed by Management, the General Partner and the
Partnerships without the vote, approval or consent of the holders of
Listed Shares (as such term is defined in the Amended and Restated
Limited Liability Company Agreement of Management, as amended, restated
or supplemented (the "LLC AGREEMENT")), unless such amendment would, as
determined in the sole discretion of the board of directors of
Management, materially adversely affect the rights or preferences of
such holders of Listed Shares or would reduce the time for any notice
to which such holders of Listed Shares may be entitled, in which case
such amendment shall require the affirmative vote or consent of the
holders of at least a majority of the Listed Shares then Outstanding
(as that term is defined under the LLC Agreement).
6
7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the Effective Date.
"General Partner"
KINDER MORGAN G.P., INC.
By: /s/ C. Park Shaper
-----------------------------------
Name: C. Park Shaper
Title: Vice President, Treasurer
and Chief Financial Officer
"Management"
KINDER MORGAN MANAGEMENT, LLC
By: /s/ Joseph Listengart
-----------------------------------
Name: Joseph Listengart
Title: Vice President and
General Counsel
"Master Partnership"
KINDER MORGAN ENERGY PARTNERS, L.P.
By: Kinder Morgan G.P., Inc.
By: /s/ C. Park Shaper
-----------------------------------
Name: C. Park Shaper
Title: Vice President, Treasuer
and Chief Financial Officer
OLP "A"
KINDER MORGAN OPERATING L.P. "A"
By: Kinder Morgan G.P., Inc.
By: /s/ C. Park Shaper
-----------------------------------
Name: C. Park Shaper
Title: Vice President, Treasuer
and Chief Financial Officer
7
8
OLP "B"
KINDER MORGAN OPERATING L.P. "B"
By: Kinder Morgan G.P., Inc.
By: /s/ C. Park Shaper
-----------------------------------
Name: C. Park Shaper
Title: Vice President, Treasuer
and Chief Financial Officer
OLP "C"
KINDER MORGAN OPERATING L.P. "C"
By: Kinder Morgan G.P., Inc.
By: /s/ C. Park Shaper
-----------------------------------
Name: C. Park Shaper
Title: Vice President, Treasuer
and Chief Financial Officer
OLP "D"
KINDER MORGAN OPERATING L.P. "D"
By: Kinder Morgan G.P., Inc.
By: /s/ C. Park Shaper
-----------------------------------
Name: C. Park Shaper
Title: Vice President, Treasuer
and Chief Financial Officer
CO2
KINDER MORGAN CO2 COMPANY, L.P.
By: Kinder Morgan G.P., Inc.
By: /s/ C. Park Shaper
-----------------------------------
Name: C. Park Shaper
Title: Vice President, Treasuer
and Chief Financial Officer
8
9
SCHEDULE 1.4
Actions Subject to Approval by General Partner
- amend or propose an amendment to the Master Partnership Agreement, or
- change the amount of the distribution made on the Master Partnership
common units, or
- allow a merger or consolidation involving the Master Partnership, or
- allow a sale or exchange of all or substantially all of the assets of
the Master Partnership, or
- dissolve or liquidate the Master Partnership, or
- take any action requiring approval of any class of units of the
Master Partnership, or
- call any meetings of the common unitholders of the Master Partnership,
or
- take any action that, under the terms of the Master Partnership
Agreement, must or should receive a special approval of the Conflicts
and Audit Committee of the General Partner, or
- take any action that, under the terms of the Master Partnership
Agreement, cannot be taken by the General Partner without the approval
of all outstanding units of the Master Partnership, or
- settle or compromise any claim, dispute or litigation directly against
or otherwise relating to indemnification of Management, the General
Partner, Affiliates of the General Partner or Management, or any of
their officers, directors, managers or members, or
- settle or compromise any claim, dispute or litigation relating to the
i-units, the Listed Shares or the Offering, or
- settle or compromise any claim, dispute or litigation involving tax
matters, or
9
10
- allow the Master Partnership to incur indebtedness exceeding 50% of
the market value of all of the then outstanding units of the Master
Partnership, or
- allow the Master Partnership to issue units in one transaction, or in
a series of related transactions, having a market value in excess of
20% of the market value of then outstanding units of the Master
Partnership, or
10