Exhibit 10.6
KINDER MORGAN ENERGY PARTNERS, L.P.
2003 UNIT APPRECIATION RIGHTS PLAN FOR NON-EMPLOYEE DIRECTORS
Section 1. Purpose of the Plan. Kinder Morgan Energy Partners, L.P. (the
"Partnership"), as a limited partnership, has a general partner rather than a
board of directors. Through the operation of its limited partnership agreement
and the Delegation of Control Agreement among the Partnership, its general
partner, Kinder Morgan Management, LLC (the "Company") and others, the board of
directors of the Company (the "Board") functions as the board of the
Partnership. The Kinder Morgan Energy Partners, L.P. 2003 Unit Appreciation
Rights Plan for Non-Employee Directors (the "Plan") is intended to promote the
interests of the Partnership and its unitholders by aligning the compensation of
the non-employee members of the Board with unitholders' interests. Because the
success of the Company is dependent on its operation and management of the
Partnership and its resulting performance, the Plan is also expected to align
the compensation of the non-employee members of the Board with the interests of
the Company's shareholders.
Section 2. Administration of the Plan.
(a) Composition of Committee. The Plan shall be administered by the
Compensation Committee (the "Committee") designated by the Board, which
shall also designate the Chairman of the Committee. If the Partnership is
governed by Rule 16b-3 ("Rule 16b-3") promulgated by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as
amended, the Committee shall be composed of two or more Non-Employee
Directors as defined in Rule 16b-3 or the full Board.
(b) Committee Action. The Committee shall hold its meetings at such
times and places as it may determine. A majority of its members shall
constitute a quorum, and all determinations of the Committee shall be made
by not less than a majority of its members. Any decision or determination
reduced to writing and signed by a majority of the members shall be
effective as if it had been made by a majority vote of its members at a
meeting duly called and held. The Committee may designate the Secretary of
the Company or other Company employees to assist the Committee in the
administration of the Plan, and may grant authority to such persons to
execute agreements or other documents on behalf of the Committee and the
Company. Any duly constituted committee of the Board satisfying the
qualifications of this Section 2 may be appointed as the Committee.
(c) Committee Expenses. All expenses and liabilities incurred by the
Committee in the administration of the Plan shall be borne by the
Partnership. The Committee may employ attorneys, consultants, accountants
or other persons.
(d) Committee Authority. Subject to the express provisions of the
Plan, the Committee shall have discretionary authority to prescribe, amend
and rescind rules and regulations relating to the Plan, to interpret the
Plan, to prescribe and amend the terms of the Unit Appreciation Rights
Agreements (the "UAR Agreements"), which need not be identical, and to make
all other determinations deemed necessary or advisable for the
administration of the Plan. The Committee may correct any defect or supply
any omission or reconcile any inconsistency in the Plan or in any UAR
Agreement in the manner and to the extent it shall deem necessary to carry
it into effect. The determinations of the Committee on the matters referred
to in this paragraph shall be conclusive on all parties.
Section 3. Eligibility. The persons eligible to participate (the
"Participant") in the Plan as a recipient of unit appreciation rights ("UARs")
shall include only directors of the Company who are not otherwise employees of
the Company or any affiliate of the Company ("Eligible Director").
Section 4. Units Subject to the Plan. The aggregate number of UARs which
may be granted to Participants under the Plan shall not exceed 500,000 UARs,
subject to adjustment as provided in Section 7 below. Should any UARs
theretofore granted to a Participant expire pursuant to Sections 6(d) or 6(e),
such UARs may again be granted to a Participant under the Plan.
Section 5. Grant of UARs. Each Eligible Director serving on the Board on
April 1, 2003, the date of adoption of the Plan by the Partnership, shall be
granted 7,500 UARs. On each first trading day of the new year thereafter, 10,000
UARs shall automatically be granted to each Eligible Director on such date
("Annual Grant"). If at any time an Eligible Director is elected to fill an
unexpired term or vacancy on the Board, such Eligible Director shall be granted
on the date of election a number of UARs equal to 10,000 multiplied by a
fraction, the numerator of which is the number of whole months remaining in the
calendar year in which such Eligible Director is so elected, and the denominator
of which is 12.
The term "Date of Grant" means (i) in the case of UARs granted to an
Eligible Director serving on the Board on April 1, 2003, the date of the
adoption of the Plan, such date of adoption; (ii) in the case of Annual Grants,
the first trading day of the applicable calendar year; and (iii) in the case of
UARs granted to an Eligible Director elected to fill an unexpired term or
vacancy on the Board, such Eligible Director's date of election.
Section 6. UAR Agreements. Each UAR granted under the Plan shall be
exercisable only for cash and shall be evidenced by a UAR Agreement, in a form
approved by the Committee, which shall be subject to the following express terms
and conditions and such other terms and conditions as the Committee may deem
appropriate.
(a) Unit Appreciation Right Period. The Committee shall promptly
notify the Participant of the UAR grant, and a UAR Agreement shall promptly
be executed and delivered by and on behalf of the Partnership and the
Participant, provided that the UAR grant shall expire if a written
agreement is not signed by said Participant (or his agent or attorney) and
returned to the Partnership within 60 days from date of receipt by the
Participant of such agreement. The Date of Grant shall be the date set
forth in Section 5 hereof, even though the UAR Agreement may be executed
and delivered by the Partnership and the Participant after that date. The
period for which the UARs are granted shall be ten years from the date of
grant and the UARs shall expire and not be exercisable at the end of such
period.
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(b) Exercise of UARs. The Committee may provide in the UAR Agreement
that UARs granted the Participant may be exercised at any time in whole or
in increments. Notwithstanding anything herein to the contrary, a UAR may
not be exercised until the first business day on or after the expiration of
six (6) months from the Date of Grant (the "Vesting Date"). If a
Participant ceases to serve on the Board for any reason prior to the
Vesting Date of a UAR, such UAR shall immediately expire on the date of
cessation of service and may not be exercised. UARs shall be exercised by
the delivery of written notice to the Partnership addressed to the
attention of the Vice President of Human Resources and Administration or
the General Counsel setting forth the number of UARs being exercised and
the date on which such exercise is to be effective ("Exercise Date"). Upon
the exercise of UARs by the Participant in accordance with the UAR
Agreement, the Partnership shall pay the Participant within thirty (30)
days of the Exercise Date an amount of cash (the "Compensation Amount")
equal to the excess, if any, of the aggregate UAR Value (as defined below)
of the UARs exercised as of the Exercise Date over the aggregate Award
Price (as set forth in the UAR Agreement) of the UARs exercised. The Award
Price for a UAR shall be the Fair Market Value of a Unit (as defined below)
on the Date of Grant of the UAR. The value of one UAR (the "UAR Value") as
of the Exercise Date shall be equal to the Fair Market Value (as defined
below) of one common unit (the "Units") of the Partnership as of such date.
For all purposes under the Plan, the "Fair Market Value" of a Unit on a
particular date shall be equal to the closing price of the Units on the New
York Stock Exchange on that date, or if no prices are reported on that
date, on the last preceding date on which such prices of the Units are so
reported. If the Units are not traded on the New York Stock Exchange at the
time a determination of Fair Market Value is required to be made hereunder,
Fair Market Value shall be deemed to be equal to the average between the
closing bid and ask price of the Units on the most recent date the Units
were publicly traded. In the event the Units are not publicly traded at the
time a determination of Fair Market Value is required to be made hereunder,
the determination of Fair Market Value shall be made by the Committee in
such manner as it deems appropriate.
(c) Termination of Board Membership. If a Participant ceases to serve
on the Board for any reason other than death or disability, any UARs which
are exercisable on the date of such cessation of service may be exercised
during a twelve (12) month period beginning on such date (but in no event
after the expiration of ten (10) years from the Date of Grant); provided
however, if a Participant's service on the Board is terminated because of
the Participant's theft or embezzlement from the Partnership or an
affiliate, disclosure of trade secrets of the Partnership or an affiliate
or the commission of a willful, felonious act while serving on the Board,
then any UARs or unexercised portion thereof granted to said Participant
shall expire upon such termination of service.
(d) Disability or Death of Participant. In the event of the
determination of disability or death of a Participant under the Plan while
he serves on the Board, the UARs previously granted to him may be exercised
(to the extent he would have been entitled to do so at the date of the
determination of disability or death) at any time and from time to time,
within a twelve (12) month period after such determination of disability or
death, by the former Participant, the guardian of his estate, the executor
or administrator of his estate or by the person or persons to whom his
rights under the UAR Agreement shall
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pass by will or the laws of descent and distribution, but in no event may
any UARs be exercised after the expiration of 10 years from the Date of
Grant. A Participant shall be deemed to be disabled if, in the opinion of a
physician selected by the Committee, he is incapable of performing services
for the Company of the kind he was performing at the time the disability
occurred by reason of any medically determinable physical or mental
impairment which can be expected to result in death or to be of long,
continued and indefinite duration. The date of determination of disability
for purposes hereof shall be the date of such determination by such
physician.
(e) Expiration of UARs. Any UARs exercised pursuant to this Plan shall
expire automatically as of the Exercise Date. Additionally, UARs shall
expire upon the Participant's termination of service on the Board in
accordance with paragraphs (c) and (d) above.
Section 7. Adjustment in Number of UARs. Solely for purposes of the Plan,
each UAR has been equated with one Unit as constituted on the date of adoption
of the Plan. If the outstanding Units shall at any time be changed or exchanged
by declaration of a Unit dividend, Unit split or combination of Units, the
number of Units which are subject to this Plan or subject to any UARs
theretofore granted, and the Award Prices, shall be appropriately and equitably
adjusted so as to maintain the proportionate number of Units without changing
the aggregate Award Price. If the Partnership recapitalizes or otherwise changes
its capital structure, or merges, consolidates, sells all of its assets or
dissolves (each of the foregoing a "Fundamental Change"), then thereafter upon
any exercise of a UAR theretofore granted the Participant shall be treated as
holding a UAR with respect to the number and class of shares of stock or other
securities to which the Participant would have been entitled pursuant to the
terms of the Fundamental Change if, immediately prior to such Fundamental
Change, the Participant had been the holder of record of the number of Units as
to which such UAR is then exercisable.
Section 8. Prohibition Against Assignment or Encumbrance. Except as set
forth in Section 6(d), Section 11 or this Section 8, no right, title, interest
or benefit hereunder shall ever be transferable or liable for or charged with
any of the torts or obligations of a Participant or any person claiming under a
Participant, or be subject to seizure by any creditor of a Participant or any
person claiming under a Participant, and UARs granted under this Plan shall be
exercisable, during a Participant's lifetime, only by the Participant. No
Participant or any person claiming under a Participant shall have the power to
anticipate or dispose of any right, title, interest or benefit hereunder in any
manner until the same shall have been actually distributed free and clear of the
terms of the Plan. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of or subject to execution, attachment or similar process, any
UAR except as allowed herein, such UAR and all rights thereunder shall
immediately become null and void. Notwithstanding the foregoing, if a
Participant obtains the approval of the Committee after making a request to the
Committee in writing, the Participant may transfer or assign a UAR to a family
partnership or other estate planning arrangement, or to a charity.
Section 9. Nature of the Plan. The Plan shall constitute an unfunded,
unsecured obligation of the Partnership to make cash payments in accordance with
the provisions of the Plan. Neither the establishment of the Plan, the granting
and vesting of UARs nor the determination of Compensation Amounts shall be
deemed to create a trust. No Participant shall
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have any security or other interest in any assets of the Partnership, in Units,
or otherwise. Nothing contained in the Plan or any UAR Agreement will confer
upon any Participant (or any person or entity claiming rights by or through a
Participant) any rights of a unitholder of the Partnership.
Section 10. Board Membership. For all purposes of the Plan, a Participant
shall be considered to be in service on the Board as long as he remains a member
of the Board. Nothing contained in the Plan or any UAR Agreement shall confer
upon any Participant any right to continue to serve on the Board. Any question
as to whether and when there has been a termination of a Participant's service
on the Board and the cause of such termination shall be determined by the
Committee, and its determination shall be final.
Section 11. Beneficiary Designation. Each Participant under the Plan may
name, from time to time, any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
in the case of the death or disability of the Participant before he receives any
or all of such benefit. Each designation will revoke all prior designations by
the same Participant, shall be in a form prescribed by the Committee, and will
be effective only when filed by the Participant in writing with the Committee
during his lifetime. In the absence of any such designation, benefits remaining
unpaid at the Participant's death shall be paid to his estate.
Section 12. Amendment and Termination of the Plan. The Board in its sole
discretion may terminate the Plan at any time with respect to any UARs which
have not theretofore been granted to Participants. The Board shall have the
right to alter or amend the Plan or any part thereof from time to time, except
that the Board shall not make any alteration or amendment which would impair the
rights of a Participant with respect to UARs theretofore granted to that
Participant without that Participant's consent.
Section 13. Effective Date and Expiration of the Plan. This Plan is
effective on April 1, 2003. If not sooner terminated under the provisions of
Section 12, the Plan shall terminate as of the earlier of (a) the date on which
all UARs theretofore granted to Participants have been surrendered or forfeited,
or (b) December 31, 2013.
Section 14. Tax Withholding. The Partnership shall have the power to
withhold, or require a Participant to remit to the Partnership, an amount
sufficient to satisfy Federal, state, and local withholding tax requirements on
any grant under the Plan.
Section 15. Requirements of Law. The granting of UARs shall be subject to
all applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
Section 16. Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Texas.
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IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing, the Partnership has caused this Plan to be duly executed as of this
1st day of April 2003.
KINDER MORGAN ENERGY PARTNERS, L.P.
By: Kinder Morgan G.P., Inc.,
its general partner
By: Kinder Morgan Management, LLC,
its delegate
By: /s/ Joseph Listengart
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Name: Joseph Listengart
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Title: Vice President
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